Summer 2020

Digital Freight Brokerages May Impact Liability for Shippers and Carriers

The transportation industry continues to evolve.  With the advent of new technology such as autonomous vehicles, the industry faces new questions pertaining to appropriate regulations, and how these advances may impact the liability of the parties to a transaction.  One of the more recent technological developments is the development and subsequent use of digital freight brokerages such as Uber Freight and Convoy, among others.  These digital freight brokers attempt to remove the human middleman, i.e. the broker, and instead utilize a web-based technology platform to match shippers with a motor carrier that can fulfill their needs on a one-time basis. The shipper provides details on the transaction, and the web-based technology typically utilizes an algorithm or other software to efficiently match the freight and a carrier.  Where the broker normally invests heavily in people, the digital freight brokerage invests in technology.

While digital freight brokerages potentially fill a need in the marketplace, the concept does not come without concerns.  There are specific regulations that both brokers and motor carriers must adhere to, and many transactions are not simple “A to B” trips. When issues arise, it requires the interplay and cooperation between all parties to a transaction to reach a resolution.  Over and above these logistical concerns, the legal ramifications arising from this development are yet to be seen.  As the plaintiff’s bar continues to craft theories of broker liability, the nature of the transaction presents questions.  For example, if the digital freight broker’s algorithm matches a shipper with a carrier that is not able to meet the needs of the shipper- to what extent is the digital freight brokerage liable? Moreover, what if through no fault of the shipper or the digital freight broker, the algorithm or related software malfunctions and fails to find a potential carrier for time-sensitive cargo?  In the same vein, what if, through no fault of the motor carrier, the digital freight brokerage software fails to communicate (or otherwise keep record of) instructions related to a shipment that impact the manner in which the motor carrier must transport the cargo which subsequently causes damage?

These scenarios have yet to be addressed by courts throughout the country and will have an impact on the development of the digital freight brokerage industry.  It is unclear what (if any) regulations may be passed that are specifically applicable to digital freight brokerages as the technology develops and that sector of the industry grows.  Given the uncertainty related to this technology and growing niche within the transportation industry, the parties to a transaction should do their best to account for these potential scenarios with specificity when negotiating agreements, as well as plan ahead to address these potential scenarios.  The transportation industry should also watch closely to see what, if any, regulations are passed specifically to digital freight brokerages to ensure compliance with any such regulations.

Written by associate James Hetzel.