Supreme Court to hear FAAAA Preemption Challenge in Montgomery v. Caribe Transport II, LLC

John C. Lane

We reported on this Seventh Circuit case in April 2025. The Seventh Circuit, which has been a friendly venue for transportation brokers, held that a transportation broker is shielded by the Federal Aviation Administration Authorization Act (FAAAA) from liability for negligent selection of a motor carrier. Now the Supreme Court has agreed to hear an appeal and to address a conflict among the Circuit Courts on the issue of federal preemption of a claim against brokers and motor carriers. The Supreme Court has granted Montgomery’s petition for certiorari, in which The Question Presented is simply stated:

Does § 14501(c) preempt a state common-law claim against a broker for negligently selecting a motor carrier or driver?

That section provides protection to motor carriers and freight brokers and freight forwarders, and is the backbone of the “FAAAA Preemption” argument:

. . . a State . . . may not enact or enforce a law, regulation or other provision having the force and effect of a law related to price, route, or service of any motor carrier . . . broker, or freight forwarder with respect to the transportation of property [emphasis added].

In Montgomery, a plaintiff severely injured in a trucking accident brought a negligence claim against the broker, arguing that it should be held liable because it was negligent in selecting the motor carrier, and that it was vicariously liable for the trucker’s negligence because it so controlled the trucker that the carrier became the broker’s agent. The Court of Appeals ruled for the broker on both theories. It specifically held that the minimal requirements the broker placed on the motor carrier did not arise to operational control. Relevant to the impending Supreme Court review, however, the Seventh Circuit held that the broker is protected by the language in the FAAAA, at 49 U.S.C. § 14501(c)(1), quoted above.

The Seventh Circuit held that the negligent hiring claim has a direct relationship to the broker’s services in hiring the motor carrier. Thus, it is expressly preempted by Section 14501(c)(1).

In a similar case in the Sixth Circuit, Cox v. Total Quality Logistics, Inc., the Court of Appeals reversed the district court’s decision, favorable to the broker, and held that preemption was unavailable to the broker because of the “safety exception” found in Section 14502(c)(2)(A). That section holds that the preemption of Section 14501(c)(1):

shall not restrict the safety regulatory authority of a State with respect to motor vehicles, the authority of a State to impose highway route controls or limitations based on the size or weight of the motor vehicle or the hazardous nature of the cargo, or the authority of a State to regulate motor carriers with regard to minimum amounts of financial responsibility relating to insurance requirements and self-insurance authorization.

Although the “safety exception” makes no mention of brokers, the Sixth Circuit in Cox held that the work of transportation brokers is sufficiently related to motor carriers’ work to bring the broker’s work within the exception. The case involved a wrongful death tort action brought by Robert Cox, as Administrator of the estate of his wife, Greta Cox.

Following Supreme Court precedent, the Sixth Circuit held that “State regulatory authority” includes a State’s power to create common-law duties that involve safety. It held that the Cox Estate’s common-law claims “are part of the regulatory authority of a State,” satisfying the first prong of Section 14501(c)(2)(A). The second prong, whether the state law must be “with respect to motor vehicles,” is the “vigorously disputed” issue and the source of the split among the circuits. The Court ruled that the statutory definitions of “motor vehicle” “make it clear that such motor vehicles are the core to the services provided by brokers” even if that relation is not direct. Unlike the decisions in the Seventh and Eleventh Circuits, the Sixth Circuit in Cox concludes succinctly:

We therefore hold that, where a negligent hiring claim against a broker substantively concerns motor vehicles and motor vehicle safety, that claim is within “the safety regulatory authority of a State with respect to motor vehicles.”

Total Quality Logistics’ petition to the Supreme Court for certiorari has been fully briefed and awaits a decision whether the Court will take up that case. The Question Presented there is different from that in Montgomery and raises the application of the so-called “safety exception”:

Whether a common-law negligence claim alleged against a freight broker, based on the broker’s selection of a motor carrier to provide transportation of cargo, is preempted because it does not fall within the safety exception to Section 14502(c)(2)(A).

