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Ken Adamo | The End of Broker Preemption · Freightvine

• speaker-0: Hello and welcome to the Freight Find Podcast, your source for all things freight transportation. I'm Chris Kaplas, Chief Scientist at DAT Freight and Analytics, and today we're diving into one of the most significant Supreme Court decisions that impacts the trucking industry in recent years, the Montgomery case. To break down what this ruling means, and more importantly what it means for shippers, carriers, and brokers, I'm joined by Ken Atomo, Chief Strategy Officer at EASE Logistics. Ken recently moved from DAT Solutions after many years here as an executive. to ease logistics, a prominent freight broker. This gives him a really unique dual perspective on how this ruling will reshape the industry. For those of you who are unfamiliar with the Montgomery decision, it removed what's called preemption protection for brokers. This means that they can now be held liable for negligent hiring of motor carriers. This was a unanimous Supreme Court ruling and was a shock to many, as most legal experts were predicting that it would go the other way. In this conversation, we're tackling the harder questions. What does this mean for broker operations and insurance costs? How does this affect smaller brokers versus the largest players? What should carers, especially owner-operators, know about this? And critically, what about shippers? Should they even care? We'll explore the immediate market impacts, what brokers need to do right now, and what a thoughtful carrier vetting process should actually look like in this new landscape. Ken also shares his vision for industry solutions, including the role of third-party vetting platforms. and how we might fundamentally reshape carrier safety oversight. So if you work in freight, logistics or supply chain, this episode is essential listening. Following my conversation with Ken, we'll present the truckload market update. So let's get started. Hi Ken, welcome to the Freightvine Podcast. speaker-1: My first one as a non-employee, I think. I don't think we ever did one prior to me being an employee. speaker-0: No, we didn't. In fact, I've had you on a couple times, mainly with Dean. Yeah. To give like end of the year summaries and stuff. So this is the first time we can have a real conversation because I don't report to you anymore. speaker-1: And I don't report to DAT anymore. They report to me because they're a... speaker-0: That's right. You're a customer. You're a customer. Well, the reason why I asked that you to be on Ken was because of the recent hearing, the ruling rather by the Supreme Court in the Montgomery case. I've heard about it. news and everything. And I know we talked about this before you while you were still at DAT. And now that you're with Ease Logistics, a prominent broker, I thought you'd be a perfect person to talk to about this. for those of people who are on this podcast who have not heard of this. speaker-1: for me now. speaker-0: Supreme Court ruling. What can you say about it initially? And then we'll go into some of the details. speaker-1: So I'm not a lawyer and I would encourage to reach out to one of the really great energetic lawyers that are out there talking about this in the freight ecosphere. But from a practical perspective, which is probably why you wanted to have me on, brokers are no longer shielded through what's called preemption from negligent hiring lawsuits, right? This was a lawsuit that someone was injured severely in a trucking accident. C.H. Robinson was the broker that had hired the carrier and it kind of brought up all these issues around carrier hiring and selection. but ultimately was decided unanimously, which was a massive surprise. ⁓ speaker-0: That was a surprise, right? Yeah. like Supreme Court decision. speaker-1: DOT, believe. I could be wrong with that, but several prominent government and NGO organizations had came out supporting Robinson's side. They filed amicus briefs, friend of the court, against the ruling prior to it was being decided, but that was unanimous amongst the justices. So brokers are now able to be held liable for negligent hiring of motor carriers. speaker-0: But it's only for negligent hiring in terms of safety. Is that right? Or is it also in terms of fraud? speaker-1: Yeah, I don't know the answer to that question. I think all of the hubbub has been about safety because that is where you see these thermonuclear lawsuits. think there's probably like a more established tort record on cargo claims in liability. It's almost, it's a much more well-known insurance landscape as well. Cause brokers have historically carried, I mean, I think I'm pretty sure, and I could be wrong. So again, not a lawyer. I'll say that a hundred times in this podcast, but I think brokers have always been able to be sued for fraud type activities, cargo theft and whatnot. speaker-0: So I think the unanimous ruling was definitely a surprise, but was the outcome a surprise to you? Did you see this coming, or do you think it would go to CHR's way? speaker-1: I mean, all of the pundits, all of the freight and non-freight law pundits suggested with all of the briefing pointing towards Robinson's side that this would have went the other way. So yeah, I think it's a surprise. I mean, there's a lot of this thing. I don't know if it's the Mandela effect or what it's technically called, but like all I saw on the internet last week was everyone at Brokers was panicking. I know a lot of Brokers. I am now a Broker. No one was panicking that I met, but it's definitely something of like high discussion and concern and a lot of people talking with their counsel and... insurers and whatnot. speaker-0: But so the markets reacting pretty quickly to this I assume. Do you think most brokers already had like a playbook in place that if this happened we need to do certain things? speaker-1: I think the one thing you'll find in brokerage is the answer to that question in many facets is no. I think there was probably enough comfortable thinking that it wasn't going to go this way that even if you were forward thinking, you weren't putting too much time into it. I, now that it went this way, I think there's like a short medium and long term. think short term, there's a lot of backlog. speaker-0: What do you think the impact on the short term is for brokers? speaker-1: Let's talk about market second. Actually, let's talk about practical first. mean, there's a lot of lawsuits that are