At TIA meeting, freight brokers brace for Supreme Court decision

Scottsdale, AZ–The Transportation Intermediaries Association annual Capital Ideas Conference here has two issues looming in the background that have the potential to upend the freight brokerage industry, one of which will arrive over months and years and another which could land at any time. The longer-term impact will come from AI.

But that is solidly embedded in brokerage already, as evidenced by the large number of sponsors, exhibitors and speakers at the meeting, all of them offering AI-related services to the 3PL community and trying to differentiate themselves from a growing pack. But more pressing is the case of Montgomery vs.

Caribe, the litigation that was presented in oral arguments to the U. S. Supreme Court in early March and is expected to settle, once and for all (as much as any legal precedent can be viewed as truly final), whether the so-called safety exception of a federal law means brokers can be held liable for the actions of a carrier that they booked to move a load.

Lynn Gravely, the CEO of NT Logistics who is taking over as TIA chair, told the opening session of the conference that Montgomery vs. Caribe is a “tomorrow” problem.

(The irony is that his remarks on Thursday came one day before the Supreme Court is expected to release opinions on some cases, but it is likely too soon for a decision to be rendered in Montgomery.)

“If the court narrows federal protections, your risk goes up, my risk goes up, insurance gets more expensive and every carrier lawsuit, every carrier decision becomes a potential lawsuit in a jurisdiction that wasn’t playing by the same rules,” Gravely said. What are the issues?

At issue in Montgomery is the Federal Aviation Administration Authorization Act of 1994 (F4A), which prohibits state action that might impact a “price, route or service” of a transportation provider. (It is not directed just at trucking).

F4A also has a clause known as the safety exception that does allow a state to pursue action, such as a tort in a state court, where the issue is the safety performance of the transportation company. The exception says it is “with respect to motor vehicles.” The issue is whether that clause brings in brokerages.

A split in circuit court decisions in recent years on that question ultimately led to the Supreme Court granting certiorari on the issue of whether the safety exception can be used by a plaintiff to sue a brokerage.

In the case of Montgomery, a truck driver who was seriously injured after being struck by a Caribe Transport II truck while on the side of the road sued the broker who booked the carrier, C. H. Robinson (NASDAQ: CHRW). The Seventh Circuit tossed C. H. Robinson out of the case, concluding that the safety exception does not apply to brokerages.

Therefore, according to the 7th Circuit decision, they fall under the ban on state action regarding a “price, route or service.” Despite being out of the case, it was C. H. Robinson that argued the brokerage community’s case before the high court. (Caribe II is a carrier with an undetermined number of power units but believed to be less than five).

Gravely told the TIA audience that brokers “should prepare for both outcomes, because the brokers who wait for the ruling to start adjusting will already be behind. These are tomorrow’s problems.” TIA chair Lynn Gravey at the opening session of the group’s Capital Ideas Conference.

There is an old adage in the brokerage industry, Gravely said: “You bet your company on every single load.” The TIA filed an amicus brief in the Montgomery case. Marc Blubaugh and his team in the transportation practice at the Benesch law firm is the outside counsel for TIA that wrote the brief submitted by the organization.

In a fireside chat between Blubaugh and Justin Olsen, chief risk officer with LOGISTIQ, Olsen noted that Justice Brett Kavanaugh had specifically cited some of the arguments in the TIA brief during the oral arguments and “seemed to be the one that was most in tune with the practical effects” of whatever decision comes down.

Olsen added that TIA would not speculate when the decision might be released (though Blubaugh told FreightWaves after the session that the chances of it landing Friday, which would be like a bomb landing in the middle of the TIA meeting, was “highly unlikely.”)

What happens after the decision comes down A decision in the brokers’ favor–which would conclude that brokers are not “with respect to motor vehicles” and are protected from legal action under the “price, route or service” clause– “will benefit everyone here in this room,” Blubaugh said.

“It will essentially take off the table one of the thorniest claims that brokers have to contend with, which is the allegation that you were negligent in choosing a given carrier,” Blubaugh said. “That claim will vanish.” It doesn’t shut the door on all litigation, Blubaugh said.

“But it can give you all peace of mind again to know that when it comes to carrier selection, the core service that all of