Third Circuit Goes Easy on Attorney AI Misuse

The Lane Law Letter
ca3.uscourts.gov

A recent Third Circuit decision underscores a growing risk for practitioners: relying on AI-generated research without verification can damage both a case and counsel’s credibility.

In McCarthy v. DEA, a Pennsylvania attorney submitted a brief relying on AI-generated summaries of eight DEA adjudications to argue the agency had acted inconsistently. The summaries—provided by a non-attorney—were incorporated without reviewing the underlying decisions. Seven were “riddled with factual and legal inaccuracies.” The eighth did not exist.

Although the attorney later acknowledged the issue, he initially characterized the errors as “minor discrepancies” and did not verify the cited authorities until ordered to do so by the Court. His reply brief introduced additional inaccuracies.

The Third Circuit found multiple violations of Pennsylvania ethical standards, noting that the attorney wasted the resources of both the Court and the DEA and harmed his own credibility. Still, the majority stopped short of imposing monetary sanctions. Citing his belated corrections and “sincere contrition,” the Court issued only a reprimand, observing that it had not yet clearly articulated expectations regarding AI use.

A strong dissent urged that the egregious conduct of the attorney was more than a mere mistake. The dissent cited myriad cases across the country, including Park v. Kim, wherein the Second Circuit emphasized that a rule about artificial intelligence use “is not necessary to inform a licensed attorney … that she must ensure that her submissions to the Court are accurate.” The client’s case was dismissed for numerous violations of Federal Rule 11, and the attorney was referred to the Court’s Grievance Panel.

Agreeing with the Second Circuit in Kim, the dissent in McCarthy concluded with

But punishing an attorney for failure to verify information obtained from AI is consistent with the standard to which attorneys historically have been held. No forewarning is necessary when it is clear what standard the attorney was required to follow. The ethical practice of the law is innate in the responsibilities of each practicing attorney. It needs no reminder as each case is accepted and resolved. The takeaway is straightforward: courts may differ on sanctions, but not on the underlying duty. Verification is not optional.

The takeaway is straightforward: courts may differ on sanctions, but not on the underlying duty. Verification is not optional.

And while McCarthy reflects restraint, most courts considering similar conduct have not been as forgiving—a trend that is likely to continue.

Summary Judgment and Indemnification Secure Dismissal and Fee Reimbursement for Retailer

John C. Lane

We recently obtained summary judgment for a major retailer that had been sued after its deliveryman allegedly injured a customer’s neighbor while wheeling a washing machine toward the customer’s home. The retailer had used the services of an intermediary to arrange the actual delivery by one of its subcontractors. The neighbor sued the retailer and the subcontractor for her alleged injuries in New York state court. The intermediary was not named as a defendant. We appeared for the retailer and removed the case to federal court.

The agreement between the intermediary and the subcontractor required the subcontractor to indemnify both the intermediary and its customer, the retailer. That agreement, together with the parties’ conduct of business, showed that the retailer, the intermediary, and the subcontractor acted independently of one another. No party exercised operational control over any other party.

We moved for summary judgment based on the Independent Contractor Doctrine. We submitted deposition and affidavit testimony, and documentary evidence establishing that neither the retailer nor the intermediary exercised control over the means and methods used by the subcontractor or its employees; neither was negligent in selecting the subcontractor; and neither was personally culpable in any way. The District Court agreed and granted summary judgment, dismissing the plaintiff’s complaint with prejudice as against our client.

While the motion was pending, we pressed the subcontractor and its insurer for contractual indemnification. The insurer conceded, agreeing to reimburse the fees previously paid to our firm. It also agreed to assume our client’s defense, which promptly became unnecessary after the dismissal.

Plaintiff’s case proceeded against the subcontractor. Just before press time, those parties reached a mediated settlement. With that settlement, the protracted case came to an end. For our client, the dismissal, along with reimbursement of defense fees, was a complete win.

