At the time of this writing, the deadline for an appeal of Aspen to the Supreme Court has yet to expire.  Our discussion last month contemplated that the Supreme Court could decline jurisdiction of such an appeal on a narrow reading that no conflict exists with Miller because each case focuses on different provisions of F4A addressing different exposures (cargo vs. bodily injury). 

Since our last update, a third Federal Circuit has offered its opinion on the subject to create an indisputable conflict with Miller, and increase the likelihood that the Supreme Court will provide guidance on F4A preemption.

On July 18, 2023, the United States Court of Appeals for the Seventh Circuit (“7^th Circuit”) issued a ruling favorable to freight brokers in the case of Ying Ye vs. GlobalTranz Enterprises, Inc., No. 22-1805 (7^th Cir. 2023), when it decided that F4A preempts state law negligence claims for personal injuries sustained in a motor vehicle accident.

In Ying Ye the 7^th Circuit was presented with facts including that GlobalTranz brokered a load to a motor carrier whose driver collided with a motorcycle during transit.  The motorcycle driver died of his injuries, and his surviving spouse filed claims against GlobalTranz based upon Illinois state law theories of negligent hiring, and vicarious liability for exercising control of the motor carrier.

The United States District Court for the Northern District of Illinois, Eastern Division (“Illinois District Court”), dismissed the claim for negligent hiring, concluding that it was preempted by F4A as relating to the services of a broker to arrange transportation, and did not fall within an exception to preemption for regulation of motor vehicle safety.  The Illinois District Court granted summary judgment on the claim for vicarious liability.

The 7^th Circuit affirmed the Illinois District Court dismissal of the negligent hiring claim, agreeing that it is preempted by F4A and not preserved by the safety exception.  In reaching this conclusion, the 7^th Circuit recognized the similarities in fact and legal issues with those considered by the 9^th Circuit in Miller, and delivered a detailed analysis of why the conclusion in favor of preemption is compelled by application of established principles of statutory interpretation to the language and intent of Congress reflected in F4A.

Thus, if both Aspen and Ying Ye are appealed as expected, and jurisdiction is accepted in each case, then the combined impact provides the Supreme Court with the opportunity to provide guidance on F4A preemption for cargo and bodily injury claims at the same time. 

Even if the Supreme Court issues favorable rulings in both cases, a narrow reading of Ying Ye could support the conclusion that only claims for negligent hiring are preempted, and other allegations of negligence not included in the appeal remain viable, such as vicarious liability on theories of control.

For those keeping score at home, the unfavorable 9^th Circuit decision in Miller applies in Alaska, Arizona, California, Hawaii, Idaho, Montana, Nevada, Oregon, Washington, Guam, and the Northern Mariana Islands; the favorable 7^th Circuit decision in Ying Ye applies in Illinois, Indiana, and Wisconsin; and the favorable 11^th Circuit decision in Aspen applies in Alabama, Florida, and Georgia.

In combination with GTU’s legal and claims pedigree, our insurer and claims handling partners have achieved success pursuing the preemption defense in many federal and state courts to eliminate and minimize freight broker loss experience, which is now further strengthened by the Ying Ye case. 

While the industry waits for issues of F4A preemption to work their way through the legal process to obtain guidance from the Supreme Court, it remains impractical to draw territorial lines in the operation of a brokerage using motor carriers regularly moving loads through multiple federal and state jurisdictions in a single trip.  In a legal environment where even favorable decisions lack finality and may be overturned, prudent freight brokers should continue to apply best practices in carrier selection to minimize these exposures and protect their business.  GTU continues to support those efforts including delivery of our unique advantages, such as our proprietary algorithm and model broker carrier agreement, to protect the reputation, goodwill, and profitability of our customers.

In Aspen the 11^th Cir. was presented with facts including that Landstar brokers loads in accordance with a process that requires motor carriers to create an online profile to be eligible to bid on a load.  Once registered, Landstar verifies information before dispatching a load.  Landstar did not follow its usual verification process, and dispatched a load to an imposter posing as the authorized motor carrier.  The load was stolen and not recovered.  The subrogated insurer of the owner of the goods filed claims against Landstar based upon Florida state law theories of negligent selection of a motor carrier. 

The United States District Court for the Middle District of Florida (“FL DC”) concluded that such claims were preempted by F4A because they relate to the services of a broker to arrange the transportation.  The 11^th Cir. affirmed the FL DC, agreeing that the cargo claim did not fall within the safety exception of F4A regarding operation of a motor vehicle. 

Counsel for the freight broker in Aspen advised GTU that they expect an appeal of the 11^th Cir. decision to be filed with the Supreme Court of the United States (“SCUS”).  Aspen is the second time a Federal Circuit has considered whether state law claims against a freight broker are barred by F4A preemption, and arguably creates a conflict that increases the likelihood that the SCUS will accept jurisdiction.

On September 28, 2020, the United States Court of Appeals for the Ninth Circuit (“9^th Cir.”) issued a ruling unfavorable to freight brokers in the case of Miller v. C.H. Robinson Worldwide, Inc., 976 F.3d 1016 (2020), when it decided that the F4A does not preempt state law negligence claims for personal injuries sustained in a motor vehicle accident.

In Miller, the 9^th Cir. was presented with facts involving a motor vehicle accident caused by a trucker who lost control of his vehicle in adverse weather.  The trailer crossed the median and collided with a passenger vehicle, whose occupant sustained severe injuries.  The injured party filed claims against C.H. Robinson based upon Nevada state law theories of negligent selection of a motor carrier.

The United States District Court for the District of Nevada (“NV DC”) concluded that such claims were preempted by F4A because they related to the services of a broker to arrange transportation.  The 9^th Cir. reversed the NV DC, concluding that the claims fell within an exception to preemption for regulation of motor vehicle safety.  C.H. Robinson filed an appeal with the SCUS, which declined to accept jurisdiction of the case without opinion.

The freight broker industry is hopeful that Aspen will be appealed to the SCUS and jurisdiction will be accepted to obtain a favorable ruling and resolve the apparent conflict with Miller.  However, there is no guarantee that the SCUS will conclude that such a conflict exists.  Narrow readings of Aspen and Miller can support a conclusion that each case deals with a different portion of the F4A statutory language, and different liability exposures, such that no conflict among the Circuits exists. 

Regardless of the ultimate outcome with SCUS, the fact patterns in Aspen and Miller demonstrate unfavorable trends of diminished safety on America’s roadways and in the chain of custody of goods which create significant tort and contractual liability exposure for freight brokers.  Prudent freight brokers will apply best practices in carrier selection to minimize these exposures and protect their business.

Freight brokers insured with GTU possess a unique advantage over their competition with the opportunity to apply our proprietary algorithm to their motor carrier lists to identify those most likely to create losses.  In addition to obvious lessons like never use the services of motor carriers rated conditional or unsatisfactory with the FMCSA, our algorithm assists with nuanced identification of motor carriers who present an increased likelihood of a motor vehicle accident, an uninsured cargo claim, and theft of a load.

Through effective utilization of this resource alone, GTU freight broker customers can promote public safety and protection of the chain of custody of goods; reduce frequency and severity of claims; lower loss costs; create the opportunity to enjoy most favored premium rates; stabilize risk management costs over time regardless of size or expertise, or the coverages and insurance limits purchased; maximize goodwill in its shipper relationships; and improve profitability.