HOW TO WIN A CASE AGAINST SHIPPERS AND BROKERS. By: Timothy M. Whiting Whiting Law Group, LTD.

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1 HOW TO WIN A CASE AGAINST SHIPPERS AND BROKERS I. Introduction to Shipper/Broker Liability By: Timothy M. Whiting Whiting Law Group, LTD. a. When a million is not enough, what do you do? You must consider the other key players, like the shipper or broker, who were responsible for putting the load in the hands of a carrier/driver who may have been unfit and unsafe to haul the load. b. There are several truths for broker/shipper cases: 1) Not every trucking case is a broker/shipper liability case. 2) Even if you do have a shipper broker case, only consider the liability of a shipper/broker in every case where the damages exceed the driver s and carrier s limits and there is no other source of recovery. 3) If the reasons a shipper should not have selected the carrier don t match the acts or facts that led to the crash, you have an uphill battle in most jurisdictions. 4) The defendants will file a MSJ in most shipper/broker cases. Keys: You must be mindful of this from the beginning and work to build a question of fact through digging deep early on and being prepared in discovery to make sure you can clearly establish a question of fact. Judge s still do not quite understand this area fully so you have an extra hurdle. 5) If you have not handled a shipper/broker liability case, I highly recommend you consult with someone who has before taking it on. II. Who is a shipper? o FMCSR 376.2(k) defines a shipper as a person who sends or receives property which is transported in interstate or foreign commerce. o Case law states that a shipper in this context must be a sophisticated shipper of goods and not merely casual shipper. For example, the greater the frequency of shipments by truck, the more likely they are sophisticated shippers. o The following questions are designed to elicit information regarding a shipper s sophistication: What types of products does [shipper] haul? How many plants and locations does [shipper] have? How does [shipper] distribute to purchasers or between other Plant locations? 1

2 What percentage of loads are shipped by truck versus other means? How much product (loads/volume/weight, etc.) does [shipper] ship by truck per day/week/month/year? How many different carriers [shipper] uses? o Demonstrating that a defendant is not merely a casual shipper of goods is crucial to successfully pursuing a shipper case. o Example of what I am saying: if I hired movers for my office to send files to storage vs. a steel company who hauls 250 loads of steel by truck each day. I am not a sophisticated shipper of goods in this example. III. Who is a broker? FMCSR 371.2(a) defines a broker as a person who, for compensation, arranges or offers to arrange, the transportation of property by an authorized motor carrier. o Key Point: Defendants argue that a majority of the FMCSRs do not apply to brokersonly shippers. However, once a broker engages in transport and ensures the delivery of goods, regardless of who actually transported the goods- the broker should be considered a motor carrier. 49 U.S.C (2) defines a broker as a person, other than a motor carrier or an employee or agent of a motor carrier, that as a principal or agent sells, offers for sale, negotiates for, or holds itself out by solicitation, advertisement, or otherwise as selling providing, or arranging for, transportation by a motor carrier for compensation. A broker only acts as an arranger of transportation. If anything else is involved, it should not have been done by a broker. o Broker Misrepresentation FMCSR 371.7: A broker shall not perform or offer to perform any brokerage service (including advertising), in any name other than that in which its registration is issued. A broker shall not, directly or indirectly, represent its operations to be that of a carrier. Any advertising shall show the broker status of the operation. In order to fall under the category of a broker, one must meet certain legal requirements such as: o Register with the FMCSA and Federal Highway Administration (FHWA) o Maintain process agents to accept legal service o Establish and maintain appropriate coverage for financial liability - $10,000 policy o Maintain administrative and financial recordkeeping o Only represent themselves as providers of brokerage services (i.e. cannot also be a motor carrier) 2

