The views expressed here are solely those of the author and do not necessarily represent the views of FreightWaves or its affiliates.
Don’t neglect this negligence case.
Recently, there has been lots of news and conversation around the U.S. Supreme Court denying the writ of certiorari in the case of AB5, California’s independent contractor law.
A related case hasn’t been in the news nearly as much, by comparison.
A week earlier, the high court took the same action (or inaction) by denying “cert” in Miller v. C.H. Robinson, a case involving a personal injury lawsuit. I argue that this will have much bigger implications for the industry. This denial of cert. could upend the massive freight brokerage industry, which has massive ramifications across the supply chain.
While the particulars are very different, the cases’ appeals to the Supreme Court stand on the same grounds: that federal law preempts state laws in both situations. That law is the Federal Aviation Administration Authorization Act (F4A), which bans states from enacting laws that could affect a motor carrier’s rates and services.
(By the way, I’m not a practicing attorney so nothing here is legal advice — and I’m definitely not YOUR attorney. However, I can help explain some things that I see as very important for the future of our space.)
A few key Supreme Court terms and what they mean for the Robinson decision
Writ of certiorari: There are courts that you have a right to access due to the nature of your claim and/or because you have been a bad boy or girl. Other courts require you to petition before they decide whether to hear you out. The Supreme Court is the latter (most of the time), and it only takes cases it sees as needing clarification.
A writ of certiorari is a lot like that scene from “Say Anything” where John Cusack is holding up his boom box begging to be heard. In the cases of AB5 and Robinson, the high court said, “Nah, we’re good.”
When the court grants cert., SCOTUS will hear the case, review the lower court’s decision and issue its own ruling. Denying cert. often has the impact of leaving the matter settled in only some places (which I explain further below on binding precedent), but it allows the ruling of that lower court to stand. This is what resulted in both the Robinson and AB5 cases.
Preemption: In both of these cases, the trucking industry was arguing that F4A preempts these laws.
Not to go all “Schoolhouse Rock!”, but preemption is a concept born out of the tension between federal and state law. The federal government is limited in the areas it can control the states, but in those areas, federal law supersedes state law. Sometimes, federal law or regulation explicitly supersedes state law.
Often, however, there is a question on the “intent” of a law or regulation and whether it aimed to squeeze out all state law. The regulation may be so broad that the intent of the federal law is to regulate the entire industry.
That’s what’s at issue here — whether federal regulation invalidates any state law claims for negligence in cases involving freight brokerage.
In these cases, the lower courts said that F4A did not preempt, and therefore AB5 could stand as good law, and the Robinson case could continue to the facts for the plaintiff to try to prove it was CHR’s fault.
Binding versus persuasive precedent: The lower courts in both AB5 and C.H. Robinson said that state law should prevail. However, the federal court system is comprised of 94 federal districts, which is then organized into 12 regional circuits. Both types of districts are based on geography, and so the 9th Circuit, which covers some of the Western states, is what’s at issue here.
The Supreme Court decides cases when there’s disagreement among the different circuits’ interpretations, and that’s where binding versus persuasive precedent comes in. A court must follow binding precedent, but is only required to consult persuasive precedent.
A court is only bound by the decision of the courts above it in its direct jurisdiction. It may also take into account persuasive precedent from ones around it. For the broad principles of both cases, only states on the West Coast have any skin in the game.
This leads to a lot of uncertainty about how any of the other circuits might decide cases that are similar to C.H. Robinson or AB5.
States like Massachusetts are considering laws similar to AB5. The legality of such laws isn’t clear on a federal level, thanks to the Supreme Court’s denial of cert. in the 9th Circuit case.
And in the case of C.H. Robinson and negligence claims dealing with an on-road collision, every state approaches these cases differently. Some are more sympathetic to the plaintiffs, for example. As a result, courts will apply 50 different standards to any case that is related to a broker involved in litigation, depending in which state the accident occurred.
What you missed about the Supreme Court’s C.H. Robinson decision
At the heart of both the AB5 and C.H. Robinson cases is the interplay between state and federal law. F4A is federal legislation that regulates interstate trucking, among other modes of transport. F4A covers everything from the definition of a broker and carrier, to liability for cargo loss and damage and other things. Ostensibly, it’s the bible for trucking.
You’ve likely already heard about AB5, but here’s a quick primer just in case.
AB5 went into effect on Jan. 1, 2020, in California. It makes it difficult (even impossible) to classify workers as independent contractors, which of course has major implications for the trucking business. An estimated 70,000 owner-operators work in California and could potentially see their working lives change as a result of AB5.
