Brokers Take the Lead – Seventh Circuit Joins the Eleventh Circuit in Finding Preemption for Brokers

ABSTRACT: On July 18, 2023, the Seventh Circuit Court of Appeals upheld a District Court’s granting of summary judgment finding that negligent hiring claims against brokers are preempted. Now two Circuits (the Seventh and the Eleventh) find negligent hiring claims against brokers are barred by preemption. The Ninth Circuit found that these claims against brokers are not preempted. But has the tide turned?

The Seventh Circuit Court of Appeals affirmed a District Court’s judgment that the Federal Aviation Administration Authorization Act’s express preemption provision in 49 U.S.C. § 14501(c)(1) barred the plaintiff’s claim and that the Act’s safety exception in § 14501(c)(2)(A) did not save the claim. Ye v GlobalTranz Enters., No. 22-1805, 2023 U.S. App. LEXIS 18137; ___ F.4^th ___ (July 18, 2023).

In Ye, a broker, GlobalTranz, contacted to provide broker services for goods to be transported from Illinois to Texas. GlobalTranz hired a motor carrier, Global Sunrise, Inc. to provide the shipping service. Global Sunrise provided the driver and vehicle to complete the shipping. While the truck was enroute, being driven by a Global Sunrise employee, it collided with the plaintiff’s husband, who, two weeks later, died. The plaintiff brought two tort claims against GlobalTranz, claiming: 1) negligent hiring of the motor carrier and 2) vicarious liability.

The District Court entered summary judgment on the claim of vicarious liability. That judgment was not appealed. The issue on appeal was the District Court’s entry of summary judgment for the broker on the negligent hiring claim. 49 U.S.C. § 14501(c) provides that a State:

may not enact or enforce a law, regulation, or other provision having the force and effect of law related to a price, route, or service of any motor carrier, broker, or freight forwarder with respect to the transportation of property.

The court, interpreting this provision, held:

“…Ye’s negligent hiring claim has much more than a tenuous, remote or peripheral relationship with broker services. The relationship is direct, and subjecting a broker’s hiring decision to common-law negligence standard would have significant economic effects. So Ye’s claim is expressly preempted by § 14501(c)(1).”  Id at 10-11.

On this point, all three Circuits agree. All three do not agree, however, that the safety exception applies.

The Ye Court held that the “safety exception” provided no exception. Under this exception the express preemption provision in 14501(c)(1):

“…shall not restrict the safety regulatory authority of a State with respect to motor vehicles, the authority of a Sate to impose highway route controls or limitations based on the size or weight of the motor vehicle or the hazardous nature of the cargo, or the authority of a State to regulate motor carriers with regard to minimum amounts of financial responsibility relating to insurance requirements and self-insurance authorization.”

The Court focused on the requirement that a common law negligence claim enforced against a broker is not a law that is “with respect to motor vehicles.”   It determined the context in which Congress specifically identified “brokers” was important. The Court opined:

“We must decide whether Ye’s negligent hiring claim is one ‘with respect to motor vehicles.’ We conclude it is not because, in our view, the exception requires a direct link between a state’s law and motor vehicle safety. And we see no such direct link between negligent hiring claims against brokers and motor vehicle safety.”  Id at 11.

The Court held:

“We thus conclude that Ye’s negligent hiring claim against GlobalTranz does not fall within the scope of § 14501(c)(s)’s safety exception. The claim is preempted and therefore properly dismissed by the district court.” Id at 22.