Chattanooga–The Transportation Intermediaries Association (TIA) was quick out of the box earlier this year after two key court decisions that didn’t favor the brokerage community, asking the federal government for some sort of guidance for 3PLs: tell us what sort of carrier hiring practices would protect us.
Chris Burroughs is the head of TIA and he told an audience at the FreightWaves Broker Compliance Symposium here on Monday that what the TIA is seeking through its request for a federal rulemaking would take a long time to arrive, earlier efforts having stalled out.
“It’s no secret that carrier selection has been problematic for a very long time,” Burroughs said in an interview at the FreightWaves Broker Compliance Symposium here. (Full disclosure: the author of this article conducted the on-stage interview with Burroughs). “I’ve been at TIA for 15 years, and we were having these arguments when I first started that hey, we’ve got to figure out and provide more clarity and eliminate the confusion that exists in the carrier selection process.”
The issue is now more stark than ever. While Montgomery vs. Caribe stripped the brokerage community of the liability and negligence protection that had (mostly) been afforded under the Federal Aviation Administration Authorization Act (F4A), it became an even bigger issue not that many weeks later when C.H. Robinson was hit with a more than $600 million nuclear verdict–now at more than $700 million–as a result of a jury award involving a carrier hired by C.H. Robinson (NASDAQ: CHRW) that had a Satisfactory rating from the Federal Motor Carrier Safety Administration (FMCSA).
The TIA’s request for a federal rulemaking on the issue occurred between the Montgomery decision and the nuclear verdict in the case of Lipe vs. Lupus Superior.
A long history of efforts
Burroughs recapped a long list of efforts on the legislative and regulatory side to get some sort of guidance on carrier selection that could be used as part of a courtroom defense. He described negotiations with the association of trial lawyers that would constantly get sidetracked by their opposition as being like Lucy pulling the football away from Charlie Brown.
The launch of Commercial, Safety, Accountability scores in 2010 was seen as a way to advance guidance on carrier selection, Burroughs said. “That was supposed to be the answer to tie a data-driven product to a safety rating,” Burroughs said. “Ultimately, that never happened.”
Chris Burroughs (l) and John Kingston at FreightWaves’ F3 Broker Compliance Symposium
Even the brokerage industry’s desire for changes softened somewhat when the industry began winning some cases through the protection of F4A, Burroughs said.
Behind the recent petition for a federal rulemaking, Burroughs said, is saying to FMCSA “hey, you are the federal agency that’s in charge of providing safety ratings to motor carriers. We want you to put forward a federal standard, taking it out of Congress’ hands because of the dysfunction and putting it back in the agency’s hands, where we believe it belongs.”
But he added, “rulemaking takes a long time.”
Guidance would be a help
A more short-term answer might be for FMCSA to issue guidance, Burroughs said. The guidance might say, according to Burroughs, “hey, these are the five or six things, whatever they come up, that should be checked prior to selecting a trucking company, and that would serve as kind of a pseudo carrier selection standard.”
FMCSA has a private document of high-risk carriers, Burroughs said. One of the requests TIA has made of the agency is to publish that list as well
The brokerage community is also the target of lawsuits filed by plaintiffs who are funded by venture capital companies. (It was discussed how Paul Clement, who represented Shawn Montgomery before the Supreme Court, is the “Michael Jordan” of attorneys who argue before the high court. Burroughs declined with a smile to estimate on what Clement was getting paid by the hour).
“They’re seeing blood in the water,” Burroughs said.
Tough choices to be made
The quandary that C.H. Robinson now faces in Lipe vs. Lupus Superior is that the ruling was not only expensive. It also involved a finding that the driver in the crash, who was killed, was essentially a C.H. Robinson employee. That sort of ruling, if it established a precedent, would open the door to even greater litigation hitting brokers.
But the clock is ticking at an annual rate of more than 6% interest on the now $700-million judgement which began at $603 million. A settlement would end the process but leave the finding about the driver’s relationship to C.H. Robinson intact.
Burroughs said C.H. Robinson’s strategy is clear: it is going to fight the verdict and not settle the case, which came out of a Dallas County courthouse.
“I’ve talked to (C.H. Robinson CEO) Dave Bozeman and (chief legal officer) Dorothy Capers,” Burroughs said. “They’re clearly going through the appeal process. They’re not going to settle the case.” He also expressed confidence based on those conversations that C.H. Robinson can win on appeal.
Better news on insurance
One of the potential negative impacts from the dual hits of Montgomery and Lipe was expected to be seen in insurance rates paid by brokers.
Burroughs said soon after the decision, “there was a two to four week period where rates were extremely high in terms of renewal.” Much of that was timing, he added; TIA members who renewed just before that period “hit the lottery.”
But that trend has calmed, according to Burroughts. “We’re not seeing any sort of massive, drastic increase in terms of insurance rates at double digits,” he said.
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