After years of litigation and appeals, the U.S. Supreme Court today unanimously ruled that freight brokers can be held liable for damages caused by carriers they hire. The 9-0 ruling in the case Montgomery v. Caribe Transport II, LLC (et al) resets expectations relating to broker liability - in essence saying brokers are not exempt from suit when accidents occur. Read on for a more detailed explanation of the case, the ruling, and what it means.
What did the Supreme Court rule in the Montgomery case?
The Supreme Court ruled in favor of the plaintiff in Montgomery v. Caribe Transport - with Justice Amy Coney Barrett writing the majority opinion, primarily aimed at freight broker/3PL C.H. Robinson, an additional defendant in the suit accused of negligently hiring an unsafe carrier:
The Federal Aviation Administration Authorization Act preempts state laws related to the prices, routes, and services of the trucking industry. But there is an important exception: States retain authority to regulate safety “with respect to motor vehicles.” This case presents the question whether a claim that one company negligently hired another to transport goods falls within that exception. It does.
In other words, the court held that the so-called F4A doesn't apply to questions of safety - limiting it to the other areas outlined in the ruling. The key phrasing in the 1994 Act in this case was related to its safety exception, which states that F4A "shall not restrict the safety regulatory authority of a State with respect to motor vehicles."
Barrett's opinion indicated negligent hiring claims like those in the suit do "concern" motor vehicles, and thus fall under that exception - reversing the lower court ruling that removed C.H. Robinson from the suit as its role fell under the "prices, routes and services" portion of the F4A, pre-empting state litigation. Lower courts have ruled in both directions in recent years, part of why the Supreme Court took up the case.
While the ruling was 9-0, Justice Samuel Alito (joined by Justice Brett Kavanaugh) wrote a concurrent opinion which stated "the case is closer than the court's opinion may suggest," and that the F4A was likely written in such a way that didn't expect these types of suits would arise. Still, they agreed with the defining question.
The Montgomery case is remanded back to its original court for hearing - it's important to note the Supreme Court did not decide on the specific merits liability with regards to the case.
What does the Montgomery ruling mean for broker liability?
Broker liability is now on the table in state courts following the Supreme Court's ruling in the Montgomery case relating to C.H. Robinson. The ruling essentially means freight brokers/third party logistics providers can be sued in state court for negligent hiring, and not exercising "ordinary care" in choosing carriers in the event of an injury accident.
Lynn Gravely, CEO of NT Logistics and new Transportation Intermediaries Association (TIA), succinctly summed up the likely ramifications of this decision at April's Capital Ideas Conference:
“If the court narrows federal protections, your risk goes up, my risk goes up, insurance gets more expensive and every carrier lawsuit, every carrier decision becomes a potential lawsuit in a jurisdiction that wasn’t playing by the same rules.”
The ruling in essence puts a heavier burden on 3PLs/freight brokers to not only vet carriers to ensure they hire those without questionable safety records, but also - even if they do - face the likelihood of defending themselves against lawsuits any time an injury accident occurs involving a carrier they hire. That increased lawsuit likelihood is why Gravely mentioned the idea of insurance going up - because insurers will need to bake in the potential legal costs and payouts.
On The Intermodal Logistics Podcast last month, TIA President and CEO Chris Burroughs did caution against considering the ruling a "death sentence" that means brokers would be held liable for every truck crash - as there are non-F4A defenses available. His major related concern though, is with the difficulties providers face in vetting carriers due to an "antiquated" system under the Federal Motor Carrier Safety Administration (FMCSA):
Burroughs stresses that the FMCSA should function for trucking companies like the FAA does for airlines, certifying their safe operation with a more robust system moving away from physical audits. He also points to a high-risk carrier database that the FMCSA should make public - all in the name of making it easier for brokers to avoid using unsafe trucking companies.
What is the Montgomery case?
Montgomery v. Caribe Transport II, et al, was brought by Shawn Montgomery, a truck driver who suffered injuries in a December 2017 accident on Interstate 70 in Illinois that led to the amputation of a lower leg. According to the suit, Montgomery's semi-truck was parked on the side of the highway when it was struck at full speed by a tractor trailer driven negligently by Yosniel Varela-Mojena.
Caribe Transport was the carrier that hired Varela-Mojena, and, according to the filing, both Caribe and the driver had poor safety records in the months before the crash. C.H. Robinson brokered the load to Caribe that was in the truck at the time of the accident.
Montgomery filed suit against all involved parties for their roles in the incident. Specifically relating to broker liability, he argued C.H. Robinson hired Caribe II when it "knew or should have known" the company only had a "conditional" safety rating and negligently hired Varela-Mojena by "failing to ensure that he was fit to drive a commercial vehicle."
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