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Yahoo
22-04-2025
- Automotive
- Yahoo
OOIDA makes now-solo case in court that California's AB5 should exempt trucking
What is likely to be the final industry battle challenging California's AB5 regulation that defines independent contractor status now awaits a ruling from the 9th U.S. Circuit Court of Appeals, which already once upheld the law's jurisdiction over trucking. Oral arguments were heard earlier this month before a three-judge panel. The roughly 40 minutes of questions and answers in the case by the Owner-Operator Independent Drivers Association touched on arguments that had not been heavily discussed previously, in part because the industry was pursuing other lines of attack against applying AB5 to trucking that ultimately fell flat in multiple court decisions following earlier success. For OOIDA, which is carrying on the lawsuit that was originally filed by the California Trucking Association in 2019, the issue is clear: AB5 'categorically prohibits leased owner operators from operating in California,' OOIDA outside counsel Paul D. Cullen Jr. said in his opening remarks. (CTA last August decided not to pursue the appeal to the 9th Circuit.) AB5 went into effect in 2019, defining when a worker can be legally considered an independent contractor and not an employee. At its heart is the ABC test, a three-pronged guidance that the law says should be used in that determination. For the trucking industry, the ABC test has been seen as problematic or an outright ban on drivers who are on a long-term lease to a trucking company because of the B prong, which says a worker can be considered independent if he or she 'performs work that is outside the usual course of the hiring entity's business.' OOIDA's focus has been on drivers on long-term lease to a carrier rather than on drivers who take spot loads, because the former could be seen as performing work that is decidedly not 'outside the usual course of the hiring entity's business.' OOIDA is appealing a March 2024 decision that rejected several arguments, including the CTA's view from early in the litigation that putting trucking under AB5 conflicts with the Federal Aviation Administration Authorization Act. That so-called F4A restricts a state's ability to regulate transportation in a way that would impact a 'price, route or service.' CTA had argued AB5 would violate that prohibition. The lower federal court rejection has left OOIDA with a smaller list of arguments against AB5. Its core push is its broad complaint that AB5 conflicts with the Dormant Commerce Clause of the Constitution. The clause upholds the idea of federal preemption of state laws even if there is no explicit law or regulation governing a particular action. The oral arguments earlier this month focused on several points, including the business-to-business exception in AB5. The B2B exception is a 13-point pathway on which, if all boxes are 'checked,' the question of status can turn to whether the worker is independent enough to pass the Borello test. Borello is a widely used standard for determining independent contractor status that is considered more lenient than AB5 and its ABC test but is still a tough bar to hurdle. Cullen, asked from the bench whether the B2B exception could be a way for a driver to remain as a leased owner-operator, said OOIDA does not believe it can. The issue, he said, is that lease operators are also under the jurisdiction of the federal Truth in Lending Act. Cullen said the act would require the carrier to have exclusive control over the vehicle, which he said is not possible under standard practices in the trucking industry. But that complete control of the carrier under the Lending Act is in direct conflict with the Borello definition of control. 'It's irreconcilable,' he said. Cullen added, however, that intrastate truck owners under lease are not subject to rules governing interstate commerce, setting up a situation where intrastate drivers don't face the conflict between the Lending Act and AB5 but interstate owner-operators do. A question from the bench on the B2B exception indirectly raised an aspect of AB5 in trucking that has been noted by several people: There have not been any known enforcement, regulatory or civil legal actions regarding trucking in AB5 since an earlier injunction against enforcing the law in trucking was lifted in 2022. Samuel Harbourt, the attorney representing California Attorney General Rob Bonta in defending AB5, responded to the judge's question that he did not think any company had been found to be operating under all the provisions in the B2B exception. But what he did not say is that there is no known litigation in which a trucking company, sued for violating AB5, ever tried to use the B2B exception as its defense. The B2B exception appears to be the basis for one of the state's main arguments, offered by Harbourt: Any claim that a person cannot exist as an owner-operator in the state is false. 