backlogged. We're waiting on this decision to come down. I think there's this misconception, at least as I've been briefed by various legal folks on this, it's really the thermonuclear things are the ones that get all of the attention, right? But like it's the, someone got their hand crushed at a dock and it's a $50,000 $100,000 type thing. And like you get those that pile up. And then I think for a small broker, especially like a $25 million a year or smaller broker, that could being very meaningfully harmful to your P &L. So I think there's that. think on the market side, as you may know, it was road check week last week, which in hindsight, DAT holds their broker customer appreciation event. They held it this past weekend. I made the decision not to go this year for a lot of reasons, but one that I didn't was road check week. I wasn't even thinking of it. And I'm very glad that I decided not to go. I was baptized again. I was rebaptized by fire during road check week. Cause I don't care if you're the chief strategy officer at a brokerage or if you're ⁓ an ops manager. It was all hands on deck last week. I have to ask you, I'm curious to get your input. Was there a lot of brokers hold off into a corner when you were at the event on their laptops or taking angry calls from. speaker-0: You know, they're brokers, so they're always on their phones. No, couldn't, I didn't tell them, see, I didn't sense anything different from previous executive symposiums I've been to. speaker-1: Yeah, I know there's a lot. mean, last week was rough. was, it was rough. And again, I don't think it's Montgomery proper yet, because there's no effect. I don't think anyone changed anything like right away in the market didn't react in the fundamental sense, but it's you've got, it was ahead. I don't know if you saw the data coming out early data is like 30 to 32 % out of service last week. There's almost 10 percentage points higher than standard capacity was absent the market last week. was wild. speaker-0: Well, there's so many other factors that are driving that, right? The fuel price, the increased scrutiny of drivers for different regulatory things. So there's so many things just piling up on top. there's just one more thing. As we've talked before with Dean and with others is that when you're this tight to equilibrium, any disruption is going to cause a massive effect. There isn't that capacity anymore to really. You're right. speaker-1: Right. And that's short term. think long term, I don't know what the midterm is. I think we're just going to figure that out as we go a little bit. think long term insurance rates are obviously going be the most dominant. And so it's an insurance rates and the impact on the capacity pool. Those are like the two things. don't, I can't see a third today, but there would be more important than those two. So I've seen estimates. The head of the TIA has come out and said it could be five X insurance increases for brokers. I think that's a wild number because it's hard to peg the insurance that a small broker carries versus like a Robinson or an RX or an RNEs. So I don't think We're very fortunate here at Ease. have an asset division. We have warehousing. We are well insured. have, I would consider top decile carrier selection practices. But if you're kind of a Wild West one man or one woman shop operating as an agent, I think it calls into question a lot more like what your insurance options look like. Are you insurable is the question. speaker-0: So we talked about this at the executive symposium and someone brought up the point that you know now brokers are the same and so the bears of entry for some really small brokers are lower than that for having a trucking company and so the idea is that the real small guys with a phone they might roll the dice and if they get sued they're just Declare bankruptcy move on and open up somewhere else the large ones can definitely be insured But it's the middle tier the small to middle tier brokers that might be most at risk What are your thoughts of that? speaker-1: I think that's true, presuming that shippers still risk giving freight to those small brokers, right? I mean, they don't exist if they're not getting any shipper freight. I think, like, brokers face everyday pressures from carriers, from shippers, and then from the regulators. I mean, we all do, right? But, like, I don't know, you could be the safest broker in the world, but if you have, a terrible pricing model or, you have really bad customer service, you're not going to get freight. Like, so I think just being safe or just having great carrier vetting doesn't mean going like, it's just one added pressure to it all. Like, the long tail of brokerage. And again, for the listeners that aren't familiar, this is a shipper focused podcast, right? But there's something like 22,000 active broker authorities out there, but like 90 % of the freight's moved by the top 500. Honestly, like 85 % of the freight's moved by the top 150. And so you've got these small tiki-tack brokers that might be Bob or Jane in their basement moving loads for their brother's chicken company. I don't know. Yeah, they're probably not going to be affected, but that middle is interesting. think like a hundred million dollars seems to be like the annual revenue cutoff, I think, where it starts to get. Interesting. Cause I think below that, to your point, you're big enough to be a target. You're moving in a freight. You know, you've probably got, I don't know, a hundred employees, maybe 80 employees. And you're probably not big enough to be seriously in talks with insurers about underwriting and balance sheet and all of that. speaker-0: but you're too big to suddenly just close up shop and open up somewhere. speaker-1: Yeah, that'd be hard to be a chameleon broker at that size, which is like the new info. speaker-0: There we go. Yeah, so but one of the things that they seem to come out especially Cavanaugh's argument in there is that this just means you need to have better carrier vetting. You need a serious process. So how do you view this from a broker's perspective? What are the red flags that brokers should be looking for the carriers? speaker-1: So let me take a step back. Pretty much all the tools and all the practice to date has been looking for affirmative signals that a carrier is unsafe, right? Like, as you know, a lot of these tools have popped up where they're pulling roadside inspections and out of service and crash data. The problem is like, there's 4.5 million active carriers. There's