Fall 2022

Broker Liability: The Silver Bullet Missed

Since the genesis of the doctrine of respondeat superior in 17th century England, there has always been an intended and recognized exception to vicarious liability with respect to independent contractors. This is now ubiquitously referred to as “the independent contractor defense,” a well-settled principle of vicarious liability. While the first case establishing “broker liability” in the U.S. (Schramm v. Foster, USDC of MD 2004) honored this principle and the independent contractor defense, subsequent decisions (e.g., Sperl v. C.H. Robinson, IL 2012) cracked that door wide open and called a broker’s ability to rely on the independent contractor defense into question. Now, the road to broker liability involves numerous different legal theories and has become a legal industry unto itself, with specialist attorneys, experts, trade associations, and tailor-made insurance products. Any broker or motor carrier with brokerage authority who fails to proactively protect themselves from the pitfalls attendant to the theories of broker liability does so at their peril. We don’t see broker liability cases involving fender benders; these cases uniformly involve serious injuries and high exposure. The case of Allen Miller v. C.H. Robinson (USDC NV 2017) was no exception.

The plaintiff, in that case, Allen Miller (“Miller”), was rendered a quadriplegic following an accident that took place in Nevada in December 2016. Defendant Ronel Singh (“Singh”) was operating a tractor-trailer eastbound on I-80. The road conditions were snowy and icy, causing Singh to lose control of his tractor-trailer, which crossed the median and overturned, blocking the westbound lanes. Miller, who was driving westbound, could not avoid Singh’s tractor-trailer and became pinned under it, ultimately causing his serious injuries.

At the time of the accident, Singh was acting as an employee of RT Service, an interstate motor carrier. C.H. Robinson (“Robinson”) had brokered a load to RT Service to haul on behalf of the shipper Costco Wholesale, Inc. Miller filed suit against Singh, RT Service, Costco, and Robinson. Miller asserted claims against Robinson for vicarious liability based on Singh’s alleged negligence and for direct negligence based on alleged negligent hiring and selection of RT Service to haul the load. By agreement of the parties, Miller subsequently dismissed Costco as a party and dismissed the claim of vicarious liability against Robinson, leaving negligent hiring/selection as the remaining claim against Robinson.

In pursuing the negligent hiring/selection claim against Robinson, Miller specifically alleged that Robinson “had a duty to select a competent contractor to transport” the Costco load. Miller claimed that RT Service was not properly qualified and that Robinson, therefore, breached this duty by retaining RT Service to haul the load.  Substantively, Miller stated that Robinson knew or should have known of RT Services’ and Singh’s incompetence because:

“there were red flags about [RT Service and Singh]. Including that [RT Services] ha[d] a history of safety violations; over 40% of [its] trucks ha[d] been deemed illegal to be on the road when stopped for random inspections; [it had] been cited numerous times for hours of service violations and false log books; and their percentage of out of service violations [was] twice that of the national average.”

Miller further argued that Robinson’s actions or omissions in choosing RT Service “were reckless and demonstrate a conscious disregard of or indifference to the life, rights or safety of . . . Miller and others” despite the fact that “RT Service was a properly authorized motor carrier with an active motor carrier registration at the time of the accident.”

Robinson filed a motion for summary judgment on the negligent hiring/selection claims asserting what is now commonly referred to in the broker liability universe as the “F four A preemption defense.” This defense promised to be the silver bullet to defeat broker liability, but now its future is less certain. As its name suggests, the defense is predicated on the doctrine of federal preemption, which is derived from the U.S. Constitution’s Supremacy Clause (“the Laws of the United States…shall be the supreme Law of the Land”). The Law of the Land in question was the FAAAA ,49 U.S.C. § 14501(c)(1). In 1994, in an effort to strengthen deregulation of the trucking industry, Congress passed the FAAAA Preemption Provision. This preemption provision addresses motor carriers, brokers, and freight forwarders (of Property) and states, in pertinent part:

“(1) General Rule. Except as provided in paragraphs (2) and (3), a [s]tate . . . may not enact or enforce a law, regulation, or other provision having the force and effect of law related to a price, route, or service of any motor carrier … or any private motor carrier, broker or freight forwarder with respect to the transportation of property.”

49 U.S.C. § 14501(c)(1) (emphasis added). Moreover, the exception provision of §14501(c)(2)(A) plays into the preemption defense too:

“[preemption] shall not restrict the safety regulatory authority of a State with respect to motor vehicles, the authority of a State to impose highway route controls or limitations based on the size or weight of the motor vehicle or the hazardous nature of the cargo, or the authority of a State to regulate motor carriers with regard to minimum amounts of financial responsibility relating to insurance requirements and self-insurance authorization.”

