Reported / Citable
Background
Plaintiffs Compania General de Combustibles S.A., Allianz Argentina Compania de Seguros S.A., and Sudamericana Seguros Galicia SA — Argentine companies and their insurers — sued multiple defendants after a Union Pacific freight train collided with a tractor-trailer carrying their cargo, destroying the shipment and resulting in non-delivery. Plaintiffs brought a state-law negligence claim against Union Pacific, alleging it failed to maintain proper lookouts, operated at an unsafe speed, and failed to take necessary steps to avoid the collision.
Union Pacific moved to dismiss under Rule 12(b)(6), advancing three arguments: (1) the Carmack Amendment to the Interstate Commerce Act, 49 U.S.C. § 11706, preempted any state-law negligence claim; (2) Plaintiffs had not pleaded sufficient facts to state a negligence claim; and (3) the economic loss doctrine under Texas law barred recovery. In its briefing, Union Pacific cited Missouri Pac. R.R. Co. v. Shiflet, 425 S.W.2d 662 (Tex. 1968), for the proposition that railroads are entitled to presume motorists will obey traffic laws.
The Court’s Holding
Judge Nicholas J. Ganjei denied the motion to dismiss on all three grounds. On Carmack Amendment preemption, the court held that the Amendment’s exclusive-remedy provision applies only to carriers that issue a bill of lading and receive property for transportation — Union Pacific here was a non-contracting railroad that never carried Plaintiffs’ cargo and was sued solely as a tortfeasor whose train destroyed the shipment. Because Union Pacific stood outside the Carmack framework, Plaintiffs’ state-law negligence claim was not preempted. The court further found that the complaint plausibly alleged all three elements of Texas negligence — duty (a railroad’s common-law obligation of reasonable care), breach (failure to maintain lookouts and safe speed), and proximate causation (the resulting collision and cargo loss) — and that the economic loss doctrine was inapplicable because Plaintiffs alleged destruction of their own property, not purely economic harm.
Separately, the court issued an order to show cause directed at Union Pacific’s counsel. After conducting its own research on Westlaw and LexisNexis and consulting the South Western Reporter, the court could not locate Missouri Pac. R.R. Co. v. Shiflet, 425 S.W.2d 662 (Tex. 1968) — neither by case name nor by reporter citation. The court ordered Union Pacific to produce a copy of the opinion and to explain, by June 29, 2026, what search engine or other tool counsel used to find the case, with an explicit disclosure if artificial intelligence was used in the research process.
Key Takeaways
- The Carmack Amendment’s preemption of state-law claims does not extend to a non-contracting railroad that never issued a bill of lading for the destroyed cargo; a cargo owner may pursue an ordinary negligence claim against such a railroad under state law.
- Under Texas law, the economic loss doctrine does not bar a claim when the plaintiff alleges physical destruction of its own property — the doctrine targets purely economic harm unaccompanied by property or personal injury.
- A federal court that cannot locate a case cited in a motion to dismiss — on Westlaw, LexisNexis, and in the bound reporter — will order counsel to produce the opinion and disclose whether AI-assisted legal research tools were used, signaling serious judicial scrutiny of potentially hallucinated citations.
Why It Matters
The substantive holdings clarify an important boundary in Carmack Amendment preemption doctrine: the statute shields contracting carriers from competing state-law claims, but leaves third-party tortfeasors — including railroads whose trains cause damage without having accepted the cargo for transport — fully exposed to state negligence suits. Cargo owners and their insurers who suffer loss from a non-contracting carrier’s negligence retain independent state-law remedies.
The show-cause order may prove equally significant as a practical matter. The court’s inability to verify Shiflet through standard legal databases, and its pointed instruction that counsel disclose any AI tool used in research, adds to a growing body of federal court orders confronting the risk of fabricated citations generated by large language models. Practitioners in the Southern District of Texas — and beyond — should treat this order as a clear warning that courts are now conducting independent verification of citations and will require counsel to account for research methodology when a citation cannot be confirmed.