Supreme Court wrestles with broker liability

The Supreme Court heard oral arguments in a case that could reshape the debate over broker liability, with one justice linking the issue to English proficiency and small-business trucking companies.

Can a broker be held liable for negligent hiring when a truck driver for a carrier it contracted with causes a crash?

That has been an unsettled question for many years. Some federal circuit courts say “Yes,” while others say “No,” creating a patchwork of court precedent on the issue.

Consequently, a broker can be sued if a crash occurs in one state but is off the hook in another. Stakeholders have asked the Supreme Court to settle the issue of broker liability several times, with no success. Earlier this week, the high court finally heard the case.

What’s being argued?

At the heart of the broker liability debate is the Federal Aviation Administration Authorization Act (F4A), which has been interpreted in two conflicting ways.

That law includes a provision that preempts state laws affecting a motor carrier or broker’s price, route or service “with respect to the transportation of property.” Nearly every court agrees that broker liability cases trigger that preemption. However, the next paragraph in the statute throws a wrench in the gears.

A second provision, known as the safety exception, states that the preemption cannot “restrict the safety regulatory authority of a state with respect to motor vehicles.” This is where the courts are split.

In the Supreme Court broker liability case, petitioners argue that states have always had their own safety rules, including common-sense rules that prevent companies from hiring dangerous individuals. Brokers are part of the hiring process of a truck driver transporting a load. Therefore, states have the right for them to be sued for negligent hiring.

On the other side, C.H. Robinson counterargues that the law clearly says a state law cannot mess with a broker’s service. Suing brokers for hiring the wrong carrier is basically telling them how to do their job. Respondents argue that the Federal Motor Carrier Safety Administration already vets drivers, so why should brokers second-guess the government? Also, brokers do not control trucks, so saying hiring a carrier is “in respect to motor vehicles” is a stretch.

Perhaps the most significant factor in the debate is the interpretation of the phrase “in respect to motor vehicles” within the safety exception.

Petitioners claim hiring a carrier is in respect to motor vehicles, while brokers argue there must be a more direct connection that does not apply to them.

Complicating things is a third provision that preempts state laws affecting intrastate broker services. However, the intrastate portion has no safety exception. Brokers argued that the statute’s structure could create the odd result that they could be on the hook for an interstate shipment but not for an intrastate shipment. Brokers argue there is no way Congress intended to cause that double standard.

So what did the Supreme Court justices say about broker liability?

Supreme Court skeptical of both sides

During oral arguments, the Supreme Court grilled both sides, with no clear indication of how this may end.

Justice Brett Kavanaugh appeared skeptical of the petitioner’s broker liability claims. He questioned how brokers are supposed to know everything about truck drivers, using English proficiency as an example.

“How are (brokers) going to figure out do (truck drivers) have an alcohol/drug issue?” Kavanaugh asked Paul Clement, the attorney representing petitioners. “How are they going to figure out English proficiency, which, of course, is a critical issue at the current moment that’s being discussed?

Clement responded by saying brokers have an easy way to protect themselves: hiring only quality carriers. That prompted Kavanaugh to raise concerns about small-business trucking companies and owner-operators being pushed out if brokers can be sued for truck crashes.

“So this whole thing’s going to really favor the large established carriers over the smaller carriers because they’re going to default to that to protect themselves, I think, which is fine, but I just want the implications of your position to be understood,” Kavanaugh said.

Kavanaugh also brought up the dichotomy between intrastate and interstate brokers. He called the “oddity” counterintuitive. Clement said it may not make sense, but Congress “made a very deliberate decision to treat brokers and freight forwarders differently for interstate and for intrastate.”

Meanwhile, Justice Ketanji Brown Jackson seemed more sympathetic to the petitioners. She pointed out that the point of F4A was economic deregulation while preserving that status quo for safety regulations.

Justice Sonia Sotomayor questioned whether FMCSA’s vetting should not be second-guessed. She pointed out that thousands of motor carriers are registered each month, making it nearly impossible to properly vet them all. Representing the federal government, Sopan Joshi conceded that FMCSA is “understaffed,” but emphasized the number of roadside inspections conducted.

Over the more than 90 minutes of oral arguments, the Supreme Court did not appear to lean towards one side or the other. A decision is expected by June. LL