If the Supreme Court grants certiorari in Total Quality Logistics and consolidates the two appeals, it will have the opportunity to clarify the long-debated issue of FAAAA preemption for transportation brokers.

Cybersecurity Threats Permit TSA to Issue Emergency Directives Without Notice-and-Comment Procedures

John C. Lane

TSA issued five successive directives requiring certain railroads to implement a number of expensive cybersecurity preventive measures. The agency bypassed the usual notice-and-comment rulemaking procedures and instead invoked emergency procedures under 49 U.S.C. 114(l)(2), allowing TSA to issue directives in emergency situations and “shall skip notice and comment.” The affected railroads petitioned the Seventh Circuit Court of Appeals to vacate the latest directive and to require TSA to follow the regular rulemaking procedures. They argued that the ongoing threat of cyber attacks does not constitute an emergency within the meaning of the statute. The Court of Appeals disagreed and upheld the agency’s directives without resort to usual rulemaking procedures. The case is styled Grand Trunk Corp. v. Transportation Security Administration, decided August 21, 2025.

Context is important here. The directives applied only to those higher risk rail operations and freight railroads that are part of the Strategic Rail Corridor Network. They include carriers with annual revenues of $900 million or more, and those that transport rail security-sensitive materials like explosives, poisonous gases, hazardous liquids, and radioactive materials. The Network railroads a part of the Department of Defense Railroads and Highways for National Defense program, which ensures that the nation’s rail infrastructure can transport military supplies in the event of conflict. The directives require railroads to develop Cybersecurity Implementation Plans, including continuous cybersecurity monitoring, and to develop Cybersecurity Assessment Plans and submit annual updates to TSA.

In this process, TSA relies upon information from the U.S. intelligence community concerning ongoing and increasing cybersecurity threats, especially from Russia and China.

TSA estimated the cost for the railroads to comply with the directives at $100 million, in large part prompting the lawsuit, according to the opinion. Despite those costs, the Court of Appeals dwelt on the “serious national security concerns that motivate the security directives.” Considering those concerns and the fact that the military relies on rail network to move supplies and equipment and that industry relies upon it to transport food and manufacturing, the Court found these directives to qualify as emergency measures under the statute. “We are also loathe to ‘second-guess’ expert agencies on potential risks to national security,” citing Supreme Court precedent.

The Circuit Court also notes that although not required, TSA has submitted these emergency measures to regular rulemaking notice-and-comment, and that the comment period has expired.

Seventh Circuit Reaffirms Protection for Freight Brokers under the FAAAA

John C. Lane

In Montgomery v. Caribe Transport II, LLC, the Seventh Circuit Court of Appeals recently ruled in favor of a freight broker and adhered to its decision in Ye v. GlobalTranz Enterprises, Inc. (July 18, 2023). The Ye decision shielded freight brokers from liability for negligent hiring of motor carriers. The Ye Court held that a freight broker cannot be held liable for negligent hiring of a motor carrier whose driver negligently caused a fatal highway accident. The Court explained that the broker was protected by preemptive language in the Federal Aviation Administration Authorization Act (“FAAAA”), 49 U.S.C. 14501(c)(1):

. . . a State . . . may not enact or enforce a law, regulation or other provision having the force and effect of a law related to price, route, or service of any motor carrier . . . broker, or freight forwarder with respect to the transportation of property. (Emphasis added).

The Court held that because plaintiff’s negligent hiring claim has a direct relationship to the broker’s services in hiring the motor carrier, the claim is expressly preempted by § 14501(c)(1). In Montgomery the Court of Appeals declined to overrule that decision, finding no compelling reason to revisit a case decided only one year earlier.

In the Montgomery case, the plaintiff was severely injured when his truck was hit by a tractor-trailer. He sued the broker on two theories: 1) that the broker was negligent in selecting the motor carrier; and 2) that the broker was vicariously liable because it so controlled the carrier that it became the broker’s agent. The Court of Appeals denied both claims. The first theory was barred by the controlling Ye decision based upon FAAAA preemption. And the Court ruled out vicarious liability because the broker did not control the operations of the motor carrier.