Big Changes to New York Auto Liability Law

Peter C. Bobchin

New York Governor Kathy Hochul has signed a new law, effective May 26, 2026 (Assembly Bill A10008C), which enacts significant changes to New York’s auto liability law. The law is applicable to all actions and proceedings commenced on or after the date the bill was signed.

Here are the three most significant changes.

  • The second prong of the serious injury threshold which allowed a party to sue for a non-permanent injury resulting in the inability to perform the usual and customary activities for 90 out of the first 180 days following an accident has been eliminated.
  • New York’s pure comparative law has been replaced by a 50-percent rule. If a plaintiff’s culpable conduct is greater than the culpable conduct of the defendant, or of all defendants combined if there are multiple defendants, plaintiff cannot recover. Thus, New York joins New Jersey and many other modified comparative negligence states.
  • A cap of $100,000 has now been placed on recovery of non-economic damages (other than in an action for damages for injuries resulting in death) where the  injured party is at fault and was (1) operating an uninsured motor vehicle he or she was responsible for insuring (unless the lapse was less than thirty days); (2) operating a motor vehicle while impaired and convicted of such; or (3) operating a motor vehicle in the commission of a felony, or immediate flight therefrom, at the time of the accident and has been convicted of such.  

The law also contains the following provision: 

No liability for non-economic loss shall be fixed unless and until the trier of fact has determined the existence of a serious injury. In any action to recover non-economic loss pursuant to this article, the trier of fact shall not determine the question of whether an injury is a serious injury until the trier of fact has determined the party or parties at fault.

This provision is significant because interest on judgment will not accrue until there is a finding of both fault and a serious injury.  This may also make moving for summary judgment on the serious injury threshold more challenging, with differing interpretations by the courts likely.

Supreme Court Rules on Brokers’ Bid for FAAAA Preemption

John C. Lane

Transportation brokers, their insurers and lawyers sought a different result. Brokers were denied federal-law protection for negligence in Montgomery v. Caribe Transport II, LLC.

Typically, it took the Supreme Court just one paragraph to state its ruling:

The Federal Aviation Administration Authorization Act preempts state laws related to the prices, routes, and services of the trucking industry. But there is an important exception: States retain authority to regulate safety “with respect to motor vehicles.” This case presents the question whether a claim that one company negligently hired another to transport goods falls within that exception. It does.

The decision was unanimous, reversing the Seventh Circuit, which had held the broker, C.H. Robinson was shielded from liability by “FAAAA Preemption.” Justice Barrett wrote for the Court. Justice Kavanaugh, joined by Justice Alito, wrote a concurring opinion.

The Court explained that sellers of goods use brokers to find motor carriers to move their goods to market. The Motor Carrier Act of 1980 deregulated aspects of the industry and eased entry into the trucking business, reduced collective rate making, and encouraged greater flexibility in pricing. Yet, state regulations remained impediments to competition. Because over-regulation, especially by states, created inefficiencies in the trucking industry, Congress enacted the FAAAA, which expressly preempts certain state regulations involving motor carriers. A year later Congress amended the Act to extend to other players in the transportation industry, including brokers.

As now written, the FAAAA contains two provisions that bring this case to the Court. First, the Act prohibits States from “enact[ing] or enforc[ing] a law, regulation, or other provision having the force and effect of law related to a price, route, or service” of any motor carrier or broker “with respect to the transportation of property.” Transportation lawyers call this the “FAAAA Preemption.” But that does not end the story. The Amended Act also includes exceptions, one of which, the so-called “Safety Exception,” is at the heart of this case.

That exception provides that the Act “shall not restrict the safety regulatory authority of a State with respect to motor vehicles [Emphasis added].” The reading and interpretation of this provision and the underscored phrase, “with respect to motor vehicles,” are central to the Court’s determination.

