Check Call: The Supreme Court and broker liability
Welcome to Check Call, our corner of the internet for all things 3PL, freight broker and supply chain. Check Call the podcast comes out every Tuesday at 12:30 p.m. EST. Catch up on previous episodes here. If this was forwarded to you, sign up for Check Call the newsletter here.
In this edition: The Supreme Court is petitioned to rule on freight brokers and F4A, and it’s been a rough year for brokerages.
Broker liability, it’s something that haunts every broker’s nightmares. What happens when something tragic happens on the road as a result of the load you’ve booked? Who is at fault?
What is F4A, officially known as the Federal Aviation Administration Authorization Act, and why does it apply to freight brokers? F4A was created in 1994 to forbid states from enacting or enforcing a law related to the price, route or service of any motor carrier. This act has given freight brokers substantial protections over the years because even though brokers have MCs (motor carrier numbers), it’s not the same type of MC as a carrier because a broker doesn’t physically move the freight.
Bringing it forward to current events, there have been three major court cases over the last few years that have brought F4A to the Supreme Court for ruling, as there now are conflicting rulings at the circuit level.
Of the aforementioned cases, two support the broker exemption for F4A and one doesn’t :
Ye v. GlobalTranz: According to FreightWaves’ John Kingston’s article, “The 7th U.S. Circuit Court of Appeals ruled in July that … F4A blocked GlobalTranz from being held liable for the death of Shawn Lin, [Ying] Ye’s husband. Lin was riding a motorcycle in November 2017 when he collided with a truck driven by a driver for a company named Global Sunrise, which had been hired by Arizona-based GlobalTranz to move freight.”
Kingston also brings up in his article, the“guy named James’ case. “When the 7th Circuit decision was handed down, it created a split in the federal circuit court system over whether a broker could be held liable for such an accident, or whether the F4A blocked that finding. In both the Ye case and the ‘guy named James’ case involving Landstar in the 11th Circuit, the F4A was invoked by the ruling appellate panels to hold brokerages not liable.”
In Miller v. C.H. Robinson, the 9th Circuit in 2020 held C.H. Robinson liable for injuries suffered by Allen Miller in an accident involving a truck booked by Robinson. The giant brokerage company asked the Supreme Court for review of the decision, but the court denied that request in June 2022.
Where that leaves us now is waiting. There is no guarantee that the Supreme Court will even hear the case, but we are left to wait while the court reviews the petition. Hopefully it puts an end to this debate once and for all.
Trac Tuesday. This week’s TRAC lane is Jacksonville, Florida, to Atlanta. This short jaunt of 309 miles is running 67 cents per mile lower than the National Truckload Index. Given that the load is headed into Atlanta, one of the largest freight markets in the country, the below average spot rates aren’t terribly surprising. On the flip side, getting a carrier a load out of Atlanta shouldn’t be too difficult. Rate coverage for this load should be about $516 all-in, before margin. Both outbound tender volumes and rejections have fallen in Jacksonville, which has to be one of the driving factors of the low spot rates.
Who’s with whom? 2023 has proved to be a tough year for freight brokers and carriers alike. While most of us this time last year knew there would be some losses, no one predicted the amount of loss the industry has faced this year.
There have been no less than 12 layoffs at major freight companies this year. Undoubtedly there are more but at smaller companies and progressively as the year went on opposed to the one fell swoop approach some of the other companies had.
First Surge filed for Chapter 11 bankruptcy and then the year was capped with Convoy’s demise and finally bankruptcy filing. While Surge attempts to battle back to operating in the black, Flexport has bought Convoy’s technology stack and nothing else from the company.
Almost all of the companies that had mass layoffs credited the turn in the market for the need to lay people off. Spot rates have somewhat bounced back but not in a significant way that has those hunting for margin breathing a sigh of relief.
Unfortunately, the trend doesn’t seem to be slowing down as we head into 2024. Best of luck and may the odds be ever in your favor come 2024. Also, if anyone has the secret to making the market turn faster, I’m pretty sure everyone would love for that to happen.
The more you know
Supply chain ‘forever about cost, quality and service’
Borderlands: Eternity Group Mexico unveils tool for shippers to monitor carbon footprint
Biden administration announces massive logistics plan
More parcel shippers likely to get caught in delivery surcharge net
See you on the internet.
Mary
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