The issue in KAM WAY Transportation, Inc. v. Superior Court (Chavez) (California Supreme Court), the expansion of vicarious liability, is of particular interest because it threatens the viability of small and medium size firms that act as intermediaries and which promote efficiency in a vital industry, the transportation of goods by truck, and could diminish competition.
The case arises out of a truck accident in which the owner-driver of a tractor-trailer truck carrying a cargo of fruit on an interstate delivery from Washington to Arizona caused an accident in which a passenger in the cab of the truck was injured. The passenger, Chavez, was being trained as a truck driver by the owner-operator and was assisting the owner-operator on this trip. Chavez sought to recover for his injuries from Singh, the driver, the motor carrier HSD, and KAM-WAY Transportation, the truck broker. Chavezs wife also sued for loss of consortium.
KAM-WAY Transportation is a freight or truck broker, which acted as an intermediary between the owner of the cargo and the motor carrier. KAM-WAY exercised no ownership or operational control over the tractor-trailer or the cargo.
Under California law, employers are generally not liable for injuries to third parties due to the negligent acts of an independent contractor. An exception is the non-delegable duty doctrine, under which one who entrusts work to an independent contractor, but who retains the control of any part of the work, is subject to liability for physical harm to others for whose safety the employer owes a duty to exercise reasonable care, which is caused by his failure to exercise his control with reasonable care. This type of vicarious liability applied only to certain specific groups, including motor carriers.
As distinguished from motor carriers, trucking (or freight) brokers are businesses that do not actually transport goods, but simply match various companies which need goods shipped with independent motor carriers. Prior to this case, Californias non-delegable duty doctrine had never been applied to truck brokers. Multiple other jurisdictions have clearly held that truck brokers should not be held vicariously liable for the acts of truck operators/drivers with whom they contract.
In the trial court KAM-WAY moved for summary judgment, arguing that KAM-WAY acted only as a truck broker, not a motor carrier, and that since Singh was acting as an independent contractor, KAM-WAY was not liable for Singhs actions. The trial court held that there was no triable issue of material fact on the claims for negligent entrustment or negligent hiring: the claim for negligent entrustment failed because Singh owned the truck, and KAM WAY, as a broker rather than a carrier, did not exercise ownership or control over the truck and shipment involved in the incident or over Singh himself as the driver; the claim for negligent hiring failed because Singh was not KAM WAY’s employee.
The trial court denied KAM WAY’s motion for summary judgment solely because it found a triable issue of fact as to whether KAM WAY had breached a nondelegable duty of care to David Chavez.
The trial court acknowledged that the nondelegable duty doctrine had only been applied to carriers, but determined for the first time that The articulated [nondelegable duty] rule that applies to carriers, should apply to brokers . . . as a matter of public policy. The court reasoned that expansion of the doctrine upheld the policy articulated by the Supreme Court in its motor carrier cases because finding there to be a nondelegable duty was necessary to ensure the incentive for careful supervision of its business and members of the public who are injured would be deprived of the financial responsibility of those who had been granted the privilege of conducting their business over the public highways.
KAM-WAY sought a writ of mandate directing the trial court to grant the summary judgment motion, arguing that the writ is necessary because if the trial proceeds against it based on a novel application of law, it will be irresistibly pressured to settle based solely on the magnitude of the potential financial exposure. The Court of Appeal summarily denied KAM-WAYs motion.
KAM-WAY has filed a petition for review in the California Supreme Court.
In our amicus letter brief to the California Supreme Court we urge that court to grant review, We argue that a trial court should not decide a novel application of law and that only the California Supreme Court should make this judicial policy determination. We pointed out that the California appellate courts had never before held that a freight or truck broker can be held vicariously liable for the acts of its independent contractor motor carrier under the nondelegable duty doctrine and that the case relied upon by the trial court held only that carriers have a nondelegable duty.
The trial court seems to have started with the view that vicarious liability is the rule, and that classical agency principles are the exception, but that in so holding the trial court misread appellate precedents. Heretofore, the doctrine of nondelegable duty has been applied only to limited classes of persons who have direct or substantial control over the persons or instrumentalities which create the risk of injury to the public. Until the trial courts decision in this case, the doctrine had never been applied to trucking or freight (or any other) brokers. Further, the nondelegable duty doctrine has been applied only where there was an underlying duty of the party to be held vicariously liable and the original contractor cannot transfer liability by hiring another to perform a task, but the trial court overlooked the fact that KAM-WAY did not itself undertake to carry on an activity that involves danger to the public.
Brokers do not and would not perform the task for which a motor carrier is hired. The freight broker is merely an intermediary between the shipper and the carrier. The broker does not transport any goods itself, does not have title to, nor custody of, the cargo, does not own or operate the motor vehicle, does not hire the vehicles driver, and does not have the expertise to assess the possible hazards of the cargo, the safety of the vehicle or the capability of the driver. The broker thus had no underlying duty to third parties to protect them from the negligence of independent truckers or drivers. The trial courts imposition of vicarious liability is based on a fundamental misunderstanding of the role of a freight broker. Unlike a carrier, who owns or has control over the commercial vehicles it operates, a broker is merely an intermediary which connects motor carriers with companies seeking transportation of goods.
Imposing this new duty on brokers would effectively extend risk to a party without consideration of fault of that party or the potential benefit to that party of the activity at issue.
We also pointed out that the Superior Courts policy determination is likely to have an enormous impact on the economy. According to the U. S. Department of Transportation, of all the goods shipped in the United States in calendar year 2012, 70% of total tons was shipped by truck (whereas only 15.8% of total tons was shopped by rail, 4.4% of total tons was shipped by ship or barge; and only a negligible percent was shipped by air).
Extending the nondelegable duty doctrine to brokers will increase the costs of truck transportation, because at the very least brokers will have to insure against vicarious liability (assuming such insurance is available) and that cost will be passed on to shippers and consumers. If such insurance is not available, or available only at prohibitive cost, many small and medium-sized brokers will likely be driven out of business, reducing competition and diminishing the availability of a useful, and in many cases, vital, service. Further, extending vicarious liability to brokers will not significantly increase protection for the public, because motor carriers are already required to have substantial insurance or bonding under both California state law and federal regulations.
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