Freight brokerage giant C.H. Robinson Worldwide Inc. (NASDAQ:CHRW) faces an uphill battle convincing the U.S. Supreme Court to settle the issue of broker liability for damages resulting from accidents involving a trucker hired by the broker but purportedly not under the broker’s employ or control. The high court reviews just 1% to 3% of the 10,000 or so petitions filed with it each year. What’s more, the justices typically focus on cases where they can resolve conflicting opinions among the 13 appellate courts. This scenario doesn’t apply to Robinson because only one appeals court, the 9th U.S. Circuit Court of Appeals, has ruled in the case that Robinson has brought before the high court.
Perhaps as a byproduct of these adverse conditions, Robinson’s attorneys have taken a different tack to draw the court’s attention: Paint the 9th Circuit, the largest of the 13 appellate courts and with a reputation for judicial independence and labor-friendly views, as a runaway court of sorts, rendering opinions relating to federal preemption of state transport regulations that thwart the intent of lower courts, Congress and of the justices themselves.
Robinson’s focus is on defeating a well-honed plaintiffs’ bar strategy of using a “safety exception” written into the landmark 1994 federal preemption law, known as FAAAA, to argue that states can regulate safety through common-law tort claims, including those filed against brokers that arise from truck accidents. Robinson is challenging a 9th Circuit’s three-judge panel’s 2-1 decision in September that the claims filed by Allen Miller, a motorist left paralyzed following a 2016 Nevada crash with a motor carrier hired by Robinson to move goods for warehouse retailer Costco Wholesale Corp. (NASDAQ:COST) from Sacramento, California, to Salt Lake City, fell under the safety exception language.
Miller had sued Robinson in 2017 on grounds that its negligence in its carrier selection contributed to the incident. Brokers argue that they own no trucks, employ no drivers, follow all federal safety guidelines, and have no control over how a driver behaves once on the road. Brokers contend that it should be up to federal safety regulators, not the industry, to determine the fitness of a driver and a trucker.
Nathaniel G. Saylor, partner in the transport law firm of Scopelitis, Garvin, Light, Hanson & Feary, called the approach “savvy” on Robinson’s part given the long judicial odds it faces, the lack of federal regulations that clearly determine a carrier’s safety worthiness, and the absence of federal legislation that would shield brokers’ carrier-selection practices from legal liability. Language designed to incorporate such protections into the 2015 FAST Act didn’t make it into the bill’s final version.
To elevate the issue’s importance in the face of these obstacles, Robinson needed to raise the specter of a lower court that was effectively defying the will of Congress and of the high court. “It’s smart drafting,” Saylor said, adding that “this is the argument that [Robinson] should be making.”
At the heart of the dispute is the interpretation of the 1994 law’s safety language. According to attorneys for Robinson and for a myriad of freight and business interests that filed supporting briefs, the statute only allows states to regulate safety only “with respect to motor vehicles.” Robinson and other commercial interests maintain the provision does not apply to brokers because they neither own nor operate motor vehicles. They maintain that the appeals court panel adopted a “broad stroke” vision of the safety exception that Congress never intended.
Robinson, which did not comment beyond the Supreme Court filing, said the 9th Circuit has “repeatedly ignored” high court precedent reinforcing Congress’ desire to see the transportation industry governed by uniform regulatory regimes rather than by a patchwork of state-by-state regulations that expose brokers, truckers and even shippers. As an example, Robinson cited a 2014 Supreme Court opinion in a case involving airline frequent flier mileage, in which the justices reversed the 9th Circuit’s interpretation of the preemptive tenets of the 1978 Airline Deregulation Act, the model upon which the 1994 statute was built. Before that case was heard, there were concerns that the 9th Circuit’s decision, if upheld, would give rise to plaintiffs’ bar efforts to “eviscerate the preemptive effect” of both laws, Robinson said.
If the high court denies Robinson’s petition and lets stand the appeals court ruling, it will validate the plaintiffs’ bar’s faulty logic, freight interests argued. Plaintiffs attorneys who already leverage the lack of federal uniformity in negligent selection regulations to bring large-dollar suits against brokers will be further emboldened by a successful breach of the federal preemption laws to craft more frequent and creative strategies that pursue brokers as well as even deeper-pocketed shippers, commercial interests said.
Plaintiffs lawyers are “already invoking” the 9th Circuit’s decision in “courts across the country as they seek to expand from their beachhead” in the circuit, Robinson said. The resulting liability will also significantly increase the cost of interstate transportation through any of the nine Western states — notably California — and the two Pacific island jurisdictions it oversees. Because of the 9th Circuit’s coast-long reach, the affected coverage area would include virtually anything coming in from and going out over the Pacific Ocean, Robinson said.