3 An example of a broker is a grain company trying to ship its product to another state. A trucking company is looking for a load to haul. A broker finds and connects these two entities to meet each of their needs. Key Point: It is important to note that approximately 40% of loads hauled are arranged through property brokers. Thus, be on the lookout for this player in every case where 1 million is not enough. IV. Six Key Considerations of Every Shipper/Broker Case 1. Plead the Primary Cause of Action: Negligent Selection 2. Establish the Minimum Standards of Care 3. Determine SMS/CSA Scores and OOS Rating 4. Establish Key Shipper/Broker Rules 5. Understand the Common Defenses 6. Consider Alternate Theories of Liability This reference paper will go through each of these considerations in turn. 1. First Key Consideration: Plead a Primary Cause of Action: Negligent Selection o The general rule is that a party is not responsible for the negligence of its independent contractor. However, there is an exception under the Restatement (Second) of Torts 411 that imputes liability for failure to exercise care to employ a competent and careful contractor. o Restatement (Second) of Torts 411: An employer is subject to liability for physical harm to third persons caused by his failure to exercise reasonable care to employ a competent and careful contractor (a) to do work which will involve a risk of physical harm unless it is skillfully and carefully done, or (b) to perform any duty which the employer owes to third persons. o The Hurnblad decision held that for purposes of determining liability for negligent hiring of an independent contractor under 411, trucking is an activity that involves a risk of physical harm unless it is skillfully and carefully done. o Generally the courts must find: the hired party was incompetent or unfit, the employer knew or reasonably should have known of the unfitness, and the incompetence was a proximate cause of the injury. Davies v. Commercial Metals 2010 WL (Fl. Ct. App 2010). 3

4 o Key Point: See the cases listed in the Table of Authorities for an in depth discussion of negligent selection and get up to speed on all the key shipper/broker cases in the country. 2. Second Key Consideration: Establish Minimum Standards of Care o When determining whether the shipper/broker was negligent in selecting a motor carrier, a shipper/broker should at a minimum do the following: 1. Determine if they have federal operating authority 2. Check Safety Rating: satisfactory, conditional, unsatisfactory 3. Check Safety Statistics: FMCSA BASIC Scores 4. Have a system in place for ongoing monitoring of the carrier s safety statistics 5. Check if carrier is in satisfactory financial condition 6. Check if carrier has proper insurance Key Point: Most important is safety rating, minimum insurance, and checking SMS BASIC scores o Written discovery and depositions provide the opportunity to find out exactly what a shipper/broker did and where it might have failed in its duty to exercise reasonable care in selecting a competent, fit, and safe carrier. Key information to ask for includes: What were policies and/or protocol for vetting and selecting motor carriers and drivers? Who was responsible for vetting and/or selecting competent, skillful, and safe motor carriers and drivers? Did you employ an outside service? Were all of these policies in writing? How often were all of these policies and protocol carried out? Does [shipper/broker] keep a file with records on each motor carrier and/or driver? Is there a system in place for continued investigation of carrier/driver safety? Did [shipper/broker] have written contracts with carriers/drivers from the date of the incident? Did [shipper/broker] make any inquiries into the finances of carriers and drivers? Is [shipper/broker] familiar with SafeStat/CSA/SMS Scores? Did [shipper/broker] investigate the carrier on these sites? o If so, when? o Was there a policy in place? o Were they checked on an ongoing basis? o What was the system? Did [shipper/broker] inquire/speak to motor carriers about training and/or safety programs? 4

5 Has [shipper/broker] ever terminated an agreement with a carrier based on safety violations? At the time of the incident, would [shipper/broker] have hired a carrier that was deficient in? Did [shipper/broker] ever ask for copies for safety inspections or logs? Did [shipper/broker] distribute written materials safety or safety policies to the carriers it used? Did [shipper/broker] discuss safety, safety programs, or safety expectations with its carriers/drivers? What did [shipper/broker] do to determine whether its carriers/drivers complied with the FMCSRs? What did [shipper/broker] do to assure to the monitoring public and [plaintiff] it was hiring competent, fit, and safe carriers to haul its loads? Did the shipper/broker have its own dedicated fleet of trucks? What did the contract outlining the terms of hauling goods state for safety? o Key Point: If the shipper/broker has its own dedicated fleet, discover how it managed and oversaw the safety of its trucks and drivers and compare it to how the shipper/broker did not do the same in selecting the outside carrier involved in your crash. o In my handling of shipper/broker cases, I have found some key resources for determining the carrier selection framework: American Transportation Research Institute (ATRI), American Chemistry Council, and Transportation Intermediaries Association (TIA) Please see the table of authorities for direct links to their websites or PDF links. o I also provided an example of carrier selection framework below from Swift Transportation Inc. s carrier selection criteria. Swift Transportation, Inc. provides an example of a broker/carrier who has incorporated the Safety Management System (SMS) into its carrier selection policies. To become an approved carrier for Swift Transportation, a carrier must provide and meet the following criteria: Provide your MC/MX# or DOT# to begin registration. Intrastate carriers without a DOT# may provide an applicable state registration number to begin registration. Carrier Contact must be authorized to enter into and bind your company to Swift Transportation Agreement. Validate or provide the carrier contact information Submit an electronic W9. Complete the Carrier Profile. Read and ACCEPT the Swift Transportation Agreement. 5

