U.S. Supreme Court Issues Broker Liability Ruling Under FAAAA

This week the U.S. Supreme Court issued a unanimous decision in Montgomery v. Caribe Transport II, LLC, et al. concerning whether the Federal Aviation Administration Authorization Act (“FAAAA”) preempts claims that a broker negligently selected motor carriers. The FAAAA has long been held to preempt state law claims against brokers, but contains a provision known as the “Safety Exception” which states that it “shall not restrict the safety regulatory authority of a State with respect to motor vehicles.” §14501(c)(2)(A). The Court reasoned that exercising ordinary care in selecting a carrier concerns motor vehicles, and therefore falls within the Safety Exception. Therefore, the court resolved a circuit split and held that the Safety Exception of the FAAAA does not preempt state law claims regarding a broker’s negligent selection of motor carriers.

This decision will undoubtedly lead to an increase in claims of negligent selection in auto tort litigation As a result, Brokers should promptly evaluate and update their standard procedures and protocols for selecting and vetting carriers, and maintain detailed and comprehensive records evidencing compliance with those procedures and protocols. Moreover, Brokers should be prepared to produce these documents in discovery and discuss them at deposition. While the practical effects of Montgomery are yet to be seen, Brokers who proactively work to update their selection and vetting protocols will be best positioned to deal with the fallout.

As broker liability claims and related litigation continue to evolve, Franklin & Prokopik remains prepared to assist freight brokers, logistics providers, and their insurers in addressing complex transportation and catastrophic loss matters. To learn more about the firm’s experience and/or questions regarding recent developments in this area, please contact James K. Hetzel, Esq. or Dillon A. Swensen, Esq.