Executives at several large carriers and brokers told investors on second quarter earnings calls that the Supreme Court decision in Montgomery v. Caribe Transport II is reshaping cost and capacity conditions across freight brokerage.
The unanimous June opinion resolved a split among lower courts and established that federal law does not preempt state tort claims when a safety exception applies. Under that precedent, federal rules governing interstate commerce leave a freight broker exposed to liability in negligent selection cases.
Knight-Swift Transportation Holdings CEO Adam Miller said the ruling could change the economic incentives for a large share of the brokerage market, where many participants have pursued the cheapest available capacity with limited attention to carrier safety records. He expects the decision to tighten the truckload market as shippers and brokers raise their standards and insurance costs climb.
Schneider National CEO and President Jim Filter said many brokers will likely avoid carriers holding conditional or unsatisfactory safety ratings from the Federal Motor Carrier Safety Administration. He estimated those carriers represent a small percentage of the market, and said drivers who move to another carrier will face higher safety standards there, which effectively removes capacity from the system.
Landstar System Vice President and CFO Jim Todd said the legal effects will take years to work through. Cases in roughly half the country that once ended with a well-crafted motion for summary judgment will now be contested, he said, while the remaining states already allowed state tort claims to proceed in negligent selection suits.
Landstar operates an asset-light model built around brokers. Company leaders said their safety standards are helping them win market share since the Montgomery decision.
Source: Trucking Dive - https://www.truckingdive.com/news/6-industry-executives-weigh-in-on-supreme-courts-freight-broker-aftermath/827470/