A Supreme Court ruling in the trucking industry could soon result in a major verdict impacting freight brokers. In the Montgomery vs Caribe II Transport case, a 9-0 ruling that federal laws do not shield freight brokers from state law when selecting carriers. Moreover, plaintiffs can now sue brokers in state courts for choosing unsafe carriers. Previously, the Federal Aviation Administration Authorization Act (FAAA) protected brokers by preempting any state-law “negligent hiring” claims. However, the ruling of the case between truck driver Shawn Montgomery and a carrier company will mitigate that. Despite the negative impact on brokers, the ruling may benefit larger freight brokerage companies.
How Will Freight Brokering Be Impacted by the Ruling?
The most significant impact on freight brokers will be the inability to rely on the FAAA as a shield. In the past, brokers used the FAAA to argue against lawsuits, noting that federal law preempted state laws. Under the ruling, brokers can now face legal action in state courts for accidents involving carriers they hired. In turn, this could change the vetting process for choosing carriers and increase the level of stringency. The ruling may also result in brokers limiting the number of carriers that they work with. A stronger vetting process could result in fewer trucks on the road and drive up rates for shippers.
Is The Verdict Impacting Freight Brokers Positively?
Despite the belief that the ruling may negatively impact freight brokers, many also believe it could have a positive effect. Particularly in the long term, for larger brokerage companies compared to smaller ones. With brokers more liable for mitigation, insurance premiums and legal costs associated with lawsuits could rise. Larger brokerage companies with greater capital may be better able to handle these situations than smaller ones. With a greater focus on the vetting process, bigger brokers with advanced software could be more successful in choosing carriers. The cheapest carriers tend to be the riskiest ones, and more stringent vetting forces them out of the industry. Smaller brokers would likely be affected by rising transport costs.
Regardless of the Supreme Court’s decision, shippers should not pause domestic cargo movement. However, a shipper should take the proper steps to avoid disruptions that could lead to delays and financial loss. In addition to keeping up to date with industry news, this can mean speaking with a qualified freight broker. Brokers are intermediaries between shippers and carriers, coordinating domestic transport for your cargo. They do this by having a network of carriers that can move your cargo anywhere in the country. Brokers also provide solutions like rate negotiation, documentation, and more. Reach A1 Freight Solutions at info@a1fsinc.com or 786-375-9420 to begin transporting your cargo domestically to the final destination.