Specifically, the Court held that the broker’s control of communications with the shipper and recipient of the loads and arranging for all pickup and delivery times do “nothing to control how the job was done and therefore fail to demonstrate agency.” Nor did requiring the motor carrier to provide information about who was hauling the load, their hours of service, and the location of trucks, the imposition of a rate contingency upon successful, on-time completion, or the tracking of the motor carrier’s on-time deliveries. Finally, the Court noted that the broker did not provide any equipment to the trucker or its driver and did not pay for maintenance or related expenses.

Three months before the Seventh Circuit’s decision in Ye, the Eleventh Circuit ruled in similar fashion that the FAAAA express preemption barred a claim against a freight broker, in Aspen Am. Ins. Co. v. Landstar Ranger, Inc. (April 13, 2023). Landstar acted as a broker to secure a motor carrier to transport an expensive load of cargo to a purchaser across state lines. Landstar mistakenly turned the shipment over to a thief posing as a Landstar-approved carrier, who ran off with the shipment. The Court of Appeals affirmed the lower court’s ruling that the shipper’s subrogated insurer could not recover the losses from Landstar, because its claims fall within the FAAAA’s express preemption.

The Eighth Circuit even applied FAAAA preemption to a commercial dispute between a shipper and a motor carrier, in Data Manufacturing, Inc. v. UPS (2009). A number of district court decisions have ruled in favor of FAAAA preemption for freight brokers, including the District of New Jersey’s case of Alpine Fresh, Inc. v. Jala Trucking Corp. (2016). But the case law is still developing. Most Circuit Courts of Appeals have not ruled on FAAAA preemption.

Caveat: Beware of the Ninth Circuit and the “Safety Exception”

The 2020 decision of the Ninth Circuit in Miller v. C.H. Robinson Worldwide, Inc. poses a problem for brokers. The Ninth Circuit agreed that the broker would normally be protected by the FAAAA preemption from claims of negligent selection, but that the claim fell within the Act’s “safety exception” allowing for claims of alleged violation of state safety laws. The Supreme Court of the United States recently declined to hear an appeal of this decision.

The Seventh and Eleventh Circuits and several district courts in the country have rejected the “Safety Exception” ruling in Miller. The transportation industry would like the Supreme Court to weigh in, but that has not happened to date.

To brokers, we say always seek legal advice on issues involving such claims. The law in this area is complex and evolving. Cases are governed by their particular and often complicated sets of facts, and by federal and state law.

We will continue to provide updates on this important issue.

New Jersey Appellate Court Explains General Contractor Liability Defenses

John C. Lane

The case arises from a ship-maintenance contract, but its principles apply equally “on land.”

USNS Red Cloud

Williams Savaria lost his life onboard the U.S.N.S Red Cloud when he fell into the ship’s 30-foot deep anchor chain locker. Bayonne Dry Dock & Repair Corp. was contracted to perform maintenance on the ship and retained 5 Seasons LSB Corporation as a subcontractor. Savaria was employed by 5 Seasons. His estate’s lawsuit against Bayonne Dry Dock was dismissed because, as the appellate court affirmed, Bayonne was under no contractual duty to ensure that 5 Seasons employed proper safety protocols in performing its sub-contractor work on the Red Cloud.

Bayonne Dry Dock, a general contractor, had hired 5 Seasons on four previous occasions to perform similar work, all with good results. 5 Seasons was engaged to paint the inside of the anchor chain locker on the Red Cloud and was contractually required to observe all OSHA and state safety regulations. Prior to the painting, Bayonne made sure through atmospheric testing that entry to the anchor chain locker was “safe and permitted.” A notice to that effect was posted. The 5 Seasons workers built a scaffold to enable entry into the locker.

The 5 Seasons supervisor, who speaks Korean, needed to delay entry to the locker until he could fetch “fall protection.” Using hand signals, he instructed the workers to rest until he returned with that safety equipment. Savaria’s first language was Spanish although he spoke some English. A co-worker ignored this warning and descended into the locker before the supervisor returned. Savaria followed, using a rope attached to a pipe to assist him. During his descent, he was heard to exclaim, either in Spanish or English, that he could not “hold on any longer.” He fell 30 feet to the bottom and was declared deceased at the scene.

