Supreme Court affirms broker liability nationwide

More information about the Montgomery case, and the Federal Aviation Administration Authorization Act (FAAA) it concerns, can be found here (or in the video embedded next to this text). Before this Supreme Court decision, interpretations of FAAA preemption varied across state courts.

The decision will impact market dynamics in for-hire trucking, but the scale is unclear. Brokers were already exposed to negligent hiring tort risks in select states, but that risk is now nationwide. Third-party logistics providers may have a greater incentive to work with large, established fleets over small, young carriers. Insurance costs may eventually rise. 

As Matt Reh, trial attorney for Armstrong Teasdale, who had represented C.H. Robinson in the lawsuit, told FleetOwner earlier this year:

“I’ll speculate a little bit here, but I think that if the court decides that there is no preemption, and these are the kinds of claims that injured parties can bring against property freight brokers, that you’ll see property freight brokers are likely to steer their work more towards larger motor carriers with larger fleets, and smaller carriers with smaller fleets may be left out to some degree,” Reh said.

Transportation industry reacts: Is broker liability a big deal?

C.H. Robinson, who argued against broker liability before the Supreme Court, issued a quick response to the decision:

“While we are disappointed in the Court’s decision, we will continue to operate responsibly, support stronger federal enforcement, and work constructively with regulators, carriers, and customers to strengthen the national safety system and support safe, reliable transportation across the country. As Justices Kavanaugh and Alito stated in the concurrence, ‘Importantly, the Court’s decision today should not be read to mean that brokers will routinely be subject to state tort liability in the wake of truck accidents,’” Dorothy Capers, chief legal officer at C.H. Robinson, stated.

However, the ruling may not have a large impact on interstate broker operations, as Grace Keegan Johnson, attorney with regional law firm Hall Estill, explains:

“For brokers who operate across the country, this opinion does not impact them much, because they already had the risk of liability in some of the circuits. In addition, the broker would not be the one to choose the forum of a lawsuit against them, so brokers processes and procedures should already be in place to limit liability risk ... Unless a freight broker only operated in limited circuits, they were already at risk of liability. The Carmack Amendment says a carrier (or broker) can be sued in any state in which it operates. So, a split circuit does not really help them. This would be different if it was a brick-and-mortar store or a company with limited jurisdiction," she stated.

Meanwhile, Harish Abbott, CEO and co-founder of supply chain productivity platform Augment, says that broker customers are certainly still concerned:

“From the conversations I’ve been having with brokers and customers this morning, the concern is real—especially among smaller brokerages that may not have the resources to absorb or defend the onslaught of litigation this is going to cause. … The operational response is straightforward: tighten carrier selection, standardize the workflow, and make sure the audit trail holds up years from now,” he stated.