In Truck Accident Litigation, Federal Law May Preempt State Common Law Negligent Hiring Claims Against Freight Brokers
Plaintiffs who suffer serious personal injuries resulting from a tractor-trailer accident rarely limit their lawsuits to suing the driver of the tractor-trailer. Instead, they commonly also sue the driver’s employer (the motor carrier) and the company whose product was being hauled (the shipper) under various negligence theories. And, where the shipper hired a freight broker to handle the logistics of finding the motor carrier to transport the shipper’s load, that freight broker usually finds itself unwillingly invited to the party, facing accusations of having negligently hired the motor carrier. A recent federal district court opinion in Texas, however, provides insight into a possible way out for those freight brokers.
In Gillum v. High Standard, LLC, 2020 WL 444371 at *2-6 (W.D. Tex. Jan. 27, 2020), Scott Gillum was hit by a tractor-trailer and sued the driver, the motor carriers involved in hiring and training the driver, and the freight broker that selected the motor carriers in Texas state court. The freight broker, which Gillum accused of negligently hiring the motor carriers, removed the case to federal court and moved to dismiss under the argument that federal law completely preempts state common law negligence claims against a freight broker relating to its provision of services as a broker. The federal district court agreed, concluding that the Federal Aviation Administration Authorization Act (FAAAA) completely preempts simple and gross negligence claims related to a freight broker’s services.
Because of an existing split amongst courts that previously addressed the issue, and in the absence of controlling authority, the court’s rationale for its preemption conclusion is as important as the outcome itself. Carefully considering existing authority, the Gillum court progressed logically through the plain language of the pertinent federal statutes, Congressional intent, the district court cases previously addressing the issue, the scope of preemption, and the limited statutory exceptions relied upon by plaintiffs opposing preemption. Doing so, it concluded unequivocally that “the FAAAA completely preempts Plaintiff's negligence claims . . . where that negligence ‘relates to’ the services the broker provides.”2020 WL 444371 at *7.
The starting point, of course, is the plain language of the pertinent statutes - the Interstate Commerce Commission Termination ACT (ICCTA) and the aforementioned FAAAA. Although the bulk of the court’s analysis and most prior case law focus on FAAAA preemption, the ICCTA should not be ignored. It provides that “no State or political subdivision thereof and no intrastate agency . . . shall enact or enforce any law, rule, regulation, standard, or other provision having the force and effect of law relating to intrastate rates, intrastate routes, or intrastate services of any freight forwarder or broker.” 49 U.S.C. § 14501(b)(1). Similarly, under the FAAAA, states “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 private motor carrier, broker, or freight forwarder with respect to the transportation of property.” 49 U.S.C. § 14501(c)(1). Under the plain language of both federal statutes, then, states seem limited in their authority to regulate the trucking industry and, in particular, the services of freight brokers.
Interpreting this statutory language, both Gillum and another recent case out of Oklahoma closely examined and discussed congressional intent. As the Oklahoma court succinctly explained, “[a]s part of a change in federal regulatory policy toward the transportation industry, Congress passed statutes that deregulated trucking and prevented states from imposing their own regulations.” Loyd v. Salazar, 416 F. Supp. 3d 1290, 1293 (W.D. Okla. 2019). The point, according to Gillum, was to “preempt state trucking regulation” and prevent states from substituting their own “governmental commands” for the competitive trucking industry market in determining the scope and extent of services offered. Gillum, 2020 WL 444371 at *2. “Congress enacted the FAAAA to protect freight shipments from state regulations.” Loyd, 416 F. Supp. 3d at 1295. And all of this was in keeping with the overall goal of eliminating the patchwork of state regulation persisting well over a decade after Congress first attempted to deregulate the trucking industry. Nationwide Freight Sys., Inc. v. Ill. Commerce Comm'n, 784 F.3d 367, 373 (7th Cir. 2015). At bottom, Gillum explained that, to enforce its goal of deregulating the trucking industry, Congress wanted to prevent states from erecting additional or different standards or regulations governing brokers’ services. Gillum, 2020 WL 444371 at *5-6.
With the statutory language and congressional intent in mind, it should not be surprising to learn that federal preemption in this context is quite expansive. In fact, the United States Supreme Court has mandated that the FAAAA’s preemption provision be read broadly and has itself concluded that, although the effect must be more than tenuous, remote or peripheral in manner, preemption applies even where a state law only indirectly affects rates, routes, or services. Gillum, 2020 WL 444371 at *2. And the reference to state law necessarily includes common law negligence claims in addition to more formal statutes and regulations. Gillum, 2020 WL 444371 at *3; Loyd, 416 F. Supp. 3d at 1295. After all, the Supreme Court explained that “a common-law rule clearly has ‘the force and effect of law,’” there is “no basis for holding that such standards must be based on a statute or regulation as opposed to the common law,” and “there surely can be no doubt that this formulation encompassed common-law rules.” Northwest, Inc. v. Ginsberg, 572 U.S. 273, 281–82 (2014).
