Impact of Sperl v. CH Robinson Worldwide inc. on Broker’s Vicarious Liability for Trucking Driver’s Negligence
Transportation Broker responsible for $23 million in damages for truck driver’s negligence!!!*
Plaintiffs filed a lawsuit against C.H. Robinson (CHR), a broker between motor carriers and shippers, and several other entities and individuals for wrongful death and personal injuries they sustained due to DeAn Henry’s negligent operation of a tractor-trailer.
At trial, the jury found that CHR was vicariously liable for the actions of Henry and entered judgement for Plaintiffs for $23.8 million.
CHR sought a judgement not withstanding the verdict but were denied. CHR then appealed to the Third District Appellate Court of Illinois.
On April 1, 2004, DeAn Henry was driving a tractor-trailer with a load of potatoes from Idaho to CHR’s warehouse in Illinois. As she was traveling on Interstate 55, she noticed stopped traffic ahead of her but was unable to stop in time, causing a multiple car accident along with two deaths and serious injuries. Henry owned the tractor she was driving and leased it to Dragonfly, a co-defendant and motor carrier.
Plaintiffs sued Henry, CHR, and Dragonfly for wrongful death and personal injuries. Henry and Dragonfly admitted liability but CHR denied fault based on the lack of an agency relationship with Henry.
Evidence showed that CHR was a logistics company and federally licensed freight broker but was not licensed as a motor carrier. CHR did not own tractor-trailers nor employ drivers. Instead, CHR used contracts with carriers to provide transportation for its customers who needed goods transported. Basically, CHR acted as a middleman between the transportation companies and buyers of goods to be transported. CHR used numerous federally licensed carriers to haul the goods, primarily perishable products for both CHR’s own products and CHR’s customers.
Dragonfly was often used as a carrier by CHR and had a standard industry contract with CHR which stated that the relationship between CHR and Dragonfly was that of an independent contractor and Dragonfly would employ, retain, or lease on its own behalf operators of commercial vehicles.
Henry leased her tractor to Dragonfly and was given permission by Dragonfly to use its carrier authority to book and deliver loads on her own. If Henry booked a load, she kept the profit. If Dragonfly dispatched Henry, Dragonfly kept 5% of the profit.
In March 2004, Henry called Troy Pleasants, a transportation manager for CHR, and requested a load. Pleasants offered Henry a load of potatoes to be delivered to a CHR warehouse for repackaging and additional transport. Pleasants told Henry that CHR required a refrigerated trailer that was at least 48 feet long. Henry accepted the load for $1,800, less a $700 advance for fuel costs. Payment was to be directly deposited into Henry’s personal bank account upon successful delivery.
CHR sent Dragonfly the load confirmation sheet (LCS) confirming the shipment and listing all the special instructions for the driver, including that the driver HAD to call the CHR transportation manager for dispatch along with 11 mandates that required almost constant contact with CHR and numerous fines for being late to deliver a load or failing to follow the communication guidelines.
At trial, Henry testified that Dragonfly did not dispatch her regarding the load, but that she communicated directly with CHR on the load and was in constant contact with CHR throughout her trip. Henry never saw the LCS that CHR sent to Dragonfly, but was familiar with the regulations of CHR and knew about the fines that could be imposed if she was late.
Federal regulations allowed Henry to drive for no more than 10 hours each day but given CHR’s guidelines, Henry would not have been able to deliver the load to the warehouse within CHR’s schedule without violating federal regulations. In other words, had Henry followed federal regulations, she would have been fined by CHR as she would have been forced to be late for delivery.
Both Plaintiffs and Defendants hired experts to testify on the standards of the industry and the different characteristics of a motor carrier and a broker.
The jury returned three general verdicts in favor of Plaintiffs and specifically found that Henry was an agent for CHR at the time of the accident which made CHR vicariously liable for Plaintiffs’ injuries under respondeat superior.
On appeal, CHR argued that the jury did not have adequate evidence to find that a principal-agency relationship existed between CHR and Henry but instead, that Henry was an independent contractor and that CHR had no right to control her actions in transporting the load of potatoes.
It is well established that a principal is vicariously liable for the conduct of its agent but not for the conduct of independent contractors. The difference is determined by the level of control over the manner of work performance.
An agency is a consensual relationship in which a principal has the right to control an agent’s conduct and an agent has the power to affect a principal’s legal relations. An independent contractor relationship is one in which an independent contractor undertakes to produce a given result but the actual execution of the work is not under the order or control of the person for whom he does the work. Specific conduct can demonstrate the existence of an agency relationship, despite contractual evidence that the parties intended an independent contractor relationship.
