The transportation industry wants the U.S. Supreme Court to resolve the contentious issue of whether freight brokers should be liable for damages resulting from accidents involving a trucker who the broker hired to move a load, but who the broker purportedly did not employ or control.
C.H. Robinson Worldwide Inc. (NASDAQ:CHRW), the nation’s largest broker, asked the high court to settle the long-running dispute over “negligent hiring” after an appellate court last September ruled that language embedded in a landmark 1994 law preempting state economic regulation of transportation services preserved a state’s authority to regulate safety through common-law tort claims, including those filed against brokers which arise from truck accidents. The lower court denied Robinson’s bid for a rehearing in November.
There is no guarantee the justices will accept Robinson’s petition. In fact, the vast majority of petitions for “writ of certiorari” are denied.
In its April petition, Robinson said the ruling by the Ninth Circuit U.S. Court of Appeals “badly misinterprets” the so-called safety exception written into the 1994 law, commonly known as the FAAAA. A common-law tort claim against a broker does not represent an “exercise” of the state’s regulatory powers. Robinson argued. The safety exception empowers a state to enact and enforce safety regulations, but does not extend its authority to act on “private claims brought by private parties to compensate for past injuries,” it said.
The law does not restrict a state’s regulatory authority “with respect to motor vehicles.” However, Robinson argued the language doesn’t apply in this case because it owns and operates no trucks. The appeals court disagreed Robinson’s contention.
The Ninth Circuit ruling reversed a federal district court decision that the claims made by Allen Miller, a motorist left paralyzed following a 2016 Nevada crash with a driver employed by a motor carrier that Robinson hired to move goods for warehouse retailer Costco Wholesale Corp. (NASDAQ:COST) from Sacramento to Salt Lake City, did not fall under the safety exception language. Miller had sued Robinson in 2017, alleging the broker was negligent in its hiring of the motor carrier, which was not identified in the broker’s petition.
For nearly two decades, shippers, brokers, and carriers have waged war against the plaintiffs’ bar over the extent to which brokers carry the legal and financial liability for accidents involving truckers and drivers engaged to transport a load. Plaintiffs lawyers maintain that brokers are responsible for ensuring that a carrier and driver have met all appropriate safety requirements, and that brokers have a much closer relationship with carriers than they publicly state.
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 also contend that it should be up to federal safety regulators, not the industry, to determine the fitness of a driver and a trucker. The latter issue has been at the center of safety and liability debates that go beyond negligent hiring.
Brokers believe that the plaintiffs bar has zeroed in on brokers because they know that smaller, margin-challenged carriers lack the insurance coverage, or the financial resources in general, to pay out on multi-million dollar verdicts. The federal government requires a minimum of $750,000 in liability coverage, though most shippers and brokers will require $1 million.
Road safety issues are of deep concern to the entire supply chain because of the specter of shippers being forced into the fray by an aggressive plaintiffs bar. Underscoring this concern, Robinson’s petition has drawn supporting pleadings from a broad cross section of the American business world. Indeed, Costco was originally named as a defendant before being dismissed from the case.
The battle over negligent hiring has been fought in the judicial, legislative and regulatory arenas. It dates to a fatal 2002 accident in Maryland between a tractor-trailer and a pick-up truck with a driver and passenger. The victims’ families sued the driver, Brian Foster, who court documents showed had exceeded his federal hours-of-service limitations and whose failure to either stop or yield at an off-ramp led to the fatal crash. They also sued the carrier, Groff Brothers Trucking LLC, and Robinson, the broker who covered the load.
The plaintiffs said Robinson was liable for the driver’s negligence because it controlled the transportation on behalf of the shipper, held itself out as a single point of contact for its shipping needs, and that the driver was functioning as Robinson’s agent when performing his duties.
The suit was eventually settled out of court for a reported $4 million. However, it was a 2004 ruling in the case by Federal District Court Judge J. Frederick Motz that sent alarm bells ringing throughout the industry. Motz found that Robinson could have done a better job of investigating why Groff had a sub-standard federal safety rating before assigning the load to the trucker. But in what would become a consequential broadside to all brokers and third party logistics (3PL) providers, Motz wrote that Robinson had “actively interjected itself” into the shipper-carrier relationship and, in so doing, had chosen to do business “in a context heavily tinged with the public interest.” Common law, Motz wrote at the time, imposed upon Robinson a “duty commensurate with its undertakings.”
The letter and spirit of the judge’s ruling effectively opened the door for the plaintiffs’ bar to sue deep-pocketed brokers for liability in truck-related accidents. Many cases have been settled out of court for significant sums, reflecting industry concerns about facing a jury sympathetic to the plight of victims and their families.