Supreme Court Holds Negligent Selection Claims Against Brokers Are Not Preempted
In a much-anticipated but surprisingly unanimous opinion issued on May 14 in Montgomery v. Caribe Transport II, LLC, the Supreme Court held a state law claim that a broker negligently selected or hired a motor carrier is not preempted by a federal deregulatory statute (the “FAAAA”), 49 U.S.C. § 14501. The decision resolves a split in the United States Courts of Appeals, where the Seventh and Eleventh Circuits held such claims preempted and the Sixth and Ninth Circuits held such claims were not.
As part of deregulation of the trucking industry, Congress enacted a law, the FAAAA, preempting state laws related to prices, routes, and services of motor carriers and, relevant to this case, brokers. That law also contained an exception from preemption for the safety regulatory authority of a State with respect to motor vehicles (though, oddly, there is no safety exception for intrastate prices, routes, and services of a broker). Before the Court was the question of whether a negligent selection claim against a broker arranging an interstate move is saved from preemption by the safety exception. Specifically, does such a claim fall within the exercise of a State’s safety regulatory authority “with respect to motor vehicles.” The Court held that the federal statute’s safety exception applies to claims that concern the vehicles used in transportation and thus includes a claim that a broker failed to exercise reasonable care in selecting a carrier to transport goods via truck.
A concurring opinion written by Justice Kavanaugh and joined by Justice Alito acknowledged the practical reality that a “broker may not always (or even often) be in a good position to objectively assess the relative safety of different trucking companies.” The concurring opinion recognized that brokers do not own or lease the trucks or hire the drivers. As Justice Kavanagh notes, state tort law can be unpredictable with litigation and insurance costs being passed on to consumers. Nevertheless, the decision underscores the importance to brokers of a sound and reasonable carrier vetting procedure that is faithfully followed.
Absent intervention by a legislature, what a broker must reasonably do to vet carriers it contracts with will evolve with case law that is fact-dependent and varies by state. However, some level of carrier screening will be necessary, as it has been in many jurisdictions prior to this decision. As with many business decisions, it will involve a balancing of legal and business risks.
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News from Scopelitis is intended as a report to our clients and friends on developments affecting the transportation industry. The published material does not constitute an exhaustive legal study and should not be regarded or relied upon as individual legal advice or opinion.
Supreme Court Holds Negligent Selection Claims Against Brokers Are Not Preempted
In a much-anticipated but surprisingly unanimous opinion issued on May 14 in Montgomery v. Caribe Transport II, LLC, the Supreme Court held a state law claim that a broker negligently selected or hired a motor carrier is not preempted by a federal deregulatory statute (the “FAAAA”), 49 U.S.C. § 14501. The decision resolves a split in the United States Courts of Appeals, where the Seventh and Eleventh Circuits held such claims preempted and the Sixth and Ninth Circuits held such claims were not.
As part of deregulation of the trucking industry, Congress enacted a law, the FAAAA, preempting state laws related to prices, routes, and services of motor carriers and, relevant to this case, brokers. That law also contained an exception from preemption for the safety regulatory authority of a State with respect to motor vehicles (though, oddly, there is no safety exception for intrastate prices, routes, and services of a broker). Before the Court was the question of whether a negligent selection claim against a broker arranging an interstate move is saved from preemption by the safety exception. Specifically, does such a claim fall within the exercise of a State’s safety regulatory authority “with respect to motor vehicles.” The Court held that the federal statute’s safety exception applies to claims that concern the vehicles used in transportation and thus includes a claim that a broker failed to exercise reasonable care in selecting a carrier to transport goods via truck.
A concurring opinion written by Justice Kavanaugh and joined by Justice Alito acknowledged the practical reality that a “broker may not always (or even often) be in a good position to objectively assess the relative safety of different trucking companies.” The concurring opinion recognized that brokers do not own or lease the trucks or hire the drivers. As Justice Kavanagh notes, state tort law can be unpredictable with litigation and insurance costs being passed on to consumers. Nevertheless, the decision underscores the importance to brokers of a sound and reasonable carrier vetting procedure that is faithfully followed.
Absent intervention by a legislature, what a broker must reasonably do to vet carriers it contracts with will evolve with case law that is fact-dependent and varies by state. However, some level of carrier screening will be necessary, as it has been in many jurisdictions prior to this decision. As with many business decisions, it will involve a balancing of legal and business risks.
News from Scopelitis is intended as a report to our clients and friends on developments affecting the transportation industry. The published material does not constitute an exhaustive legal study and should not be regarded or relied upon as individual legal advice or opinion.