A group of industry folks sued the state of California claiming preemption and secured a temporary injunction preventing AB5 from taking hold in trucking shortly after it came into effect. The California Trucking Association’s case traveled up to the 9th Circuit U.S. Court of Appeals, which ruled in April 2021 that the AB5 law was not preempted by F4A. However, the 9th Circuit allowed the injunction to stay until the Supreme Court could hear the CTA’s case.
Ultimately, the high court refused to take up the AB5 case. That means the lower court’s decision will stick.
The C.H. Robinson case is very different. C.H. Robinson, the massive freight brokerage that brought in $23.1 billion in revenue last year, hired a carrier to haul a load for a shipper in 2016. That carrier had a history of safety violations. The truck crossed into oncoming lanes and a passenger vehicle crashed into the truck. The accident rendered the driver of the passenger vehicle a quadripelgic.
The plaintiff sued on a state law claim of negligence, arguing that C.H. Robinson was negligent in selecting this particular carrier because the brokerage knew or should have known that the carrier operated unsafely.
The 9th Circuit ruled against the broker in September 2020, stating that C.H. Robinson had “negligently selected an unsafe motor carrier resulting in plaintiff’s serious injuries in a motor vehicle accident.”
In June, the Supreme Court declined to hear this case, otherwise known as denying cert.
In denying cert., the high court says the ruling from the lower court stands, which means that the claim for negligent hiring against CHR can proceed — i.e., that such claims are not (at this time) preempted and can be decided on the merits of the case.
This means that state law negligence claims can proceed when pitted against a brokerage.
High court’s lack of ruling means a patchwork of trucking standards
Due to the lack of ruling and precedent, our trucking regulations will continue to be a patchwork, differing from state to state.
State laws will continue to regulate employee relations. Each will apply different standards toward or against independent contractor designations.
And personal injury is a beast unto itself. For years, tort reform from state to state has been a hot-button issue, and the recent decision to reject cert. in the C.H. Robinson case ensures that will continue for some time.
Enforcement will come down to case-by-case rulings. Because we don’t have a clear ruling from the Supreme Court, you cannot be quite sure what a court will decide until after the fact. These laws will leave brokerages in the dark on whether they are responsible for collisions.
That ambiguity is bad for business. Companies can’t protect themselves adequately from potential liability, or don’t know if they’re wasting resources even trying to.
Trucking companies have millions at stake when it comes to the “nuclear verdicts” that have become an industry norm. From 2010 to 2018, the average verdict size for a lawsuit above $1 million that involves a trucking crash has increased from $2.3 million to $22.3 million, according to CNBC. Even those with impeccable safety records aren’t safe from the increasing threat of a lawsuit. CNBC reported in 2021 that trucking insurance rates have increased by up to 25% annually in 2019 and 2020.
This is why I believe that the Robinson case is the bigger deal. Say what you want about employee relations, but liability is a huge bugaboo for brokers, carriers and shippers.
How the C.H. Robinson decision could transform trucking
There are two main reasons why this is a big deal for the industry.
The first is the continuation of a trend I have been tracking for years, which started in a 2004 case involving C.H. Robinson and a different collision that resulted in serious injuries for the passenger driver. Since then, broker liability has started to look more like carrier liability.
One major benefit of being a broker is being divorced from liability for the actions of an independent contractor. Over the next few years, that benefit could largely go away.
The operations of a brokerage may start to look very different. First, brokers’ overhead costs will substantially increase, which could pose a risk to the business model. You’re likely to see some megabrokerages agree to take on additional liability to insulate shippers since they will incur the liability anyway. You are also likely to see large brokers partner more closely or even buy trucking carriers. You may see the pure-play nonasset go away. In all of these cases, this trend can create opportunities as well as risks, but undeniably what it is to be a broker is going to change, and that means brokers and carriers in the future will look very different.
The second is that shippers should be on notice. Candidly, I am surprised more shippers have not appeared in these lawsuits.
Plaintiffs’ attorneys have long looked for the deepest pockets, and typically shippers have the deepest ones of all. Any argument made about brokerages could be made against shippers, too. If a vendor is working with carriers with particular safety ratings, would that not put the shipper on notice?
To maintain independence, and claim ignorance from a negligence claim like the ones against Robinson, you have to maintain a certain distance. Ambiguity reigns. Do nothing and perhaps you did not do enough.
But historically, shippers have been quite involved. They typically write into contracts strong protections from lawsuits. However, those stipulations only protect the shipper from claims by their broker or carrier.
In the event of a third-party claim, if the carrier or broker cannot uphold its obligations, the shipper will be on the hook. Does that force shippers to rethink their vendor strategy, pushing more freight to larger, more stable fleets — and thus reshaping the market even further?
There are earth-shattering implications to both decisions by the Supreme Court. Don’t lose sight of either.