Earlier this year, in the case of C.H. Robinson v. Miller, No. 20-1425, 2022 WL 2295168 (U.S. June 27, 2022), the U.S. Supreme Court delivered a blow to freight brokers when it refused to grant a broker’s request for review of the Ninth Circuit’s opinion that the Federal Aviation Administration Authorization Act of 1994 (FAAAA) does not preempt negligence claims against freight brokers under state law, despite the FAAAA’s language suggesting otherwise.
The Ninth Circuit’s decision, apparently permitting “negligent brokering” claims, opens up freight brokers to tort liability for their retention of commercial carriers who are then involved in motor vehicle accidents. Brokers (and their insurers) should pay close attention, as this issue remains a hot topic in the commercial transportation arena. Brokers and their insurers should be proactive in preparing to defend against a potential onslaught of state law claims arising from their selection of commercial carriers across the country.
The Underlying Tort Case
In 2016, Allen Miller was rendered a quadriplegic as a result of an accident with a tractor trailer in Nevada. The truck driver apparently lost control and crossed the median into oncoming traffic, trapping Miller and seriously injuring him. Miller filed suit against the trucking company, its driver, and C.H. Robinson Worldwide, Inc., the freight broker who arranged for the trailer to transport goods for Costco Wholesale, Inc. The trucking company hired by C.H. Robinson evidently had a poor safety record, including a high rate of failed road inspections and numerous hours-of-service violations.
In his lawsuit, filed in the U.S. District Court for the District of Nevada, Miller alleged that C.H. Robinson had a duty to select a qualified and competent commercial carrier, and it breached that duty by hiring a commercial carrier that it knew or should have known had a history of safety violations.
C. H. Robinson argued that Miller’s negligence claim was preempted by the FAAAA. The statute bars state law claims which are directly or indirectly “related to a price, route, or service of any…broker.” The statute provides for limited exceptions, which C.H. Robinson argued did not apply in this case. C.H. Robinson did not own the motor vehicle, nor did it employ the driver involved in the accident. Miller argued that the “safety exception,” which provides that the FAAAA “shall not restrict the safety regulatory authority of a State with respect to motor vehicles,” applied, and therefore he could proceed on his tort claim.
The District Court (correctly) sided with C.H. Robinson and held that Miller’s negligence claim was preempted by the FAAA because the claim was “related to” C.H. Robinson’s services. More importantly, the Court held that, by relying on the “safety exception” to the FAAAA’s preemption clause, Miller was attempting to create a private tort action and usurp the state’s police power to enforce its own safety regulations. Under Miller’s logic, brokers would be subject to a higher level of service in selecting a motor carrier, and in order to avoid liability for alleged negligence, a broker would be forced to consistently monitor each carrier’s background.” Further, “such additional inspection would result in state law being used to regulate” broker services by creating “a standard of best practices.”
Miller appealed to the Ninth Circuit.
The Ninth Circuit’s Reversal
The Ninth Circuit reversed, holding that, while the negligence claim was “related to” C.H. Robinson’s services (and was therefore preempted by the FAAAA), the “safety exception” did apply to permit Miller to proceed with his claim. Interestingly, the Court held that, in enumerating the exception, “Congress intended to preserve the states’ broad power over safety, a power that included the ability to regulate conduct not only through legislative and administrative enactments, but also through common law damages.” The Court also found that Miller’s claim was sufficiently connected to motor vehicles (which is required for the exception to apply) simply because it arose out of a motor vehicle accident, even though C.H. Robinson’s involvement was indirect.
The case was remanded back to the District Court for further proceedings. The decision is recorded at Miller v. C.H. Robinson Worldwide, Inc., 976 F.3d 1016 (9th Cir. 2020).
C.H. Robinson applied to the Supreme Court to review the Circuit Court’s decision, but the Court declined to do so. C.H. Robinson Worldwide, Inc. v. Miller, No. 20-1425, 2022 WL 2295168 (U.S. June 27, 2022).
The Impact on the Industry, and What Brokers and Their Insurers Can Do
With this new risk of common law tort liability across the country, brokers and their insurers face brand new challenges, not only in how they run their businesses, but in how they can successfully defend against these claims in various jurisdictions.
The Ninth Circuit’s decision places a huge financial burden on the transportation industry. Given brokers’ regional and nationwide operations, the impact of potential tort liability resulting from the negligence of commercial carriers and their drivers could be immense. This will significantly increase the cost of doing business, with those costs being spread across the industry.
Plaintiffs’ attorneys will rely on the Ninth Circuit’s decision in an attempt to establish a previously non-existent duty on the part of brokers to perform a detailed investigation into each and every carrier it retains across the country. Brokers will be forced to perform these investigations with each state’s common law tort laws in mind, which will be complicated, time-consuming, and costly. In enacting the FAAAA, including the preemption provision, Congress arguably did not intend to place such an extreme burden on brokers.
So, what can brokers do?
First and foremost, brokers, their insurers, and interested business organizations such as the U.S. Chamber of Commerce and the National Retail Federation should follow related developments in the law across the country, and actively participate in pointing the Courts in the right direction, to reinforce the FAAAA’s protection of brokers from tort liability. Litigation across the country is inevitable, and, if other Circuit Courts reach decisions which conflict with the Ninth Circuit’s opinion in C.H. Robinson, the Supreme Court may weigh in to settle the issue in the coming years. Industry advocates should be prepared weigh in to protect the interests of all industry players.
In the immediate future, brokers should consider developing systems to perform and document reasonable inquiries into their chosen carriers on a regular basis. Importantly, under common law in most jurisdictions, alleged tortfeasors are generally only required to act reasonably under the circumstances. Therefore, while brokers should now be proactive about checking on their commercial carriers’ safety records, the standard is never perfection, and they should not be held liable for the negligence of carriers when they otherwise acted reasonably.
The Commercial Transportation Team at Weber Gallagher is available to provide advice to our clients on this and other developments impacting their businesses and bottom lines and provide practical recommendations as the industry continues to transform. The team is also available to provide expert representation and counsel to clients facing litigation in New York, New Jersey, Pennsylvania, and Delaware, in both state and federal court.