6 Provide a Certificate of Insurance that meets the insurance minimum requirements below: Certificates must be submitted from your insurance producer (agent) o $100,000 cargo coverage o $1,000,000 auto liability coverage o $1,000,000 general liability coverage o any carrier with more than 5 employees require WC (if employees count grows greater than five, carrier must immediately supply WC) If RMIS does not already have a copy of your certificate on file, we will request one for you from your insurance agent (producer). Required to meet the following Swift Transportation Carrier Compliance Requirements: o Safety rating must be satisfactory or none. o Companies must have active common or contact authority. o Companies with broker authority cannot register, and must contact the Swift 3PL division o Unsafe Driving: score must be equal or lower than 65% (non HazMat) or 60% (HazMat) o Fatigue Driving: score must be equal or lower than 65% (non HazMat) or 60% (HazMat) o Driver Fitness: score must be equal or lower than 80% (non HazMat) or 75% (HazMat) o Drugs/Alcohol: score must be equal or lower than 80% (non HazMat) or 75% (HazMat) o Vehicle Maintenance: score must be equal or lower than 80% (non HazMat) or 75% (HazMat) o All carriers must have appropriate Federal, State, or Provincial Authority. o Financially stable 3. Third Key Consideration: Determine the Safety Rating, SafeStat/CSA/SMS Scores, and Out of Service Ratings o Key Point: These may be the most important consideration for shipper/broker cases. This is how one determines whether the carrier was unfit, unsafe, and incompetent when it was selected to haul the load. o To do this, it requires searching the FMCSA website (A&I/SafeStat/CSA/SMS) for safety statistics. 6

7 o These are initiatives by FMCSA to improve large truck safety and reduce injuries and fatalities as a result of commercial motor vehicles. There are three different areas on the FMCSA website one can pull safety ratings from: 1. Safestat/ Analysis and Information (A&I): Analysis and Information (A&I) Online website was initially developed in 1997 by the FMCSA and the Volpe National Transportation Systems Center to provide FMCSA headquarters and field staff access to current motor carrier safety data via the FMCSA intranet. The site went public in 1998 and now provides motor carrier safety information to FMCSA and State enforcement personnel as well as motor carries, insurers, shippers, and the public to help promote analytically sound, safety-conscious decision making. 2. Compliance, Safety, Accountability (CSA): CSA is a FMCSA initiative to improve large truck and bus safety and ultimately reduce crashes, injuries, and fatalities that are related to commercial motor vehicles. 3. Safety Measurement System (SMS) SMS is a one-stop shop for public motor carrier safety data. SMS uses this information to identify motor carriers that pose the greatest risk to safety for interventions. Key Points: SMS/ CSA are tools that FMCSA recently launched to make it easy to find information on motor carriers and address roadside performance data. An enhanced website was released July 24, One uses SMS to search for Motor Carrier Safety Data and find out how the FMCSA uses this data to enhance safety. SafeStat combines current and historical safety performance information to measure the relative safety fitness of commercial motor carriers. This information includes Federal and State data on crashes, roadside inspections, on-site compliance review results and enforcement history. The main difference between SafeStat and CSA/SMS was the expansion of categories and some of the threshold levels. The improvements to the website include: consolidated FMCSA safety information so users do not have to go to multiple sites and easy access to detailed information and improved performance monitoring tools. 7

