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What the Supreme Court Broker Liability Ruling Means, and Doesn't · The Intermodal Logistics Podcast

0:04
SPEAKER_00: Thanks very much for joining us on this edition of the Intermodal Logistics Podcast.
0:09
SPEAKER_00: I'm Kevin Baxter with my co-host today, InTech Logistics CEO Rick Lagore.
0:14
SPEAKER_00: Hey Rick?
0:15
SPEAKER_00: Hey there.
0:15
SPEAKER_00: Good to be back.
0:16
SPEAKER_00: Yeah.
0:17
SPEAKER_00: Not too long time, No see.
0:19
SPEAKER_00: We've actually seen each other quite a bit.
0:20
SPEAKER_01: Yes, we have.
0:21
SPEAKER_01: Shelly needs to start getting in on these things because I've it's been a string of just me here for a bit.
0:26
SPEAKER_01: Everyone's got sick of me.
0:30
SPEAKER_00: But speaking of longtime No see, this one is actually a longtime No see.
0:34
SPEAKER_00: We've uh are welcoming back a returning guest to talk about some uh kind of pretty big news in the in the freight world over the last several months uh relating to the illegal side of things.
0:46
SPEAKER_00: And he is Mark Bluebaugh, partner and co-lead of Benish Law's transportation and logistics practice.
0:53
SPEAKER_00: Mark, you were on uh few years ago, and I think we were even talking about Montgomery back then.
1:00
SPEAKER_00: But uh uh before we get into all of the uh specifics of uh of the topics today, uh tell tell folks what you've been kind of dealing with this year uh in particular on the legal front, and probably related to that to some degree, but but otherwise as well.
1:17
SPEAKER_02: Yeah, no, well, first of all, thanks for inviting me.
1:19
SPEAKER_02: It's great to see both of you.
1:20
SPEAKER_02: I appreciate the invitation to be part of the podcast.
1:23
SPEAKER_02: Um and and yes, yeah, as you as you mentioned, I'm uh a partner in the Columbus office of the firm Benish Friedlander.
1:30
SPEAKER_02: I co-lead our firm's transportational logistics practice.
1:33
SPEAKER_02: Uh, I have been with the firm for 29 years uh and helped to create and build the firm's transportational logistics practice uh with the teamwork and support of many, many others, of course.
1:44
SPEAKER_02: Um and I'm particularly proud of the transportational logistics practice that we have built here at the firm.
1:51
SPEAKER_02: It is a multidisciplinary practice group of attorneys who spend all of their time or substantially all of their time supporting our clients who are involved in all manner of transportational logistics-related services.
2:04
SPEAKER_02: So, whether that's carriers of all modes and sectors, intermodal, truckload, LTL expedited, domestic intermediaries, freight brokers, as well as providers of managed transportation services, international forwarders, ocean and air, customs brokers, freight tech companies, uh, and the rest of it.
2:21
SPEAKER_02: And as we always have, we continue to kind of be a one-stop shop for them, helping with everything from the day-to-day contracting, drafting, and negotiation, uh provision of regulatory advice, handling mergers and acquisitions in the industry, resolving business disputes through litigation or otherwise, uh, just kind of generally protecting our clients, helping them grow, solve the problems they're dealing with every day.
2:45
SPEAKER_02: And certainly one of the big issues this year has been related to freight broker liability exposure.
2:52
SPEAKER_00: So Yeah, so uh I it's been a couple of months or a few months now since the uh Supreme Court decision on that Montgomery case.
3:04
SPEAKER_00: What did your first reactions?
3:07
SPEAKER_00: I mean, obviously you were preparing people for the the possibility either direction for for quite a while is something you were following.
3:15
SPEAKER_00: Um where did the I guess let's back up to the the background on the case and what you what they were actually deciding on and and then the implications.
3:30
SPEAKER_02: Sure, by all means.
3:31
SPEAKER_02: So this is a it's one of these classic fact patterns that we see emerge every day.
3:35
SPEAKER_02: We've got a customer, retains a freight broker, in this case it was CH Robinson, uh, to arrange for the interstate transportation of a load.
3:42
SPEAKER_02: In this case, it was plastic pots that were being moved.
3:46
SPEAKER_02: So CH contracts with a federally licensed motor carrier called Carib Transportation to perform the transportation for this particular customer.
3:56
SPEAKER_02: Uh after picking up the load in Ohio, the motor carrier's driver uh veers off the road while transporting the load through Illinois and collides with another tractor trailer that was stopped on the side of the road.
4:10
SPEAKER_02: And that tractor trailer was being driven by a gentleman named Sean Montgomery, who was injured as a result of the collision.
4:18
SPEAKER_02: Uh, and that's what spawned the litigation in the first place.
4:22
SPEAKER_02: So Mr.
4:23
SPEAKER_02: Montgomery initiated litigation in federal district court in Illinois.
4:28
SPEAKER_02: He sued uh not only the motor carrier and the motor carrier's driver, but also C.H.
4:33
SPEAKER_02: Robinson and certain affiliates of C.H.
4:36
SPEAKER_02: Robinson as well.
4:37
SPEAKER_02: And the allegation uh was really twofold.
4:40
SPEAKER_02: One, that CH had negligently selected uh this motor carrier to perform the transportation, and also that there was um unnecessary control over um over the motor carrier.
4:52
SPEAKER_02: But focusing on the negligent selection uh angle, the uh the general uh argument that Mr.
5:00
SPEAKER_02: Montgomery and his counsel brought was that, hey, this this driver uh that the motor carrier used had been involved in another crash incited for careless operation a few months earlier, uh, that the motor carrier had been involved in at least three reportable crashes over a period of time between May and September of 2017.
