EVERY DAY IS A WINDING ROADBROKER ISSUES PANEL

Moderator: Michael Kroul, KTI, Inc.

Panelists: Jeffrey Simmons, GlobalTranz

Chris McLoughlin, C.H. Robinson Worldwide

Justin Olsen, England Logistics

FAAAA Preemption

49 U.S.C. § 14501(c)(1):

“Except as provided in paragraphs (2) and (3), a State . . . 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 . . . Broker, or freight forwarder with respect to the transportation of property”

FAAAA Preemption

49 U.S.C. § 14501(c)(2):

“Paragraph (1) –

“(A) shall not restrict the safety regulatory authority of a State with respect to motor vehicles, the authority of a State to impose highway route controls or limitations based on the size or weight of the motor vehicle or the hazardous nature of the cargo, or the authority of a State to regulate motor carriers with regard to minimum amounts of financial responsibility relating to insurance requirements . . .“(B) does not apply to intrastate transportation of household goods; and“(C) done not apply to the authority of a State . . . to enact or enforce a law . . . Relating to regulation of tow truck operations performed without the prior consent or authorization of the owner or operator of the motor vehicle.”

FAAAA PreemptionPersonal Injury Casualty Cases

• Federal District Courts are divided on whether FAAAA Preemption under 49 U.S.C. § 14501(c) prohibits state law negligent hiring claims against brokers and freight forwarders.

• No Federal Court of Appeals, nor U.S. Supreme Court have addressed the issue.

FAAAA Preemption

Cases finding that FAAAA Preemption does NOT apply:

• Owens v. Anthony, No. 2-11-0033, 2011 WL 6056409 (M.D. Tenn. Dec. 6, 2011)(citing several aviation cases, the court held that personal injury cases are not preempted by FAAAA, because such claims involve highway safety issues, which are reserved to the states by 14501(c)(2))

• Montes de Oca v. El Paso-Los Angeles Limousine Express, Inc. No. CV-14-9230 RSWL, 2015 WL 1250139 (C.D. Cal. March 17, 2015)(holding that personal injury negligence claims are not preempted by 14501(c)(1) and, thus, there is no federal question in a removal action from state to federal court).

FAAAA Preemption

Cases finding that FAAAA Preemption does NOT apply:

• Mann v. C.H. Robinson Worldwide, Inc., No. 7:16-cv-00102, 2017 WL 3191516 (W.D. Va. July 27, 2017)(negligent hiring claims have only a “’tenuous, remote, or peripheral’” connection to “price, route, or service” of a broker and has no “significant impact” related to Congressional objectives in 14501(c)(1); and, even if it did, the safety provisions of 14501(c)(2) create an exception to preemption).

• Hentz v. Kimball Trans. Inc., Case No. 6:18-ev-1327-Orl-31GJK, 2018 WL 5961732 (M.D. Fla. Nov. 14, 2018)(preemption only applies if the state law relates to price, route or service concerning an MC’s “transportation of property;” Congress did not intend to preemption ordinary state law negligence claims, evidence of that intent include the wording and lack of providing a federal remedy)

FAAAA Preemption

Cases finding that FAAAA Preemption does NOT apply (continued):

• Nyswaner v. C.H Robinson Worldwide Inc., 353 F.Supp. 3d 892 (D. Ariz. 2019)(distinguishes FAAAA from ADA due to “with respect to the transportation of property” language included in FAAAA; state law negligence claims only require conformance to a general duty of care not state law relating to rates and services. Congress did not intend to immunize brokers and carriers from liability for tortious conduct)

• Scott v. Milosevic, 372 F. Supp. 3d 758 (N.D. Iowa 2019)(ADA does not preempt private tort actions; neither does FAAAA)

FAAAA Preemption

Cases finding that FAAAA Preemption does NOT apply (continued):

• Gilley v. C.H. Robinson Worldwide, Inc., Civ. Action No. 1:18-00536, 2019 WL 1410902 (S.D. W.Va. March 28, 2019)(state personal injury/wrongful death claims are too tenuously and remotely related to a broker’s services to fall within the purview of FAAAA preemption; and, even if it did, the safety regulation exception would take it outside of FAAAA preemption)

FAAAA Preemption

Cases finding that FAAAA Preemption DOES apply:

• Creagan v. Wal-Mart Trans., 354 F. Supp. 3d 808 (N.D. Ohio 2018 (appeal filed, No.19-3562 (6th Cir. June 12, 2019))(brokers “arrange” for transportation by MC; thus, it is “services” encompassed in FAAAA. Also, the “safety exception of 14501(c)(2) does not apply. *claims for vicarious liability were also held to be preempted)

• Volkova v. C.H. Robinson Co., No. 16 C 1883, 2018 WL 741441 (N.D. Ill. Feb. 7, 2018)(term “services” is used broadly and negligent hiring claims relate to the core services of a broker and enforcement of state law claims for negligence would have a significant economic impact on brokers; thus FAAAA preemption applies. “Safety” exception applies to “safety regulation,” not common law claims, which are preempted).

FAAAA Preemption

Cases finding that FAAAA Preemption DOES apply (continued):• Krauss v. IRIS USA, Inc., Civ. Action 17-778, 2018 WL 2063839 (E.D. Pa. May 3, 2018)(Volunteer at a charity injured during unloading. Carmack

extended to preempt personal injury claims under the “conduct theory”)

• Miller v. C.H. Robinson Worldwide, Inc., Case No. 3:17-cv-00508-MMD-WGC, 2018 WL 5981840 (D. Nev. Nov. 14, 2018)(Arranging of carriers by broker’s is “services.” Plaintiff seeks to reshape the level of service of brokers; therefore, preempted. 14502(c)(2) relates to “state regulatory authority” and exception to preemption does not apply)

• Loyd v. Salazar, CIV-17-977-D, 2019 WL 4577108 (W.D. Okla. Sept. 20, 2019)(Arranging for motor carriers directly relates to a broker’s “services” and falls squarely within preemption. 14501(c)(2) “safety” exception does not apply because a negligent hiring of a broker only indirectly concerns the safety of motor vehicles owned/operated by a motor carrier.)