not 4.5 million active DOT enforcement officers. There's never going to be, but I think we all agree there's like way less enforcement than... we would need to get like an accurate picture. We saw last week enforcement went up out of service went up. What does that tell you as like a professor, right? Like clearly there's something underlying this that's at play. I think what's gonna change here is gonna be subtle, but very important is I think the burden is gonna shift a little bit more to looking for affirmative signals that someone is in fact safe, which is why you hear a lot of folks talking about the small carrier, kind of getting the raw end of the deal here. Cause I've personally met in my time at DAT or FedEx or even here now, I've met hundreds of carriers that have been in business for over a decade and never had a roadside. If you're running like the I-90 corridor, Dean could tell you this. You could run for years and never get a roadside. You could be running though Houston to San Antonio, like from the port in and get a hundred a year. so like is, and again, Leffler, Matthew Leffler says it's the best. Right now we don't, like we don't kind of officially know that they're not safe until they've been into an accident, generally speaking. And so like, what if that carrier that has never been inspected has just not been popped for DUI, but you know, that driver is driving under the influence and wipes out a school bus. Like how would you as a broker have vetted and prevented against that accident? And again, it's not what you can prove in court. It's what you can prove to a jury and how well a plaintiff's attorney could go after what you should have known. speaker-0: Well, that raises a lot of the question for the FMCSA data and all of that stuff. It is not totally accurate and is certainly not comprehensive. So get back to the point that you made though. What are some of the KPIs we should do to see the affirmative signals rather than to your point you're only finding negative signals? What kind of affirmative signals would you want to do? Total miles driven? speaker-1: Now that's part of it. And again, there's no perfect science, which is why I think this is so tricky. This is the typical government at play, right? Like I'm going to give you a problem without a solution. The problem is now you're liable. It would have been nice if the Supreme Court had the authority to say, and we're doubling the budget of the FMCSA and every carrier is going to have an A through F safety rating by the end of 2026. That would have been glorious, I think. And again, absence of that. So when I say EES has really high betting standards, we have a two year authority without like high level exception based on thorough vetting like hand vetting, two year tenure requirement. And that as you know, it's an industry with a speaker-0: We do let me back up you say we as easy you have two years you tell me more about that. So you're vetting process for care speaker-1: Yeah. So like I said, two years and again, I'm two and a half weeks in, so I couldn't recite this the way our office people could. But from what I understand, it's selecting, we have a lot of customers in the auto space, right? We were kind of found in the, forged in the cradle of the big three and Honda and all that. So high standards. But the problem becomes if you're, the industry as a whole could never adopt that standard because two year old carrier, you're not born two years old. And the industry turns over at a hundred percent. So I think like that's one affirmative signal, but the competition for those carriers has Trust me, if you look at any broker's rates that has high vetting standards, the competition for those carriers has went through the roof these last couple of weeks, even before Montgomery, to be frank. speaker-0: So can carriers then as a strategy, once you get over the two year, whatever, two year, three year, whatever hump is, do their rates go up now? Because they know they're more valuable? Or is the market pressure just keep that down? speaker-1: mean, that'd be a great study for a student, right? Like I think if you could get your hands on that data, like I don't have it because I don't sit at the intersection of where that data would exist. But yeah, I think if you took, because we don't hire anyone's below that. So I only see the ones above. I think if someone wanted to take a stratified sample of carriers one month through 10 years, I think you'd find some asymptote in there, probably around two or three years where one. Once you've made it, you've made it generally as a carrier, right? The turnover in the higher tenure buckets is very low compared to the low tenure buckets. yeah, I mean, but the problem becomes returning, it's an industry that turns over at a very high rate and eventually you just run out of two year old carriers. Yeah. So like, think the problem the industry's gonna have to solve is how do you take a carrier that's been on the road for six months and decide whether they're safe or not? speaker-0: That's tough because it's not just safety anymore over the track record. It's fraud because you have the exact same indicators, right? Where this on a character suddenly shows up, you know, it's a risk of fraud or theft rate that it might not be. It might be a chameleon. Yeah. speaker-1: I think it's like the standard basket. think highway is a major player in the space. think they have a pretty good model I think it'll be interesting to happen the first time it's tested in court where a highway vetted carrier as a pass No, highways not vetting for safety, right? They're vetting for speaker-0: How does highway or how because they're a third party there are for-profit third party How do they do it? And how do you think if you were king of the world king of the trucking? How would you do the vetting? Let's first with highway. What does highway? speaker-1: So I'm two and a half weeks into being a customer. The product's pretty slick, right? But from what I can tell, it's a publicly available data plus ELD integration. It's basically like a know your customer type tool, which we should put a pin in that because there's an interesting thing developing around vetting the carrier versus vetting the driver. Cause the driver's the one driving the truck and the driver's the one who's going to essentially plow into a car and cause a lawsuit. So set that aside for a minute. And I know Highway just released know your driver and all of that. If I were king of the world, I would attempt to sue the FMCSA to compel them to rate. And again, FMCSA, we gloss over it by using the abbreviation, it's the Federal Motor Carrier Safety Administration. 