Shawn Montgomery suffered serious injuries in a two-truck accident. Montgomery’s truck was struck by a tractor-trailer driven by Yosniel Varela-Mojena when it swerved off course. Varela-Mojena was driving for Caribe Transport II, LLC, a motor carrier. C.H. Robinson Worldwide, Inc., a broker, had coordinated the shipment. Montgomery sued Varela-Mojena, Caribe Transport, C.H. Robinson, and other related entities. Montgomery claimed that Caribe Transport had been found by the Federal Motor Carrier Safety Administration to be deficient with respect to the qualifications of drivers, hours of service of drivers, inspection, repair and maintenance, and recordable crash rate, and more. He alleged that C.H. Robinson negligently hired Caribe when it knew or should have known of its poor safety record.

C.H. Robinson raised the FAAAA Preemption defense and argued that the Safety Exception does not apply to brokers, since it mentions only motor carriers. The district court held that the FAAAA expressly preempts Montgomery’s negligent-hiring claim and that the claim does not fall within the Safety Exception. The Seventh Circuit affirmed based on its prior precedent. The Supreme Court granted Montgomery’s petition for Certiorari to resolve a division among the circuits.

C.H. Robinson argued that the Safety Exception barred only state laws (including case law) of a State “with regard to” motor vehicles, but does not mention brokers. Here we learn that words mean something. Noting that the statute does not define “with regard to,” the Court turned to its ordinary meaning. Dictionaries define the phrase as “referring to,” “concerning,” or “regarding.” Using these definitions and “putting the pieces together,” the Court concludes that a claim is “with respect to motor vehicles” if it “concerns” or “regards” the vehicles used in transportation.”

Applying that interpretation, the Court lays out its conclusion succinctly:

Requiring C.H. Robinson to exercise ordinary care in selecting a carrier therefore “concerns” motor vehicles – most obviously, the trucks that will transport the goods. So Montgomery’s negligent-hiring claim falls within the FAAAA’s safety exception, which saves it from preemption.

The issue has been debated for several years, with brokers hoping to receive FAAAA Preemption. The Supreme Court has dashed those hopes, and brokers, insurers, their lawyers, and the market will be reacting to this decision.

Supreme Court Rules New Jersey Transit Lacks Sovereign Immunity

John C. Lane

New Jersey Transit Corporation is a creation of the State of New Jersey. It operates bus and computer train services in New Jersey, New York, and Pennsylvania. When it is sued for personal injuries arising out of accidents, will NJ Transit have sovereign immunity as an arm of the State of New Jersey? That was the question before the Supreme Court of the United States, which held unanimously that NJ Transit is not an “arm of the State” and thus does not come under the umbrella of sovereign immunity. The case is Galette v. New Jersey Transit Corporation. But why is this issue before the Supreme Court?

That’s because the sovereign immunity of the several States is rooted in the Constitution. In a long line of Supreme Court decisions interpreting the immunity doctrine the Court has held that sovereign immunity is a right bestowed upon the States by the Constitution. It is personal to the State and is not shared by counties, municipalities, school boards, or even a bank created by the State. The issue is whether the state-created agency is so tied to the State, by control, finances, or other factors as to be considered an “arm of the State.” NJ Transit is not.

Two distinct lawsuits against NJ Transit reached the Supreme Court. Jeffrey Colt was injured when he was struck by a bus in midtown Manhattan. Cedric Galette was injured in Philadelphia when an NJ Transit bus crashed into a car in which he was a passenger. Both men sued NJ Transit in state courts in New York and Pennsylvania, respectively. NJ Transit pleaded that it is an “arm of the-state” and thus entitled to New Jersey’s sovereign immunity.

The New York Court of Appeals disagreed and ruled that Mr. Colt was free to pursue his tort action in the New York courts. The Supreme Court of Pennsylvania held the opposite, ruling that Mr. Galette’s suit was barred by New Jersey’s sovereign immunity because, it concluded, NJ Transit is an arm of the State. The constitutional issue, and the divide between New York and Pennsylvania’s highest courts brought the cases to the Supreme Court, where they were heard together. The Court undertook a thorough review of its legal precedents and the principles espoused, to analyze the relationship between the State and the New Jersey Transit Corporation.