With that context in mind, Gillum concluded that preemption expansively encompasses common law negligence claims that “relate to” the services of a freight broker. This includes negligent hiring claims because, as a federal court in Illinois even more recently than Gillum outlined, “[t]he heart of plaintiff’s negligent hiring claim is that [the freight broker] failed to exercise reasonable care in arranging for a motor carrier, that is, its service as a freight broker.” Ye v. Global Sunrise, Inc., 2020 WL 1042047 at *3 (N.D. Ill. March 4, 2020). Similarly, the Oklahoma court in Loyd explained last year that “[w]ith few exceptions, the conclusions reached by district courts conducting an express preemption analysis are that the ‘services’ of a freight broker involve arranging for a motor carrier to transport property and that a state-law negligent brokering claim is directly ‘related to’ the broker's performance of this service with respect to the transportation of property.” Loyd, 416 F. Supp.3d at 1297. With that in mind and considering the prior cases to have considered the issue, Gillum ably summarizes federal preemption of state common law negligence claims against freight brokers:
In essence, Plaintiff claims that [the broker] was negligent in arranging for the transportation of property between motor carriers. These allegations “go to the core of what it means to be a careful broker.” Krauss, 2018 WL 2063839, at *5 (holding FAAAA completely preempted claim against freight broker under negligent hiring theory because careless selection of a carrier is a core service of a freight broker); see also Georgia Nut Co. v. C.H. Robinson Co., No. 17 C 3018, 2017 WL 4864857 (N.D. Ill. Oct. 26, 2017) (“While the services of a freight broker do not include the actual transportation of property, they are focused on arranging how others will transport the property; these services, therefore, fall within the scope of the FAAAA preemption.”).
. . .
The Court finds most persuasive the line of cases that have held negligence claims against freight brokers are preempted under the FAAAA because “[e]nforcing state negligence laws that would have a direct and substantial impact on the way in which freight brokers hire and oversee transportation companies would hinder” the objective of the FAAAA in deregulating the shipping and transportation industry.
. . .
Plaintiff's claims against [the freight broker], therefore, seek to enforce a duty of care related to how Defendant arranged for the transportation of property between [the motor carriers], which—Plaintiff admits—are the very “services” Defendant provides as a federally-licensed freight broker. Such a claim “falls squarely within the preemption of the FAAAA.” Creagan, 354 F. Supp. 3d at 813. Indeed, the claim directly implicates how Defendant “performs its central function of hiring motor carriers” and will therefore “have a significant economic impact” on Defendant's services and is not tenuous, remote, or peripheral.
. . .
Such a holding comports with the impetus behind the FAAAA's preemption provision because, in essence, Plaintiff is seeking “to reshape the level of service a broker must provide in selecting a motor carrier to transport property.” Miller v. C.H. Robinson Worldwide, No. 17-cv-408, 2018 WL 5981840, at *4 (D. Nevada Nov. 14, 2018), appeal docketed, No. 19-15981 (9th Cir. May 7, 2019). To avoid negligence liability, a broker like Defendant would need to inspect each motor carrier's background and the ways in which the motor carrier investigates, hires, and trains its own drivers, and “such additional inspection would result in state law being used to, at the least indirectly, regulate the provision of broker services by creating a standard of best practices, and ultimately contravening Congress's deregulatory objectives in enacting the FAAAA.” Id. (citing Rowe, 552 U.S. at 370).
Gillum, 2020 WL 444371 at *4, 5, 6.
Because a negligent hiring claim imposes additional burdens on freight brokers and reshapes their required level of service, such claims effectively regulate the industry and interfere with federal deregulation. Therefore, according to Gillum (and Ye and Loyd), federal law preempts those claims.
Although there remains a sharp divide amongst the federal district courts to have addressed the issue, freight brokers confronting state law claims related to their broker services have a powerful, persuasive preemption argument at their disposal. And if Gillum, Loyd, and Ye are any indication, the better-reasoned trend may be toward national recognition that the FAAAA completely preempts state law claims against freight brokers for alleged negligent hiring of motor carriers.
Floyd Hartley is licensed in Arizona, Colorado, and Texas. He primarily defends catastrophic personal injury matters around the country, as well as handling employment disputes and complex business and commercial litigation. For more than two decades, Floyd has litigated business, commercial, energy, employment, whistleblower, and white collar matters in federal and state courts nationwide. From 2010-2014, he served as a lead member of the trial team successfully representing Halliburton nationwide in all civil litigation arising from the Deepwater Horizon oil spill in the Gulf of Mexico.