The court examined possible exceptions to the rule of non-liability, surveying past legal precedent. It found that Bayonne Dry Dock did not control the means and manner of 5 Seasons’ work. It hired a reputable subcontractor of known good reputation. 5 Seasons was contractually obligated to provide its workers’ safety equipment. Bayonne had no duty to ensure that 5 Seasons provided the safety procedures required of it. Nor was Bayonne required to determine whether language barriers precluded the following of instructions. Those duties all lay with 5 Seasons.

Facts of individual cases will be important, but the legal principles apply to all work settings. If no exception applies, the New Jersey courts will not impose a duty of care upon the general contractor to ensure that its subcontractors’ employees “safely perform their work.” The case is Estate of Savaria v. Bayonne Dry Dock & Repair Corp., in a per curiam opinion of the Appellate Division of the Superior Court of New Jersey rendered on August 13, 2024.

New Jersey Insurance Commissioner Issues Bulletin on $1.5 Million Coverage Minimum

John C. Lane
Photo by Jonathan Schmer on Pexels.com

In January 2024 Governor Murphy signed into law a new requirement for auto liability insurance coverage, which takes effect for policies issued or renewed on or after July 1, 2024. The new law left open to question, for example, whether the new $1.5 Million minimum coverage would apply only to New Jersey-based motor vehicles, or possibly to any motor vehicle passing through or engaging in business in New Jersey.

The Commissioner’s Bulletin does not answer all the issues but does commit the regulators to certain understandings for motor carriers and their insurers. By the Act’s terms, the new minimum limits apply to owners and operators of commercial vehicles “registered or principally garaged” in New Jersey engaged in intrastate commerce. Vehicles having a gross vehicle weight rating of 26,001 or more pounds must be insured for not less than $1.5 Million. Those with a GVWR of 10,001 or more, but less than 26,001 pounds must have liability coverage of not less than $300,000.

The Bulletin parrots the statutory language that the required minimum insurance coverage may be provided as permitted by existing law, through a single fleet primary policy or a combination of primary and excess policies.

Insurers and producers (brokers and agents) are required to inform their insureds of the new required limits.

One issue not covered by the Act or the Bulletin is whether the New Jersey Deemer Statute will apply these minimums to out-of-state motor carriers operating in or through New Jersey, or by reforming an existing non-compliant out-of-state policy in the event of a covered casualty. We can expect this issue to spawn coverage litigation if the issue arises.

For many truckers in New Jersey, the new minimum insurance limits may not pose a significant problem. The New Jersey Motor Truck Association has advised us that a poll of their members reflects that the majority already have coverage meeting the new requirements. Our experience suggests that some New Jersey-based intermodal motor carriers may need to increase their coverages to meet the requirements.

Both the American Trucking Associations and the New Jersey Motor Truck Association originally opposed the new Act on various grounds, both practical and constitutional, but they did not carry the day with the Legislature or the Governor. Whether there will be litigation on those issues remains to be seen.

We shall report here any further developments under the new Act and possible action at the federal level, where the minimum liability insurance requirement for non-HAZMAT vehicles remains $750,000.

Federal Removal Jurisdiction and Procedure – A Refresher

John C. Lane

Federal courts have limited jurisdiction, governed by Congress. A Notice of Removal from state court to federal court is not a mere notice – it is a pleading, governed by strict federal statute, that commences a federal action. If those statutory requirements are not followed in full, the federal court will remand your case to state court, if indeed it gets to federal court at all. The requirements are jurisdictional and cannot be waived.

Why remove to federal court?

Reasons are myriad: to escape a state court known for very high verdicts, or to seek a perceived better judiciary or jury pool, broader discovery rules, or nation-wide subpoena power, or good case management. Also, federal judges are more familiar with subjects covered by federal law, such as transportation law. (In some cases the state court venue may be preferable. That, too, must be considered.)

So, what are those rules for federal removal jurisdiction?