5:21
SPEAKER_02: And this particular accident happened in December of 2017, uh, that the carrier only had nine trucks, so this was disproportionate to the number of trucks they had, that the motor carrier uh met the definition of a high-risk carrier according to the FMCSA and had received a conditional safety rating as a result.
5:42
SPEAKER_02: Uh, and you know, generally just arguing that, hey, this is a deficient motor carrier for a variety of reasons, that there were these uh alleged red flags uh that meant that CH shouldn't have chosen to uh use this motor carrier in the first place.
5:58
SPEAKER_02: So the procedurally, what had happened and what where the legal issue came from was that in in response, uh CH raised uh the argument of preemption under federal law and said, hey, these claims that you're bringing for negligence against us are preempted by what's called the Federal Aviation Administration Authorization Act.
6:18
SPEAKER_02: We call it the F4A for short.
6:21
SPEAKER_02: Uh and the district court agreed and said, you know, we're gonna throw this uh case out.
6:25
SPEAKER_02: The negligence claims are invalid against C.H.
6:28
SPEAKER_02: Robinson, it's protected by federal law.
6:30
SPEAKER_02: Uh the Seventh Circuit, because the case was appealed by the plaintiff, went up to the Seventh Circuit Court of Appeals, and the Seventh Circuit agreed and said, Yep, district court, you got it right.
6:38
SPEAKER_02: Um, we're going to affirm the dismissal of the negligent hiring claims.
6:42
SPEAKER_02: Uh and then Mr.
6:44
SPEAKER_02: Montgomery appealed yet again and said, Supreme Court, please take my case.
6:49
SPEAKER_02: And the interesting thing here is that despite winning in the courts below, CH joined Mr.
6:55
SPEAKER_02: Montgomery in asking the Supreme Court to review the case, even though it had won.
7:00
SPEAKER_02: Uh, essentially saying, Supreme Court, we need a resolution on this issue of whether the F fora does or does not preempt these claims or whether they are saved by the safety exception, which I'll mention in a moment.
7:13
SPEAKER_02: But the Supreme Court did accept the case for review.
7:16
SPEAKER_02: And so the the core legal issue uh that was before the court centered on the uh the F4A and the safety exception that is built into the statute.
7:28
SPEAKER_02: And uh the safety exception is really the core legal issue that was at stake.
7:34
SPEAKER_02: And what that what the safety exception is in the statute, it's a savings clause that says all of this preemption that we're providing for here in the statute does not restrict the quote, the safety regulatory authority of a state with respect to motor vehicles.
7:54
SPEAKER_02: And those are the words that all of this litigation was about, because some lower courts had concluded that this exception, that that language, saves negligence claims from preemption.
8:07
SPEAKER_02: Other courts, like the court, the lower courts in Montgomery, said, no, the safety exception is inapplicable.
8:13
SPEAKER_02: It doesn't make a difference here.
8:15
SPEAKER_02: And so what the Supreme Court did, uh, its analysis turned on the construction of really three words with respect to.
8:25
SPEAKER_02: What does that mean and with respect to motor vehicles?
8:28
SPEAKER_02: So CH argued that it has narrow meaning, a very narrow reading.
8:34
SPEAKER_02: The Supreme Court disagreed and said, hey, this phrase with respect to, it's going to be given its what the court characterizes as ordinary, broad meaning.
8:44
SPEAKER_02: It means concerning, referring to, regarding.
8:47
SPEAKER_02: And if you apply that broad definition, the court said, look, you know, the obligation to use ordinary care, reasonable care in selecting a motor carrier, yeah, obviously, in the court's words, uh, concerns motor vehicles in some fashion, because the motor vehicle is used to transport the goods that are tendered by a broker's customer.
9:10
SPEAKER_02: So and the court reviewed and rejected a bunch of the other textual counter-arguments that C.H.
9:16
SPEAKER_02: Robinson and others uh had made.
9:18
SPEAKER_02: And so that's really where the court came out at the end of the day.
9:22
SPEAKER_02: Does that make sense?
9:24
SPEAKER_00: Yeah, that's uh great explanation, actually.
9:27
SPEAKER_00: Uh and you know, as you mentioned, C.
9:30
SPEAKER_00: H.
9:30
SPEAKER_00: Robinson was on board with the idea, like let's get let's get a precedent set here at the Supreme Court level, because there were other cases floating around that uh had sort of disparate opinions, and and the idea is let's at least know definitively what's going to happen here.
9:50
SPEAKER_02: Exactly.
9:50
SPEAKER_02: Because there was a significant split in the federal circuit courts as to whether or not the safety exception applied or it didn't.
9:57
SPEAKER_02: And it created a lot of uncertainty uh as a result.
10:01
SPEAKER_02: Um and so, you know, as disappointed as I am in the outcome of the case, um, we know that that defense in many instances is not going to be available.
10:11
SPEAKER_02: It still can be available in certain limited circumstances, but generally speaking, it's not going to apply.
10:18
SPEAKER_00: So in the uh I I mean you mentioned the that that phrase was kind of the the key, and and the court ruled 9-0 on on this particular piece, which is unusual for the Supreme Court these days, it feels like, but uh at least at least in the high profile cases that we hear about.
10:37
SPEAKER_00: Um but there were there were a few divergences there.
10:41
SPEAKER_00: Um Kavanaugh had his own sort of uh different opinion within that uh that nine-o um piece.
10:50
SPEAKER_00: Yes.
10:51
SPEAKER_00: What does that mean going forward in terms of future litigation?
