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In Wake of Seventh Circuit Ruling, Freight Brokers Sleep Easier

July 24, 2023

The Seventh Circuit Court of Appeals recently issued an opinion that has profound implications for freight brokers facing tort litigation. The opinion issued in the case of Ying Ye v. GlobalTranz Enterprises, Inc., No. 22-1805 (7th Cir. July 18, 2023), recognizes the preemptive effect of the Federal Aviation Administration Authorization Act (FAAAA) concerning freight broker liability in regard to the hiring of motor carriers.

In 1994, Congress enacted the FAAAA, which has since provided freight brokers with substantial protection from tort liability. In relevant part, the FAAAA provides that states may not enforce laws “having the force and effect of law related to” the services of a freight broker. 49 U.S.C. § 14501(c)(1). There has been substantial disagreement between courts whether direct tort actions filed against freight brokers regarding their selection of motor carriers are preempted by the express preemption provisions of the FAAAA.

Until recently, the Ninth Circuit opinion in Miller v. C.H. Robinson Worldwide, Inc., 976 F.3d 1016 (2020), stood alone at the federal appellate level. In that case, the Court recognized that negligent hiring and selection claims against freight brokers are covered by the express preemption provisions of the FAAAA but found that the safety exception with respect to motor vehicles overcame the preemptive effect of the Act. The exception provides that the FAAAA “shall not restrict the safety regulatory authority of a State with respect to motor vehicles.” 49 U.S.C. § 14501(c)(2)(A).

The Ninth Circuit held that preempting state law tort actions would hinder a state’s ability to regulate motor vehicle safety, contending that potential tort liability incentivizes brokers to select safer carriers, thereby reducing trucking accidents. Consequently, precluding tort claims restricts a state’s regulatory authority. The US Supreme Court's decision not to review the Ninth Circuit opinion on June 27, 2022, solidified Miller as persuasive authority. However, the reasoning of the Miller Court was squarely rejected in a subsequent opinion by the Ninth Circuit explaining that the Miller Court decision was at odds with a United States Supreme Court opinion. In R.J. Reynolds Tobacco Company v. County of Los Angeles, 29 F.4th 542, 553 n.6 (9th Cir. 2022), the Ninth Circuit repudiated the reasoning of the Miller Court and its incorrect statement that “The scope of a preemption clause is also tempered by ‘the presumption that Congress does not intend to supplant state law,’ particularly in areas of traditional state regulation.” The R.J. Reynolds Court correctly pointed out that where Congress has specifically included an express preemption clause in legislation, the focus is on the meaning of the text of the legislation without any presumption against preemption.  Id. at 552-553.  The Court explained that the United States Supreme Court has already determined that if a “statute contained an expressed pre-emption clause, we do not invoke any presumption against pre-emption but instead focus on the plain wording of the clause, which necessarily contains the best evidence of Congress’ pre-emptive intent.” Id. at 553, footnote 6, citing Puerto Rico v. Franklin California Tax-Free Tr., 579 U.S. 115, 125 (2016).

Subsequent to the Ninth Circuit decision, the Eleventh Circuit, in Aspen American Insurance Co. v. Landstar Ranger, Inc., 65 F. 4th 1261 (11th Cir. 2023), reached a different conclusion and found that the negligent hiring and selection claims were expressly preempted and the “safety exception” did not overcome the intent of Congress to preempt state tort claims for negligent hiring or selection of motor carriers by brokers.

The newly issued Seventh Circuit opinion in Ying Ye v. GlobalTranz Enterprises, Inc. solidifies the preemptive effect of the FAAAA prohibiting freight broker liability for negligent hiring and selection claims. The GlobalTranz suit, like the Miller case, arose from a collision between a commercial motor vehicle and a non-commercial vehicle. The fatal trucking collision in GlobalTranz involved a motorcyclist and a motor carrier retained by the defendant freight broker. The primary issue on appeal was whether the Safety Regulatory Authority Exception applied to plaintiff’s negligent hiring claim against the defendant freight broker.

In contrast to the Ninth Circuit, the Seventh Circuit, like the Eleventh Circuit, interpreted the exception narrowly, holding that a direct negligence claim brought against a freight broker is not a law “with respect to motor vehicles.” And therefore, the FAAAA’s preemptive effect does not restrict a state’s ability to regulate safety in that regard. While the Ninth Circuit required merely an indirect link between tort liability and motor vehicle safety – incentivizing safer motor carrier selection – the Seventh Circuit deemed this connection too tenuous. Instead, it interpreted the Safety Regulatory Authority Exception as requiring a direct connection between a state’s law and motor vehicle safety. And it found negligent hiring claims provide no such connection. 

In conclusion, the recent Seventh Circuit opinion in Ying Ye v. GlobalTranz Enterprises, Inc., in conjunction with the Eleventh Circuit decision in the Aspen American Insurance Co. case, offers much-needed clarity on freight broker liability. The vital ruling reaffirms the preemptive effect of the FAAAA as it pertains to negligent hiring and selection claims brought against freight brokers.

Shareholder Robert Burke and Associate Nicholas Sandowski authored this analysis. If you have questions about how this development might affect your company, please contact our Transportation practice group Shareholders Robert M. Burke, Gregory D. Conforti, Timothy R. Couture, William A. Geiser, Edward W. Hearn, Julie J. Busch, Michael J. Linneman, Susan K. Swing or David A. Warnick.

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