For cases removed on the basis of diversity of citizenship, the most common basis, the first requirement, as in all diversity cases, is that every plaintiff must be of diverse state citizenship from every defendant. But that is only the beginning. 46 U.S.C. 1441 and 1446 list these requirements:

  • No defendant may be a citizen of the state in which the action is brought [even if the plaintiff is from a different state and there is otherwise complete diversity].
  • As with all cases based on Diversity Jurisdiction, the amount in controversy must exceed $75,000 exclusive of interest and costs.
  • The Notice of Removal must be signed and attested to by an attorney pursuant to Federal Rule 11.
  • All co-defendants who have been properly joined and served must join in or consent to the removal.
  • The notice of removal must be filed within thirty days of receipt of the initial pleading, by service or otherwise, unless the complaint does not provide sufficient information to allow a defendant to plead federal removal jurisdiction.
  • If the initial pleading does not provide the necessary information for removal, the notice of removal may be filed within thirty days of receipt of that information.
  • Caveat: A case must be removed not later than one year from commencement of the state-court proceeding, unless the federal district court finds that the plaintiff acted in bad faith in order to prevent a defendant from removing the action.

Each one of these requirements must be investigated by your attorney and specifically pleaded in the Notice of Removal. Again, the Notice must be signed and attested to by your attorney. We emphasize this: the requirements are jurisdictional and cannot be waived by any party or the federal district court.

What constitutes citizenship of the parties?

Generally, a person is a citizen of the State in which he or she resides. Issues can arise if the person has two residences in different states, or is in one state on temporary assignment, such as a member of the armed forces. Or a person who lives and works in one state but still considers her home as the place she was raised.

A corporation is a citizen of the State of its incorporation and the State where it maintains its principal place of business. A Delaware corporation having its principal place of business in Illinois is a citizen of both states for federal jurisdiction purposes. A limited liability company is a citizen of the state of its formation and the state of citizenship of each of its members. A partnership is treated similarly for federal jurisdiction purposes.

The determination of the citizenship of the various parties can require considerable time and effort on the part of your defense attorney. Helping your attorney to identify citizenship of your corporate entities is very important.

What constitutes the “amount in controversy” and how and when is it determined?

The simplest method is to look to the ad damnum clause in the complaint, if the state court rules permits such a clause in the initial pleading. New York and New Jersey do not, but they allow a defendant to demand a statement of the damages claimed. The response to that demand may be the first indication that the amount in controversy exceeds $75,000, thus meeting that element of the federal removal requirements and starting the thirty-day limit for removal. Federal courts in Manhattan and Brooklyn will not accept removal jurisdiction until it is made clear that all requirements are met, especially the amount in controversy. A discovery response may also be the trigger, by listing special damages such as medical expenses or lost earnings, again starting the removal clock.

Other possibilities exist. New York and New Jersey require a statement in the complaint that the amount sought exceeds the “jurisdictional limits of all lower courts” usually between $15,000 and $20,000 and thus not implicating federal jurisdiction. Be alert, though. Some attorneys will add a phrase like this: “and the jurisdictional minimum of the federal courts.” In our judgment, that phrase meets the amount in controversy requirement, and the thirty-day removal clock starts when that initial pleading is received by the defendant or its agent, by service or otherwise.

Some attorneys will send a pre-suit settlement demand letter to the defendant or its claims agent. If that demand exceeds $75,000, the amount in controversy has already been met and the thirty days begins to run on receipt of the complaint. If you do not provide defense counsel with a copy of that letter immediately upon assignment, the time for removal may be lost.

What can you do to help your defense attorney?

Send the lawsuit papers as soon as possible. The time to answer in state court is already running. If federal removal is your goal, your attorney will evaluate the factors and advise you. Send your attorney your complete file – including claim notes. Valuable information resides there. Finally, be prepared to help your attorney determine the citizenship of the defendants to be represented.

Successes in 2023

The Lane Law Letter

We look back at some of our successes in 2023.

Summary Judgment in Quadriplegic Accident

A severe accident on the Cross-Bronx Expressway involved a Jeep Grand Cherokee, a Honda Odyssey, and two tractor-trailers. An occupant of the Jeep was rendered a quadriplegic and brought suit in Bronx County against the operators of the other vehicles. The Court granted summary judgment for our trucking company client after seven years of litigation. This high-exposure case will proceed against the owners of the Honda and the other tractor-trailer.