10:55
SPEAKER_02: Yeah, I mean a 9-0 is a 9-0, uh notwithstanding the concurring opinions, but Justice Kavanaugh did have uh some helpful uh language and comments in his concurring opinion.
11:06
SPEAKER_02: And Justice Alito had joined uh uh Justice Kavanaugh's opinion as well.
11:12
SPEAKER_02: Uh and most importantly, he he emphasized that the court's decision shouldn't be read to mean that brokers will routinely be subject to state tort liability uh arising from truck accidents.
11:28
SPEAKER_02: Uh and you know, that drives home the point that an injured party still has to prove each and every element of a tort claim.
11:37
SPEAKER_02: You know, was there a duty in the first place?
11:41
SPEAKER_02: Was there a breach?
11:42
SPEAKER_02: Was it the proximate cause of the actual accident that occurred?
11:46
SPEAKER_02: So all of those defenses are still available.
11:49
SPEAKER_02: What the Supreme Court's decision did is remove one legal defense.
11:54
SPEAKER_02: And admittedly, it was a powerful defense in the jurisdictions that accepted it.
12:00
SPEAKER_02: Uh, but you know, cases of alleged broker negligence still remained defensible on the merits, and that's how these cases were being defended before the Supreme Court's decision, because again, not all jurisdictions recognized the scope of preemption.
12:18
SPEAKER_00: So, I mean, basically as you said, it takes the defense away on that particular uh on those particular grounds.
12:27
SPEAKER_00: What do you see as as how this moves forward in terms of how brokers should be viewing the situation?
12:35
SPEAKER_00: I mean, I guess, I guess we can jump right into the the follow-up that just occurred recently with CH Robinson, uh, coincidentally enough, in in a different case uh where it looks like there are some implications right away.
12:49
SPEAKER_02: Yeah, yeah.
12:50
SPEAKER_02: So, you know, keep in mind a couple of things.
12:52
SPEAKER_02: One one point I I like to emphasize to everyone is that the brokers today are facing the very same risks that existed the day before Montgomery issued.
13:05
SPEAKER_02: You know, again, what Montgomery did is remove one defense of many that a broker can raise.
13:11
SPEAKER_02: And the vast majority of brokers were already arranging loads to, from, or through those jurisdictions that had already rejected this particular defense.
13:24
SPEAKER_02: So, you know, there was initially a lot of chatter that this uh radically changed the liability profile of brokers.
13:32
SPEAKER_02: It did change the profile, but not to the magnitude originally reported.
13:39
SPEAKER_02: So, you know, the Supreme Court's decision was bad.
13:42
SPEAKER_02: It's not necessarily fatal.
13:44
SPEAKER_02: Certainly the$604 million verdict that we've heard about is bad.
13:48
SPEAKER_02: Um, but the the main point to keep in mind, if we think about the um the case down in Texas, for instance, you know, we only know so much about that particular case.
14:01
SPEAKER_02: Um we know there was an accident.
14:03
SPEAKER_02: It was back in 2021 down in Jackson, Mississippi.
14:07
SPEAKER_02: We know that uh who the parties were, that it was involved a tractor trailer driven by a motor carrier and it's and its driver.
14:14
SPEAKER_02: We know that CH was the broker that selected that motor carrier.
14:17
SPEAKER_02: We know that that was a significant crash that uh developed into a multi-vehicle pile-up and a fire.
14:24
SPEAKER_02: We know that three people were killed, uh burned to death.
14:28
SPEAKER_02: Uh, there was video footage.
14:31
SPEAKER_02: Uh I'm told that you know there was part of it, you know, you had a woman screaming for 20 minutes as she burned to death.
14:37
SPEAKER_02: Um, and obviously a lot of other folks were injured as well, and the driver uh of the motor carrier died too.
14:44
SPEAKER_02: And the plaintiff represented, I think it was 17 injured parties in that particular case.
14:50
SPEAKER_02: So, but unlike a lot of other litigation, one thing I think it's important for us all to keep in mind, we have to have a little uh epistemological humility here.
14:59
SPEAKER_02: You know, I wasn't at the trial, you weren't at the trial, very few people were at the trial.
15:04
SPEAKER_02: So we don't have visibility to everything that happened during the course of that trial, how the witnesses played, precisely what testimony was elicited, what evidentiary rulings were made during the trial, what did the driver say or not say about being ill and who did he say it to?
15:23
SPEAKER_02: So, unlike a bench trial where we would have a written opinion from a judge kind of explaining the rationale for a judgment, we don't have anything like that in this particular case yet.
15:35
SPEAKER_02: Um, you know, the judge did issue certain rulings before trial, but they were, I'll say, simple orders that were unaccompanied by opinions, in other words, just saying, I'm going to deny summary judgment to C.H.
15:47
SPEAKER_02: Robinson, I'm going to deny C.
15:49
SPEAKER_02: H.
15:49
SPEAKER_02: Robinson's motion to exclude the plaintiff's expert.
15:52
SPEAKER_02: I'm going to, you know, deny a motion to exclude evidence that CH may have changed its vetting process after Montgomery, uh, with no real further analysis on that point.
16:03
SPEAKER_02: So all we can do at this point in time is try to glean what we can from the responses to what are rather cryptic jury interrogatories that were submitted to the jury.
16:16
SPEAKER_02: And they were, it was a version that was different from the version that CH wanted the jury to receive, as you might expect.
16:21
SPEAKER_02: And when I read those uh responses, it's very difficult to discern how much of this verdict was driven by what I'll call the vicarious liability control claims versus direct negligence on the part of CH in selecting this motor carrier.
16:40
SPEAKER_02: So there's there's a lot of uncertainty in that respect.
