At this point, we’re well past the new year, but 2023 has not yet fully shaken free of 2022. Especially not for the trucking industry. Two big legal cases from 2022 continue to present ongoing concerns.
The cases are California Trucking Association Inc. v. Bonta and C.H. Robinson Worldwide Inc. v. Miller. The first pits California’s definition of full-time employees against federal employment laws. The second asks whether brokers can be liable for negligent drivers. Both cases have far-reaching ramifications. Accordingly, members of the trucking industry had hoped the U.S. Supreme Court would address these cases and provide some clarity. It did not.
California Trucking Association Inc. v. Bonta
In 2019, California passed a law that said workers were eligible for various employment benefits unless they passed a three-part test to qualify as independent contractors. Naturally, this law, AB-5, would have a huge impact on numerous industries, services and prices. Employers such as Uber, DoorDash and other delivery services quickly secured exemptions for their contractors.
The California Trucking Association (CTA) and a pair of independent owner-operators also sought an exemption. They claimed the new law ran afoul of federal law, and they won their case in the district court. The court placed an injunction, preventing the state from enforcing the law against trucking companies. However, California’s Attorney General appealed. On review, the 9th Circuit U.S. Court of Appeals reversed the district court’s ruling, rendering the trucking industry vulnerable to lawsuits based on AB-5.
The question at the heart of the case was whether the Federal Aviation Administration Authorization Act (F4A) preempted AB-5. Generally, when federal and state laws clash, the federal laws will preempt the state laws. Here, as the 9th Circuit noted, the F4A “expressly preempts any state law ‘related to a price, route, or service of any motor carrier … with respect to the transportation of property.’”
The 9th Circuit then explored whether the restrictions in AB-5 were “related to” anything the F4A set off-limits. It found a distinction between laws that were “significantly related” and those in which the relation was merely “tenuous, remote, or peripheral.” It decided that AB-5 concerned a motor carrier’s interactions with its workers and previous rulings suggested those interactions were not “significantly related” to F4A’s exemptions. Accordingly, it said F4A did not preempt AB-5’s restrictions on motor carriers.
With its ruling, the 9th Circuit lifted the injunction. This means the state can now enforce the law against trucking companies. It also means that trucking companies can only classify workers as independent contractors if they meet the three-part “ABC” test:
- The trucking companies leave independent workers “free from control and direction” as they perform their work
- The independent workers do their work “outside the usual course” of the trucking companies’ business
- The workers routinely perform the same type of work independent of the trucking companies
Currently, the case only affects truckers in California, but that doesn’t much reduce the cause for concern. California is the nation’s most populous state, and where it leads, other states often follow. As Freight Waves noted, several other states have already been discussing laws similar to AB-5. If they pass these laws, the 9th Circuit’s ruling means that they’ll likely be free from F4A preemption.
C.H. Robinson Worldwide Inc. v. Miller
Everyone in the trucking industry is keenly aware of the threat of nuclear verdicts. In the trucking world, these are typically personal injury or wrongful death cases that result in verdicts of $10 million or more. Sadly, they have become increasingly common, and they don’t appear to be going away anytime soon.
This second case adds a new wrinkle to the threat of nuclear verdicts. It started when a truck driver crashed into Allen Miller. The injuries left Miller a quadriplegic, and he sued. That much was unsurprising, but the twist was that Miller included the brokerage firm C.H. Robinson in his suit.
As Freight Waves reported, brokers have largely avoided liability for truck crashes. C.H. Robinson doesn’t have its own roster of drivers. Instead, it manages a network of drivers who are willing to carry loads for other clients. In this case, C.H. Robinson found a driver to carry a load for Costco. When that driver got into a crash that injured Miller, Miller sued the driver and RT Service, the company for which the driver worked. Miller also named C.H. Robinson as a defendant.
Specifically, Miller had pressed two claims against C.H. Robinson, but later dismissed a claim of vicarious liability. He continued to press a claim of negligence against state common law, arguing that C.H. Robinson had failed its duty to hire a competent contractor. His attorneys noted several red flags that should have steered C.H. Robinson away from RT Service:
- A history of safety violations
- Failed more than 40% of its random truck inspections
- Numerous citations for false log books
- More than twice the national average of out of service violations
C.H. Robinson argued that the F4A preempted Miller’s claim. Again, the F4A says that states may not “enact or enforce a law, regulation, or other provision … related to a price, route, or service of any motor carrier … or any private motor carrier, broker or freight forwarder.”
The District Court agreed with C.H. Robinson, noting that the broker’s “service” is to find carriers for clients. It said that holding C.H. Robinson liable would have a significant, direct effect on the broker’s services. The relation was not tenuous or remote. It was significant enough to merit preemption.
Additionally, the District Court noted that Miller’s claim was not a “run of the mill personal injury claim.” It warned that Miller’s claim could “reshape” the very standard for broker liability. Brokers would have to change the way they interact with the marketplace. They would have to conduct their own reviews of drivers and trucking companies, rather than relying on Federal Motor Carrier Safety Administration (FMCSA) reviews. More troubling, they could find themselves facing different standards for negligence or liability in each state where they do business.
And this may be where things stand. The 9th Circuit U.S. Court of Appeals overturned the District Court’s ruling. It agreed that Miller’s claim was “related to” C.H. Robinson’s services as a broker, but it said the District Court was wrong to say the F4A’s safety exception did not apply. The 9th Circuit found that courts generally favor a broad interpretation of “the safety regulatory authority of a State.” Accordingly, it said that a state’s authority included common-law injury claims.
After the 9th Circuit ruled on the case, C.H. Robinson settled with Miller. Transport Dive did not reveal the settlement details, but it did note Miller’s attorneys had earlier been looking for a settlement of $27.3 million.
Two Strikes Against the F4A
Because the U.S. Supreme Court chose not to hear these cases, trucking companies will have to live with greater uncertainty than they would like. Without guidance from the nation’s highest court, the results for similar cases may vary from state to state. This may be especially concerning for brokers who may have to wonder how much each state expects them to be responsible for driver selection.
There may, however, be two lessons that trucking companies can take forward from these cases. First, they’ll want to be sure to work with attorneys who understand how individual state laws and federal laws intersect. Second, they will want to think carefully before relying upon the F4A. Both these cases raised the bar for successfully claiming that the F4A preempted state-level claims.