Thornburg & Wiser: On pre-emption of claims against freight brokers, shippers

Thornburg

By Robert Thornburg and Justin Wiser

A historical marker identifying the intersection of U.S. Highway 40 and U.S. Highway 41 as the “Crossroads of America” is located at a corner in Terre Haute. These two highways were incorporated into the original federal highway system in 1926 and, in 1937, “The Crossroads of America” was adopted as Indiana’s motto. Today, this motto remains important to the Indiana economy and the Indiana Economic Development Corporation (IEDC) in marketing the state as a global logistics leader.

Trucking is an important component of the logistics industry, connecting buyers and sellers and moving “two-thirds of all of our country’s freight, when measured by weight[,]” according to the American Trucking Associations.

Unfortunately, given the high volume of goods moved interstate by motor carriers, accidents are an inevitable consequence, and litigation resulting from tractor-trailer accidents has historically involved the motor carrier and its driver (either an employee of the motor carrier or an independent contractor). In recent years, however, others in the distribution chain, including shippers and freight brokers, also have been targeted under theories of liability based on allegedly negligent selection and/or supervision of the motor carrier and the driver involved in the collision, especially in catastrophic injury cases where a jury award has the potential to exceed a motor carrier’s financial responsibility limits. The viability of this novel theory is now being tested across the country. In 2018, federal district courts in Illinois, Ohio and Pennsylvania concluded the Federal Aviation Authorization Administration Act (FAAAA) expressly pre-empts state law tort actions against brokers and/or shippers where the allegedly negligent conduct is derived entirely from the services provided by, and duties placed upon, a motor carrier.

Wiser

Several cases have found that negligent hiring claims against freight brokers and/or shippers are pre-empted by FAAAA when the alleged negligence results in personal injury. Yet, Indiana courts have not had an opportunity to explore FAAAA preemption in such a scenario. This article, intaking direction from these 2018 decisions, explores the history of FAAAA preemption and the current state of the law regarding broker and shipper liability.

As prior case law indicates, “In the early twentieth century, commercial motor vehicles were largely regulated by individual states.” Owner-Operator Independent Drivers Association, Inc. v. United States Department of Transportation 

The United States Supreme Court, however, disagreed and determined the plaintiff’s state law claims stemming from the storage and disposal of a car, once towing had ended, were not sufficiently connected to a motor carrier’s service with respect to the transportation of property to warrant pre-emption under the FAAAA. In reaching its holding, the Supreme Court delineated the test for determining FAAAA preemption as follows:

“Although [the FAAAA] otherwise tracks the ADA’s air-carrier preemption provision, … the FAAAA formulation contains one conspicuous alteration — the addition of the words ‘with respect to the transportation of property.’ That phrase ‘massively limits the scope of preemption’ ordered by the FAAAA. … As the New Hampshire Supreme Court correctly understood, for purposes of FAAAA preemption, it is not sufficient that a state law relates to the ‘price, route, or service’ of a motor carrier in any capacity; the law must also concern a motor carrier’s ‘transportation of property.’”

The Supreme Court also noted: “Title 49 defines ‘transportation,’ in relevant part, as ‘services related to th[e] movement’ of property, ‘including arranging for, receipt, delivery, elevation, transfer in transit, refrigeration, icing, ventilation, storage, handling, packing, unpacking, and interchange of passengers and property.’”

In essence, because the plaintiff’s Consumer Protection Act and negligence claims were not “related to th[e] movement” of his car, the Supreme Court found the claims fell outside Title 49’s definition of transportation and, therefore, were not subject to FAAAA preemption.

In this context, courts must examine whether state law relative to negligent hiring claims, let alone the underlying facts, necessarily relate to the “price, route, or service” of the broker. As seen in several federal district court cases, the analysis focuses on whether the claims have a connection to the freight broker’s core services, particularly the question of how a broker arranged for a motor carrier to transport the shipment.

The answer is not clear-cut. Several federal district courts previously disagreed, holding that personal injury negligence claims are not pre-empted. Even the 2018 decisions caution that the “related to” component cannot be “too tenuous, remote, or peripheral.” The court therefore must be persuaded that there is a direct or indirect connection to “price, route, or service.” There is no “sweeping immunity” granted to freight brokers, and as the Indiana Supreme Court has recognized, “preemption analysis begins with the presumption that federal statutes do not preempt state law.” Kennedy Tank & Mfg. Co. v. Emmert Indus. Corp., 67 N.E.3d 1025, 1028 (Ind. 2017).

As of January 2019, the state appellate courts of Indiana have yet to address squarely whether the FAAAA pre-empts claims against freight brokers or shippers and, if so, what types of claims may be pre-empted. The roadmap ahead for broker and/or shipper liability for negligent selection/supervision claims in Indiana will likely be guided by the analyses contained in these recent federal district court cases. While it seems Indiana courts may be persuaded by the legislative intent of preventing interference with competitive market forces and deregulation, it is yet to be seen whether 2018 is the beginning of an emerging pre-emption trend or if 2018 was merely a speed bump for these state law claims.•

• Robert Thornburg is a member of Frost Brown Todd, Indianapolis, and a member of FBT’s product, tort and insurance practice group. Justin Wiser is a product, tort and insurance associate at FBT. Opinions expressed are those of the authors.