16:45
SPEAKER_00: Basically, that means this verdict could have happened potentially even pre-Montgomery, based on how the jurors decided to hear the case.
16:56
SPEAKER_00: Exactly.
16:57
SPEAKER_00: Exactly.
16:57
SPEAKER_02: And it's very frustrating that, you know, almost identical sets of facts or substantially similar sets of facts can result in wildly different outcomes in different jurisdictions because of the nature of our legal system.
17:10
SPEAKER_02: You could have uh you know, similar case in one state, totally different outcome in another state.
17:15
SPEAKER_02: Could even be in the same city in a state, you know, two different juries reached the opposite conclusions.
17:20
SPEAKER_02: But uh this one we we we know how it played out uh for CH.
17:25
SPEAKER_00: And there uh they've already said that they are uh going to appeal this, uh, correct.
17:31
SPEAKER_00: Do you know what the the timeline on that is uh at this point?
17:34
SPEAKER_02: Well, there will be a number of post-trial motions that will be filed in the first instance, where CH Robinson will be asking the judge to set aside or modify the jury verdict or to take some other to grant a new trial.
17:50
SPEAKER_02: There'll be a variety of those motions.
17:52
SPEAKER_02: You know, um you it'll take some time for the judge to process those, dispose of those.
17:58
SPEAKER_02: Once all of those post-trial motions are complete, then the appeals process will begin.
18:04
SPEAKER_02: Um, the judge doesn't completely set aside the jury verdict.
18:08
SPEAKER_02: Uh, and based on her pretrial rulings, I wouldn't expect her to do that.
18:12
SPEAKER_02: Uh as the case works through the appellate courts, that will take years.
18:17
SPEAKER_02: Uh, it will take a substantial amount of time for it to work its way up.
18:20
SPEAKER_02: I mean, the Texas Supreme Court has um issued a number of favorable rulings to the transportation industry in recent years.
18:31
SPEAKER_02: Uh, you know, one, it reversed uh a$90 million jury verdict against Werner last year.
18:38
SPEAKER_02: Took Werner several years to get it to the Supreme Court and get it reversed, but ultimately prevailed.
18:43
SPEAKER_02: Uh, the day after Montgomery, uh, there was a decision that was issued in a uh shipper liability case.
18:49
SPEAKER_02: It wasn't a broker liability case, but the principles were very similar.
18:54
SPEAKER_02: Uh, and the Texas Supreme Court said, hey, shipper, you didn't have to, you didn't have a duty to investigate the carrier in the way that the plaintiff alleged that you did.
19:03
SPEAKER_02: You didn't have to, you know, quantitatively or qualitatively rank uh thousands of motor carriers and figure out which ones are safe or not.
19:12
SPEAKER_02: So the Texas Supreme Court, and I'm I'm speaking very generally here, has you know, from my reading, been sending some messages to the lower courts that they, you know, you have to rein this in a little bit, but um, we'll see how this case kind of emerges over time through the course uh of the appeals.
19:33
SPEAKER_00: So post Montgomery then, uh this this was obviously a case that was uh underway already.
19:38
SPEAKER_00: Have you seen any any rulings or any any sorts of uh uh situations come up that have uh looked like they've been directly impacted by Montgomery, uh uh plaintiff being uh a defendant being added, or you know, things like that in different cases that maybe wouldn't have happened before?
19:59
SPEAKER_02: Yeah, I mean, certainly it has highlighted to the plaintiff's bar that brokers are valid targets in this type of litigation.
20:08
SPEAKER_02: So previously it may not have been on the radar of certain members of the plaintiff's bar, now it is.
20:14
SPEAKER_02: Uh also there may have been weak claims that a plaintiff's attorney may have been somewhat chilled from bringing because they knew, oh, there's this preemption argument, do I want to spend my time fighting about all that?
20:27
SPEAKER_02: And now there's less uh less disincentive for them to do that.
20:32
SPEAKER_02: They figure, hey, why not throw the broker in as well?
20:34
SPEAKER_02: I'll shake them down for what I can, even if it turns out to be cost of defense.
20:39
SPEAKER_02: Uh yeah, I was mediating a case involving broker liability the day before Montgomery uh issued.
20:48
SPEAKER_02: And during the course of that mediation, both sides recognized that the decision could come down at any point in time.
20:55
SPEAKER_02: So both sides were motivated to find a middle ground uh in order to avoid the potential liability.
21:02
SPEAKER_02: Now, we we struck the deal that Wednesday, and then Thursday morning, unbeknownst to any of us, the decision came down.
21:09
SPEAKER_02: So it was an example of had that case not settled that day, I'm sure that the settlement value would have gone up, which is what's you know disturbing to uh freight brokers all over the over the nation as a result.
21:21
SPEAKER_02: Now, I can't say that I've seen this massive wave of new filings, that it's you know, thousands, there's a tsunami of of new cases being filed.
21:28
SPEAKER_02: The plaintiff's bar already was doing a lot of this, but it's certainly you can expect an upward trend.
21:34
SPEAKER_02: That's just it's without doubt that there'll be more of that litigation now that now that Montgomery has been issued.
21:40
SPEAKER_02: And when you see a$604 million verdict, it gets the attention of the plaintiff's bar, too.
21:45
SPEAKER_01: Yeah, yeah, that's a big number.
21:46
SPEAKER_01: So the uh some of the other things that I've seen out there is that uh as as as you said, it will start to escalate some um because there people have found a hole that they can they can move through.
21:58
SPEAKER_01: Um Have said that this is going to open up the shippers as well, besides brokers.
