Penske Lawsuit SHOCKS Brokers: Who’s Liable for Freight?

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The latest BLS data shows a surprisingly ‘boring’ month for trucking jobs, with only 100 added. Dive into what this means for fleets and owner-operators, and why the industry might not be ‘overcorrecting’ as feared. We also break down the volatile oil market, current diesel prices, and the complex Penske lawsuit that’s shaking up broker liability. Get the crucial updates supply chain pros need to know.

The Fifth Circuit Court of Appeals has reinstated liability claims against two Penske entities in connection with a fatal 2018 jackknife crash in Texas, dealing a significant blow to carriers and brokers who assumed that tendering a load down the chain extinguished their legal exposure. The six-page ruling has broad implications for how carriers and brokers structure freight transactions and vet downstream partners.

The load — originating from an automotive seat manufacturer — traveled through at least four parties before the fatal accident. Penske Logistics, the asset-based carrier, first received the tender. It passed the load to Penske Transportation Management (PTM), its managed transportation and brokerage arm, which then handed it to Liberty Lane, which in turn brokered it to OK Trans, the carrier whose driver was involved in the crash that killed a motorist.

The Fifth Circuit took two distinct actions. It reinstated PTM as a defendant, citing the U.S. Supreme Court’s Charas v. Trans Air precedent commonly referred to in freight as the Montgomery decision, which eliminated the Federal Aviation Administration Authorization Act’s safety-exception shield for brokers. The court also reversed a Southern District of Texas summary judgment that had protected Penske Logistics from vicarious liability as the employer of the downstream driver.

“When a carrier takes on a load, as it moves down the chain, it still has responsibility. It does not wipe its hands of it.” — John Kingston, citing attorney Mark Blubaw of Benesh

Kingston, a senior journalist who covers freight markets, noted that the ruling — though only six pages — signals that a carrier’s lack of knowledge about re-brokering further down the chain is unlikely to serve as a defense. “Based on my thin reading of what the judge said, I don’t think that’s going to make any difference,” he said.

The case adds to a growing body of Texas litigation reshaping freight liability. Kingston also flagged a separate Texas ruling this week involving Atlas Freight, where plaintiffs attempted to extend shipper liability but were rejected — the second such failed attempt in the state following an earlier Home Depot case. Texas state Supreme Court rulings have generally trended pro-business on liability caps, but federal district and appellate courts in the state have proven less predictable.

The Penske ruling is expected to prompt re-litigation in other brokerage cases where defendants had previously won dismissal under the FAAAA’s safety exception. Kingston said he expects “a lot of others” where brokers previously protected will now be pulled back into active lawsuits and returned to federal district courts for further proceedings.

• The Fifth Circuit reinstated liability claims against both Penske Logistics and Penske Transportation Management in a 2018 fatal Texas crash case.

• The court ruled carriers retain vicarious liability as a load moves down a multi-party brokerage chain, even without knowledge of re-brokering.

• A separate Texas ruling this week rejected shipper liability claims against Atlas Freight, marking the second such defeat for plaintiffs in that state.

Speaker 1 [0:00] Talking about jobs, John Kingston, how you doing, sir?

Speaker 2 [0:04] Not bad, yourself? Doing well.

Speaker 1 [0:07] So let’s talk about the jobs market right now. You are, have been reporting on the jobs market. Tell us, what does it look like in overall jobs and in freight specifically?

Speaker 2 [0:16] Boring, very boring this month. Jobs in truck transportation were up 100 jobs, that’s it. And they, and after all the machinations of the past few months, the number of jobs out there is the same as it was in February. So truck transportation jobs, and remember, that’s an independent owner-operator is not in there. Okay. So I want to make that point, but the number of truck transportation jobs surveyed by the BLS has really, I mean, it’s gone up and down, but it’s where it is. And it’s where it was in July, the same place it was in February. And it’s down from last year.

Speaker 1 [0:48] By the way, John, I think that’s super encouraging because the fear has been, we’ve talked about it frequently on the show, Dr. Miller, Jason Miller, who was on the show a couple of weeks ago, talked about the fact that he believed that fleets were going to overcorrect and hire too many drivers, as they tend to do in these upcycles. It’s not happening. That’s not what the data says. Now, you mentioned the BLS data does not have owner-operators, something we’ve talked about before. But owner-operators are not— I mean, there is a lot of pressure on owner-operators right now in the market because of the regulatory compliance elements. But really, there isn’t a case to be made that the larger fleets are adding trucks according to this data.

Speaker 2 [1:27] Yeah, I mean, I, I would imagine if you really dove into the data and looked over years’ worth, there’s probably got to be some correlation between the number of truck transportation jobs and the number of owner-operators out there, independent owner-operators out there, just because they’re serving the same market. So at a certain point, if you’ve got a really strong market, you’re going to hire more types of jobs that will be reflected in the data, and probably the number of independent owner-operators goes up too. And then conversely the other way as well. So I wouldn’t imagine that there’s a big divergence. in the direction of the numbers between people who are, let’s say, W-2 workers that can get surveyed by the BLS and those who are out on their own.

Speaker 1 [2:06] I think this is great. I’m glad that the industry is not overcorrecting. Like I said, it’s something that the industry has known to do is overcorrect, and it’s encouraging that the cycle may live on longer. We’ve talked about it being a supercycle. Again, I think this is Exhibit A of why we will have a longer cycle. Let’s move on to oil. Tell us a little bit about the state of Hormuz. What are we hearing? What is happening? What’s moving? What’s not moving right now, John?

Speaker 2 [2:33] Well, I think what’s really notable is that whenever there’s a hint that there’s going to be some progress, the market really— you talked about overcorrecting. I won’t say they overcorrect, but they react very strongly to that, more than they do for prospects of nothing happening. So over the weekend, when there were suggestions that maybe we were moving toward a deal, The market, the first couple of days of this week really sold off. The past couple of days, it’s been up. Right now, if it settled right now— let’s say I’m just— when I say it, I mean I’m talking about the price of ultra-low sulfur diesel on CME. If it settled right now where it was, it’d be up about $0.12 in 2 days. So you can see it’s corrected upward as the prospect for peace that we got all excited about over the weekend is starting to fizzle out. But $0.12 is less than a drop. So people, traders just do not want to be caught short if suddenly there’s peace in our time, and they don’t want to be on the wrong side of that trade. So they react rather vehemently to any prospect that maybe this is coming to some sort of end, which, as we know, it really isn’t. Hopefully, it will soon. But the numbers that are going through the straight-up home moves have not shown any significant increase over the last several days.

Speaker 1 [3:47] Now, John, are they biased to the downside? It sounds like they are not, as you talked about, no