Summary Judgment, Indemnity and Insurance Coverage

An accident on a state highway in New Jersey led to debilitating injuries to the driver of a small delivery truck when his vehicle impacted a truck operated by a company retained by our client, a broker. The injured man sued our broker client and the trucker involved in the accident. The trucker’s insurer denied additional-insured coverage for our client and commenced a declaratory judgment action to avoid that coverage. We represented the broker in both actions. In the personal injury action we obtained summary judgment dismissing the complaint and enforcing contractual indemnity against the trucker. That double victory led to a settlement of both actions. The insurer settled the personal injury claim in full and made reimbursement to our client for legal fees and expenses incurred in both cases.

Voluntary Dismissal in Alleged Roadway Distraction Claim

Plaintiff’s car was struck in the rear by co-defendant’s vehicle, from which plaintiff suffered spinal injuries requiring surgery. Co-defendant claimed he had been distracted by a truck that was weaving from lane to lane, and even coming close to tipping over. His identification of the truck, which he said bore the name of our client, a popular food service transporter, started out as very sketchy and became virtually worthless after depositions. Plaintiff was persuaded that the phantom truck, if it existed, was not owned by our client. Plaintiff voluntarily dismissed the claim against our client.

Settlement, Exoneration, and Insurance Coverage

A small outdoor recreation business was sued by a young man injured in a rope incident in a state park in New Jersey. The man suffered spinal fractures and had a lengthy hospital and treatment course. He sued our client in state court. Our client made timely notification to its general liability insurer, but the insurer reserved rights as to coverage and commenced a federal declaratory judgment action. We defended that suit, counterclaimed for coverage, and impleaded the client’s insurance broker. After nearly seven years of litigation, the insurers moved for summary judgment. We defeated those motions and a motion to amend the complaint. The insurers succumbed. Together they settled the personal injury case in the high six figures, and then paid the majority of our legal fees and expenses incurred over nearly seven years of federal court litigation.

Summary Judgment Under Graves Amendment and Independent Contractor Doctrine, Indemnification against Subcontractor

An accident at an intersection in Yonkers, New York resulted in shoulder and back injuries. Both injuries resulted in surgical intervention. The injured party brought suit against our client, a freight forwarder, and its subcontractor, who was operating a tractor-trailer involved in the subject accident. The trailer was owned by our client. We obtained summary judgment under both the Graves Amendment and an independent contractor defense. We also obtained summary judgment for contractual indemnity on our cross-claim against the subcontractor.

Voluntary Dismissal in Severe Injury Case

A New Jersey municipal employee was injured while unloading cargo from a trailer, allegedly caused by an ice condition on the product being unloaded. The injured employee sued several parties, including our client, a freight broker. After completion of discovery, and without the need for motion practice, we persuaded our client’s subcontractor to settle the case and obtain a release for our client, while also agreeing to reimburse our client for attorneys’ fees and expenses incurred defending the case.

Plaintiff’s Bad Faith Delay of Defendant’s Removal to Federal Court

Plaintiff sued in state court in New York after an accident on the Cross-Bronx Expressway. His injuries were not serious and treatment was scant. His attorney refused to negotiate a settlement, but he wanted to avoid a federal removal. When we obtained an order that plaintiff provide a written demand, the attorney delayed as long as he could and then provided a written demand of $74,000, just below the $75,000-plus minimum for jurisdiction. Later, counsel served discovery responses that surreptitiously increased the demand to $2,000,000, but that was beyond the one-year limitation for removal. We removed anyway, citing an exception in the statutory deadline provision. The federal court retained jurisdiction, finding that “plaintiff acted in bad faith in order to prevent or delay defendants from removing this action.” The case settled in two weeks for what it was worth – next to nothing.

Moral: Never give up!

The Lane Law Letter will continue to bring you updates on matters of pertinent law in New York and New Jersey.

Supreme Court to Handle Another Arbitration Dispute: Are Bakery-Product Delivery Drivers Transportation Workers or Bakery Workers?