FAAAA PreemptionApplicable to Cargo Cases

Courts are quite uniformly applying FAAAA Preemption under 49 U.S.C. § 14501(c) to dismiss claims against brokers for cargo damage, absent a contract agreeing to liability or finding that the broker acted or held itself out to be a carrier or a freight forwarder.

• Ameriswiss Tech, LLC v. Midway Line of Illinois, Inc., 888 F. Supp.2d 197 (D.N.H. 2012)

• Georgia Nut Co. v. C.H. Robinson Company, Case No 1:17-cv-03018 (.D. Ill. Oct. 26,

2017)

• Delta Stone Products v. Xpertfreight, 304 F. Supp. 3d 1119 (Utah 2018)

CUSTOMER CONTRACT DEMANDS

Broker must agree to liability for cargo damage:• Contracts of this nature can create gaps between a carrier’s liability under Carmack and what the broker

agrees to in the contract.• Invoice Liability vs. Actual Damage or Wholesale or Production Costs• Liability for broken seal (when no damage to cargo is established)• Liability for variance in temperature (perhaps without actual damage to cargo)• Liability as the equivalent of an absolute insurer

*Often even absent a contract for cargo liability, the customer will apply leverage or simply offset freight charges and create a practical liability.

CUSTOMER CONTRACT DEMANDS

PROBLEMS SUBROGATING CARGO CLAIMS - GAPS BETWEEN INSURANCE COVERAGE AND CARMACK LIABILITY

• Cargo Insurance Exclusions• Temperature damage, unless the result of reefer breakdown/malfunction• Theft, Mysterious Disappearance, Unattended Vehicle• Moisture Damage or Rust• Excluded Commodities (e.g. soft fruit, electronics, wine & spirits, etc.)

• Invoice Value vs. Wholesale Value or Production Costs• Broken Seal• Temperature Variance• Released Values – Limitations on Liability

CARGO INSURANCE ALTERNATIVESTHAT HELPS COVER GAPS

• Shipper’s Interest Insurance• Becoming more affordable• May be purchased on a load-by-load basis• May be purchased for a particular shipper

CUSTOMER CONTRACT DEMANDS

• Indemnification Provisions• Traps (indemnifying for acts of carriers, [sub]contractors, etc.)• Taking on potential liability over which you have no control• Anti-Indemnity Statutes• Not uniform among states• May not apply to protect brokers – only carriers• Better to have clear and acceptable contractual language than to rely on an anti-indemnity statute to

save you• Increased Insurance Limits

• Demands for $250,000 in cargo and/or $2,000,000 in auto liability• Availability to increase insurance on a load-by-load or specific customer basis

EXPANSION OF 3PL SERVICES

• Warehousing• Freight Forwarder (Carmack liability) or Warehouse/Bailment Liability

• Limitations on liability (Carmack or UCC through Warehouse Receipt)• Drop & Hook Operations

• Staging Trailers• Over the road or just in the yard

• Yard Services• Trucks or Yard Dogs

• Issues (Should you address through contract?)• When does Carmack liability apply as opposed to bailment?• What insurance is necessary?• Who maintains, fuels, sets and monitors reefers?• When is load considered delivered?• Sealed loads and driver access to load (shipper load & count; rec’d in apparent good condition)• Access to yard and trailers• Damage to trailers

CARRIER VETTING ISSUES AND CONCERNS

Purposes:• Safety & Accident Liability• Protection of Cargo• Fraud Prevention (theft of load, fuel advances, double-brokering, imposters, etc.)• Customer Service (track & trace, timeliness, professionalism, etc.)

Issues:• Efficiency• Timeliness of Setup• Setting policy to address capacity challenges, along with vetting for quality carriers• Establishing a written SOP and adherence to same• To CSA or not (alternatives to public view)• National Hiring Standard legislation• Affiliations with “conditional” or “unsatisfactory” carriers• Risks of gaps in operating authority

CALIFORNIA DREAMIN’ (OR NIGHTMARE THAT KEEPS GCs UP AT NIGHT!)

1. AB5 Legislation

2. California Consumer Protection Privacy Act (CCPA)

AB5 LEGISLATION

• Prompted by Dynamex Operations West, Inc. v. Superior Court of Los Angeles, 4 Cal. 5th 903 (2018).- Court adopted ABC Test

• Effective January 1, 2020.• AB5 adopts Dynamex test and legal presumption that a worker is an employee for purposes of:

1. The California Labor Code2. The Unemployment Insurance Code3. All “Wage Orders” of the California Industrial Welfare Commission

• To overcome such legal presumption that worker is an “employee,” the company must satisfy each element of the ABC test. - Element “B” is the problem (“That the worker performs work that is outside the usual course of the company’s business.”)

• There are exclusions/exceptions• Impact on Brokers?

CCPA

• Applies to for-profit entities that, among other things, collect consumer personal information from California residents and do business in California • California residents have the following rights:

1. Right to know what personal information is being collected about them2. Whether their personal information is sold or disclosed and to whom3. To say no to the sale of personal information4. To delete their personal information5. To equal service and price, even if they exercise their privacy rights

• Companies will need to develop, implement and maintain appropriate policies and procedures to identify, maintain, safeguard, and report in-scope personal information

• Violation/Penalties• Effective date – January 1, 2020 (except Business to Business requirements postponed to January 1, 2021)

QUESTIONS?