22:04
SPEAKER_01: And shippers really haven't really been that that involved to this point on this type of litigation.
22:11
SPEAKER_02: Shippers have been pulled into this litigation with increasing uh regularity.
22:17
SPEAKER_02: I've been involved in a number of cases involving claims against shippers.
22:21
SPEAKER_02: Um, usually shippers' uh liability exposure is much lower than the broker because they're not usually the ones involved in selecting the particular carrier.
22:34
SPEAKER_02: Um there may be claims for vicarious liability sometimes that are brought against shippers as well, or claims that the broke the shipper was negligent in choosing the broker and that it should have done more due diligence in that regard.
22:45
SPEAKER_02: You know, the plaintiff's bar is very good about casting a wide net, uh, and they continue to reach up the supply chain to as many parties as they can in the hope of maximizing recovery.
22:56
SPEAKER_02: So shippers, there some shippers had actually relied on F4A preemption pre-Montgomery, and there were a couple of courts that actually applied F4A preemption on behalf of shippers, um, essentially saying, hey, it's the same sort of argument.
23:13
SPEAKER_02: If the broker benefits, you should benefit.
23:15
SPEAKER_02: That was a minority view, I would say, but it was a colorable argument because there were a couple of courts that had reached that conclusion.
23:22
SPEAKER_02: Um I was at the oral arguments at Montgomery in the Supreme Court, and there was some discussion of shipper liability, and it was clear during the course of the oral argument uh that the Supreme Court didn't have a whole lot of interest in that topic, didn't seem to think that there was um that the shippers had a very strong position in that regard.
23:42
SPEAKER_02: Um but you can expect there'll be more against shippers as well.
23:45
SPEAKER_02: I I agree with you, Rick.
23:48
SPEAKER_00: Well, I mean, a lot of it does come down to for instance, in the Montgomery case, the carrier was, you said, nine nine trucks.
23:56
SPEAKER_00: Uh so smaller company, whereas then if if it's a large broker that's involved or a large shipper taking it that next level, that's obviously going to be something that that attorneys are going to be looking for in terms of where they can um get more out of the situation, I would think.
24:14
SPEAKER_02: Looking for the deep pockets.
24:16
SPEAKER_02: That's always the case.
24:17
SPEAKER_02: And sometimes the shippers are the deepest pockets uh that are available.
24:22
SPEAKER_00: Yeah, and it could depend on on each one.
24:24
SPEAKER_00: Obviously, sometimes the carrier is bigger than the broker, so it could go either direction.
24:28
SPEAKER_00: Yep, absolutely right.
24:30
SPEAKER_00: So um so you work with with TIA and uh and we had Chris Burroughs on um a few, I think I told you a few weeks before Montgomery actually came down.
24:43
SPEAKER_00: We were talking about it in hypotheticals still at that point.
24:46
SPEAKER_00: But um what have you heard from TIA membership and what are you telling TIA membership about sort of how to proceed from here uh now that it happened?
24:57
SPEAKER_00: I know you talked about some implications and some non, not real implications just yet, but but what are you telling folks overall?
25:05
SPEAKER_02: Yeah, well, yeah, the the questions we're always receiving are you know, what standard's going to protect me and make me bulletproof so that I have no exposure?
25:12
SPEAKER_02: And you know, sadly there's there's no uh clear definitive answer um uh on that particular point.
25:19
SPEAKER_02: But there are a couple of fundamentals that um uh I've been encouraging brokers to be thinking about.
25:26
SPEAKER_02: You know, number one, you know, talk to your insurer.
25:31
SPEAKER_02: Uh you know, the insurers are the ones who are underwriting much of this risk.
25:37
SPEAKER_02: Um, you know, you'll have a broker will, of course, have its own self-insured retention or deductible, uh, but uh and should have concerns about any kind of excess exposure as well.
25:47
SPEAKER_02: But the underwriters are the ones that are bearing some of this risk.
25:51
SPEAKER_02: And and the underwriter may require a broker to approach carrier vetting in a particular way, or or the manner in which a given broker vets their carrier base may have an impact on premiums ultimately.
26:08
SPEAKER_02: So I think a good initial step would be talking to the insurer about those issues.
26:14
SPEAKER_02: I think, second, you know, while this is a, it has been an opportune time for brokers to revisit their carrier onboarding and monitoring policies, and they should do so.
26:28
SPEAKER_02: You need to be thoughtful, cautious about making sudden, radical changes to a policy.
26:35
SPEAKER_02: So as you're reviewing, as a broker is reviewing its policy or protocol for determining what carriers it will use, a broker should be asking itself, what actual empirical evidence do I have, if any, to support my conclusion as a broker that a given factor or a given data point either is or is not probative of safety or security or whatever the concern is that I have.
27:07
SPEAKER_02: So going through that exercise is a very worthwhile one.
27:11
SPEAKER_02: I think third, ultimately, when you know what your criteria are going to be, uh, it needs to be reduced to writing.
27:19
SPEAKER_02: You want a written policy that establishes what your practice is going to be.
27:26
SPEAKER_02: And kind of the twin to that is you need to develop some kind of documentary record that will show your compliance with your own policy on a load-by-load basis.
27:40
SPEAKER_02: Um, so that in the event that there is a catastrophe, a broker is able to say, here's what our policy was, here's how we met our policy when we tendered this load to this particular carrier on this particular day.
27:54
SPEAKER_02: So that's another part of it.
27:56
SPEAKER_02: I think that another piece of advice that I've been uh giving to brokers in the marketplace is training.
28:03
SPEAKER_02: You know, you need to ensure that once you have this policy in place, uh that your folks are actually following it and complying with it.