NJ Transit is a “body corporate and politic with corporate succession.” It can sue and be sued, enter into contracts, acquire real or personal property, and make and alter bylaws. It can raise funds, establish its own operating divisions, adopt and maintain its own employee benefit programs, and even own or control any corporate entity that it acquires or forms to carry out its statutory objectives. Its organic statute labels NJ Transit as an “instrumentality of the State,” but that label lacks historical weight. Not all instrumentalities of a state may invoke sovereign immunity. Other New Jersey statutes dictate that a state entity that can sue and be sued is not “part of the State.” By law, NJ Transit is independent of any control by the State department of transportation. Moreover, the State of New Jersey is not liable for its debts.

Most important to the Court is that a state-created corporation that is formally liable for its own judgments is not an arm of the State. “NJ Transit is not an arm of New Jersey and thus is not entitled to share in New Jersey’s interstate sovereign immunity.”

New York Appellate Court Fines Attorney for Use of AI-Generated “Fake” Cases

John C. Lane

It is the first appellate case in the State. The Appellate Division, Third Department, excoriated an attorney for the misuse of generative AI in legal papers. In five filings during an appeal, the attorney included “no less than 23 fabricated cases, as well as many other blatant misrepresentations of fact and law from actual cases.” In all, he was fined $7,500 for conduct ruled inappropriate, in Deutsche Bank National Trust Co. v. LeTennier, decided on January 8, 2026.

It all started as a garden-variety real estate foreclosure action on property in upstate New York. The defendant, Jean LeTennier, originally acting as attorney pro se, was unsuccessful in the trial court, including a number of post-judgment motions. At that point the attorney stepped in to represent the defendant in the appeal. The Court notes that there are distinct legal grounds for setting aside a foreclosure, if the facts and law are followed. But the attorney relied upon generative artificial intelligence to do his legal research, and did not check to see if the case precedents generated by AI actually existed, or actually stood for the proposition assigned to them by AI. Most were non-existent.

“Hallucinated cases” may look like real cases, “but their citations lead to cases with different names, in different courts and on different topics – or even to no case at all.” The attorney using AI as an assistant has an absolute obligation to check, and read, every case he cites, whether generated by AI, or by genuine, old-fashioned legal research. That didn’t happen here, to the Court’s consternation.

According to the Court, defendant submitted at least 23 fabricated legal authorities (“AI hallucinations”) across five filings during the pendency of the appeal. The attorney acknowledged that the papers were actually his own and that by signing a paper, an attorney or party certifies that the papers and their presentation or the contentions are not frivolous. In his own defense, the attorney argued that 90% of his citations were accurate! That alone was “simply unacceptable by any measure of candor to any court.”

The Court noted that attorneys and litigants are not prohibited from using AI to assist with the preparation of court filings. But they must not rely upon the technologies if they are not trained on their dangers and without human oversight. The attorney has an obligation to fact check and cite check every document filed with a court.

Perhaps most offensive to the Court was the attorney’s attitude on oral argument. “Rather than taking remedial measures or expressing remorse, defense counsel essentially doubled down . . . on his reliance of fake legal authorities as not ‘germane’ to the appeal.”

Added to all of that, the Court found that the attorney and his client had pursued a baseless appeal. And for all of that, the attorney was fined $7,500, and his client, $2,500, both as a punishment and a deterrence to others.

Courts throughout the country are facing these problems and sanctioning attorneys. Federal district courts in New York and New Jersey have imposed monetary sanctions under Federal Rule 11 against attorneys who have cited to generative AI-produced fake cases. The New Jersey Federal District Court put it this way last September in OTG N.Y., Inc. v. Ottogi Am., Inc.:

Unfortunately, attorneys’ use of generative AI without proper oversight has become a prevalent issue for courts across the country. Examples abound where district courts have found legal briefs containing AI hallucinated case law masked as actual legal authority. In other words, AI can generate a legal proposition that appears to come from a judicial opinion and is even properly cited under The Bluebook Uniform System of Citation; but there is just one problem – it’s not real. AI made it up. And those who rely on AI blindly, do so at their own peril.

We hope these stern warnings and stiff penalties will help to stem this unacceptable practice in our courts.

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.