Amid all the anxiety over the Supreme Court’s denial of the California Trucking Association’s case against the state’s AB5 contractor law, threatening to put 70,000 owner operators in California out of business, another court decision with implications for the independent contractor/broker relationship may have been missed by some in the audience. The case involved decisions by the Ninth Circuit Court of Appeals and hinged on the interpretation of the appropriate application of federal law, specifically the Federal Aviation Administration Authorization Act, or FAAAA.
The suit involved a decision in a Nevada district court appealed to the Ninth Circuit against large broker C.H. Robinson after a 2016 crash involving a carrier hauling a load brokered by C.H. Robinson. The Ninth Circuit sent that case back to the district court after it had argued that C.H. Robinson was shielded from liability claims for the crash by the FAAAA. C.H. Robinson appealed the decision up the chain to the Supreme Court, yet denial of the petition to rehear means the decision will stand and the case will proceed at the district level.
At issue is whether brokers should be held liable via private action for the safety outcomes of the motor carriers they choose to use. In this particular crash case, plaintiffs allege the motor carrier showed out-of-service rates above the national average in the FMCSA’s CSA Safety Measurement System, likewise adverse inspections/violations in the various measurement categories there. C.H. Robinson’s “negligent selection” then, of this carrier, as the argument went, made them liable for damages.
The case holds significance for brokers, obviously, given the rise in post-crash litigation, sometimes known as nuclear verdicts. There could be a feeling of epicaricacy, which means getting the pleasure at another’s misfortune. It’s about time brokers took some responsibility for their mistakes, yet this case, I’d wager, holds some importance, too, for owner operators’ ability to easily do business with a broker, generally speaking.
Depending on how the risk of liability develops, a further chilling effect on brokers’ willingness to contract with any small carrier showing negative violation information in the various BASIC categories of the CSA SMS, or negative percentile rankings via any of the many private services that recreate the old “CSA Scores” in those categories, could exponentially grow. This is exactly why motor carriers need to review their CSA SMS scores on a weekly or monthly basis.
The chilling effect could also extend to other scenarios for otherwise newer carriers, too. In a story last week about the rash of double-brokering by entities impersonating carriers/brokers and/or, as the case may be, bad actors duly authorized and insured/bonded as carriers/brokers set up in the federal system for the express purpose of executing double-brokering schemes, a broker noted a common theme among carriers he suspected of it – no inspections or violations were recorded in the CSA SMS.
Here is a reality – just because you don’t show an inspection doesn’t mean you’re a bad actor. It is most definitely possible, and in some cases I’d wager even probable, for a one-truck or other small carrier to go months – even years – without a roadside inspection being conducted. I’ve seen ICs running with authority for upward of three plus years now without an inspection, partially attributable to fairly light loads and equipment maintained so well it’s obvious to any inspector who sees it roll across the scales. I have talked to several brokers in just the last two weeks who just would not work with some independent contractors simply as a function of their good fortune, perhaps, in avoiding the delay of a roadside inspection.
It wasn’t the first time I’d heard of such a policy, but it appears to be on the rise, in this owner operator’s experience. It’s becoming an epidemic in the last three months or so, and even more intense in the past two weeks. It seems like the “experts” are declaring that no inspection is 100% proof of double brokering! Yet brokers who operate with such a policy in place ignore reality, given the high variability in inspection intensity throughout the nation, and basic due diligence that can be conducted by motor carriers to determine the very real and safe nature of so many, including those with only a short history of operating authority. As the risk of liability for selection rises and the availability of carriers grows as freight volumes moderate and/or decline, it’s a broker’s easy way out to just to say “no” and move on – not a good situation for many newly minted authorities out there.
A couple of attorneys from a group that NTA works with were realistic about due diligence for brokers when it comes to the information (or lack thereof) in the federal system, noting liability insurance that freight brokers may carry often prohibits contracting with any carriers with a Conditional safety rating or one or more of the Behavioral Analysis and Safety Improvement Categories (BASICs) in a value above the intervention thresholds. That is, with the old “CSA Scores” at levels above what FMCSA considers to be high priority for further audits or other investigations.
These attorneys commented that there remains a deep divide among industry stakeholders regarding if and how to use such information. At the heart of the matter is whether BASIC scores are reliable and whether it is appropriate in the first place for a broker to use such information in its selection policies. Some crash cases have held that the scores are unreliable and not indicative of motor carrier safety. As many of you know, Congress pulled the scores from public view on that account all the way back in 2015, after small carriers proved how the percentile-ranking methodology being used was stacked against them, even if they only had a few violations, in some instances.
A patchwork of laws based on individual district decisions around the liability for selection, however, is where we are today when it comes to brokers. And for an industry whose participants can traverse the entire nation in just a few days, that patchwork is what the FAAAA was in part designed to help eliminate. When you’re looking at a patchwork like that, a business is faced with either taking a risk and the worst potential outcome happening, or simply eliminating that worst possible outcome with an internal policy that does not allow certain carriers to be selected.
The C.H. Robinson case isn’t the first negligence suit, nor will it be the last. As with independent contractor classification rules, crash litigation against carriers themselves, and so much more, the patchwork approach is becoming the norm, and is likely to be the detriment of all involved, including many owner operators that won’t get the opportunity to haul some loads.