28:12
SPEAKER_02: The only thing worse than not having a policy at all is then having a policy and then violating it, you know, left and right.
28:21
SPEAKER_02: You know, that's that does not look good, and the optics will not serve you well.
28:25
SPEAKER_02: So that's yet another kind of fundamental point to keep in mind.
28:30
SPEAKER_02: Um so you know, that's the those are the types of questions that I've been receiving, the types of feedback that I've been giving uh to the brokers uh out there in the marketplace who are trying to navigate uh the current situation.
28:44
SPEAKER_01: Aaron Powell Well, some of these mega brokers to be able to get that training down to all the levels and all the offices across the country or across the globe, um, become super difficult.
28:55
SPEAKER_01: So we've seen some carriers or I should say brokers out there that have taken their database of what they had as contracted carriers and just sliced off a whole bunch of them and said, you're not even going to be allowed to even look at these people anymore, which takes off more capacity out of the market.
29:15
SPEAKER_01: There's just all kinds of little different nuances that play through this and and how can you execute this 100% all the time.
29:23
SPEAKER_01: I know there's a lot of software out there that people are trying to put in that says, okay, I'll be perfect if I can do this software and it's going to go ahead and vet all my carriers just perfectly.
29:33
SPEAKER_01: There isn't a perfect thing out there.
29:35
SPEAKER_01: As you said, the um you never know what a once it goes to trial, what the result will be.
29:42
SPEAKER_01: It could be it could be go any direction.
29:46
SPEAKER_02: You're so right, Rick.
29:47
SPEAKER_02: And while technology is highly valuable in terms of operationalizing your policy and your protocol and can help minimize errors and oversights and and you know the mistakes that human beings make, there's only so much that technology can do because ultimately most of the solutions out there are going to require the broker to develop the rules that are going to be applied.
30:12
SPEAKER_02: What is the real substantive content?
30:14
SPEAKER_02: And and the foundational elements of carrier selection uh are there's not a whole lot of disagreement about the very core basic elements, you know, using a federally licensed motor carrier that has active operating authority, um, looking at the safety rating, you know, uh I still maintain that the use of unrated uh uh carriers or even satisfactory uh rated carriers is the way to go.
30:41
SPEAKER_02: Um carrier in the LIPA case that involved C.
30:44
SPEAKER_02: H.
30:44
SPEAKER_02: Robinson was satisfactory rated, though, and that wasn't enough for this particular jury.
30:49
SPEAKER_02: Um I sympathize with those who still want to use conditional carriers from time to time, uh, who haven't, because some conditional carriers haven't been able to get FMCSA to revisit their safety rating.
31:04
SPEAKER_02: But from my own experience, I think the use of such carriers is more trouble than it's worth, uh, notwithstanding arguments that can be made and what the operations people will sometimes um uh argue for.
31:18
SPEAKER_02: But I think the real, the real wrinkle, once you get past all that, because most everybody in the marketplace agrees, you know, with the safety rating issue and the uh the operating authority and uh and the like, then you get into a situation where reasonable people um disagree about what other criteria, if any, should be considered after that.
31:38
SPEAKER_02: Um that was the case before May 14th when the Supreme Court ruled, and that remains the case after May 14th as well.
31:44
SPEAKER_02: And you can talk to defense attorneys, safety consultants, risk consultants, tech companies, other stakeholders, everybody's got their own position.
31:54
SPEAKER_02: And and and I think we have to recognize that um the uh maybe the the overton window, so to speak, of what is reasonable here is pretty broad.
32:04
SPEAKER_02: Um so it it's it's a challenge, and I know it's not the the answer that uh everyone wants to hear.
32:10
SPEAKER_01: Yeah.
32:10
SPEAKER_01: And so to go a little bit further, the ultimate that there's still a person at the sitting in front of their computer, talking with their customer, talking with the carrier, and there's still a judgment call that they're making.
32:24
SPEAKER_01: The software doesn't take them all the way through the process.
32:28
SPEAKER_01: So um my my question is do you see the FMCSA coming around and making some some rulings um on how they regulate the carrier base to be more definitive to say absolutely they're out.
32:43
SPEAKER_01: Um because it it as I said, it's there's some uh interpretation a a broker can do.
32:50
SPEAKER_02: We certainly, certainly hope so, Rick.
32:52
SPEAKER_02: You know, TIA, uh speaking of TIA, has petitioned the FMCSA for rulemaking or to provide guidance uh even for the brokerage community about what constitutes reasonable care under the circumstances.
33:06
SPEAKER_02: And to your point, FMCSA is the agency that regulates motor carriers and brokers.
33:13
SPEAKER_02: So it should be equipped to provide direction uh to the marketplace.
33:18
SPEAKER_02: You know, I would love to see a green light, red light, for instance, uh from the federal government.
33:24
SPEAKER_02: Well, who wouldn't?
33:25
SPEAKER_02: Um TIA is also uh promoting legislation and has been for many years to do uh to establish a national motor carrier safety selection standard, uh, and otherwise educating policymakers and the like about the importance of this issue.
33:41
SPEAKER_02: Um, I'm hopeful that the FMCSA will, in fact, um take some action sooner rather than later in response to the petition uh and provide some of that guidance uh because it really is uh it's so essential for the reasons that you've indicated.
33:58
SPEAKER_02: I mean, they are the Federal Motor Carrier Safety Administration.
34:01
SPEAKER_02: They should be able to do this for us.
34:04
SPEAKER_01: Certainly make it a lot easier.
34:06
SPEAKER_01: Take a little bit of the interpretation out of the broker and and put it back in 100% something is uh something that's red light, green light.