8 o The FMCSA websites for SMS/CSA/Safestat/A&I are resources to assist in selecting safe, competent, and fit motor carriers and what a reasonably careful shipper/broker should, at a minimum, be checking on a systematic basis. See Puckerin Navigating the SMS Website on FMCSA: o When you open to the home page of the Safety Management System you will find a number of tools for motor carrier research and information. 1. SMS Welcome 2. Search bar to check Motor Carrier Safety and Performance Date- Put in DOT#/ MC# 3. The date of the most recent data update Sample Carrier Overview: o When you type in the information for a specific motor carrier, you will be brought to a carrier overview page with information specific to that carrier. The information on the page includes: 1. Carrier information, 2. Safety ratings, 3. Behavior Analysis and Safety Improvement Categories (BASIC) status, and 4. Insurance information. o Key Point: It is important to note that one is able to get this information retroactively for the time of the crash. All you have to do is request a snapshot from the FMCSA for statistics and ratings at that time. BASIC Status Bar: o BASIC Stands for Basic Analysis and Safety Improvement Categories. o There are 7 BASIC categories: 1. Unsafe Driving; 2. Crash Indicator; 3. Hours of Service Compliance; 4. Vehicle Maintenance; 5. Controlled Substances and Alcohol; 6. Hazardous Materials Compliance; 7. Driver Fitness. Key Point: Each BASIC also has a detail page that gives more information about the motor carrier s performance in this category. 8

9 o A motor carrier s BASIC status may indicate a warning symbol next to categories where the motor carrier has been prioritized for interventions or further monitoring. If you see a warning symbol this mean that the motor carrier has been prioritized for interventions and further monitoring in this category. Seeing a warning symbol in a motor carrier s BASIC status is a good indicator that the motor carrier has a higher crash rate than those carriers without a warning symbol. This can be used to show that the motor carrier never should have been selected by the shipper/broker. BASIC Detail Page: o When you click on one of the BASIC categories, you will be brought to a detail page with additional information regarding how the motor carrier has performed in that category. o This goes into more detail on each BASIC category and gives more information about the motor carrier s performance in this category. o This page highlights: Carrier measure for the basic Carrier s percentile in relation to the intervention threshold A summary of investigation results- whether serious violations have been discovered within the past 12 months Intervention Threshold for Each Basic: o The intervention thresholds for each BASIC are based on each category s relationship to crash risk. o The categories with the strongest relationship to crash risk that have a threshold of 65% or greater are: 1. Unsafe Driving, 2. HOS Compliance, and 3. Crash indicator o The categories in the other BASICs have less of a risk of a crash and therefore have lower thresholds of 80% or greater are: 1. Controlled Substance and Alcohol, 2. Vehicle Maintenance, 3. Hazardous Materials compliance, and 4. Driver Fitness 9

10 o Key Points: The Intervention Thresholds for carriers are organized by BASIC and are set based on a given BASIC s relationship and crash risk. The FMCSA s analysis has shown that the strongest relationship to crash risk is found with high percentiles in the Unsafe Driving, HOS, Compliance and Crash Indicator BASIC. Therefore, these higher risk BASICs have a lower threshold for interventions than the other BASICs. Two Key Charts to show relationship of deficiencies and increased risk: Crash Rate by individual BASIC categories with a Status 10

11 Crash Rate by Number of BASIC categories combined with a Status o See also The Carrier Safety Measurement System Effectiveness Test by BASICs on the FMCSA website. 11

12 Safety Rating & OOS Rates Shows carrier s out of service rate compared to the national average. Key Point: Even if the carrier doesn t have deficient scores, you may argue that it s out of service (OOS) rates were high and combined with a conditional rating may be enough to show the motor carrier was unsafe, unfit, and incompetent to haul for them. Especially so if you have a certain status on one or more BASIC categories. 4. Fourth Key Consideration: Establish Key Shipper/Broker Rules a. Reptile Rule: (Three Versions) 1. A reasonably careful shipper/broker of goods should exercise reasonable care to hire competent, fit, and safe motor carriers to haul its loads. 2. A shipper/broker of goods should exercise reasonable care to hire competent, fit, and safe motor carriers to haul its loads. 3. A shipper/broker of goods should hire competent, fit, and safe motor carriers to haul its loads. o Practice Point: The Reptile Rule works by showing that a shipper and/or broker is an integral part of the transportation chain from the carrier being selected, to the load being picked up to be delivered and to what led to your collision. o Key Point: A shipper and/or broker is as much a part of the process of a load being put on the road as the driver and carrier who haul it and cause the crash. After all, they select the carrier who hires the driver who picks up the load all which leads to the collision. Why shouldn t they be just as responsible if the cause of the crash was related to deficiencies of the carrier/driver if it had exercised reasonable care in selecting the carrier? They should! Must get the judge in your case to understand this chain of transportation. 12

