While the concept of preemption dates back almost two centuries, the scope and extent of preemption remains a hot topic of litigation, especially when considering the preemptive effect of the Federal Aviation Administration Authorization Act, otherwise known as “FAAAA.”
Transportation brokers are routinely named in lawsuits, especially when the motor carrier’s insurance coverage limits are insufficient to cover the alleged damages. When this occurs, brokers are quick to invoke the FAAAA’s preemption of state and common law claims.
In order for the FAAAA to preempt a claim, the Court must determine the following:
- The claim is a “law, regulation or other provision having the force and effect of law,” and
- The claim is “related to a price, route, or service” of a motor carrier, broker, or freight forwarder.
The relationship between the state law and price, route, or service must be more than “tenuous, remote, or peripheral.” The relationship between the law and the price, route, or service is typically the main point of contention.
The question of whether the FAAAA preempts claims that a broker negligently selected a motor carrier has, as one federal district Court described, “sharply divided” the federal district Courts.
In the Third Circuit, evaluation of whether the FAAAA preempts a claim begins with the analysis outlined Bedoya v. American Eagle Express Inc., 914 F.3d 812 (3d Cir. 2019).
According to the test in Bedoya, the first step in the FAAAA preemption analysis is to determine whether the state or common law at issue impacts prices, routes, or services by “mention[ing] a carrier’s prices, routes, or services,” “specifically target[ing] carriers as opposed to all businesses,” and “address[ing] the carrier-customer relationship rather than non-customer-carrier relationships.”
The second step is to determine whether the impact on prices, routes, or services is significant.
If the law has a significant impact on prices, routes, or services, then the FAAAA preempts the law.
The test in Bedoya was applied to negligent selection claims in two cases in the Third Circuit, Ciotola v. Star Transportation & Trucking, LLC and Lee v. Golf Transportation, Inc. Both cases arose from motor vehicle accidents and both addressed Motions for Summary Judgment filed by defendants claiming to be brokers arguing that the FAAAA preempted negligent selection claims asserted by the respective plaintiffs.
In Ciotola, 481 F.Supp.3d 375, the Court determined that the negligent selection claim did not directly impact prices, routes, or services. The Court found the claim also applied to all businesses, and not just brokers or motor carriers. It also found that the claim focused on the broker/carrier’s relationship with those it “employs” and, thus, targeted “inputs” like labor, capital, and technology. While the Court acknowledged that claims targeting “inputs” could impact prices or services, “the … FAAAA [was] not intended to preempt state common-law claims that do not significantly impact prices, routes, or services.” Turning to the second step of the Bedoya test, the Court concluded that any negative financial consequences resulting from enforcing a negligent selection claim “was not significant enough to interfere with Congress’ goal of deregulation.” Thus, ultimately, the Court found FAAAA did not preempt the negligent selection claim.
By contrast, in Lee, 2023 U.S. Dist. LEXIS 200143, the Middle District of Pennsylvania held the FAAAA did preempt plaintiff’s negligent selection claim against the broker-defendant. In so finding, the Court held that a negligent selection claim directly impacted the broker’s industry “output” which was to arrange for transportation by hiring a motor carrier to transport shipments. The Court described this “output” as a broker’s core service, noting that the claim was based entirely on the broker’s selection of the motor carrier. Second, the claim would have a significant impact on the broker’s service. Enforcing a claim of negligent selection against the broker would require the broker to perform a host of additional services that it does not presently undertake, including hiring, qualification, and supervision of its retained drivers. The Court further noted requiring brokers to hire, qualify, and supervise drivers would subject brokers to a “patchwork of laws throughout the country; impose compliance with new regulations; carry a substantial financial consequence; and expose brokers to additional liability.” Thus, the Court held the FAAAA preempted the plaintiff’s negligent selection claim against the broker-defendant.
This split in authority within the Third Circuit may be explained by the classification of the entity that claimed preemption under the FAAAA. In Ciotola, where the Court found no preemption, the Court held it was not clear whether the defendant seeking preemption was a broker or a motor carrier. The defendant claimed it was a broker, pointing out it had only broker authority, did not hire the driver, and did not provide the driver with his tractor-trailer. However, the Court noted the defendant’s actions “take on characteristics of a motor carrier,” including directly communicating with the driver on the day of the pick-up, instructing the driver to report any problems to the defendant instead of the motor carrier, advising the driver to present himself as a representative of the defendant upon arrival at the shipper, the driver signing the Bill of Lading as a representative of the defendant, and the Bill of Lading listing the defendant as the carrier. In Lee, the evidence of record unquestionably indicated that the defendant seeking preemption was a broker. Considering the test for preemption under the FAAAA closely examines the impact of the law on the entity’s particular service, and whether the impact is significant, the entity’s classification as either a broker or a carrier is consequential as brokers and carriers provide different services.
For brokers, the lesson to be learned is this: Stay in your lane. If you are a broker, do not cross into the province of a motor carrier. Communications to you from the driver should flow through the motor carrier. The driver should not represent himself or herself as your representative. The Bill of Lading should identify the actual motor carrier and not you. All communications, contracts, and other documents should identify you only as a broker. Ciotola instructs that having only broker authority is insufficient to show you are only a broker. Thus, in order to later claim the preemption under the FAAAA, your actions at all times should reflect that of a broker. While the application of preemption under the FAAAA is fact-intensive, following this guidance will place you in the best position to invoke the FAAAA preemption.
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