Supreme Court Silent on Freight Brokers’ Tort Liability Under FAAAA’s ‘Security Exception’ | Weber Gallagher Simpson Stapleton Fires & Newby LLP

Earlier this year, in the case of CH Robinson v. MillerNo. 20-1425, 2022 WL 2295168 (United States, 27 June 2022), the United States Supreme Court dealt a blow to freight brokers when it refused to grant a broker’s request in review of the Ninth Circuit’s opinion that the Federal Aviation Administration Authorization Act of 1994 (FAAAA) does not prevent negligence claims against cargo brokers under state law, despite FAAAA wording suggesting otherwise.

The Ninth Circuit’s ruling, apparently allowing “negligent brokerage” claims, opens freight brokers to tort liability for their retention of commercial carriers who are later involved in motor vehicle accidents. Brokers (and their insurers) should pay close attention, as this issue remains a hot topic in commercial transportation. Brokers and their insurers should be proactive in preparing to defend against a potential onslaught of state law claims arising from their selection of commercial carriers across the country.

The underlying tort case

In 2016, Allen Miller became a quadriplegic following an accident with a tractor-trailer in Nevada. The truck driver apparently lost control and drove across the median into oncoming traffic, trapping Miller and seriously injuring him. Miller sued the trucking company, its driver, and CH Robinson Worldwide, Inc., the freight broker who arranged the trailer to transport goods for Costco Wholesale, Inc. The trucking company hired by CH Robinson obviously had a poor safety record, including a high rate of failed roadside inspections and numerous hours of service violations.

In his lawsuit, filed in the U.S. District Court for the District of Nevada, Miller alleged that CH Robinson had a duty to select a qualified and competent commercial carrier, and that he breached that duty by engaging a commercial carrier that he knew or should have known. had a history of security breaches.

CH Robinson argued that Miller’s negligence claim was preempted by the FAAAA. The law prohibits state law claims that are directly or indirectly “related to any price, route, or service of any … broker.” The law provides for limited exceptions, which, according to CH Robinson, did not apply in this case. CH Robinson did not own the motor vehicle, nor did it employ the driver involved in the accident. Miller argued that the “safety exception,” which provides that the FAAAA “shall not restrict a state’s safety regulatory authority with respect to motor vehicles,” applied, and that he could therefore pursue his action in tort.

The district court (correctly) sided with CH Robinson and ruled that Miller’s negligence claim was preempted by the FAAA because the claim was “related” to CH Robinson’s services. More importantly, the Court ruled that by relying on the “security exception” to the FAAAA preemption clause, Miller was attempting to create a private tort action and usurp police power. of the State to apply its own security rules. Under Miller’s logic, brokers would be subject to a higher level of service when selecting a motor carrier, and in order to avoid liability for alleged negligence, a broker would be required to constantly monitor each carrier’s track record. . Further, “such additional inspection would result in the use of state law to regulate” brokerage services by creating “a standard of best practice.”

Miller appealed to the Ninth Circuit.

The inversion of the ninth circuit

The Ninth Circuit quashed, finding that although the negligence claim was “related” to the services of CH Robinson (and was therefore preempted by the FAAAA), the “safety exception” did make a request to allow Miller to pursue his claim. Interestingly, the Court held that in listing the exception, “Congress intended to preserve the states’ broad power over security, a power that included the ability to regulate conduct not only by statute and administrative enactment, but also by common law damages”. The Court also found that Miller’s claim was sufficiently related to motor vehicles (which is necessary for the exception to apply) simply because it arose out of a motor vehicle accident, even though the CH Robinson’s involvement was indirect.

The case was returned to the High Court for further processing. The decision is recorded at Miller vs. CH Robinson Worldwide, Inc.., 976 F.3d 1016 (9th Cir. 2020).

CH Robinson asked the Supreme Court to review the Circuit Court’s decision, but the Court declined to do so. CH Robinson Worldwide, Inc. v. Miller, No. 20-1425, 2022 WL 2295168 (United States 27 June 2022).

The impact on the industry and what brokers and their insurers can do

With this new risk of common law tort liability across the country, brokers and their insurers face new challenges, not only in how they conduct their business, but also in how they can successfully defend themselves. against such claims in various jurisdictions.

The Ninth Circuit’s decision imposes an enormous financial burden on the transportation industry. Given the regional and national operations of brokers, the impact of potential tort liability resulting from the negligence of commercial carriers and their drivers could be immense. This will significantly increase the cost of doing business as these costs are spread across the industry.

Plaintiffs’ attorneys will rely on the Ninth Circuit’s decision to try to establish a previously non-existent obligation on brokers to conduct a detailed investigation of every carrier it retains across the country. Brokers will be forced to conduct these investigations with each state’s common law tort laws in mind, which will be complicated, time-consuming and expensive. In enacting the FAAAA, including the preemption provision, Congress arguably did not intend to impose such an extreme burden on brokers.

So what can brokers do?

Above all, brokers, their insurers, and interested trade organizations such as the United States Chamber of Commerce and the National Retail Federation should monitor related developments in the law across the country and actively participate in directing the courts in the right direction. management, to strengthen FAAAA protection of brokers against tort liability. Litigation across the country is inevitable, and if other circuit courts issue rulings contrary to the opinion of the Ninth Circuit in CH Robinson, the Supreme Court could weigh in to settle the issue in the coming years. Industry advocates must be prepared to weigh in to protect the interests of all industry players.

In the immediate future, brokers should consider developing systems to regularly perform and document reasonable inquiries into the carriers they have chosen. It is important to note that under common law in most jurisdictions, alleged tortfeasors are generally only required to act reasonably in the circumstances. Therefore, while brokers should now be proactive in checking the safety records of their commercial carriers, the norm is never perfection and they should not be held responsible for the negligence of carriers when they have otherwise acted reasonably.

Weber Gallagher’s commercial transportation team is available to advise our customers on this and other developments impacting their business and bottom line and provide practical recommendations as the industry continues to transform. The team is also available to provide expert representation and advice to clients facing litigation in New York, New Jersey, Pennsylvania and Delaware in state and federal courts.