THE JUBILEE PANEL! HALF-CENTURY GAME CHANGERS THAT ROCKED THE TRANSPO WORLD AND HOW THEY IMPACT OUR PRACTICES TODAY SCHRAMM V. FOSTER : THE DECISION THAT USHERED IN THE ERA OF BROKER LIABILITY Tamara B. Goorevitz, Esquire Franklin & Prokopik, PC 2 North Charles Street, Ste. 600 Baltimore, MD 21201 tgoorevitz@fandpnet.com (410) 230-3625
Introduction On May 5, 2002, Brian Foster, an employee of Groff Brothers, LLC, a motor carrier, attempted to drive a tractor trailer across a highway in western Maryland, crossing directly into the path of a pick-up truck being driven by 18 year old Tyler Schramm. The Schramm vehicle collided with the trailer of the Groff Brothers’ vehicle, causing serious injuries to Tyler Schramm. In 2004, the United States District Court for the District of Maryland issued an Opinion in the case of Schramm v. Foster , 341 F.Supp.2d 536, 542 (D. Md., 2004), denying freight broker C.H. Robinson Worldwide, Inc.’s Motion for Summary Judgment as to the issue of negligent hiring. The Court held that the issue of the C.H. Robinson’s potential liability for the negligent hiring of a motor carrier was one for the jury to decide. In doing so, the Court ushered in the era of broker liability, and liability in particular, for the negligent hiring of a motor carrier. The Schramm opinion sent shockwaves throughout the brokerage community. How could a broker be liable for the actions of a carrier that an independent contractor, and how could the question of whether a broker was liable for the negligent hiring of a carrier that was authorized to operate by the DOT be left to a jury’s determination? Transportation Intermediaries Association (TIA), an organization for third-party logistics professionals doing business throughout North America, began to hold seminars to discuss Schramm and eventually published a Carrier Selection Framework (which it continues to update) to help its member logistics providers navigate the post-Schramm world of carrier selection. Due to Schramm and the opinion of one judge in a federal court in Maryland, the broker and third-party logistics world was drastically changed. 1
The Rise of Broker Liability Since trucking deregulation, third party logistics companies emerged to fill the role once provided by large carriers, in particular, serving as freight brokers between shippers and smaller carriers. However, with claimants seeking larger awards, and with small and medium fleet owners finding the insurance market limited, claimants began to focus on brokers’ liability. Claims of alleged negligence in hiring an unsafe motor carrier became increasingly common. However, it wasn’t until the Schramm opinion was issued that the era of broker liability truly began. Schramm and the Cases That Followed By now, in 2017, the facts of the Schramm case are well known: a minor plaintiff with devastating injuries; an unrated motor carrier with only one million dollars in insurance coverage; the involvement of the largest non-asset based broker in the United States, C.H. Robinson; and because it bears repeating, a minor plaintiff with devastating injuries. 1 Back in an era when a Driver Safety Evaluation Area (SEA) rating still existed (note: Groff Brothers’ SEA rating was 70.63, down from 74.00 in September 2001, which the Court also found to be a significant fact), the Schramm opinion was unprecedented. In its motion for summary judgment, C.H. Robinson argued: Prior to forming its contract carrier relationship with Groff Brothers, it followed the same procedure it had followed for each of the 20,000 plus motor carriers with whom it had also contracted: C.H. Robinson obtained Groff Brothers = tax identification number, secured proof that Groff Brothers maintained liability 1 The factual portion of the Schramm opinion includes: “Schramm suffered neurological damage from which he is not expected to recover. He remains in a semi-vegetative state and suffers from various complications, including seizures, caused by injuries to his brain. As a result of these injuries, Schramm requires assistance with all basic life functions.” 341 F.Supp.2d 536 2
insurance of at least $750,000 and verified that Groff Brothers was authorized by the Federal Motor Carrier Safety Administration (FMCSA) to operate as a motor carrier. C.H. Robinson also consulted the Department of Transportation = s (DOT) website to ensure that Groff Brothers did not have a A conditional @ or A unsatisfactory @ rating. C.H. Robinson also relied on Groff Brothers = history of transporting loads for CH - prior to the accident at issue, Groff Brothers transported approximately 191 freight loads on behalf of C.H. Robinson = s customers, without incident. In denying C.H. Robinson = s Motion for Summary Judgment as to Plaintiffs = negligent hiring claims, the Court noted that although C.H. Robinson could not be deemed a carrier under federal law, the Court believed that C.H. Robinson = s A self-proclaimed @ status as a A third party logistics company @ providing A one point of contact @ service to its shipper client is A sufficient under Maryland law to require it to use reasonable care in selecting the trucks whom it maintains in its stable of carriers. @ The Court held that the duty to use reasonable care includes, at least, the duties: A (1) to check the safety statistics and evaluations of the carriers with whom it contracts available on the SafeStat database maintained by FMSCA, and (2) to maintain internal records of the persons with whom it contracts to assure that they are not manipulating their business practices in order to avoid unsatisfactory SafeStat ratings. @ The Court noted that such obligations would not be onerous and did not find that the imposition of such a duty would contradict the regulations promulgated by the FMCSR. Rather, the Court stated that it believed imposing such a duty furthers the critical federal interest in protecting drivers and passengers on the nation = s highways. Schramm , 341 F.Supp.2d at 551-52. The Court also took note that CH Robinson recognized the importance of a carrier = s safety by requiring its contract carriers to have a satisfactory rating. The Court emphasized that 3
despite the disclaimer on the SafeStat website, the fact that Groff Brothers = rating was marginal A implies a duty of further inquiry, and from the existing records, it can be inferred that Robinson should have been reasonably alerted to the fact that Groff Brothers = provenance was suspicious. @ The Court also noted that Groff Brothers A predecessor, @ RG Transportation, A had experienced a safety performance problem which prompted the formation of Groff Brothers. @ (Plaintiffs had argued that violations of regulations by a predecessor company, RG Transportation were A highly probative @ as to the competency of Groff Brothers to provide safe transportation of the load involved in the occurrence). Id. at 552. Of course, the Schramm opinion wasn’t entirely against C.H. Robinson, indeed, Plaintiffs’ claims of respondeat superior, negligent entrustment and alleged violations of federal regulations were all dismissed by the Court. But all that mattered to the brokerage industry at the time the Schramm opinion was issued was that one count, negligent hiring, had survived, and for the first time, a jury would be deciding the broker’s fate. In the years immediately following the Schramm opinion, there were few cases setting precedent involving broker liability. Then, in 2008, the case of Jones v. C.H. Robinson Worldwide, Inc., 558 F.Supp.2d 630 (W.D. Va. 2008) followed by Sperl v. C.H. Robinson Worldwide, Inc. , 946 N.E.2d 463 (Ill. App. Ct. 2011), in 2011 further put the “nail” in the proverbial broker liability “coffin.” These cases again expanded the scope and prevalence of broker liability. Although the Jones Court, like the Schramm Court, dismissed the counts of Respondeat Superior and Negligent Entrustment against C.H., once again, the count of Negligent Hiring survived. In a factual scenario that would become all too familiar in the years that followed, the Court’s opinion in Jones highlighted the following facts: 4
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