The 3PL industry’s latest win in the legal battle over broker liability comes in a federal appellate court where a pro-broker precedent already exists.
Meanwhile, the latest attempt to have the U.S. Supreme Court rule on the issue may have been taken up by the court in a conference held Friday.
In the most recent case, the U.S. Court of Appeals for the 7th Circuit, in a decision handed down Jan. 3, held that C.H. Robinson (NASDAQ: CHRW) did not have an “agency” relationship with carrier Caribe Transport, affirming a lower court ruling.
The issue arose in a lawsuit brought by truck driver Shawn Montgomery, whose vehicle was struck in 2017 by a Caribe truck while the latter was delivering plastic pots. The freight had been brokered by C.H. Robinson. In the original lawsuit filed in the case, his injuries were described as “severe, numerous and permanent.”
But the 7th Circuit is also the venue for the decision in the case involving Ying Ye, whose husband was killed in an accident with a truck hired by 3PL GlobalTranz. That case found that the Federal Aviation Administration Authorization Act (F4A) protected GlobalTranz from liability. Ye’s attempt to have the Supreme Court review the case was rejected a year ago.
According to the decision in the Caribe case – Caribe, not Robinson, is listed as the lead defendant – attorneys for Montgomery asked the U.S. District Court for the Southern District of Illinois to overturn the findings in Ye, which it declined to do.
The appellate court in its recent action affirmed that lower court decision, which had handed down its decision in early January 2024.
But attorneys for Montgomery took another tack: They argued that Caribe was C.H. Robinson’s agent, not an independent contractor, and that the agency relationship meant C.H. Robinson could not claim protection through F4A.
The lower court also disagreed with that argument, but the Montgomery attorneys pursued it in their appeal.
Addressing the question of whether there was “vicarious liability” against C.H. Robinson, the three-judge panel cited precedent – coincidentally in an earlier case against the broker – that said vicarious liability can be found “for the conduct of [an] agent but not for the conduct of an independent contractor.”
The panel then reviewed several of the tests to determine whether a third party is an agent – which would more likely lead to a finding of liability or negligence against a 3PL – or an independent contractor, which has protected 3PLs in most questions of broker liability.
“When determining whether the broker/carrier relationship has stepped outside the [independent contractor] norm, the ‘cardinal consideration’ is whether the broker retained the right to control the manner of delivery, rather than its ‘mere result,’” Yandle wrote, again citing precedents. “Other factors include the right to make hiring decisions, the right to discharge or otherwise terminate the relationship, the method of payment and whether taxes are deducted, the provision of equipment, the level of skill required, and the relative nature of the work and supervision between the parties.”
After an extensive review of the relationship between Caribe and C.H. Robinson, Yandle wrote that the “undisputed evidence shows that Caribe and [its driver] Varela-Mojena were not Robinson’s agents and vicarious liability does not attach.”
With this decision, the concurrent affirmation of both the Ye decision and earlier precedents on the question of “independent contractor versus agent” strengthens the body of law protecting brokers from liability or allegations of negligence when a carrier they hire is involved in an incident that leads to litigation.
But since the Caribe case was handed down in the 7th Circuit, which already had the Ye decision, its outcome does not expand the number of circuits that have recognized the protection of brokers under the F4A, the 1994 law that prohibits states from taking actions that could impact a “price, route or service.”
Among the key precedents is the Landstar case involving theft of cargo (NASDAQ: LSTR). There, the 11th Circuit ruled that F4A protected the 3PL. That was also the venue for the Gauthier case, with TQL having prevailed on the question of broker liability.
In Miller vs. C.H. Robinson, however, the 3PL lost a portion of its F4A argument in the 9th Circuit.
What that means is that there are major recent legal precedents on the question of broker liability in the 7th and the 11th circuits favorable to the 3PL industry and one 9th Circuit precedent involving a case the 3PL industry would very much like to see overturned. A court in a circuit without a precedent could choose any one of these rulings when a question of broker liability comes before it.
That conflict is one of the reasons why the industry has attempted to have the Supreme Court weigh in, but the high court declined to grant review of both the Ye and Miller cases.
It’s now up to the unusual request by both plaintiff and defendant in Gautier vs. TQL for certiorari to have the Supreme Court take up the issue.
That request may have been on the agenda in a Supreme Court conference Friday to determine what cases to accept and which to reject. The widely read SCOTUS blog on Friday described the Gauthier vs. TQL case as a “featured petition” in a review of the cases before the court with requests for review.
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