94 % of carriers don't have a safety rating. speaker-0: Is that a recent thing? Was it gutted at one time or was it never fully funded? speaker-1: At one point, I don't take credit for this joke. I forget who made it originally, but there had been more heads of the FMCSA than Cleveland Brown's quarterbacks since like 2000. So like, yeah, they've had no continuity. They're not probably resourced to be able to do this. I don't know if you've ever really been on the website, right? But there's a line that I just get the biggest kick out of. One second. If you just give me one second, I'll pull it up. Right at the bottom where every site, every app, every user goes. to see if a carrier is like authority status, right? It's called safer as their site. It says at the bottom of something that I absolutely love right where I would tell you if they had a safety rating. It says, I quote, the federal safety rating does not necessarily reflect the safety of the carrier when operating in interstate commerce. Nice. No one wants to, think even the government doesn't want to plant an affirmative flag that says this carrier is safe and to get a conditional rating, which is like the, like speaker-0: that's a big speaker-1: There's like a lot of things in this case too that I think that are lessons learned. Like the carrier in question in this case had a conditional safety rating, which if you're not familiar, you either have no rating. That's like 94, 95 % of all carriers. You have conditional, which is like, there's some problems, but you can, and people operate, there's businesses that have been years, 10 years that have had a conditional rating the whole time. And then you have unsatisfactory, which first of all, I don't usually speak in absolutes, but like no one should be hiring unsatisfactory carriers, period, end of story. I think conditional, I don't think anyone's hiring them today post Montgomery, unless they have a very established working relationship with them and they have all of the data around why that may have happened. There's an interesting case that's been developing on social media. I've kind of gotten to know the guy a little bit just through the internet where he got a conditional rating for some stuff that wasn't egregious, but then like to get the government to come in, it just really aren't incentivized to re-inspect to get that removed. So it kind of puts, so I think there's probably a tiny bit of gray and unconditional. But we're still talking about 6 % of carriers fall into those two buckets. speaker-0: Yeah, it's tiny. So you only get thrown into those other buckets if you have an accident or fail a road check. speaker-1: No, it's a culmination of things, right? It's all based off your safety score. And then you would get an onsite and then basically the conditional would be your probationary status. And then you'd have to, my understanding was that you had to get re-inspected and basically get a clean bill of health from the DOT to have that removed. like, so big carriers, right? There's, there's in all likelihood, there's a lot more big, larger carriers that have these ratings because they have more, it's an actuarial game, right? Where if you're, let's say you have like a nagging problem with like brake maintenance and that shows up in a bunch of road size and. They come and they do an onsite inspection and they find that like the safety and maintenance logs aren't up to speed. You could get slapped with a out of compliance conditional safety rating. speaker-0: So I would guess just for the amount of a road check and those kind of things for any kind of safety things, the larger carriers are probably more prone to being checked because they have more drivers, more tractors out there. speaker-1: More equipment, most of all, right? I'm deemed to tell you this, the biggest offenders are people with trailer pools because equipment inspections can ding the trailer or the tractor. And so, yeah, that's the case. But it's just like the law of small numbers. think if you're a single owner operator operating on a, especially like a rural west to east route or east to west route, there's a chance you may, mean, knock on wood, I don't even want to say this, love it. I can't tell you the last time I was pulled over. Do I speed occasionally? Sure. But like, I don't drive enough to where like, you know, I'm gonna... face the high likelihood of getting pulled. I live in the middle of nowhere. speaker-0: Yeah. So do you think there's a role for more third parties here? do you that... mean, because I don't see the government suddenly... You know, even if they tripled the number of agents they have out there, quadrupled it, increased it by a factor of 10, you're still only going to hit a small minority of the carriers if you're looking for inspections to actually pull people over. So again, if you were still, if you were king of the highways, how would you do it differently? If you were suddenly in charge of the FMCSA and you had an unlimited budget. speaker-1: If I had an unlimited budget, would make it a point to have every single motor carrier inspected at least once every two years with an onsite. speaker-0: See, that's, I'm trying to think of what that would cost. A lot. speaker-1: The problem is like, I don't know. speaker-0: Doesn't every truck have to be inspected? speaker-1: Not on a random roadside, Like a state could have... I think two different things, right? Like I think, Pennsylvania, grew up outside of Pittsburgh. Every year you had to get your car inspected. But yet still there's jalopies driving around with like their mufflers falling. speaker-0: for registration. So before you go on, New Hampshire, just repeal that. I don't have to get my car inspected anymore. Ohio makes no sense to me. speaker-1: doesn't have it. But but so yeah, I think there's like state kind of depends on your state and all of that. But like by and large, you have to obviously get your CDL renewed and like do your hearing and your med check and all that and your vision. But yeah, there's no guarantee that you're going to get a D O T roadside. In fact, I know a lot of folks like so on highway first came out a lot of carriers were getting up in arms because you can't just like pull into a way scale and say inspect me please. mean, you know, try and sometimes you might get an inspection. But and you know, truck drivers like