13 b. Establish Shippers/Broker Rules of the Road- below are a few examples: 1. The safety of everyone on our roads should always be the first consideration when a shipper/broker chooses a motor carrier to haul freight. 2. A shipper/broker must place loads with safe motor carriers to protect everyone on the roads. 3. A shipper/broker must place loads with competent, careful, skillful carriers to carry loads because the operation of tractor trailers on our roads poses a danger to everyone on our roads. 4. To protect everyone on the roads, a shipper/broker must not place a load with a motor carrier whom it knows, or should know, regularly violates federal trucking safety regulations. 5. To protect everyone on the roads, a shipper/broker must consider all available safety information when choosing a carrier. 6. To protect everyone on the roads, a shipper/broker must check the safety measurement system BASIC scores before placing a load with a motor carrier. 7. If you determine that a motor carrier has a track record of not being safe, it would not be appropriate to use the motor carrier. 8. If you determine that a motor carrier has a track record for being unsafe, it would be below the standard of care to hit the motor carrier, knowing that information. 9. Using a motor carrier with unsafe track record may result in an increased risk of serious physical injury or death to anyone on the roads. 10. There was nothing to prevent you from obtaining this information prior to the crash. c. These additional Rules of the Road can also be used as interrogatories, requests to admit, or key deposition questions: You agree that you are a reasonably careful shipper of goods? You agree that you exercise reasonable care in the selection of the carriers you use to haul your loads? You agree that reasonable care in the selection of carriers is to avoid hiring carrier who are incompetent, unfit, and unsafe to haul your loads? You agree as a reasonable, careful shipper of goods on our nation s highways, it is important to select competent, fit, and safe carriers to haul you loads? You agree that as a reasonably careful shipper of goods, you should exercise reasonable care to hire competent, fit and safe motor carriers you haul your loads You agree as a reasonable, careful shipper exercising reasonable care in selecting a competent, fit, and safe motor carrier you should check the safety rating statistics on the FMCSA website? You agree that you do not continuously check the safety ratings? 13

14 5. Fifth Key Consideration: Common Defenses a. Common Defense #1: Proximate Cause o Defense Arguments Regarding Proximate Cause o In Jones v. C.H. Robinson, the Court agreed that Jones must demonstrate the necessary causal connection between the particular quality or qualities that made it an incompetent carrier and the crash in which the plaintiff was injured. o Generally the courts must find: the hired party was incompetent or unfit, the employer knew or reasonably should have known of the unfitness, and the incompetence was a proximate cause of the injury. Davies v. Commercial Metals 2010 WL (Fl. Ct. App 2010). o This is the biggest defense in these cases. It is important to know your state s proximate cause requirements. o There are two main types of proximate cause they use to attack in these cases- cause in fact and legal causation: 1. Cause in Fact: would be the argument that the injury would not have occurred absent the defendant s conduct. This is essentially the but for test and is more lenient than the legal causation. 2. Legal Cause: the defendant s conduct has to be so closely tied to the plaintiff s injury that he should be held liable. Legal cause is essentially a question of foreseeability: would a reasonable person see that the injury would occur as a likely result of the defendant s conduct? o Counter Arguments: 1. Recent case law shows a trend toward relaxing proximate cause requirements. These courts have held that the cause in fact was negligent selection, i.e. the carrier should not have been selected by the shipper/broker. This relaxation of proximate cause typically happens only in states that use a more lenient cause in fact analysis. 2. The two pivotal cases which demonstrate a trend towards the relaxation of proximate cause are Chinn v. Mark Transp., Inc. (Unpublished) and Shropshire v. Shaneyfelt (District Court in PA- Unpublished). Key Point: In Chinn, the shipper, ARFA selected, motor carrier MTI. ARFA failed to look into MTI s operating authority, safety statistics and OOS ratings. If it would have, ARFA would have known that MTI didn t have operating authority. The court 14

