Supreme Court Holds Freight Brokers Can Face Negligent-Selection Claims

Today, the United States Supreme Court held that state tort law direct-negligence claims for negligent selection/hiring of motor carriers by freight brokers and freight forwarders are not preempted by the Federal Aviation Administration Authorization Act of 1994 (FAAAA or F4A). Previously, there was a split amongst U.S. Circuit Courts of Appeal regarding whether the “safety exception” found in FAAAA’s preemption language saved negligent selection against freight brokers. Today, a unanimous Supreme Court held that FAAAA’s safety exception preserves claims for negligent selection against freight brokers involved in tort litigation.

The case involved an accident in Illinois. The plaintiff was involved in a crash after a tractor-trailer operated by a motor carrier with a “conditional” safety rating from the FMCSA (which permits motor carriers to operate) struck the plaintiff’s vehicle, resulting in severe injuries that required a leg amputation. At the time of the accident, the motor carrier was hauling a load that was brokered by defendant C.H. Robinson. The plaintiff sued the at-fault driver, the motor carrier, and C.H. Robinson, alleging that C.H. Robinson was directly negligent for selecting and assigning the load to an unsafe motor carrier.

Following precedent from the U.S. 7^th Circuit Court of Appeals, the plaintiff’s claims were dismissed because the 7^th Circuit had previously held that direct negligence claims against freight brokers were preempted by the FAAAA, specifically language found in 49 U.S.C. § 14501(c)(1). However, 49 U.S.C. § 14501(c)(2)(A) states that preemption language found in the statute “shall not restrict the safety regulatory authority of a state with respect to motor vehicles . . .” (the safety exception). Plaintiffs have argued that that state tort laws allowing for claims of negligent selection against brokers are saved by this “safety exception”. Previously, the 7^th and 11^th Circuits held that the safety exception did not save negligent selection claims against freight brokers, while the 9^th and 6^th Circuits (the latter interpreting Ohio law) held that it did. This set up the classic “split amongst the circuits” that invited the Supreme Court to wade in and settle the question.

Today, the U.S. Supreme Court unanimously held that the safety exception does indeed exempt direct-negligence claims against freight brokers for negligent selection from FAAAA’s preemptive scope. Dismissing the freight brokerage industry’s arguments, Justice Barrett reasoned that state common-law tort claims are a form of safety regulation with respect to motor vehicles:

The preemption provision “shall not restrict the safety regulatory authority of a State with respect to motor vehicles.” All agree that common-law duties and standards of care form part of a State’s authority to regulate safety. State common-law duties and standards of care are “designed to be . . . a potent method of governing conduct and controlling policy” Negligent-hiring claims impose a duty of reasonable care in employing a contractor for work carrying a risk of physical harm. (citations and parenthetical language omitted).

C.H. Robinson argued that the claims against it did not involve “motor vehicles”. This argument was rejected by the unanimous Court.

The Court also dismissed the brokerage industry’s arguments that the plaintiff’s interpretation of the safety exception swallows FAAAA’s preemptive rule, creates redundant and surplus language, and fails to consider the distinction between intrastate and interstate transportation mentioned in the statutory language.

Interestingly, Justice Kavanaugh in a concurring opinion states that the question was a close call and recognizes that the Court’s decision may invite more litigation against brokers that will allow “the costs of litigation and insurance, as well as the costs of brokers’ conducting more substantial inquiries into trucking companies, [to] cascade through the economy and be paid in part by American consumers in the form of higher prices. . . . But those countervailing points ultimately do not carry the day in determining how broadly to construe the vague ‘with respect to motor vehicles’ language in this Act.” He concludes his thoughts by inviting brokers to “. . . ask Congress and the President to change federal law. But as of now, federal law does not preempt state tort liability against brokers for negligent selection of trucking companies.”

The practical effect of this decision is that FAAAA preemption will no longer be a defense for freight brokers defending negligent selection claims in accident litigation. Therefore, when state law allows for theories of negligent selection and hiring against freight brokers, plaintiffs will be allowed to pursue such theories.

Going forward, brokers, freight forwarders, and 3PLs will presumably be expected to engage in some kind of vetting process to screen out unsafe motor carriers from their platforms in order to avoid state-law tort claims for negligent selection. This may create a dangerous “catch-22” for the industry because plaintiffs will then be able to point to these screening efforts as evidence that the brokers are exercising sufficient control over carriers to create vicarious respondeat superior liability for the motor carrier’s negligent conduct. The Supreme Court’s opinion does not address this potential trap for the industry.

Note should be made that in Michigan, there is state-specific case law that holds that a hiring entity like a freight broker owes no duty of care when selecting and hiring an independent contractor. Therefore, in Michigan, the viability of negligent selection claims against freight brokers is still dubious on the basis of state law despite the U.S. Supreme Court’s decision today.