that's not in their nature generally. speaker-0: would you want to be inspected? speaker-1: They're just trying to put tape, right? They're just trying to put things, what we would call like things on tape in a sports analogy to like show that, Hey, look. And again, if you're the DOT, like, I don't know that I would have created that either because they could have just gotten their brakes and tires and everything's perfect. And then they go get their inspection and then they don't touch it for two years. So it's kind of, it's like when they announced a DUI checkpoint, it's like, well, I just, you know, people just aren't going to go there. Like paying attention to where the DUI checkpoints are. I'm not, cause I don't drive under the influence, but people who do probably are very well aware of where those things are. you. speaker-0: Who's think an inspection at the carrier, say every two years or so. But that one of every truck? speaker-1: So that's not my prefer that you asked me if I were like ahead of the FMC, the world, if I were king of the world, I would form an SRO amongst brokers. Cause I don't care. And now that I'm on the broker side, I don't care about anyone else. All right. Like a self-regulating organization. So Finra, are you familiar with Finra that regulates stock brokers and whatever? I think someone like a Finra for brokerage could set standards across the industry and say your carrier vetting program is up to the. speaker-0: But they're sorry. speaker-1: carrier broker betting standard. within that they could fund an organization that could audit and have actual people that go out. There's also like privatization. I was talking about this with Leffler and Fuller on a podcast last week. I think this could be a push towards privatization. This happens in other industries, ⁓ in aviation it happens where you have, you can contract with a private company to come out, do your inspection, upload all the materials to the government and then you'll be on a good. speaker-0: That makes sense that makes sense so you have something you don't wait for the accident you have you're proactive which I'll look at me I'm being tested but wouldn't that be ripe for like I only get my really good trucks inspected and I keep the other ones out of the show speaker-1: It's figured out. Yeah. But at end of the day, you've got 12 bit and again in civil trials, as you are very well aware, it is not beyond all reasonable doubt. It's to the preponderance of the evidence. One of my favorite words, preponderance. And if you can convince, who are the 12 drivers going to side with? The truck driver sitting there and they're, you know, I don't want to stereotype, but the truck driver or the, you know, the corporate big shots sitting across the courtroom who were like, yeah, we did our vetting. So speaker-0: So the vetting, and you raised a really interesting point, vetting at the driver level or the carrier level. Do you think we can ever get down to the driver level? That's where the actual speaker-1: I don't know if we can't. And I have to. Yeah. That's why I said the person holding the steering wheel, which I guess we'll, you know, we're really on point with our second base today. Cause I think like this all ultimately gets to a conversation about autonomous trucking, but yeah, the person holding the steering wheel, the person who made a decision to drive when they were tired or were coerced by a dispatcher or decided to drive into the influence or whatever, didn't have adequate training. I don't want to place it on them because a lot of those factors are external, but It's ultimately the person in the cab making a split second decision that alters lie. Like the human side of this is like, you don't have a nuclear verdict without lies being altered. Right. Now for 200 million bucks, if you want to cut my leg off, like by all means, because I don't know if you, I don't know how well, you know, the details of this and I'm not making light of anything at all, but like this person wasn't killed. They were, I believe they lost their leg. speaker-0: It was a truck. was another truck driver, right? speaker-1: whatever we have. I mean, I'm just saying, hey, offer stands, anyone out there has turned a million bucks, he could televise it if you want. But yeah, I mean, ultimately, lives are altered, decisions were made, and then like, who's accountable. And I think like, the thing we have to keep coming back to is the Supreme Court didn't change the rules for what constitutes negligence for a broker, right? They just took away the preemption to be held viable for negligence. So we're all trying our best to not be negligent in our hiring process or our career selection process. speaker-0: So I think we said it's going to impact the brokers obviously because it's going to change insurance requirements. What do you think for the carriers? How is it going to affect the carriers and how will that be disproportionate based on different carrier sizes? speaker-1: I was putting the two groups. think if you're an unsafe carrier, your life just got pretty miserable. I don't know that there's any kind of coming back from that. think if you're, then we have to divide the safe carriers into demonstrably safe and presumed safe. speaker-0: Now is there any correlation would you go on a limb to say the larger the carrier the more safe they are? you think is there any correlation to that or are there a lot of really safe owner operators? speaker-1: I don't know that they're more safe. think that they probably, bigger they are, the closer they approximate the overall safety stats of the industry, just based on the rules of central tendency. like, I think it's definitely harder to determine just like anything else in any stat, right? You pull one person from the bunch, are they safer? Are they not? I'd rather be able to make that determination on Schneider than I would Chris Kapless trucking. That's one truck. speaker-0: But what about the, you know, I agree, know, statistics are they work, but what about that long tail of owner-opera is really you own the truck. So they're not just a sample of one. They have a different vested interest. I would argue, and I think Dean would, Dean Croak would agree that a lot of the owner-opera is out there. Some of the safer drivers. speaker-1: I just think it's more bimodal. speaker-0: cool is those middle tier carriers are the ones that don't have the least safe. speaker-1: I think the worst owner operator is probably worse than the worst big fleet. just think like there's