“This decision does not fundamentally change the way we operate,” said Fuel Transport’s Blackwell. (Granddriver/Getty Images)
key takeaways:
- The U.S. Supreme Court ruled unanimously in May that federal law does not protect freight brokers from state-level negligent-hiring lawsuits.
- Brokerage firms said the decision increases legal risks while strengthening carrier investigations, insurance verification, security reviews and compliance monitoring practices.
- Brokers and shippers are re-examining carrier weighting as TIA says it will continue to defend members against negligent selection claims.
As the dust begins to settle from the US Supreme Court’s recent Montgomery v. Carib Transport II decision, several major freight brokerages have said that the decision, while increasing legal risks, will also strengthen industry safety practices.
The high court ruled unanimously in May that federal law does not protect freight brokers from state-level negligent-hiring lawsuits. The decision clarified that the Federal Aviation Administration Authorization Act does not preempt such lawsuits, because the law includes a security provision, even though it prohibits states from regulating certain broker activities.
“This decision does not fundamentally change the way we operate,” said Ray Blackwell, general manager of U.S. sales and operations at logistics company Fuel Transport. “Compliance, safety and carrier accountability have been inherent in our business from the beginning, shaped by decades of experience in fleet operations and driver recruiting.”
Blackwell said this foundation informs a proactive approach to carrier management, including investigations, insurance verification, security reviews and ongoing compliance monitoring. He considers this decision to strengthen these efforts on a large scale.
He also stressed that brokers should think beyond the minimum regulatory requirements, and incorporate compliance into day-to-day operations rather than viewing it as a separate task.
In the days following the decision, Landstar System issued a statement Reflections on the decision and its impact on the industry.
“Security is fundamental to how Landstar operates,” said Frank Longaro, president of the independent agent-based broker. “This decision reinforces the importance of changing how we operate and being consistent with the standards that make Landstar the leading platform for independent agents, (business capacity owners) and third-party carriers.”
Longaro said his company has already been implementing disciplined processes to evaluate, qualify and arrange transportation for years. He also noted that the decision may focus attention on carrier selection practices and raise expectations more broadly.
Landstar is ranked 25th on the Transport Topics Top 100 list of the largest logistics companies in North America and 11th on the TT Top 100 list of the largest for-hire carriers.
Other major 3PLs have also taken note of the Supreme Court decision.
A company spokesperson said, “RXO does not expect this decision to have any negative impact on our business.” “Indeed, it underscores the importance of choosing a brokerage partner with rigorous carrier screening processes and financial stability. We believe this decision will accelerate industry consolidation, strengthening the long-term competitive advantage of scaled players.”
RXO Logistics is ranked 11th on the TT100 list.
“There has been a lot of activity in the market around what this means for the supply side and the number of carriers,” said Dave Kiesling, group vice president at Kenco, a third-party logistics and supply chain management company. “Much more needs to be done as these individual cases, which will now be decided at the state level, be resolved.”
Kiessling said the decision raises questions about what motor carrier due diligence means for both brokers and shippers. He expects intense scrutiny in the short term as brokers re-examine their existing carrier bases. He also suspects this is a warning to many brokers to ensure they do not have bad actors in their carrier pool.
“If a carrier has received a satisfactory safety rating, it means they have gone through a real DOT audit,” Kiessling said. “It’s almost like a gold star. It means they’ve successfully demonstrated to the government that, ‘Hey, I do things safely.’ “Those conditional and/or those non-rated carriers are now at a loss.”
Kiessling expects capacity reductions to increase in the long term as questionable carriers and owner-operators face higher insurance costs and increased legal risk. They also expect that investigative technologies developing in response to new legal liabilities will contribute to this trend. They hope this will help reduce friction over time.
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“We have been told that many brokers are deactivating some of their conditional or unrated carriers or not allowing them to be used in the future,” Kisling said. “Secondly, we have seen a big increase in our customers asking about our document verification process.”
It’s important for any process to be clear, consistently implemented and fully documented, Kiesling said. He stressed that this also includes how inspection criteria are applied across all shipments.
Kenko Logistics is ranked 39th on the TT100.
The Transportation Intermediaries Association expressed deep disappointment that the decision overturns decades of legal precedent and shifts safety standards and responsibilities from the federal government and carriers to states and brokers.
“While brokers are fully committed to safety and to working in good standing with federally licensed motor carriers, the decision imposes an impossible task on brokers,” TIA said in a public statement. “Our members will continue to vigorously defend against negligent selection claims as plaintiffs must still meet the applicable legal standards.”
The Supreme Court’s decision also has significant implications for shippers.
“In the past, shippers could focus primarily on cost and service, while brokers and carriers handled most of the compliance burden behind the scenes,” said Fuel Transport’s Blackwell. “Now, everyone involved in carrier selection has to think more carefully about the risks.”
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Blackwell expects to see more scrutiny around carrier investigations, documentation and ongoing monitoring. This means shippers can trust brokers with a demonstrated security record more, and it could lead to more standardized security and risk benchmarks in the future.
“Across the industry, we are seeing brokers investing more heavily in carrier qualification programs, security monitoring tools, compliance reviews and ongoing carrier performance management,” Blackwell said. “Many are formalizing standards that may have been different before.”
Blackwell sees the lack of a consistent benchmark for adequate oversight as a challenge for the industry. They’ve seen brokers respond by developing more structured frameworks around onboarding, security scoring, insurance verification and carrier monitoring to create more transparency and accountability across their entire network.
“Compliance cannot be treated as a periodic exercise,” Blackwell said. “Investigating a carrier one time and filing paperwork is no longer enough. The strongest brokerages are moving toward continuous inspection models that combine carrier qualification, ongoing security monitoring, performance reviews, insurance verification, and operational controls.”
