April 26, 2023

11th Circuit Rules Negligence Claim Against Broker Preempted, Creating Circuit Split

Holland & Knight Transportation Blog
Jameson B. Rice | William P. Byrne | Kristine Orozco Little
Transportation Blog

Freight brokers are often sued for negligence when there is cargo damage or personal injury involving a motor carrier hired by the broker. Personal injury claims in particular can involve damages in the tens and hundreds of millions of dollars, which represents a substantial risk for brokers. However, brokers often contend that these claims are preempted. The U.S. Court of Appeals for the Eleventh Circuit recently held in Aspen Amer. Ins. Co. v. Landstar Ranger, Inc., No. 22-10740 (11th Cir. April 13, 2022), that the Federal Aviation Administration Authorization Act (FAAA) preempts such negligence claims, reaching the opposite conclusion of the U.S. Court of Appeals for the Ninth Circuit.

In Aspen Amer., Landstar, the broker, engaged a carrier to haul a load for its shipper customer but was alleged to have dispatched the load to a fraudster who stole the goods. The shipper's insurance carrier brought a negligence claim against Landstar in the U.S. District Court for the Middle District of Florida. The Court held that the claim was preempted by the FAAA, which the Eleventh Circuit affirmed.

The FAAA expressly preempts state-law claims "related to a price, route, or service of any motor carrier … broker, or freight forwarder with respect to the transportation of property." 49 U.S.C. Section 14501(c)(1). There is, however, a "safety exception" that states that preemption "shall not restrict the safety regulatory authority of a State with respect to motor vehicles." 49 USC Section 14501(c)(2)(A).

The Eleventh Circuit held that the negligence claim was related to the service of a broker and, therefore, the FAAA applies. It held further that the safety exception did not apply to the broker because there must be a direct relationship between the state law and "motor vehicles" for the safety exception to apply, and there was no such direct relationship between the law as applied to the broker and motor vehicles. The Court gave three reasons to support its conclusion:

  1. The U.S. Supreme Court determined in Dan's City Used Cars, Inc. v. Pelkey, 569 U.S. 251 (2013), that the phrase "with respect to the transportation of property" in the FAAA "massively limits" the scope of the FAAA. The Court determined that a similar level of restriction should similarly limit "with respect to motor vehicles."
  2. Every claim involving the price, route or service of a broker is indirectly related to a motor vehicle. If this indirect connection were sufficient to satisfy the connection to a motor vehicle, the exception would swallow the rule. To avoid this outcome, the relationship to motor vehicles must be direct.
  3. There is another exemption to FAAA preemption that involves "the authority of a state to impose highway route controls or limitations based upon the size or weight of the motor vehicle or the hazardous nature of the cargo." 49 USC Section 14501(c)(2)(A). If the motor vehicle aspect of the safety exemption were read expansively to include an indirect connection to motor vehicles, the specific exemption would be unnecessary and mere surplusage. The more narrow reading of "with respect to motor vehicles" requiring a direct connection to motor vehicles avoids this conclusion.

In fact, because by definition a broker is not permitted to provide motor vehicle transportation for compensation in its capacity as a broker, the Court determined that "a claim against a broker is necessarily one step removed from a 'motor vehicle.'" Landstar at p. 20.

The Ninth Circuit in Miller v. C.H. Robinson Worldwide, Inc., 976 F. 3d 1016 (9th Cir. 2020), applied the safety exception, reasoning that the connection with motor vehicles may be either direct or indirect. The court held that "negligence claims against brokers, to the extent that they arise out of motor vehicle accidents, have the requisite 'connection with' motor vehicles." In the narrow reading of this holding, it does not apply to the Landstar case, because there was no motor vehicle accident in Landstar. In fact, the Eleventh Circuit in Landstar cited the Miller case as an example of the view that personal injury cases are distinct from property damage cases. However, the Eleventh Circuit expressly stated that personal injury cases and property damage cases should not be distinguished for purposes of determining whether the safety exception applies. And because the Eleventh Circuit determined that "a claim against a broker is necessarily one step removed from a 'motor vehicle,'" the Eleventh Circuit almost certainly would have reached the opposite conclusion if it were to be presented with a personal injury case such as Miller.

The Supreme Court did not grant certiorari in the Miller case. Perhaps the conflicting Eleventh Circuit opinion on the need for a direct versus an indirect connection with motor vehicles to avoid preemption will form the basis for the Supreme Court to take up the issue.

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