some like leased on, there's some like lease to purchase, there's some predatory leasing. Like there's just a lot of stuff that happens in that long tail that I think like the variability amongst them is probably way more. Okay. So I think the big, the top ed is probably more homogenous. Honestly, like, I don't know, someone was pointing, I'm not going to mention any names. I think it's totally unfair what was happening, but some. speaker-0: Okay. speaker-1: Sure. Prominent folks on social media were posting the safety stats blindly and then like unveiling who they were. And like, I don't know if I was a plaintiff's attorney and like, so the odds of a large household brand carrier having a fatal accident is exponentially higher, almost infinitely higher than an owner operator. there's like, believe it or not, like trucking is actually pretty, there's only about 5,000 fatalities a year, which is 5,000 too much. We all agree on that, but like your odds give or take if you're an average American pedestrian driver. Your odds are about one in 60,000 of being killed by a commercial motor vehicle a year. So I think we'd all agree that that's pretty negative. Like if that went from one in 60,000 to one in 55,000, I don't think any of us would actually notice. Right, right. But the odds are the owner operator is not going to be involved in the accident. But if you have 10,000 trucks, 100,000 trucks or power units, whatever, you're going to. So I don't know if you're a plaintiff's attorney and you're sitting there. Why did you hire this fleet that had 50 fatal accidents last year. It's like well yeah speaker-0: divided by the number of miles driven and number of units, yeah, juries don't. speaker-1: You're 12 people who weren't smart enough to get out of jury duty. speaker-0: Hey, having been stuck in jury duty, sometimes you try hard and you just don't win. speaker-1: My uncle my uncle with my one uncle was awarded to jail and the other uncle was a sheriff so I never got selected ⁓ speaker-0: ⁓ Usually, usually happens like speaker-1: I don't know. People don't know about trucking. Like I can't tell you how many people I to over the last, I've been doing this now close to 15 years. People who ship, they work in the supply chain department of their business and they don't know anything about trucking and logistics. speaker-0: That's because it works. speaker-1: The potato ships go to the dock and I don't have to think about it's not my job to organize the transportation. I got to get the potato ships palletized and on the dock. speaker-0: Well, let's talk about the third stakeholder here. We talked about the brokers, talked about the carers. What about shippers? Should they care? speaker-1: I think they should care. mean, think this is why I've been arguing that you need to like brokers smaller than a hundred million, whose jobs got harder because I would feel confident. I've met our compliance, our head of compliance and our ops people. would be, I would feel beyond confident to walk into a shipper and lay out how we're vetting carriers. Cause if it's good enough for some of the shippers that we service and some of the products that we ship, it's good enough for anyone. you know, the reason I say that is the auto industry isn't just, if you've been in this industry for any amount of time, auto. the big three or even the foreign automakers who have set up shop in America are some of the most strict hard line. Like if you get a report wrong at a major auto shipper, you could be off for a month, right? So I think there's no mistakes tolerated. So I would feel comfortable. Does a $10 million a year broker have a compliance department? No, because there's 10 people working there and nine of them are brokers and one person does payroll and accounting. speaker-0: So I'm just trying think from a shipper's perspective, I have two brokers, A and B, and now suddenly the brokers are liable if something's happening. The shipper's always been liable if something happens. I'm a big retailer and someone's hauling my stuff, I'm gonna be pulled into a lawsuit regardless. And so the question is, do I care whether the broker is now liable too? I would think that they would be better, they now have skin in the game. for picking a better carrier. So I think I would want to be able to tie. So my guess is it's gonna lead to consolidation of the brokerage side, just simply because shippers will not work with certain brokers that don't seem to have a safe vetting program. Does that make sense? speaker-1: Yeah, I agree with you completely. I don't think it's in front of mind as other folks are talking about. think this whole thing has caused more of a focus. Like I'm seeing in the RFPs, you we do more than our fair share of RFPs in a week. I'm seeing more questions about explain your carrier vetting process. What are your controls that you have in place? Yeah. I'm seeing questions about how can you talk about your balance sheet? In other words, like if I don't know the legal term is, but if you get your pantsuit off, how can you absorb it? Like talk about your insurance. So I think like more of that. But this is the thing. This is why I think it's going to fold this into two distinctly different markets. think there's brokers who kind of welcome that. Look, think Robinson didn't want to... This is like the logical trap you can fall in. You can't reasonably argue that like this is good for big brokers and they wanted this no matter what because a big broker fought all the way to the Supreme Court against this. So like in absence of anything else, no one wanted more regulation and oversight and liability. But then you have to like pivot your thinking to in a world where that decision has been made. I do think it benefits the bigs more than the smalls because they can absorb it, they can explain it, they can administer it. speaker-0: They can absorb it. reduce some of the low cost brokers who would be willing to cut corners because then now it raises the total price. I would say this is only going to lead to higher speaker-1: It's inflationary. There's no doubt about it. I said this last week with Craig and I think he and Loughlin agreed. I'm not certain about anything here except that it's inflationary. There's no world that I can see in which this brings prices down. And I think maybe for good reason. Like at the end of the day, like you can't pound your fist on the table and say we need safer highways. We need stricter carrier vetting standards. We need Burt Reynolds back in a truck filming, you