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The Seventh Circuit joins the Eleventh in deciding that the FAAAA preempts state law-based negligence actions

8/23/23

By: Christopher G. Donnelly

Last month, the Seventh Circuit joined the Eleventh Circuit by deciding that state law-based negligence claims are preempted by the Federal Aviation Administration Authorization Act (“FAAAA”). In 1994, Congress sought to deregulate the trucking industry upon its finding that state governance of intrastate transportation of property had become burdensome to “free trade, interstate commerce, and American consumers.” The FAAAA expressly preempts the enforcement of state laws which are “related to a price, route, or service of any … [freight] brokers with respect to the transportation of property.” However, the so-called “safety exception” of the FAAAA identifies very specific circumstances where state laws “with respect to motor vehicles” are shielded from preemption and are free to be regulated by the states.

In Aspen American Insurance Company v. Landstar Ranger, Inc., the Eleventh Circuit addressed “whether the express preemption provision of the [FAAAA] bars Florida negligence claims against a transportation broker based on the broker’s selection of a motor carrier, and if it does, whether the Act’s ‘safety exception’ allows those claims to proceed.” There, the Eleventh Circuit held that negligent hiring claims in particular are preempted by the FAAAA, as the application of the negligence standard would regulate brokers, not “in their capacity as members of the public,” but “in the performance of their core transportation-related services.” The Eleventh Circuit also held that the safety exception did not prevent preemption.

With the Seventh Circuit’s latest decision in Ye v. GlobalTranz Enterprises, Inc., a Circuit Court majority was created. This case was brought on appeal from the United States District Court for the Northern District of Illinois which granted the freight broker’s motion to dismiss after finding that the plaintiff’s claim was barred on preemption grounds. The Seventh Circuit agreed with the trial court explicitly in finding that common law tort claims such as the plaintiff’s “fall comfortably within the language of the preemption provision.”

The Seventh Circuit also found that the common law negligence claim “str[uck] at the core” of the freight broker’s services by challenging the sufficiency of the broker’s carrier selection. Following this rationale, the Seventh Circuit held:

In our view, then, Ye’s negligent hiring claim has much more than a tenuous, remote, or peripheral relationship to broker services. The relationship is direct, and subjecting a broker’s hiring decisions to a common-law negligence standard would have significant economic effects. So Ye’s claim is expressly preempted by § 14501(c)(1).

The Seventh Circuit next turned its attention to the FAAAA safety exemption. Again, the Seventh Circuit agreed with the trial court in finding that the safety exemption did not prevent preemption. Specifically, the Seventh Circuit found that Congress’ intent was for the safety exemption to apply to motor vehicles themselves, rather than to brokers:

It is difficult to conclude that the same Congress that prescribed specific—often itemized—regulations for motor vehicle safety intended something broader than “motor vehicle” in a safety exception that immediately follows an express preemption provision regulating “motor carriers.” So we draw the line where Congress did—at state safety regulations directly related to “motor vehicles.”

As the Seventh Circuit itself observed, its conclusion “aligns squarely” with the Eleventh Circuit’s decision in Aspen.

For more information, please contact Christopher G. Donnelly at cdonnelly@fmglaw.com or your local FMG attorney.