'The exemption was intended to be a demanding standard for a reason,' Harbourt said, 'which is the California legislature reasonably decided to make the ABC test the central worker classification standard under California law.' Another route around AB5 – the two-check system, which was touted by TransForce soon after the AB5 injunction was lifted in 2022 – received a mild vote of confidence by Robin Tholin. She was representing the Teamsters, added as a defendant with the state earlier in the case. Tholin also cited earlier testimony in the case that AB5 had not been that disruptive to trucking in California. 'There were no changes in indicators like load-to-truck ratios that would be expected from a lack of available drivers,' she said. (The chart below is the five-year SONAR series of the Los Angeles Outbound Tender Rejection Index, a measure of truck capacity.) The two-check system involves a truck owner being hired as an employee and paid a regular wage that generates a W-2 form for tax purposes, satisfying the goals of AB5, while leasing the truck to the company and being paid for maintenance and other costs. Whether the two-check system would comply with AB5 has been a subject of debate; Tholin's comments, from the side of the legal case defending AB5, suggested the state considers it acceptable. Tholin also said that 'if drivers want to be truly independent, they can obtain their own operating authority under the Federal Motor Carrier Safety Administration.' That always has been a suggested route to get around AB5, but it comes with drivers being required to finance many things they now get from the carrier by being leased, such as insurance and the protection of the carrier's motor carrier authority. More articles by John Kingston Another federal circuit weighs broker liability, boosting odds of Supreme Court review Freight fraud everywhere, but Truckstop CEO asks: Is anybody going to jail? A market on the precipice: 5 takeaways from the April State of Freight The post OOIDA makes now-solo case in court that California's AB5 should exempt trucking appeared first on FreightWaves.
Yahoo
17-04-2025
- Business
- Yahoo
Another circuit weighs broker liability, boosting odds of Supreme Court review
Another case involving the question of broker liability – one that brokerage giant TQL already won at the federal district court level – is awaiting a decision from the U.S. Court of Appeals for the 6th Circuit on the appeal from the family of a woman killed by a truck hired by TQL. The location of the case is significant. The original case, Cox vs. TQL, was decided in favor of TQL in June 2024 in the U.S. District Court for the Southern District of Ohio. Ohio is in the 6th Circuit of the federal judiciary system. Oral arguments were heard in January. Attorneys who represent brokerage companies have been hoping the U.S. Supreme Court will take up the question of whether a broker is liable if a carrier hired by the 3PL gets into an accident or some other misfortune occurs, such as a theft. The scoreboard so far: Brokerages have prevailed in cases not just in lower courts but at the appellate level in the 7th and 11th circuits. But in the case of Miller vs. C.H. Robinson (NASDAQ: CHRW), a 9th Circuit court ruled against the brokerage in a complicated decision. With the split decisions among the circuits, there have been at least three attempts to get the Supreme Court to clarify the issue of broker liability, but it has swatted them all away so far in not granting certiorari. One of those cases also involved TQL. Its attempt to get Supreme Court review was unusual in that while it was the plaintiff that filed the request with the high court, TQL, which had won at the appellate level in the 11th Circuit, agreed with the plaintiff that the Supreme Court should take up the issue. Like many others in the brokerage sector, it sought to have Supreme Court clarification on the issues. But the request was denied in January. A decision by the 6th Circuit upholding the lower court ruling in favor of TQL would add slightly to the split, because the scorecard would have three circuits ruling in favor of the legal argument that federal law under the Federal Aviation Administration Authorization Act (F4A) preempts broker liability in such cases, with the 9th Circuit decision in Miller vs. C.H. Robinson on the other side of the divide to a limited degree. But a 6th Circuit decision in favor of the plaintiff in the TQL case, the family of Greta Cox, killed in the 2019 crash, would create further divisions in the issue, which might pry open the door to Supreme Court review a little wider. At the recent Capital Ideas Conference of the Transportation Intermediaries Association, Marc Blubaugh, co-chair of the transportation practice at the Blubaugh law firm – and coincidentally located in Columbus, Ohio, in the 6th Circuit – raised the prospect of Cox vs. TQL helping a push for certiorari on the question of broker liability. 