49 U.S.C. §14501(c)(2)(A). The preemption argument is based on these two (2) provisions and goes something like this. Because Miller’s common law negligence claim directly concerned the services a freight broker provides in the transportation of property, particularly the selection of a motor carrier to transport goods on behalf of a shipper, it is therefore preempted under the FAAAA based on 49 U.S.C. § 14501(c)(1). In other words, because state common law acts as an “other provision having the force and effect of law”, Miller’s tort claim is preempted. The argument continues that, because, unlike §14501 (c)(1), §14501(c)(2)(A) is expressly silent with respect to brokers and applies only to motor carriers, there is certainly a legitimate and persuasive legal argument that the preemption exception provision does not apply to claims against brokers that appears to be well grounded in the plain meaning interpretation of the text of the FAAAA.

In the Miller case, the Nevada District Court judge was suitably persuaded by the FAAAA preemption defense and granted Robinson’s Motion for Summary Judgment in a 2018 opinion. Miller appealed to the U.S. Court of Appeals for the 9th Circuit, which was less impressed with the preemption defense, reversing the District Court’s decision in 2020. In reversing the District Court’s grant of summary judgment, the 9th Circuit agreed that Miller’s common law claim was “related” to broker services but held that it fell within the §14501(c)(2)(A) states’ safety exception and was not, therefore, subject to preemption.

Robinson subsequently filed a petition for writ of certiorari to SCOTUS in April, 2021, and five supporting amicus briefs were filed by venerable industry members including the Transportation Intermediaries Association. As there was a split across the District Courts as to whether the FAAAA preempts state negligence claims against brokers,[1] there was great hope abound that SCOTUS might review the case and reverse the 9th Circuit to improve further on its nation-leading reversal rate of 80.4%. SCOTUS’s reversal of the 9th Circuit’s decision would have been the silver bullet to end all broker liability cases and return the tort industry to its pre-2004 status quo. Unfortunately, SCOTUS denied the petition on June 27, 2022. There have been nine (at last count) unfavorable preemption defense decisions in broker liability cases since Miller. Insofar as the 9th Circuit ruling is the only US Court of Appeals decision on record, the District Courts are inclined to follow it in the absence of a ruling from SCOTUS or their own Circuit Court of Appeals.  Without contrary guidance from the higher courts, rulings will likely continue in the US District Courts and State Courts in line with the 9th Circuit holding that a broker is subject to state “negligence claims” to the extent that they arise out of motor vehicle accidents.

My own recent attempt to advance the preemption defense in the United States District Court for the District of Maryland, the birthplace of broker liability, was recently declined at the summary judgment stage in an unpublished opinion (Ortiz, v. Ben Strong Trucking, Inc., CCB-18-3230), although the court did provide some cold consolation by striking the plaintiffs’ broker liability expert. The Ortiz court pointed out that other “district courts in the Fourth Circuit have found common-law negligent selection claims not to be preempted under the FAAAA” citing (amongst others) Vitek v., Inc. (D. Md. Apr. 27, 2020) before ultimately relying on the 9th Circuit decision in Miller v. C.H. Robinson. The Vitek court did recognize, and I would suggest correctly so, that “[i]n the negligent hiring context [as opposed to pure negligence], defendants can credibly argue that the imposition of liability risks a pseudo-regulatory effect by reshaping the level of service a broker must provide in selecting a motor carrier.” Ultimately I believe that FAAAA preemption is still a viable defense, and it should be pursued in every broker liability case because the issue has not been resolved in every jurisdiction, and there still appears to be a mix of views among the Circuits and District Courts as to the viability of the defense.

[1] Prior to Miller, other district court decisions finding in favor of the preemption defense include: Gillium v High Standard, LLC, W.D., Texas, San Antonio Division, January 28, 2020; and Zamorano v. Zyna, LLC, United States District Court, W.D. Texas, San Antonio Division, May 11, 2020; Ying Ye v. Global Sunrise, Inc., Fed. Carr. Cas. P 84952, 2020 WL 1042047 (N.D. Ill. 2020); Creagan v. Wal-Mart Transportation, LLC,  354 F. Supp. 3d 808 (N.D. Ohio 2018); Loyd v. Salazar, 416 F.Supp. 3d 1290 (W.D. Okla. 2019); and Flexider USA Corp. v. Richmond, Case 3:19-cv-00764 (M.D. Tenn. Aug. 29, 2019).

Written by principal Andrew Stephenson.