know, smoking the Bandit 2 and we're not going to pay higher freight rates for it. That stool will never stand on its own. You need that leg that balances everything, which is someone needs to pay for it. speaker-0: Yeah, so it's willing to hire costs and maybe they're willing to do that. But what about what about platforms themselves? Like you mentioned highway, but there are other there's other vetting systems out there. Do think there will end up being one one one vetting platform to rule them all? speaker-1: No, but I think you're gonna have to subscribe to multiple because what if, imagine again, I've just been, I don't know, maybe I've just been scared out of my mind by the attorneys I've been talking to, including our own, who's fantastic of like, imagine yourself like in your area, in a chair, you're in a courtroom, right? Cause like a lot of these things, and again, I'm learning a lot of these things don't succeed on summary judgment. There's some means they're kind of gonna trial. So you're sitting there and they're like, well, highway was a pass, Boulevard was a pass, Avenue was a pass, but... Carrier selector had it as an F. Why didn't you buy carrier selector? If you had only bought carrier selector, you would have known that this truck was terrible. So I think it's just like what's reasonable. And I think there are a few that are an industry standard. I think the more interesting thing is going to be marketplaces. I know we can't probably go into it too much given who sponsors this podcast, but I think there's a lot of discussions and I've gotten, you know, inbound emails from a few of them around like, Hey, marketplaces are still good and unaffected by this, which I don't honestly think is true. And they'll be affected in some way, but I think the question will become exposure. When there's risk, what's the number one counter? What was the one thing you think about when you once risk has entered the equation? What's the number one thing you think about? I've been taught this my entire career. You think about exposure, right? I don't worry about hantavirus. Is it a risk? Yes. Am I exposed to hantavirus? No. So I thought too concerned because it's a risk that I don't have exposure to. speaker-0: think what this is doing is that everyone needs to be concerned about the vetting of the carrier. And so the question is, you know, how much risk do you open yourself up to for this? Because this is why shippers use brokers, because they want to risk, cover their risk a little bit on exposure to the hundreds of small carriers. They want the broker to do some vetting for them, right? And so it seems like one of the reasons why brokers have taken off in the last 20 years. speaker-1: Yeah, I think that sounds, I don't know, I kind of pushed back a little bit on that. think the anti-broker crowd has come out and said, well, the only reason that shippers have ever used brokers is to absolve themselves of legal liability. I'm like, that's not true at all. know that's not what you're saying, but I think like that gets hyperbolic when you kind of take it to its extreme. think... speaker-0: It's one of the things that I trust the broker for I'm paying them for is to make sure ⁓ it's just a legitimate carrier is that someone who's getting an action those kind of things the vetting we trust the vetting process because even what you said I think shippers are gonna fade a lot more tension for the broker saying okay talk me through your vetting process speaker-1: Talk me through your bidding process. Like, yeah, I don't think brokers should, if you're in a position where you're defending like the fact that you shouldn't be held to a standard for hiring carriers when the entire mission of our industry is to hire quality carriers, I think you're probably on the wrong side of history and you'll be pushed out. speaker-0: That's why I'm so surprised that this was a surprise. guess maybe because of the legal, because I know there are some technicalities like the FAAA that it was relying on really didn't deal with safety. It dealt with pricing and things like that. So was a little bit of stretch that it tied over to that. But I don't know the details of how this came out. But to your point, it just seems, yeah, sure. If you picked them, you should be held responsible for who you pick. speaker-1: I'm reminded very violently two and a half weeks ago, I was reminded about how competitive this industry is, how fast paced it is. And I'm telling you, the people who were worried about this and are sitting around moping about it, I don't know, why are you in this particular, you could be in any other business in the world and like, why would you be in this one if you're worried about like, yeah, it's gonna make it more competitive, it's gonna make it harder, but like, I don't know. speaker-0: This is the same thing that a lot of large carriers are actually, maybe they're not saying it loudly, the increased regulatory focus on drivers for drugs and things. That's only going to drive the price of transportation up, which is good for the carriers, because if everyone's price goes up, then the larger ones benefit. the ship will pay. speaker-1: Yeah, this is, think, unless there's like some, unless like the first mega lawsuit on this happens against a Werner or something like that, where like they were able to convince that any accidents are too many. Like I think the clear cut winner here are big asset. They've been on the winning side of a lot of these regulatory things that have broken the last year. I joke all the time that a lot of these like armchair advocates for the trucking industry that are popped up in the last two or three years, they're going to accidentally re-regulate the industry. Like we could very easily get to a world where like there's 20 trucking companies again. But like a lot of these things move us back. you know, there's people out there today are doing for margin caps on brokers and price floors. It's like boys and girls. Let me tell you a story about like 1978. speaker-0: Yeah, there's, mean, there's raising the barrier makes sense for certain things. I think the economics of full truckload are just too strong to make it. That barrier would have to go way up to really reduce and consolidate the full truckload. LTL, different story. But one of the things is the whole idea of what proximate cause is, because that's the one thing that the trial courts are going to interpret. Something you said earlier, let's see how the first trials go, because now they're going to