34:14
SPEAKER_01: Yep, I'm with you.
34:16
SPEAKER_00: That's been identified as as a gap, even what's been out there uh in terms of what people can reasonably find so far.
34:25
SPEAKER_00: Uh the review process is somewhat slow.
34:29
SPEAKER_00: They don't necessarily have the staff to be able to get everywhere and and double check all these different carriers.
34:36
SPEAKER_00: Different carriers pop up in different ways and operating authorities and all of that.
34:41
SPEAKER_00: A lot of different questions there.
34:43
SPEAKER_00: So I mean, I I think when we had Chris on, he he had suggested that the it did seem as if DOT and FMCSA were were taking some steps, uh more more concrete steps in recent months than they had maybe in a while.
34:58
SPEAKER_00: Uh, do you see them continuing to move in a better direction?
35:02
SPEAKER_00: Especially, you know, we had you on three years ago and there were uh there were gaps there.
35:07
SPEAKER_00: Then have some of the gaps closed and are things getting better?
35:11
SPEAKER_02: Some gaps have closed.
35:13
SPEAKER_02: Uh, I will give a lot of credit to the current staff and leadership at FMCSA.
35:19
SPEAKER_02: Uh they are engaged, they are accessible, they are responsive, um, they've had uh their own sets of internal challenges with the transition to MODIS and the like, but uh they they have definitely been um more active uh than we have seen in some years, I think, uh in a positive way.
35:38
SPEAKER_02: I do think that you know we'll continue to see reforms.
35:41
SPEAKER_02: I hope they'll issue the guidance we were alluding to.
35:44
SPEAKER_02: Uh, I think that, you know, CSA reform should continue.
35:48
SPEAKER_02: Um, you know, that's a subject for data analysts and safety consultants above my pay grade, but but the system itself doesn't instill a lot of confidence in me at least.
35:59
SPEAKER_02: Um and and I and I certainly don't think that the average broker is in a better position to evaluate that data than the enforcement officials themselves and the agency.
36:08
SPEAKER_02: So um, you know, the systems and the the manner and nature of the data that FMCSA has has a lot of challenges with it.
36:18
SPEAKER_02: But the bottom line is I I think we're directionally going in a positive uh positive direction.
36:26
SPEAKER_00: Well, we've we spent most of our time on on this case, uh, which I think is appropriate.
36:32
SPEAKER_00: It's a pretty big deal.
36:33
SPEAKER_00: Oh, yeah.
36:33
SPEAKER_00: But uh is there some or is there any other major legal issue or uh that that you feel is kind of going a little under the radar that's that's affecting the transportation industry right now?
36:46
SPEAKER_02: Yeah, you know, I think that one thing that um is on my mind still, and I think it should be uh of concern to the to the brokerage community in particular, is what might happen with the so-called subject of broker transparency.
37:02
SPEAKER_02: Um, this was a rule that has been on the books since 1980.
37:08
SPEAKER_02: Um and the stated purpose of the original rule was to eliminate kind of what was seen as an unnecessary government interference with the business dealings among shippers and brokers and carriers when it comes to uh compensation.
37:26
SPEAKER_02: And the FMCSA has been engaging in some proposed rulemaking on this topic, um, which leaves the brokerage community unsettled, let's say.
37:40
SPEAKER_02: So all the good things that FMCSA is doing, this is one thing that I that I hope doesn't come to pass, but um yeah, they are essentially looking at uh modifying a rule that would require brokers to reveal to motor carriers the margin that they are making on any given transaction.
38:01
SPEAKER_02: And again, there's historical reasons why the original rule was put in place that no longer apply today because the the freight brokerage marketplace is a very different animal than it was in 1980.
38:13
SPEAKER_02: Uh, but this would require brokers to disclose their margins in that way.
38:17
SPEAKER_02: It's not it's not the way that free markets work typically.
38:21
SPEAKER_02: Um the federal government, from my perspective, shouldn't be involved in the economic relationships among shippers, brokers, and motor carriers.
38:30
SPEAKER_02: Um, the federal government largely got out of that business during deregulation.
38:35
SPEAKER_02: And when it terminated the ICC, I mean, even the name of the successor agency, as we were talking about, the Federal Motor Carrier Safety Administration, demonstrates that the focus should be on safety, not on economic or financial issues.
38:49
SPEAKER_02: Um, so it's something that I've got my eye on.
38:52
SPEAKER_02: It's something I that I think all of us should be attuned to.
38:56
SPEAKER_02: Uh again, hopefully the agency will not do anything um disruptive, but we'll have to kind of wait and see.
39:03
SPEAKER_02: But that's that's certainly an issue that it's under the radar right now a little bit, but it could quickly emerge as a very important issue.
39:11
SPEAKER_02: Imagine, you know, if if your customers knew that their commercial information, what they're paying, could be publicly available to a motor carrier.
39:20
SPEAKER_02: Um that's competitively sensitive information.
39:23
SPEAKER_02: So uh lots of reasons we don't want that information out in the marketplace.
39:28
SPEAKER_00: Yeah, that would that would have uh pretty far-reaching implications if uh if it were to uh come to pass.
39:34
SPEAKER_00: Do you have any uh ideas on on the timeline of any sort of resolution there, or is that sort of up in the air too?
39:42
SPEAKER_02: It's pretty invisible.
39:43
SPEAKER_02: Uh the agency does not uh necessarily uh forecast when any decisions may be forthcoming.
39:51
SPEAKER_02: Um yeah, I'm I'm heartened that it hasn't that nothing is issued yet.
39:56
SPEAKER_02: I'd like to think that that bodes well, but that's sheer speculation on my part.