15 held that even though the cause of the accident was driver fatigue caused by hours of service violations, the proximate cause of the accident was that it would not have been involved in the accident had the proper selection been performed. See also Shropshire v. Shaneyfelt (District Court in PA- Unpublished). Note: The proximate cause law in PA where Chinn was cited is a cause in fact state. 3. In accordance with these cases, it is important to argue that a reasonably careful shipper/broker would have checked the carrier s safety statistics including its OOS ratings or otherwise discovered its deficiencies. Had it done this, either the shipper/broker would not have selected the carrier or the vehicles would have been placed out of service. Key Point: Some Courts, who primarily use legal cause analysis, still require that the deficiency be the cause of the collision. b. Common Defense #2: Extent of Duty o Defense Arguments Regarding Extent of Duty: Shippers/Brokers will argue they do not have to investigate beyond the safety rating The motor carrier had a satisfactory or conditional rating on the SMS website when we hired them, therefore they are authorized by the FMCSA to operate as a motor carrier. Duty therefore, does not extend to checking additional safety statistics. o Counter Arguments: 1. Satisfactory rating does not mean anything. The rating is static as the ratings are often many years old and therefore does not reflect current status on operating safely. 2. According to ATRI studies from 2012, 96.8 of shippers are checking all FMCSA safety statistics. 3. Safety statistics are updated measurements of operating safely. The FMCSA websites for SMS/CSA/Safestat/A&I are resources to assist in selecting safe, competent, and fit motor carriers. The SMS website is one-stop-shop for public motor carrier safety data. 4. Checking for a Satisfactory overall rating is usually NOT sufficient to meet duty on its own when the CSA website as up to the month safety statistics.- Puckerin/ Schramm/ Jones 15

16 5. In Puckrein v. ATI Transport, Inc., the Court established that a shipper/broker has a continuing duty to inquire into competence, safety, and fitness of motor carrier. It not enough to check once and never follow up. 6. Furthermore, in Schramm v. Foster stated that it was the duty of a third party logistics broker, when selecting a carrier, included, at a minimum, the checking of a carrier s safety statistics and evaluations on the SafeStat FMCSA database. Even when a carrier s score is not unsatisfactory, there is a duty of further inquiry if that motor carrier has a marginal rating or its provenance is suspicious. 7. The Court in Jones v. C.H. Robinson Worldwide, Inc. held that a shipper could have become aware of propensity through a variety of public sources of information available: SEA scores, roadside inspection reports, FMCSA data indicating above-threshold SEA scores mean a carrier is 63% more likely to be involved in a collision, carrier s internal problem logs, conditional safety rating, and citations from compliance reviews. o Key Point: Be careful when the carrier has a satisfactory rating because in all of the case law above, the carriers had a conditional or no rating at all. c. Common Defense #3: FMCSA scores are not reliable: o Defense Arguments Regarding FMCSA Scores: o You cannot predict the likelihood of a crash. o Small carrier s scores are very volatile and a single violation can cause a small carrier s score to swing widely. (90% of all carriers have 6 or fewer trucks) o The scores rate motor carriers on a bell curve from 1 to 100 so of 100 companies 70 companies necessarily fall below the satisfactory rating. o The defendant will likely argue that because the scores are percentiles, 25% of carriers will necessarily be above the 75 th percentile threshold. The scores are percentiles- not a bell curve. The methodology is such that it calculates and compares crash rates meaning within the reference group, there is methodology. o Defendants will argue that SMS/CSA/SafeStat scores are not used for shipper determination of carriers safety. o Defendants will also argue that the scores do not necessarily equal higher crash rates. 16

17 o Counter Arguments: o The methodology compares trucks against their peer group according to the size of the company. So small companies are compared to small companies to determine the percentile score. o The score is a percentile- not a bell curve. Additionally, the data is time-weighted, size adjusted with ongoing data from roadside inspections, compliance review, enforcement actions, and crashes. It is only based on your individual scores in your peer group. o FMCSA SMS website clearly shows relationship to deficient scores and increase likelihood of a crash. o Volpe, a federal agency that is an arm of the USDOT, took all of the rated carriers and all of the SafeStat/CSA scores and showed that higher scores in the SafeStat CSA categories absolutely predict higher crash scores. See the Volpe study referenced in the table of Authorities. o See also all the cases referenced in the Table of Authorities. d. Common Defense #4: Preemption o Defense Arguments Regarding Preemption: o Federal laws preempt duty to consider safety scores. o While any ruling under state law made by any Court could be subject to preemption, such a situation would only arise under a condition of explicit, field, or conflict preemption. o The defendant will likely address the Federal Aviation Administration Authorization Act of 1994 ( FAAAA ) 49 U.S.C (c)(1) which states, a state may not enact or enforce a law or regulation related to a price, route, or service of any motor carrier with respect to the transportation of privacy. o Counter Arguments: o It is important to immediately point out that this does not apply to trucking cases as a shipper is not considered a motor carrier- it s considered a shipper. Furthermore, 49 U.S.C (c)(2)(A) explicitly states that 14501(c)(1) shall not restrict the safety regulatory authority of a State with respect to motor vehicles. (emphasis added). 17

