A decision handed down Tuesday in favor of 3PL GlobalTranz sets up the possibility of another attempt to have the Supreme Court review the issue of broker liability when things go horribly wrong on the road.
The 7th Circuit Court dismissed an appeal from Ying Ye, the widow of Shawn Lin, who was killed in November 2017 while riding a motorcycle that collided with a truck operated by carrier Global Sunrise. That carrier, with a safety record described in the court documents as less than stellar, was hired by GlobalTranz.
Ye sued both GlobalTranz and Global Sunrise in the U.S. District Court for the Northern District of Illinois. Global Sunrise was based in Illinois, although the crash took place in Texas. The 7th Circuit covers Illinois, Indiana and Wisconsin.
She did win summary judgment against Global Sunrise for $10 million two years after the carrier’s counsel stopped responding to the case.
But the appellate court backed the lower court finding that Ye’s claim against GlobalTranz was preempted by the Federal Aviation Administration Authorization Act (FAAAA) of 1994, the law that prohibits states from enacting transportation regulations in conflict with the Act.
In dismissing Ye’s appeal, the court was upholding the verdict of the lower court that FAAAA preempted action against GlobalTranz because it could impact trucking “prices, routes or services,” the core regulation regarding trucking in the law.
Ye was represented by Public Citizen, an interest group founded by famed activist Ralph Nader. Adina Rosenbaum, one of the attorneys who worked on the Ye case, told FreightWaves that no decision has been made whether to appeal the 7th Circuit decision to the Supreme Court.
The FAAAA has a “safety exemption” that does allow state action against trucking and other transportation companies if it can be proven that there has been a serious violation of safety standards.
But the lower court and the appellate court found that the safety exemption in the 1994 law cited by Ye did not apply to brokerages like GlobalTranz against Ye’s claims, which were made under Illinois state law. As a result, FAAAA protected GlobalTranz from a liability claim.
But where the Supreme Court might come into play is that there are now at least three significant decisions about broker liability under the FAAAA safety exemption, two that align and a third that is in conflict with them.
One is the Ye decision. The second is a decision that aligns with the Ye judgment in protecting brokers under FAAAA: the recent decision in the 11th Circuit (Alabama, Florida and Georgia) involving stolen cargo brokered by Landstar (NASDAQ: LSTR). The conclusions in that case regarding FAAAA preemption of state laws are similar to the findings in the Ye case.
On the other side of the divide is the case of Miller v. C.H. Robinson (NASDAQ: CHRW).That case involved a lower court decision that found C.H. Robinson negligent for its hiring of a carrier, RT Service, which in December 2016 was operating a truck that crossed a median and struck a car driven by Allen Miller. The crash left Miller a quadriplegic. The lower court ruled that the safety exemption did not protect C.H. Robinson.
The Supreme Court in June 2022 chose not to grant certiorari review of the case. The case later was settled. But the precedent in the case, that the safety exemption could be used by the injured party to find negligence against a broker, remains in the body of case law.
At a panel earlier this year at the annual meeting of the Transportation Intermediaries Association, the potential damage of the Miller v. C.H. Robinson case to the brokerage sector was discussed. One possible course of action to reduce the potential havoc that Miller might bring to the brokerage industry was to find another decision that was in conflict with the findings of Miller v. C.H. Robinson.
Panelists said their hope was that the conflict might cause the Supreme Court to reconsider the issue, as opposed to its decision to reject review of the appeal on Miller as a stand-alone case. With the Ye v. GlobalTranz case now through the circuit court appeal, and the Landstar case also in the books, that conflict now exists.
“I expect that the plaintiff is virtually certain to seek review by the U.S. Supreme Court,” Marc Blubaugh, head of the transportation group at the Benesch Law Firm, said in an email to FreightWaves. He said that while gaining review by the court is “always an uphill battle … the fact that a very clear circuit court split now exists certainly makes it more likely that the court will entertain review.”
The Transportation Intermediaries Association, which represents the brokerage community, expressed satisfaction with the decision. “The freight brokerage industry has been scrutinized for years regarding negligent selection lawsuits and our role in the safety profile of a motor carrier,” the TIA said in a prepared statement. “This decision along with the Landstar case provides two favorable rulings for the brokerage industry from these claims of negligence. TIA will continue to advocate for an updated safety rating process of motor carriers that will help ensure that only the safest carriers are selected and removing the ambiguities and confusion in the carrier selection process.”
Even if there is no appeal by Ye and Public Citizen, the decision by the 7th Circuit did spell out what it saw as the distinction between its rejection of how the safety exemption in FAAAA protected GlobalTranz and how the 9th Circuit concluded that it did not protect C.H. Robinson.
One basis for the conclusion by the court in the Ye case is its interpretation of the term “motor vehicles.” The court said the safety exemption in FAAAA could create liability for a “vehicle, machine, tractor, trailer, or semitrailer … used on a highway in transportation.”
The court in the Ye case reviewed federal law and concluded it found nothing that suggested Congress intended its regulation to consider a broker to be in the explicit definition of motor vehicles. “We find no evidence … that Congress sees a direct relationship between broker services and motor vehicles,” the court wrote.
By contrast, the 7th Circuit wrote, the 9th Circuit interpreted language in the exemption that it was “with respect to motor vehicles” as impacting entities that have an indirect link to motor vehicles, “including negligent hiring claims against brokers.” The court in Ye then wrapped up its decision by several pages of discussing what “with respect to” means legally.
“No doubt ‘with respect to’ is broad, but we decline to equate it to ‘relating to,’” the court said. “Our different view of this phrase offers another reason why our construction of the safety exception is narrower than the 9th Circuit’s.”
Nathaniel Saylor, a partner with the trucking-focused Scopelitis law firm, said even if the Ye case is not appealed to the Supreme Court, the arguments made by the 7th Circuit regarding the difference between it and the 9th Circuit “could be a persuasive precedent in a different federal court.”
Describing the Ye decision as a “big win,” Saylor said the logic in spelling out the differences with the 9th Circuit were “well reasoned.”
“So the hope would be that the next time the case comes up, a different circuit would have the benefit of both these decisions and hopefully would follow the 7th Circuit reasoning on why the 9th Circuit didn’t rule correctly,” he said.
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