TT Talk - Legal eagle: US freight brokers test defences
In the past six months, two important appellate court decisions in the United States (in the Seventh and Eleventh Circuits) have come down in favour of the freight brokerage industry on the issue of whether negligence claims against freight broker are pre-empted by the Federal Aviation Administration Authorization Act (F4A).
‘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 motor private carrier, broker, or freight forwarder with respect to the transportation of property.’
However, the pre-emption contains exceptions including the so-called ‘safety exception’ in §14501(c)(2)(A). Under this exception, the express pre-emption provision in §14501(c)(1) ‘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’.
For years, freight brokers have taken the position that F4A bars negligence claims against them, but it was not until September 2020 that an appellate court issued an opinion on this issue. In Miller v. C.H. Robinson, the Court, in a 2-1 decision, ruled that while pre-emption is applicable to freight brokers, a plaintiff’s negligence claim falls within the safety exception to F4A, allowing the claim against freight brokers to proceed. The matter was appealed to the US Supreme Court, but the application was denied.
However, this year saw both the Seventh and Eleventh Circuits reject Miller v. C.H. Robinson and hold that these negligence claims are pre-empted by F4A and the safety exception does not save plaintiff’s claim.
Aspen American Insurance Co. v Landstar Ranger Inc. (11th Circuit)
First, the Eleventh Circuit in Aspen American Insurance Co. v. Landstar Ranger Inc. in April 2023 found that plaintiff’s negligence claim against the broker was pre-empted by F4A. In this case, the freight broker was hired to transport cargo, but the consignment was then mistakenly given to a fraudulent motor carrier, and the goods were stolen. Aspen American Insurance was the cargo insurer and brought a subrogated claim against the freight broker on the basis of negligent selection of the fraudulent motor carrier.
The freight broker argued that the Act pre-empted Aspen’s negligent hiring claim. Like Miller, the Eleventh Circuit held that negligent hiring claims against brokers are expressly pre-empted by § 14501(c)(1). However, the court proceeded to analyse the safety exception in § 14501(c)(2)(A) and ultimately concluded that negligent hiring claims against brokers are not ‘with respect to motor vehicles’ and therefore not saved by the Act’s safety exception. They further concluded that in cases of negligent hiring claims against brokers – regardless of whether the cause is lost property or bodily injury – “a mere indirect connection between state regulations and motor vehicles will not invoke the [Act’s] safety exception for brokers”.
Ying Ye v GlobalTranz Enterprises Inc. (7th Circuit)
Then in July this year, the Seventh Circuit in Ying Ye v GlobalTranz Enterprises Inc, found that plaintiff’s direct negligence claim against the freight broker was pre-empted and the safety exception did not save plaintiff’s negligence claim. In this instance, a company contacted a freight broker to provide services for goods to be transported from Illinois to Texas. A motor carrier was selected to fulfil the movement. During transit, the truck collided with a motorcycle driven by the plaintiff’s husband on an interstate highway in Texas. The motorcyclist sustained serious injuries and died two weeks later.
The Estate of the deceased filed suit against the freight broker for negligent hiring and vicarious liability, as well as the motor carrier (who later defaulted), in United States District Court for the Northern District of Illinois. The District Court granted the freight broker’s motion to dismiss as to the negligent hiring claim finding that the claim was prohibited by the express pre-emption provision of the F4A and the pre-emption was not saved by the safety exception. Summary Judgment was granted in the vicarious liability claim against the freight broker. The plaintiff appealed the negligent hiring decision, but the Seventh Circuit affirmed the lower court.
The Court found, as did Aspen and Miller, that the negligent hiring claim falls within the F4A pre-emption provision, noting that “subjecting a broker’s hiring decisions to common-law negligence standard would have significant economic effects”. However, unlike Miller but in line with Aspen, the Ye court concluded that the safety exception does not save plaintiff-appellant’s claim.
The primary basis for the Court’s conclusion on the exception was that common law negligence claims enforced against a broker is not a law that is “with respect to motor vehicles”, the pre-requisite for the safety exception. Here “the exception requires a direct link between a state’s law and motor vehicle safety. And we see no such direct link between negligent hiring claims against brokers and motor vehicle safety”. The court provided a detailed analysis of the statutory construction and text supporting their position.
The Court further reviewed the recent F4A appellate decisions and found that their conclusion “aligns squarely” with Aspen. Then they went on to address Miller, finding the Ninth Circuit’s reading of the safety exception applying to broker’s fault and noting that the Ninth Circuit’s “presumption against pre-emption” in Miller is in direct conflict with the US Supreme Court’s instruction to focus on the plain wording of the clause as the Ninth Circuit itself later admitted in R.J. Reynolds Tobacco Co. v. County of Los Angeles.
The Ye case is a clear split with the Ninth Circuit as both cases involved bodily injury to a plaintiff as a result of road accident where a broker had arranged a motor carrier to transport goods. But the Miller 2-1 decision is now the minority on this issue, and the R.J. Reynolds decision may have even provided an opening to attack Miller in the Ninth Circuit.
With the recent decisions trending in favour of pre-emption, courts now looking at this issue will have persuasive authority, if not controlling authority, to support ruling in favour of pre-emption on negligence claims against brokers. That said, with the split now existing between the circuits, it may be that the US Supreme Court will again be asked to resolve this issue. Time will tell.
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