18 o This means that even if 14501(c) did apply, the express language of the statute provides that the a State s imposition of a duty on a shipper/broker not to hire an incompetent, unfit, or unsafe motor carrier would fall under the State s authority to regulate the safety or motor vehicles and is unrestricted. o The Supreme Court accurately stated that it is difficult to believe that Congress would, without comment, remove all means of judicial recourse for those injured by illegal conduct. o Courts across the country have heard cases based on state law theories of negligent selection and those cases were not preempted by o The defendant might also argue that the federal government s declared policy to recognize and preserve the inherent advantages of transportation is in the public interest. o The defendant will also argue that a duty to consider a carrier s safety scores from federal systems like SMS/CSA/SafeStat would run afoul of the federal regulatory objective to create a system of interstate transportation that is safe and efficient. However, It is entirely in the public interest to ensure that shippers are required to select only those motor carriers who sufficiently meet the requirements of the FMCSRs and all pertinent State regulations. 6. Sixth Key Consideration- Alternate Theories of Liability: a. Non-Delegable Duty The Restatement of Torts (second) 428 states that, an individual or corporation carrying on activity which can be lawfully carried out only under a franchise granted by a public authority and which involves unreasonable risk of harm to others, is subject to liability for bodily harm caused to such other by the negligence of a contactor employed to do work in carrying on the activity. In many states, this doctrine is applied to trucking cases. Courts have held that a trucking company, which is a licensed motor carrier, has a non-delegable duty to the public at large and may not use outside carriers to shield itself from liability. A trucking company that retains an independent contractor pursuant to a sub-hauler agreement owes a non-delegable duty to ensure that the sub-hauler does not operate in a negligent manner. A two pronged test was laid out in Serna v. Pettey Leach Trucking Inc.: 1. The carrier must be engaged in commercial trucking which is lawfully carried out under a public franchise or authority (this is normally granted by the Department of Transportation); and 18

19 2. The carrier s activity must involve a possible danger to the public and is liable to a third person for harm caused by the negligence of the carrier s independent contractor. b. Broker Acting as a Motor Carrier The distinction between a motor carrier and a broker is often blurred. For example, a common carrier is not a broker when they arrange for transportation of shipments which they are authorized to transport and which they have accepted and legally bound themselves to transport. FMCSR 371.2(a). It is important to show that the broker was acting as a motor carrier in the subject transaction by establishing that the broker had control over the transaction and have a motor carrier number. Some of the factors of control include: set the price with the customer, assumed the legal obligation to transport the load, and accepted the load. c. Agency Relationship Between Broker/Shipper and Motor Carrier An agency is a consensual relationship in which a principal has the right to control an agent s conduct and an agent has the power to affect a principal s legal relations. A principal is vicariously liable for the conduct of its agent but not for the conduct of an independent contractor. If a broker has the right to control the driver as to the means of doing her work, an agency relationship exists and the party will be vicariously liable for the activities of the driver. It is important to look at your State s jury instructions for definitions of an independent contractor as you must distinguish the two. The Court will consider all the surrounding circumstances and actions of the parties notwithstanding contractual labels. There 6 factors to prove an agency relationship: 1. Whether the agent retained the right to control the matter in which the work at issues was performed; 2. The question of hiring; 3. The right to discharge; 4. The manner of direction of the servant; 5. The right to terminate the relationship; and 19

