Third party logistics (3PL) companies often serve their shippers as truck brokers (property brokers) who are defined by statute and regulation to be…
“a person, other than a motor carrier or an employee or agent of a motor carrier, that as a principal or agent sells, offers for sale, negotiates for, or holds itself out by solicitation, advertisement, or otherwise as selling, providing, or arranging for, transportation by motor carrier for compensation.” 49 U.S.C. § 13102(2)
“a person who, for compensation, arranges, or offers to arrange, the transportation of property by an authorized motor carrier.” 49 C.F.R. § 371.2.
These definitions, found in the U.S. Code (U.S.C.) and Code of Federal Regulations (C.F.R.), are very straight forward and easily understood. However, recent decisions of federal district courts point to the many nuances of actual practice which often are important in deciding the rights, responsibilities, and potential liabilities that may arise from such practice.
If you are working within strategic decision making for any logistics operation which includes truck brokerage you should take note that state and federal courts are establishing (or have established) more precedent for the following;
Under the principle of specific jurisdiction, if you knew, or should have known, that the likely route of any load you brokered would take that load into any state along such route, then courts of any of those states may take jurisdiction over your organization for the purpose of adjudicating any claim made against your organization in any one of such states.
This developing principle of personal jurisdiction is different from what has controlled in the past, wherein you were likely to be sued only in your state of operations, or in the state of destination for the load you brokered, given sufficient contacts or statutory authorization. The most recent decision holding that a broker could be sued in a state along the route of a brokered load is, Dixon v. Stone Truck Line, Inc., No. 2:19-CV-000945-JCH-GJF (D.N.M. Dec. 3, 2020).
There, the District Court of New Mexico held that a broker having no contacts with the New Mexico, other than having brokered a load that, because of its origin and destination, was “most likely” to travel through New Mexico, could be sued in New Mexico for personal injuries inflicted on a resident of New Mexico from the truck carrying such load.
The Court also decided another key issue for brokers who may broker a truck into a particular state where injury is caused. Applying the “but-for standard”, the Court found that directing a truck through a particular state amounts to an “event in the causual chain leading to plaintiff’s injury”, sufficient for that state to have jurisdiction over the broker and the issue of damage, which might include personal injury or death.
The practical impact of such a decision, and the developing majority, is that truck brokers may now have to defend lawsuits in all states through which loads they broker travel, even though they may not control the routing of such loads, if by examining the likely route they knew or should have known that the load would travel into the state in which they are now being sued.
Contracting for Strategic Impact of State Court Jurisdiction over 3PL Property Brokers.
In assessing the risks, or costs, related to doing business in many states, truck brokers must not only know how they are affected by their own state (i.e., state where incorporated and/or primarily located), but they must also have a realistic idea of how they might be impacted by the state or federal courts of other jurisdictions. This is particularly so if they are to have current contracts with thier motor carriers, which reflect the appropriate apportionment of culpability in relation to actual proximate cause of injury or property damage to others.
Brokers are frequently sued in state courts over cargo loss and damage claims, breach of contract, and various theories of direct and vicarious liability for personal injury. While the broker may have a valid substantive defense to any such cause of action, the cost of defending such lawsuits, if brought in a state other than where the broker is primarily located, becomes much more expensive and difficult to defend.
So it is that the New Mexico District Court, Dixon v. Stone Truck Line, Inc., No. 2:19-CV-000945-JCH-GJF, at *14-15 (D.N.M. Dec. 3, 2020) along with similar decisions in other jurisdictions*, established two important principles for all 3PLs who broker truck loads through various states.
When engaged in truck brokerage of an interstate nature, you must know and prepare for the fact that you may be sued within any state through which the truck you brokered might travel, if such path of travel might be reasonably anticipated. This is so, notwithstanding that your brokerage operations has no office, registration, or other indicia of actually being a part of such state.
Following the logic of the New Mexico District Court, in anticipation of having to defend state court suits for actions of carriers who precipitated such actions, you must contractually protect the cost of such defense with both forum selection clauses and indemnity provisions, which require the carrier to be responsible for the cost of such defense, since but for their actions, and routing of any particuar load, you would not be in those courts foreign to your place of operations.
The nature and extent of changes required in the contracts between truck brokers and motor carriers to reasonably protect the anticipated additional cost of such expanded notions of personal jurisdiction are two complicted to be properly covered within this article. However, as with all changes in the law which may materially affect strategic operations, it is enough to remind all that……..”an ounce of prevention is worth a pound of cure”, as motivation for review of this issue with your appropriate counsel.
(*Vogel v. Morpas, Civil Action No.: RDB-17-2143, 2017 U.S. Dist. LEXIS 185709, at *9-11, 2017 WL 5187766, at *5-6 (D. Md. Nov. 9, 2017) (concluding Maryland court had personal jurisdiction over out-of-state trucking broker where contract with carrier facilitated two intermediate stops in Maryland on way from Michigan to Philadelphia, even though it was carrier’s choice to make Maryland stops);Turner v. Syfan Logistics, Inc., No. 5:15cv81, (W.D. Va. Apr. 18, 2016) (holding that, in case involving trucking accident in Virginia, Virginia court had personal jurisdiction over interstate trucking broker; court determined that broker purposefully targeted Virginia as state through which carrier it hired would transport load based on Load Confirmation, which obligated carrier to drive to Moorefield, West Virginia from Chattanooga, Tennessee, mileage listed on document contemplated route of 527 miles, and two quickest routes aligning with mileage both went through Virginia);Brandi v. Belger Cartage Serv. Inc., (D. Kan. 1994) (concluding that Kansas court had personal jurisdiction over Colorado broker that arranged for shipment by Arizona carrier from Kansas City, Missouri to Colorado when freight was damaged while in Kansas because broker must have been aware that goods would travel through Kansas and broker should have foreseen being haled into court in a state through which it had arranged for the shipment of goods).