40:01
SPEAKER_02: Uh and uh and again, I think the brokerage community is is all in favor of honoring the contracts that it enters into, paying to a motor carrier the rates that have been negotiated.
40:14
SPEAKER_02: Um that's not controversial, uh, but drilling down into margins and seeking the confidential commercial information of a ship or customer is a whole different matter.
40:28
SPEAKER_00: Oh, Mark, thanks uh so much for taking the time to uh speak with us.
40:32
SPEAKER_00: Where can uh folks find more uh about you and your practice?
40:36
SPEAKER_02: Sure.
40:36
SPEAKER_02: You can go to our website, uh www.benishlaw, b-e-n-e-s-c-h l-a w dot com.
40:44
SPEAKER_02: You can find my bio if you if anyone's interested in being on our newsletter distribution list, just send me an email, uh mbluebaugh, b-l-u-b-a-u-g-h at benishlaw.com, and I'd be happy to add you to the uh the mailing list where we send out updates and and the like regarding legal developments affecting transportation and logistics.
41:04
unknown: Great.
41:04
SPEAKER_00: Thanks again, Mark.
41:05
SPEAKER_00: We really appreciate it.
41:07
SPEAKER_02: Thank you for inviting me.
41:08
SPEAKER_02: It's great seeing both of you.
41:12
SPEAKER_00: The Montgomery case has been a topic of conversation in the industry for for quite some time, before the ruling, because there was there was the question of what was going to happen.
41:23
SPEAKER_00: Then uh post-ruling, there was a a bit of a massive freakout out there, I guess.
41:31
SPEAKER_00: Uh Mark's telling everyone that, you know, calm down a little bit, but just sort of re-evaluate your your your procedures, make sure that you're you're thinking about the right things as as you move forward.
41:46
SPEAKER_00: And and you should be protected if you're if you're thinking in that that right manner.
41:52
SPEAKER_01: Absolutely.
41:52
SPEAKER_01: That's that's what it comes down to a lot of cases.
41:54
SPEAKER_01: Um anyway, is just to go ahead and have a procedure, document it.
41:59
SPEAKER_01: Talk with your um insurance people.
42:01
SPEAKER_01: That was a good point.
42:02
SPEAKER_01: Talk with your insurance people and make sure that uh you're following the rules that they want you to follow.
42:07
SPEAKER_00: Right.
42:07
SPEAKER_01: Um, so that if something does happen, hopefully it never does, but if it does happen, at least you have their backing to say, well, if you do X, Y, and Z, you're gonna be able to, I'll be able to support you if you happen to lose that case.
42:22
SPEAKER_01: Um it's just as we were talking, there's just a lot of interpretation that's still out there in terms of how a broker is going to determine whether or not they're gonna put that load on that particular carrier.
42:33
SPEAKER_01: So um yeah, that's it's a tough, it's a tough regulatory environment.
42:39
SPEAKER_01: Um hopefully FMCSA Mark seemed to make some kind of alluded to.
42:45
SPEAKER_01: Maybe they're gonna be a little bit tougher and help us get to a red light, green light um situation with the carriers are chosen, uh, which would be fabulous.
42:53
SPEAKER_01: Uh would help all of us get past the interpretation, which there's still interpretation out there.
42:57
SPEAKER_01: So yeah, it's uh it's a big case.
43:00
SPEAKER_01: A lot of folks are super scary.
43:02
SPEAKER_01: That number of uh what was it, like 604 million or something like that?
43:06
SPEAKER_01: Yeah.
43:06
SPEAKER_01: That's a big scary number for anybody.
43:08
SPEAKER_00: And of course, that is being connected in in coverage to the idea of the the Montgomery case, but but Mark did caution that you know there there's still a lot not known about this particular case, whether whether that really factored in too much to the decision or whether there were other elements at play.
43:27
SPEAKER_00: And of course, I I mean I mean if you back back all the way up, you would rather not be in the situation in the first place if you're a broker getting uh involved in in a case like this.
43:39
SPEAKER_00: So so that's sort of where maybe the biggest implication of Montgomery is just that there will probably be more uh chances for you to be involved.
43:50
SPEAKER_00: So that's why dot all the I's across all the T's uh and and be just very intentional about everything that you're doing.
43:59
SPEAKER_01: Absolutely.
44:00
SPEAKER_00: Well, we appreciate having uh Mark on again to uh take us through that case and and some other uh implications uh out there for for some other issues that are uh happening right now.
44:13
SPEAKER_00: Uh we could have jumped into a few others as well.
44:16
SPEAKER_00: We had plenty more to go.
44:18
SPEAKER_00: Had a long list of questions and uh we definitely could have uh hit some other topics, but uh we will uh be seeing Mark again, I'm sure, down the road.
44:27
SPEAKER_00: And uh certainly their their website has uh has resources as well.
44:31
SPEAKER_00: There's a blog there with some looking too.
44:37
SPEAKER_00: And uh we do appreciate having you join us again on the intermodal logistics podcast.
44:43
SPEAKER_00: Please do rate and review us uh wherever you get the podcast.
44:46
SPEAKER_00: Subscribe, follow, automatic downloads, all that is great.
44:50
SPEAKER_00: Drop us a comment.
44:52
SPEAKER_00: And uh if you need to uh reach out to us uh separately, feel free to email podcast at intechlogistics.com and visit www.intechlogistics.com for more about Intech Logistics, the company.
45:07
SPEAKER_00: For Rick Lagore, I'm Kevin Baxter.
45:10
SPEAKER_00: Thanks again for joining us, and we'll be back soon with another episode.