determine what is proximate cause and is having a vetting speaker-1: think we know who the first big one's going to be, Delilah Coleman's family is going to almost certainly sue C.H. Robinson. You I you're familiar with Delilah's law and she was at the State of the Union. It was the little girl that was hurt and he wasn't able, Delilah's dad has been vocal and he's been on the Hill. And I think that'll probably be the camera in the courtroom, first big case to test. You know, when you get in the nuts and bolts of this, it's kind of funny because like the circuits were split. What the Supreme Court did here was unify everything because There were certain circuits where you could be held liable, but the preemption didn't exist. So I don't know where like Minnesota fell and all of that for Robinson. Obviously they were preempted. They were preempted. now I think that'll be the first high profile case if I had to like. speaker-0: We'll see. We don't have a timeline for that. Do you have a sense? I don't have a sense for it. speaker-1: The moment they rule is the law of the land, right? I mean, that's how it works. speaker-0: when this case will come up, because then they speaker-1: Oh, I don't know that. don't know the father, Delilah's father personally. just, I don't gamble. You know that about me. But if I had fake money at an executive broker retreat, as you may have just participated in, and I was playing fake poker, I may have also placed a little fake chips on him being the first big lawsuit. speaker-0: Yeah, all right. Well, when that comes, we'll get you back on and you can tell us more about it. Now I wanted to your perspective because you say more things than a lawyer would. speaker-1: Now I ⁓ Well, it's because I'm in here. That's what it comes down to. Is there time to shine, man? Like I said, when rates are hopping and there's big regulatory things that are driving rates, it's our time. It's the nerds time to shine. This is the risk person at every brokerage is like, it's my time. speaker-0: There we go and with that Ken, thanks so much for joining me for having me two and a half weeks on the job Hey, you haven't been fired yet. So that's all right. Everyone stay tuned for truckload market update speaker-1: Great, thanks Ken. Thank you. speaker-0: truckload market update for 28 May 2026. In drive-in, we saw the change in active contract rates drop 0.2%, spot rates increased 4.2%, and the current level of replacement rates for drive-in is positive 6.2%, which means new contract rates coming in from an RFP are on average about 6.2 % higher than the rates they're replacing, showing that the carriers now have the strength in the market right now. Okay, the market gap between spot and contract is positive 22 cents a mile, very high compared to previous periods. So again, it's showing that spot is much higher than contract. Therefore, we're in a tighter or a tightening market. Year-over-year change in spot rates is 31.3 % for drive-in and contract rate year-over-year change is 3.8%. Okay, temp control. We saw that contract rates increased 0.4%. Spot rates increased 4.0%. Same, similar to what we did in drive-in. and the current level of replacement rates for temp control is positive 3%, about half of what it is for dry van. And the market gap is about 21 cents a mile between spot and contract, spot greater than contract in the temp control market. And year-over-year change rate in spot is 24 % and about 4.5%, 4.4 % for contract. Intermodal, we found contract rates increased 1.3%, spot rates increased 3.5%, but again, I say this every time, there's not that much there. The current level replacement rates, interestingly, is about flat. It's negative 0.7%. So it's been bouncing less than 1 % change every two week period. So really kind of staying the same. The market gap is negative one cent a mile, same as it was last period. Year over year spot rates change by 8 % increase and an 8.8 % change in contract rates. Flatbed, we saw the contract rates dropped 2%. Spot rates dropped 0.3%. Which is a little surprising. We had seen flatbed spot rates going up. Current level of replacement rates for flatbed is 7.1%. We're seeing a sustained increase there. There's a lot of demand for flatbed going in for contract is just definitely increasing. Gap now between spot and contract is 17 cents a mile where spot is greater than contract for flatbed. Year-over-year rates for spot rates is up 16%. For contract, it's about a 0.5%. We're gonna see that increasing. I see that gap widening. Okay, mixed bag. If you look contract rates, Dry Van, Flatbed were down, Temp Control, Intermodal increased slightly. The Spot rates rose 3 to 4 % for all the modes except Flatbed, which stayed flat pretty much, but it's in the 3 to 4 % for everyone else. Comparing year over year though, most Spot rates increased 10 to 30 % and most contracts about 0.5 to 9%. So as we would expect, Spot grows faster than Contract. It'll probably peak sooner and then come down faster. That's usually how that works. Replacement rates are in the positive 3 to 7 percent range for all the modes except intermodal like I said is flat. Similarly the gap between spot and contract is positive between 17 and 22 cents a mile except for intermodal again which is flat. But essentially what we're doing is we're in the first phase first four or five months maybe six months of a truckload cycle. These cycles usually last 36 months 36 to 48 months. We'll see how this one works through. This seems to be more supply driven in that we have a a reduction in capacity, a reduction in supply as opposed to demand increasing. Demand is kind of stable, but the contraction of capacity is really what's affecting things. And with that, that summarizes the truckload market update for 28 May, 2026. And that's a wrap for this episode of The Freight Find. The Freight Find podcast is hosted by myself, Chris Kapless, and is produced and edited by DAT Freight and Analytics. For more information or to catch up on previous episodes, swing by our website at www.dat.com slash resources slash Freightvine. And don't forget to hit that subscribe button wherever you listen to podcasts. And hey, why not drop us a review while you're at it. If you have any feedback or questions about what you've heard or suggestions for what you'd like to hear in the future, please send an email to me at chris.capless at dat.com. That's chris.caplice at dat.com. ⁓ finally, a big thanks from all of us at DAT for tuning in. We hope you learned something new and you come back again.