State of Freight 5 takeaways: Montgomery talk; short-term strength

Max Fuller is the founder and former CEO of U. S Xpress. Dave Bozeman is the CEO of 3PL giant C. H. Robinson.

They didn’t plan it, but on Thursday they both expressed a view of the future of the freight market in public forums that has also been heard in conversations since the Supreme Court handed down its decision on broker liability last week in Montgomery vs. Caribe Transport II.

What Max Fuller and Bozeman said out loud is that the impact of the unanimous decision might not stop with brokers. Additionally, shippers might be as affected as 3PLs by the Montgomery decision. That was one of several topics heard in this month’s FreightWaves State of Freight webinar, with the strengthening market never far from the discussion.

Here are five takeaways: Two industry leaders see peril for shippers FreightWaves CEO Craig Fuller brought a guest on to the State of Freight: his father Max. The company Max Fuller founded, U. S. Xpress is now part of Knight Swift (NYSE: KNX).

Max Fuller turned out to be one of two trucking executives Thursday who publicly raised the prospect that the impact from Montgomery might not be limited to just brokers. It could extend to shippers as well. The other was Bozeman (NASDAQ: CHRW).

Bozeman, appearing Thursday before the Wolfe Research transportation conference in New York, said what many people have been considering since the Supreme Court handed down its decision last week.

The argument that shippers might now find themselves liable is that the Supreme Court found that the phrase “with respect to motor vehicles” in the so-called safety exception of the Federal Aviation Administration Authorization Act (F4A) applies to brokers. The safety exception allows state action on safety issues even as F4A bars it in many other areas.

Mixed decisions from federal courts protected 3PLs in some regions of the country but not in others. With the Montgomery decision, it’s now settled that the safety exception means brokers are “with respect to motor vehicles” and state actions like lawsuits can proceed against them. But the Supreme Court didn’t say anything about shippers.

Could they be sucked into that “with respect to motor vehicles” definition under the safety exception? “Shippers are now going to have to start looking because this particular ruling now changes the dynamic and the space of where shippers can be liable on some things.” Bozeman said according to a transcript of his remarks.

“So their vetting process of brokers is going to go up.” Max Fuller, with his background as a carrier rather than a broker, said much the same thing in the State of Freight webinar. “From what I see, they’re progressing to the point where the shipper is going to have liability, kind of like brokers,” he said.

Shippers at times will use a “cheaper carrier to get a cheaper rate,” Fuller said. “They support people that aren’t being as safe as they should.” Craig Fuller said the current strengthening market, now aided by potential fallout from Montgomery, is the “the time when the shippers say ‘we’re partners.’”

But he added that a legitimate response might be “where were you two years ago when I needed to move my truck?” “They always come up with being partners when it gets into a tough market,” Max Fuller said. Bozeman also expressed the view that C. H.

Robinson–even though it was effectively the losing party in the decision–may benefit from Montgomery’s consequences. Shippers “(are) going to want a broker that has the strong economics and the strong service schedule to be able to have trust in where they move their goods.” Bozeman said.

“And that means a lot of those kinds of smaller, less-scaled brokers will probably be hampered and come out of the system. That could be 20%, 30% of that.

“ Strength into Memorial Day likely to continue Craig Fuller and Zach Strickland, SONAR’s head of market intelligence, posted what has become a regular feature of the State of Freight webinars since late last year: a chart showing rising freight rates. SONAR’s National Truckload Index (Linehaul only) is up to $2. 64 per mile. On May 1, it was just under $2.

20 per mile. “I think this is the lowest number for what we’ll see all weekend,” Fuller said. “I think this is going to continue to rally through the weekend. I don’t see any softness coming into Memorial Day.” Strickland noted that June tends to be the busiest month of the year in freight markets.

Fuller said that was a contrast to other holidays, where there is often a “pretty significant slump” in freight demand after the celebration has passed. “Let’s remember what happens in June,” Fuller said.

“You’ve got a combination of beverages shipping, you’ve got the big construction season, you’ve got gardening, you have a lot of the summer goods and summer activities that take place.” And back-to-school shipping starts to emerge then as well, Fuller added. “There’s no reason to think we won’t have a real bullish June,” he said.

Reason for overcapacity is becoming clear Fuller conc