John C. Lane

And why does it matter? Because if they are transportation workers, their putative class action under the FLSA must proceed in court, not by contracted-for arbitration. But if they are bakery workers, they must submit to arbitration. The Second Circuit held they are not transportation workers and therefore must submit to arbitration. The Supreme Court has agreed to hear the workers’ further appeal, in Bissonnette v. LePage Bakeries Park St., LLC.

Certainly Section 1 of the Federal Arbitration Act forbids a transportation worker, even an independent contractor, to be compelled to arbitrate a claim against an employer. That was settled by the Court in its 2019 decision in New Prime, Inc. v. Oliveira. The unusual setting in Bissonnette raises the issue for the Court of whether the workers are transportation workers or, perhaps, bakery workers.

The workers entered into distributor agreements with defendant bakery companies. In a putative class action, they alleged they were misclassified as independent contractors rather than employees, in violation of the FLSA and Connecticut law, seeking reclassification and damages. The bakery defendants moved to compel arbitration under a contractual provision that also excluded class or other representative actions. But what was their job?

Under the agreements, plaintiffs purchased their own service territories, identified new customers, developed relationships with existing customers, ordered and delivered products, stocked and replenished products in customers’ locations, and otherwise promoted sales and customer service. Plaintiffs purchased bakery goods from defendants and sold them to the customers at a profit, which they kept.  They increased profits by increasing business. The goods came from outside Connecticut and were transported by the workers to their final destinations in Connecticut, using their own vehicles.

Plaintiffs claimed they were transportation workers, transporting bakery products on the intrastate leg of interstate commerce. In contrast, the bakery companies focused on the business aspect of the work, to say that plaintiffs are not transportation workers because their primary activities are in the bakery industry, not the transportation industry. They are more akin to sales workers or managers responsible for all aspects of a bakery products distribution business. Thus, they argue, the Section 1 exception is no impediment to the application of the full Federal Arbitration Act.

The Connecticut district court agreed with the defendant bakeries, ordering the workers to arbitration. The Second Circuit affirmed. The Supreme Court recently granted certiorari to decide whether these distributors of bakery products are in the bakery industry or the transportation industry. And that determination will decide whether their employment claims will be resolved in court or in arbitration.

New York Governor Hochul Vetoes the Grieving Families Act

John C. Lane

We addressed this bill in July 2022 when it was passed by the New York Legislature last year and sent to the Governor for signature. The bill would add wrongful death compensation for the value of “grief or anguish caused by a decedent’s death,” a type of damages never before found in New York law. Under current law, and for the past 176 years, the measure of damages has been the loss of economic support or other benefit resulting from the decedent’s death. The law would expand the statute of limitations and would apply retroactively to every pending lawsuit.

In an Op-Ed to the New York Daily News on January 30, 2023, Governor Hochul made clear her objections to the Act as written, while agreeing with the plaintiffs’ bar on the need to change existing law:

The question is how. Last year, the Legislature passed a bill, the Grieving Families Act, that would effectuate a complete overhaul of the wrongful death framework. It would dramatically expand beneficiaries, categories of damages, and the statute of limitations.

Experts have highlighted concerns that the unintended consequences of this far-reaching, expansive legislation would be significant. It is reasonable to think that the legislation as drafted will drive up already-high health insurance premiums, adding significant costs for many sectors of our economy. . . . This is a question that would benefit from careful analysis before, not after, passing sweeping legislation.

The Governor further commented that what was missing in the Legislature’s process “was a serious evaluation of the impact of these massive changes on the economy, small businesses, individuals, and the state’s complex health care system.” The Op-Ed continued:

We must fully understand the impacts of potential changes on small businesses, families, doctors and nurses, struggling hospitals in underserved communities, and the overall economy to ensure that undesired consequences don’t overshadow the good we can do for grieving families.

While this is a breath of fresh air from an unexpected source, we note Governor Hochul’s total omission of the potential effect on liability insurers, the premiums needed to meet these expanded liabilities, and the effect on the future availability of insurance for New York businesses and individuals. Perhaps that was a step too far for the Governor.