THE MORNING RANT: Supreme Court Rules that Freight Brokers Can Be Sued for Hiring Negligent Trucking Companies; Shady Foreign Carriers Hardest Hit?

There was a blockbuster 9-0 Supreme Court ruling last week that may cause a major shakeout in the trucking and logistics industries. It should also help in further ridding our roadways of unqualified foreign drivers.

As a result of this unanimous ruling, if trucking brokers* don’t perform some “reasonable” level of due diligence on the safety of the carriers they hire, those brokers can be held liable for damages caused by the trucking companies whom they have contracted.

(*The role of a trucking broker is to match those who are shipping goods with freight haulers who have available capacity. The broker’s cut is the difference between the amount paid by the shipper and the amount accepted by the freight carrier.)

With the complicity of blue states that have pretty much been granting CDLs (commercial driver’s licenses) to any foreign national requesting a license, our highways have been overrun with unsafe rigs driven by non-citizens. Many of these drivers can’t even read English road signs, and many clearly don’t know how to operate the trucks they’re driving. The highway carnage has forced President Trump’s Transportation Department to aggressively push back against this foreign invasion.

The SCOTUS ruling is certainly going to help, as it will disincentivize brokers from hiring the “chameleon carriers” that keep springing up whenever a shady operation is shut down. The way the system had been operating is that if a high-risk carrier using an unqualified driver was in a bad wreck, the operation would technically go out of business, but it would immediately re-brand with the same drivers and equipment as a new legal entity with no operating history.

The lack of an operating history should now be a non-starter for those brokers who might hire these chameleon trucking companies.

Wrecks have always happened and always will. There are typically several hundred thousand accidents of some sort each year involving large trucks, and several thousand deaths. A broker should not be held liable for occurrences that are statistically guaranteed to happen. But some carriers have much worse records than others. A broker can and should be held liable for disregarding a poor safety record. As Justice Kavanaugh noted, “they [brokers] have a strong incentive to do business only with safe and reliable motor carriers.”

As documented at Freightwaves:

The question a jury will now be permitted to ask in every state in America is whether the broker exercised reasonable care in selecting the carrier. That means: Did you check the carrier’s safety record? Was the carrier’s FMCSA data available to you? Did the data show elevated crash rates, conditional safety ratings, high out-of-service percentages, or prior enforcement history? Did you have a documented process for evaluating carrier safety? Or did you book the cheapest truck and move on?

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If a broker has no documented carrier vetting process, that absence is itself evidence.

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The Supreme Court told the freight industry something today that it should have already known. If you pick the carrier, you own the choice. Document it. Defend it. Or answer for it.

There is going to be a great deal of confusion in the short term. There is concern that legitimate small carriers will have difficulty booking loads if brokers are scared of not hiring highly-vetted, large-scale carriers. Meanwhile, brokers have generally only had nominal amounts of liability insurance, so they’ll be scrambling in coming weeks to obtain new liability coverage from insurance providers who will also need to sort out just what it is they’ll be insuring.

Amidst all this chaos I see a great opportunity for some entity to create a ratings agency for trucking companies. I’ve spent much of my career looking at business reports from Dunn & Bradstreet and credit ratings from Moody’s and the like. If I were an executive at one of those companies, I’d already be organizing a team to create a trucking carrier credit rating system. It would be a one-stop website where trucking companies could upload their organizational and operating histories, and where brokers could subscribe to verify that a carrier meets the broker’s risk appetite. If the big credit agencies aren’t going to create such a clearinghouse, there is an entrepreneurial opportunity waiting there for some tech bro (or gal) with an understanding of the trucking business.

Despite the short-term upheaval, this Supreme Court ruling is welcome, since the old system had incentivized the explosion of illegitimate trucking companies using unqualified foreign drivers.

[buck.throckmorton at protonmail dot com]

posted by Buck Throckmorton at 11:00 AM

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