20 6. The character of the supervision of the work done. o Key Point: See Sperl v. C.H. Robinson in Table of Authorities for a list of factors. d. Restatement (Second) of Torts 414 Generally, one who hires an independent contractor is not liable for the acts or omissions of the independent contractor. However, Restatement (Second) of Torts 414, provides an exception to the general rule. 414 states that one who entrusts work to an independent contractor, but who retains the control of any part of the work, is subject to liability for physical harm to others for whose safety the employer owes a duty to exercise reasonable care, which is caused by his failure to exercise his control with reasonable care. e. Joint Venture Joint venture can be created when two or more persons combine their money, property, or time in the conduct of some particular line of trade, or for some particular business deal, and agree to carry out a single enterprise for profit. No particular formalities are necessary for a joint venture and there may be a joint venture for a single truck haul. A joint venture does not require a formal agreement and is normally a question for the jury to resolve. A joint venture is harder to establish than agency liability but if the two parties have a constant or long standing relation and a close financial connection, this may be a good avenue for recovery f. Alter Ego The legal theory of alter ego liability is very case and fact specific. The theory of alter ego liability allows the Plaintiff to recover from a corporation if the Plaintiff can establish enough evidence to pierce the corporate veil of the shipper/broker company. The shipper/broker must be closely related to the motor carrier. Some factors that can establish alter ego liability include commingling of funds and the failure to observe corporate formalities. 20

21 If you can establish alter ego liability, you also might be able to sue the shareholders, partners, or parent company of the shipper/broker that was responsible for the accident. V. Conclusion To summarize all this, consider 7 Key Points to remember when you encounter for shipper/broker cases: 1. Show that the shipper/broker is an integral part of the transportation chain of a load being picked up and delivered. 2. If a shipper case, establish if was a sophisticated shipper or if a broker case, then you must show that they met the proper legal requirements for being a broker. 3. Discover their selection procedure to show what they did to select a competent, fit, and safe carrier. 4. Know the case law standards of care and Rules of the Road for what a reasonably careful shipper/broker should do in selecting a competent, fit, and safe carrier. 5. Check all safety sources on the FMCSA website. 6. Shift focus away from circumstances of the collision and onto the negligent selection of the carrier. 7. Hire a great expert. **Please Call Tim Whiting if you are interested in obtaining the PowerPoint presentation that accompanies this reference paper. Timothy M. Whiting WHITING LAW GROUP, LTD. One East Wacker Drive, Suite 2300 Chicago, IL Office: (312) [email protected] Website: Website: 21

22 Table of Authorities Key Cases: L.B. Foster v. Hurnblad, 418 F.2d 727 (9 th Cir, 1969) Hudgens v. Cook Industries, Inc., 521 P.2d 813 (Okla. 1973) Puckrein v. ATI Transport, Inc., 897 A.2d 1034 (N.J. 2006) Jones v. C.H. Robinson Worldwide, Inc., 558 F.Supp.2d 630 (W.D. Va. 2008) Schramm v. Foster, 341 F.Supp.2d 536 (S. Md. 2004) Chinn v. Mark Transportation, Inc., 2010 WL (N.J. 2010) Shropshire v. Shaneyfelt, 2013 U.S. Dist. LEXIS (W.D. Pa. 2013) Sperl v. C.H. Robinson Worldwide, Inc., 946 N.E.2d 463 (Ill. App. Ct. 2011) Serna v. Petty Leach Trucking Inc., 110 Cal.App. 4 th 1475 (2003) Martter v. Beyers, 75 Cal.App. 2d 375 (1946) Thompson v. Hiter, 356 Ill.App. 574 (Ill. App. Ct. 2005) Johnson v. Pacific Intermountain Exp. Co., S.W. 2d 237 (1983) Hoffman v. Crane, 2014 WL (Ill. App. Ct. 2014) Key Statutes: 49 C.F.R (a) 49 U.S.C U.S.C (2) 49 U.S.C (c)(1) 49 U.S.C (c)(2)(A) FMCSR 371.2(a) FMCSR Restatement (Second) of Torts 428 Restatement (Second) of Torts 414 Restatement of Torts 411 Key Websites: American Chemistry Council: Transportation Intermediaries Association: Volpe: Truck Safety Coalition: U.S. Department of Transportation: Federal Motor Carrier Safety Administration: Analysis and Information (A&I): Key Research: American Transportation Research Institute (ATRI), Evaluating the Impact of Commercial Motor Vehicle Enforcement Disparities on Carrier Safety Performance, July John A Volpe, The Carrier Safety Measurement System (CSMS) Effectiveness Test by Behavior Analysis and Safety Improvement Categories, National Transportation Systems Center, January 24, The Reliability of CSA Data and Scores, American Transportation Association, December The Safety Measurement System (SMS) Display Enhancement and New Adjudicated Citations Policy, Federal Motor Carrier Safety Administration (FMCSA), Summer Broker Liability in Truck Accident Cases, The Plaintiff Magazine, November 2009: 22