'The more circuit decisions that come out, the greater the likelihood that the court would resolve the split among the circuits,' Blubaugh said. 'It is one of the criteria that the court looks at in addition to whether it is an issue of critical importance to the Supreme Court.' In the Ohio case, according to court documents, Greta Cox was driving with her grandson Brian Ragland on May 8, 2019, when her car was struck from behind by a truck driven by Amarjit Singh Khaira, who was driving for a company called Golden Transit. That company had been hired by TQL to transport condiments from Kraft Heinz (NASDAQ: KHC) from Illinois to California. In the original complaint filed by the Cox estate in January 2019, attorneys make several claims. One is that TQL was a motor carrier and identified itself as such. It's not just a casual term in litigation questions over brokers and the F4A; decisions have been made in favor of 3PLs in which a court has determined a 3PL is not a motor carrier. If it were, it could be found liable under the so-called 'safety exception' of F4A, which has the potential to bring in a wider range of negligence and other claims against a carrier that otherwise might be blocked by F4A. The key provision of F4A, which dates back to 1994, is that a state cannot take regulatory action that impacts a 'price, route or service' of a motor carrier or other transportation method. But the safety exception says F4A does not 'restrict the safety regulatory authority of a State with respect to motor vehicles,' including such issues as cargo size, weight and insurance. It was the safety exception that led to an unfavorable decision for C.H. Robinson. The lawsuit also says Golden Transit was 'an unsafe, incompetent motor carrier with a history of publicly available red flags [and had] a history of safety violations.' The initial suit against Golden Transit and its drivers was settled out of court for an undisclosed amount. That left the litigation against TQL, which said action against it was preempted by F4A. Judge Jeffrey Hopkins agreed. Hopkins said of the Cox estate's claim that TQL was a motor carrier, which could have opened the door to the safety exception, that the charge was 'preempted because a common law negligence claim enforced against a broker is not a law that is with respect to motor vehicles.' On the question of liability and whether finding a broker can be liable or negligent under F4A, Hopkins turned to a court ruling in a case involving Ying Ye and GlobalTranz, in which the 3PL prevailed. The case was one of the decisions where the losing plaintiff sought Supreme Court review and didn't get it. 'The enforcement of such a claim and the accompanying imposition of liability would have a significant economic effect on broker services,' Hopkins wrote. He then cited, working from the GlobalTranz case: 'By recognizing common-law negligence claims, courts would impose in the name of state law a new and clear duty of care on brokers, the breach of which would result in a monetary judgment.' More articles by John Kingston Breaking from the FreightTech AI pack: Companies make their case at TIA meeting New Mack long-haul truck makes grand entrance in bid for market share ATBS says independent drivers earned a little more in '24 but drove more as well The post Another circuit weighs broker liability, boosting odds of Supreme Court review appeared first on FreightWaves.
Yahoo
17-03-2025
- Business
- Yahoo
Stolen load of cellphones involving RXO may be another key broker liability case
A case involving giant 3PL RXO has the potential to add another decision to the body of law regarding broker liability. RXO (NYSE: RXO) brokered a shipment of cellphones for phone reseller PCS Wireless. The shipment was booked a few months before RXO was spun off as a standalone 3PL by XPO, and RXO is identified in the initial lawsuit as 'f/k/a' – formerly known as – XPO (NYSE: XPO). The shipment totaled about 54,000 phones with a value of approximately $11.5 million. They were to move from Texas to South Florida. RXO hired carrier Wizard Equipment Corp. to move the load, but it was stolen near Tampa, Florida. PCS' insurer paid out $5 million for the theft; the suit in the Western District of North Carolina is over the remaining $6.5 million that PCS says it should be paid to be made latest filing in the case is a move by RXO to have the court sanction PCS Wireless because of RXO's claim that the phone reseller has not acted in a timely manner to several requests in the discovery process. But in that filing, RXO also spells out the bigger issue than whether PCS is going to be reimbursed for some of RXO's losses. 