Key Takeaways:

• The phrase “with respect to motor vehicles” within the “safety exception” to the FAAAA’s exemption provision includes claims concerning or regarding motor vehicles used in the transportation of property.

• Claims against brokers for negligently selecting motor carriers to transport property are claims “concerning” motor vehicles, such that they fall within the “safety exception” and are not preempted by the FAAAA.

• While not necessarily increasing the liability of brokers who select reputable motor carriers, increased litigation and related costs to brokers and their insurers are anticipated based on the decision.

In a short, unanimous decision delivered by Justice Barrett on May 14, the United States Supreme Court in Montgomery v. Caribe Transport II, LLC et al. ruled that the FAAAA does not preempt state law negligent hiring claims against brokers who arrange interstate shipment of goods by motor carriers. The decision, which acknowledged a split amongst federal appellate courts over the breadth of the so-called “safety exception” to the FAAAA’s exemption provision, ruled that the “safety exception” applies to prevent preemption of negligent hiring claims against brokers.

The facts of the underlying tort suit are common: a motor carrier hired by a broker to deliver a load of goods interstate to a third party caused an accident with another motorist, who then sued the broker, alleging that the broker should have known that retaining the motor carrier would result in a crash because the carrier had a sub-par safety rating.  The U.S. District Court for the Southern District of Illinois ruled that the FAAAA’s exemption provision set forth in 49 U.S.C. § 14501(c)(1) – which preempts state laws related to the prices, routes, or services of any motor carrier or broker “with respect to the transportation of property” – preempted the negligent hiring claims and ruled that the claims did not come within the “safety exception” to the preemption provision, which is set forth in 49 U.S.C. § 14501(c)(2)(A). The U.S. Court of Appeals for the Seventh Circuit affirmed.

The “safety exception” states that the preemption provision “shall not restrict the safety regulatory authority of a State with respect to motor vehicles.” The Supreme Court acknowledged agreement by the parties that common-law duties and standards of care form a part of a state’s authority to regulate safety. Because the phrase “with respect to motor vehicles” is not defined in the FAAAA, the Supreme Court interpreted the phrase in its “ordinary meaning,” with reference to dictionary definitions defining the phrase to mean “referring to,” “concerning,” or “regarding” and to a prior decision of the Court interpreting the same phrase in the FAAAA’s exemption provision based on those definitions to mean “concerns.”  With these reference points, the Supreme Court concluded that “a claim is ‘with respect to motor vehicles’ if it ‘concerns’ or ‘regards’ the vehicles used in transportation.”

The Court then applied its interpretation of the “safety exception” to the facts before it and concluded that requiring the broker to use ordinary care in selecting a motor carrier “concerns” motor vehicles, “most obviously, the trucks that will transport the goods,” and determined that the exception saved the motorist’s negligent hiring claims from preemption.

In a short concurrence, Justice Kavanaugh, joined by Justice Alito, acknowledged arguments raised for a narrower construction of the “safety exception,” including that the FAAAA’s insurance requirements do not apply to brokers and that the act does preempt state court lawsuits against brokers for arranging intrastate transportation. The concurrence, however, concluded that the “overall structure of the safety regime for the trucking industry,” and specifically, the non-preemption of state court lawsuits against motor carriers for trucking accidents, favored a broader construction of the phrase “with respect to motor vehicles” within the “safety exception,” such that negligent hiring claims against brokers would not be preempted by the FAAAA.

The concurrence posited that allowing negligent hiring claims against brokers would not necessarily mean brokers would be subject to liability for the claims, provided they selected reputable trucking companies. Still, it acknowledged the practical effect of its decision – increased insurance and litigation costs to brokers and higher costs on brokers to more thoroughly vet motor carriers – but found that those “legitimate and weighty” concerns did not warrant a narrow construction of the “safety exception.”

We can expect the Court’s decision to ripple quickly and strongly through the trucking and insurance industries, and potentially, as the Court itself predicted, “to cascade through the economy and be paid in part by American consumers in the form of higher prices.”

One likely, but immediate, consequence is to prevent the quick dismissal of brokers from lawsuits, and as a result, to increase the costs to brokers and their insurers to successfully defend even those brokers who select reputable motor carriers.

If you have questions about how this impacts your business, please contact:

• Christian A. Cavallo
• John M. Allen
• Robert M. Hanlon Jr.
• Jeffrey L. Kingsley
• David L. Brown
• Or another member of the Transportation or Global Insurance Services teams.