By: Bryan J. Nelson, Esq., Alyssa Milby, Esq., & Elle Slattery, Esq.

Unlike most major historical events, you likely don’t remember where you were on September 28, 2020. Unfortunately, I do. I remember working remotely from my home and going about my day as general counsel for a 3rd party logistics company. I received a case alert regarding Miller v. C.H. Robinson Worldwide, Inc., 976 F. 1016 (9th Cir. 2020). Hoping for the best and fearing the worst, I found myself winding through the opinion’s language searching for positive quotes I could later cite in support of FAAAA’s broad preemptory effect in favor of my brokerage company on current and future negligent hiring claims. As you well know, that desired quote was never found in the Miller case, as the Court ruled that the so called “safety exception” allowed the state law claims of negligence to proceed against brokers. While hope was not yet gone, it soon faded. On June 27, 2022, the Supreme Court denied the petition to rule on the Miller case on appeal, pouring cold water on the industry’s aspirations for clarity from the highest Court. Having moved to private practice by that time, I not only needed to advise my prior company of the Supreme Court’s determination, I found myself having discussions with all of my clients regarding the impact of the Miller case remaining in effect.

Fortunately, as you recall from Taylor Johnson’s News Alert from April 14, 2023 (you can find a copy here), despite the ruling of the Miller case, our firm was able to secure a victory for brokers in the matter of Aspen Am. Ins. Co. v. Landstar Ranger, Inc., 65 F.4th 1261 (11th Cir. 2023). In the Landstar case, the Eleventh Circuit agreed with our argument that the FAAAA preempts state law negligence and gross negligence claims for cargo loss and damage. Thankfully, the Eleventh Circuit took things a step further and opined that regardless of whether the claim was brought for cargo loss or damage or for personal injury, a common law negligence claim against a broker is not a law that is “with respect to motor vehicles,” and the “safety exception” under FAAAA would not stop preemption.

That bring us to today. So please take a moment to recognize where you are, as today is the date FAAAA preemption of broker negligence claims became the majority opinion among United States Circuit Courts of Appeal. Today, Tuesday, July 18, 2023, the Seventh Circuit Court of Appeals joined the Eleventh Circuit Court of Appeals and affirmed a lower court ruling in favor of transportation broker GlobalTranz Enterprises (GlobalTranz) and against Ying Ye (Ye) finding that FAAAA preempts state law negligent hiring claims brought against freight brokers.

Ye brought a state law negligent hiring claim against GlobalTranz alleging that GlobalTranz should be liable for its role in brokering a shipment to a carrier that was ultimately involved in a collision that resulted in the death of Ye’s husband.

GlobalTranz argued that Ye’s claim, with its basis in state law, was preempted by FAAAA, which is federal law. FAAAA was enacted by Congress to assert federal control over the regulation of the prices, routes, and services of certain transportation enterprises. This Congressional fix was necessary because the application of various state or common laws lead to a patchwork of contradictory legal standards that left both potential plaintiffs and defendants in transportation claims uncertain of what standards would be applied. GlobalTranz’s stance was that the actions of property brokers with respect to the arrangement of the transportation of goods are actions which properly fall under the control of FAAAA. In this case, the Seventh Circuit agreed, stating:

In our view, enforcement of such a claim—and the accompanying imposition of liability—would have a significant economic effect on broker services. By recognizing common-law negligence claims, courts would impose in the name of state law a new and clear duty of care on brokers, the breach of which would result in a monetary judgment. To avoid these costly damages payouts, GlobalTranz and other brokers would change how they conduct their services—for instance, by incurring new costs to evaluate motor carriers. Then, by changing their hiring processes, brokers would likely hire different motor carriers than they would have otherwise hired without the state negligence standards. In our view, then, Ye’s negligent hiring claim has much more than a tenuous, remote, or peripheral relationship to broker services. The relationship is direct, and subjecting a broker’s hiring decisions to a common-law negligence standard would have significant economic effects. So Ye’s claim is expressly preempted by § 14501(c)(1).

The Seventh Circuit then held that the FAAAA’s “safety exception,” which Ye lobbied for, did not apply to the claim before the Court because the claim was not “with respect to motor vehicles.” The Court wrote:

The Act’s text makes clear that Congress views motor vehicle safety regulations separately and apart from those provisions imposing obligations on brokers. And this separateness counsels a reading of “with respect to motor vehicles” that requires a direct connection between the potentially exempted state law and motor vehicles. Any other construction would expand the safety exception’s scope without a clear, text-based limit. So we agree with the district court that the connection here—between a broker hiring standard and motor vehicles—is too attenuated to be saved under § 14501(c)(2)(A).

In reaching its conclusion and ruling in favor of FAAAA preemption, the Seventh Circuit not only eviscerated Miller’s interpretation of the phrase “with respect to motor vehicles,” likely making it difficult for future plaintiffs’ attorneys to rely on this weakened precedent, but the Seventh Circuit also relied heavily upon the Landstar case argued by Taylor Johnson. This Seventh Circuit opinion is another great win for transportation brokers and the transportation industry at-large. A link to the opinion in Ying Ye v. GlobalTranz Enterprises, Inc. Case No. 22-1805, can be found here. The impact of this decision is yet to be known, but its effects may be felt immediately by those brokers currently before a court for negligent hiring, or in the near future when it comes time to negotiate policy renewals for contingent auto and truck broker liability policies.

If you would like to speak with one of our transportation lawyers about this case, the impact (operationally and financially) it may have on your business, or any other transportation-related topic, please contact us.