Key Takeaways
- The US Supreme Court’s decision in Montgomery v. Caribe Transport II does not expand shipper liability for negligent hiring claims arising from motor carrier accidents.
- Montgomery addressed whether freight brokers may be subject to state-law negligent hiring claims under the Federal Aviation Administration Authorization Act’s (FAAAA) safety exception; the decision did not directly concern shippers.
- Shippers have long faced potential negligent hiring and carrier selection claims, but plaintiffs continue to face substantial causation and evidentiary hurdles in pursuing such actions.
- Sophisticated shippers have historically mitigated transportation liability risk through broker oversight, carrier vetting procedures, contractual indemnification provisions, and insurance requirements.
- Although plaintiffs may continue naming shippers in transportation accident litigation, Montgomery does not materially alter the existing legal framework governing shipper liability exposure.
It is with some amusement that I read the hailstorm of comments regarding the United States Supreme Court’s decision in Montgomery v. Caribe Transport II. What has surprised me most is certain reactions, particularly regarding the potential liability of shippers. There has been a lot of talk regarding how the Montgomery decision might affect shipper negligent hiring liability claims. The answer, as I wrote after reading this month’s opinion, is that it changes nothing.
As has been written about ad infinitum, the crux of the Montgomery case was whether brokers could be sued for State negligent hiring claims under the FAAAA’s safety exception. The Court said yes, they could. Argue as you may as to the correctness of this decision (and I say the Court is 100% correct), the case did not deal with shippers and likely could not, since the FAAAA by its own terms applies only to motor carriers and brokers (though, admittedly, this issue has been raised in the past). The fact is that shippers could always be, and in the past have been, named in suits claiming they were negligent for various reasons. However, such claims remain a tough road to hoe for plaintiffs, who must overcome substantial proximate cause and evidentiary hurdles. One example of such a matter was another C.H. Robinson case before the Supreme Court, Miller v. C.H. Robinson Worldwide (2020), in which Costco Wholesale Corporation was a named defendant only to be dismissed.
This is not to say that shippers—particularly large shippers—are not targets or should not be prepared. In fact, in my experience, many large shippers have been prepared for decades, certainly since the seminal 2004 case Schramm v. Foster in which the federal district court in Maryland found that brokers can be held liable for failing to exercise reasonable case in vetting and selecting carriers. Many of my shipper clients have developed contractual due diligence requirements and underlying carrier operations standards for brokers to utilize as a part of their vetting process, effectively setting at least a floor of reasonability. In addition, shippers often maintain their own internal systems and criteria for verifying brokers’ capabilities.
A consideration is what happens if the shipper directly contracts with a carrier. Here again, sophisticated shippers have developed their own due diligence criteria and standards for contracted carriers, sometimes exceeding the standards utilized by even the largest brokers. In addition, whether contracting through brokers or directly with carriers, knowledgeable shippers typically insist the relationship be properly papered and include reasonable insurance requirements and indemnification provisions to the extent permitted under applicable state law.
Whether using brokers or carriers, shippers, particularly large shippers, are potential defendants in negligent hiring cases where a carrier utilized for one of their shipments is involved in an accident that causes injury. However, as stated above, this possibility was there long before the Mongomery decision and was in no way affected by the verdict in that case. Whether we see an increase in suits is anyone’s guess, but if that does occur, Montgomery will not be the sole underlying cause.