Federal appeals court rules claims against freight broker after crash are preempted

Earlier this week, the 7th Circuit Court of Appeals--the federal court with appellate jurisdiction over courts in Illinois, Indiana, and Wisconsin--ruled in favor of GlobalTranz, a freight broker, in a highway accident suit brought against it by plaintiff Ying Ye after her husband was killed in a crash caused by a carrier GlobalTranz had engaged to haul freight.

The appeal presented the question of whether a plaintiff's claims against a property broker for negligently selecting/hiring an allegedly unsafe motor carrier are preempted by a federal law known as the Federal Aviation Administration Authorization Act (FAAAA), 49 U.S.C. 14501(c). That law, which is regularly raised as a defense in various transportation-related cases, says that states

may not enact or enforce a law, regulation, or other provision having the force and effect of law related to a price, route, or service of any motor carrier ... or any motor private carrier, broker, or freight forwarder with respect to the transportation of property.

In GlobalTranz, Ye argued the freight broker was negligent--and therefore liable for damages--in its hiring of the motor carrier that caused the accident. More specifically, Ye claimed GlobalTranz had a duty to use reasonable care in vetting the safety of motor carriers that it authorizes to haul freight, and that it breached that duty in this case, which led to her husband's death. She pointed to a history of hours-of-service violations that, according to her, should have alerted GlobalTranz to potential safety concerns with this particular carrier.

For its part, GlobalTranz argued Ye's negligent hiring claim was preempted by FAAAA, citing a recent case from the 11th Circuit Court of Appeals, which supported that proposition. The court agreed, holding in part:

In our view, enforcement of such a claim—and the accompanying imposition of liability—would have a significant eco- nomic effect on broker services. By recognizing common-law negligence claims, courts would impose in the name of state law a new and clear duty of care on brokers, the breach of which would result in a monetary judgment. This is exactly what Ye seeks here against GlobalTranz. To avoid these costly damages payouts, GlobalTranz and other brokers would change how they conduct their services—for instance, by incurring new costs to evaluate motor carriers. Then, by changing their hiring processes, brokers would likely hire different motor carriers than they would have otherwise hired without the state negligence standards. Indeed, that is the centerpiece of Ye’s claim: that GlobalTranz should not have hired Global Sunrise.

Ye countered that even if her negligent hiring claim fell within the scope of FAAAA's prohibition, it was then carved out by the FAAAA's so-called "safety exception," which provides that its preemptive scope:

shall not restrict the safety regulatory authority of a State with respect to motor vehicles, the au- thority of a State to impose highway route controls or limitations based on the size or weight of the motor vehicle or the hazardous nature of the cargo, or the authority of a State to regulate motor carriers with regard to minimum amounts of financial responsibility relating to insurance requirements and self-insurance authorization.

Indeed, it's this "safety exception" on which the 9th Circuit Court of Appeals recently relied in allowing a similar claim against a property broker to proceed on the merits. That case was Miller v. C.H. Robinson, which garnered much attention when Robinson appealed the ruling to the U.S. Supreme Court. The Supreme Court declined to hear that appeal, leaving the 9th Circuit's ruling intact.

The 7th Circuit disagreed with Ye's contention and the 9th Circuit's analysis of the "safety exception," finding that state common law negligence claims enforced against freight brokers are not laws “with respect to motor vehicles” and therefore do not fall under the safety exception.

Accordingly, the court concluded Ye's negligent hiring claim was preempted by FAAAA and could not proceed. Significantly, the court wrote:

We see, too, that the Federal Motor Carrier Safety Administration—which is tasked with motor vehicle safety as its top priority—requires brokers to maintain records of their trans- actions, abide by certain advertising standards, and avoid conflicts of interest with shippers. See 49 C.F.R. §§ 371.3, 371.7, 371.9. But nowhere do we see any indication that the Administration imposes safety standards on broker hiring or otherwise recognizes a relationship between brokers and mo- tor vehicles. A clear conclusion emerges from this broader review of Title 49 and the regulatory landscape: Congress’s references to motor vehicle safety do not impose obligations on brokers.

Conclusion

The court's GlobalTranz decision is an important development in FAAAA preemption jurisprudence. It means that, at least in states falling within the 7th Circuit, brokers will be shielded from negligent-hiring-type claims. BUT, the circuit split that now exists on this issue among the 7th, 11th, and 9th circuits could very well lead to the issue being addressed in a future U.S. Supreme Court case. Also, brokers should be aware that the 7th Circuit's decision does NOT shield them from other theories of liability, namely vicarious liability. For example, it's still conceivable that a freight broker could be held vicariously liable for the negligence of a carrier's truck driver if the evidence supports that the broker exercised a sufficient amount of control over that driver.

About Trucksafe Consulting, LLC: Trucksafe Consulting is a full-service DOT regulatory compliance consulting and training service. We help carriers develop, implement, and improve their safety programs, through personalized services, industry-leading training, and a library of educational content. Trucksafe also hosts a monthly live show on its various social media channels called Trucksafe LIVE! to discuss hot-button issues impacting highway transportation. Trucksafe is owned and operated by Brandon Wiseman and Jerad Childress, transportation attorneys who have assisted some of the nation’s leading fleets to develop and maintain cutting-edge safety programs. You can learn more about Trucksafe online at www.trucksafe.com and by following Trucksafe on LinkedIn, Facebook, Twitter, and YouTube.