The court found that while the carrier agreement between CHR and Dragonfly provided that the relationship was solely that of an independent contract and that the carrier employed the drivers, there were substantial facts that indicated the presence of an agency relationship between CHR and Henry. The court’s cardinal consideration when determining if a person is an agent or an independent contractor is the right to control the manner of work performance.
Other factors the court considered were the nature of the work performed in relation to the general business of the employer, the right to discharge, the method of payment, the provision of necessary tools, materials, and equipment, whether taxes were deducted from payment, and the level of skill required. Upon applying those factors to the case, the appellate court found that the jury’s finding of an agency relationship was not against the manifest weight of the evidence.
Specifically, CHR controlled the manner of Henry’s work performance. Henry directly contacted CHR for a load and CHR agreed to the load while requiring her to have certain equipment. CHR dictated special instructions for the load on the LCS and even though Henry never saw the LCS, she was familiar with the LCS requirements because she had made deliveries for CHR before. The special requirements required Henry to pick up the load at a specific time, make daily check calls, stay in constant communication with CHR, notify CHR if she had an accident, routinely measure the temperature of her load and call CHR if the temperature was not within a certain degree.
CHR used fines to ensure compliance with their guidelines which, in this assignment, ran contrary to federal regulations. As such, CHR clearly dictated Henry’s method of delivery and through CHR’s extensive requirements, along with the fine-based compliance, dictated Henry’s conduct through the entire transportation process indicating that CHR had the right to control the manner in which Henry performed her job.
Additionally, the factor relating to the nature of work performed in relation to the general business of the defendant shows that CHR’s business is closely related to the nature of work performed. CHR is the in the business of transportation logistics which requires the service of semi-tractor drivers. The nature of Henry’s work is transporting freight from one location to another. According to the court, “the work Henry performs is not unique; it is directly related to, if not the same as, the general transportation business conducted by CHR.”
CHR also controlled the method of payment as Dragonfly was not involved and had Henry successfully completed the transfer, CHR would have directly deposited payment into her personal bank account. Moreover, CHR provided the materials for delivery as it purchased the potatoes and requested their transfer from one facility to another.
Consequently, the appellate court was unable to find that the jury’s conclusions were wrong. CHR acted as a motor carrier and controlled the details of Henry’s operations; therefore, CHR was responsible for the fault attributed to Henry.
Once the agency relationship between CHR and Henry was established, CHR became entirely liable for Henry’s negligent conduct.
Ramifications of ruling
The Court’s rulings presents several issues to be considered when a broker contracts with carriers or drivers.
For instance, the use of a system of fines to ensure timely deliveries was a substantial factor in the court’s decision in Sperl. Fines pertaining to a driver’s conduct throughout the entire course of transporting a load suggests control over the entire shipping process; especially where a driver must violate federal regulations to evade those fines.
A court could find that a broker has such control over the driver’s conduct to indicate an agency relationship. If an agency relationship is shown, the broker could become vicariously liable for the acts of the driver and be responsible for their negligence.
The court stated that the cardinal consideration in determining the existence of an agency relationship is the right to control the manner of work performance. Here, because the fine-based systems required that Henry violate federal regulations to fully comply with CHR’s delivery requirements, that cardinal consideration was met. Brokers should keep that consideration in mind when contracting with carriers or drivers individually.
Another aspect of broker behavior to be considered is direct contracts with drivers without the go-between of the carrier. One has to wonder if Dragonfly had directly negotiated the transportation agreement with CHR, instead of Henry herself, if CHR would have been found liable as a principal.
Also, if payment would have been paid to Dragonfly to be dispersed to Henry, perhaps that would have tilted the scale in CHR’s favor and changed the outcome of the Illinois case.
As the court stated in Sperl, to determine the existence of an agency relationship, all factors must be considered. Would the jury’s finding would have been different if CHR did not require constant communication with the driver or if the fines imposed complied with federal regulations or if Dragonfly would have been the entity that initiated the contact with CHR for a load?
Brokers and carriers must keep the distinction between themselves clear in order to prevent the appearance of an agency relationship with potentially negligent drivers. Otherwise, we may very well see more verdicts against brokers in the millions of dollars.
Now with the provisions of CSA, brokers may have a greater duty to investigate trucking companies and their drivers prior to hiring them. You can expect that plaintiff’s attorneys will drill down through the layers. Many brokers and shippers are now paying very close attention to:
- the carriers operational history
- on-road performance data
- operating authority
- insurance information
- commodities transported, and
- monthly evaluations
This may be a good idea with the CSA guidelines, but the counterargument is that with TOO MUCH supervision comes responsibility. It’s an ongoing Catch-22 that keep lawyers in business.
*Thanks to Tara Hoffmann for assisting in this research