'A key dispute in the … matter centers on whether RXO acted as a carrier or a broker for the subject shipment,' the 3PL writes in the RXO request filed March 6. The issue of liability for 3PLs when a carrier hired by it is involved in a fatal crash or one in which there are injuries has been mostly coming down on the side of brokers. Courts generally have found that brokers are not liable in such incidents, including a case involving Landstar (NASDAQ: LSTR) that was about theft, not injuries. Other large brokers that have prevailed in the federal courts over questions of broker liability following serious accidents include TQL and GlobalTranz. But in the case of Miller vs. C.H. Robinson (NASDAQ: CHRW), the Ninth Circuit found in 2020 that the Federal Aviation Administration Authorization Act (FAAAA) did not preclude legal action against the broker. The so-called F4A is the statute generally cited by brokers when they defend against claims of FAAAA, which dates back to 1994, contains a clause that protects against legal action that could affect a 'price, route, or service.' In the brokerages' victories, courts generally have held that finding a 3PL liable or negligent in such a case would be preempted by the FAAAA. Courts also have ruled in some of the cases that a broker cannot be considered a motor carrier. Efforts to have the U.S. Supreme Court review the clash between the Miller case and conflicting cases in other circuits have been rejected several times by the high court. That happened even in the recent TQL case when the 3PL, though it had won in the lower courts, backed the losing plaintiff's request for Supreme Court review, hoping to get clarity. RXO declined comment in the case. An email sent to attorneys for PCS had not been responded to by publication time. RXO's request for sanctions against PCS carries a long list of allegations, with the terms 'non-compliant' and 'evasive' appearing several times. The dates on the communications the two companies had over the issue go back as far as late October. What appears to have led to the recent filing of the sanctions request by RXO is PCS' responses to a Feb. 4 order. RXO said the responses were 'non-compliant, evasive and deficient.' The broader issue of broker liability, at least as far as PCS sees it, is whether RXO will fall under the terms of the Carmack Amendment, a federal law that dates back to 1906. In its initial complaint, PCS raised that issue. As to whether RXO can be defined as a carrier that falls under the Carmack Amendment, PCS' amended complaint in the case leaves little doubt where it believes RXO falls: 'Defendant is a carrier subject to the Carmack Amendment.' An online summary of the Carmack Amendment by the law firm Russell Mirkovich and Morrow defines the Carmack amendment as establishing 'a uniform national system of liability in claims affecting either the carrier or shipper over state lines, and it also limits the liability of carriers. This law applies to the interstate shipping of all commodities by shippers and carriers, with exceptions for fishermen, farmers and some other categories.'PCS says of RXO in its complaint: 'Under the Carmack Amendment, Defendant is liable for the loss of the shipment, Plaintiffs are entitled to recover the damages suffered because of the loss of the shipment.' In its response to that charge, RXO simply says 'denied,' which is standard practice. But it is likely that the question will be at the heart of any litigation going forward, regardless of the RXO sanctions request. But PCS' complaint also appears to hedge its bets, discussing RXO's liability if it were found to be acting as a broker, not a motor carrier, and therefore presumably not subject to the Carmack Amendment. 'If it did act as a broker with regard to the shipment, Defendant had a duty to act with due diligence and to properly and carefully select any third-party it hired to transport the shipment,' the complaint said. 'If it did act as a broker with regard to the shipment, Defendant negligently breached this duty when it selected and hired Wizard Equipment Corp to transport the shipment from Texas to Florida.' 'PCS suffered damages because of Wizard Equipment Corp's negligence,' the complaint states. 'Defendant is vicariously liable for Wizard Equipment Corp's negligence.' In a separate part of the action, PCS said it is pursuing an alternative argument 'because [RXO] disputes that it is subject to the Carmack Amendment.' More articles by John Kingston TransForce, which hires thousands of drivers a year, eyeing smaller fleets J.B. Hunt keeps its 11-year-old debt rating from Moody's Kal Freight bankruptcy staying under Chapter 11, allaying fears of chaotic exit The post Stolen load of cellphones involving RXO may be another key broker liability case appeared first on FreightWaves. Sign in to access your portfolio
