Transportation Industry Newsletter - Spring 2018

Transportation Industry News Spring

2018

Changing Tides: US District Court Finds Negligent Hiring 3 Claims Against Broker Are Preempted Under FAAAA Drivers Must Show “Concrete Damage” to Have Standing for 4 Claims Based on Inaccurate Information in Database The Collateral Source Rule And Its Possible Use For 5 Impeachment Purposes Team Directory 7

Selling or Buying a Trucking Company?

Learn What is Under the Hood Jesse Elison | jesse.elison@smithmoorelaw.com Trucking companies, similar to many small businesses, are often family affairs involving the work of multiple generations. A couple of siblings start a company, and some of their children take over the reins and help it grow, and perhaps decades later a potentially large group of cousins are determining whether and how to sell it. They will soon learn that selling a trucking company is a huge undertaking.

They may consider various possible exit strategies, such as a family member stepping forward to buy all the other members’ shares, a strategic buyer emerging with whom the family builds enough comfort to trust them with the family business, or the members hiring an advisor to conduct an auction to find the best possible price.

Every aspect of the business, from the type of legal entity to the age of its assets, will affect the transaction. The desired structure of the sale, be it an asset sale or the sale

of the stock of the entity, will carry with it tax implications for the selling owners and can impact the proceeds they will receive. EBITDA (earnings before interest, tax, depreciation and amortization: a mark of a company’s operating performance) and cash flow will, as much as anything, drive the price the sellers can feel justified asking and the buyer might be willing to pay. If a sale is in your ownership’s future, next year or in ten years, today is the right time to begin preparing for it.

Often a business owner, who is rightly focused on the financial and operational aspects of the business in preparing for a potential sale, will not identify fundamental legal and tax considerations that can have as large an impact on value as the operations themselves.

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The business owners, who have been successfully operating for years, may not even realize what a key role the state of their transportation law compliance programs will play in their ability to sell their business and the ultimate value they receive, but they can be sure that the potential buyers will.

During due diligence those buyers, with the assistance of able transportation counsel in addition to specialists in other legal areas, will delve into every aspect of how the target company does business. This includes customer/ shipper contracts, equipment, technology, management, drivers, accident liabilities, environmental, health, and safety management, and the many laws and regulations governing the business. If the potential buyer’s review finds issues with the target company’s compliance with transportation laws, or even potential risks, the sellers can expect the potential buyers to seek holdbacks, indemnification rights, or even reductions in the purchase price to protect themselves from that risk.

From the buyer’s point of view, lifting the hood of each respective area reveals a more complete picture of the company’s value. In this process, it is critical that the sellers have transportation law counsel on its side to both (i) evaluate and remedy weak points ahead of time and (ii) respond to challenges from the buyer’s counsel in an informed and persuasive manner to minimize impacts to the achieved purchase price for the sellers. And a potential purchaser of a transportation business who does not arm itself with transportation law expertise will miss critical issues that will impact its ability to successfully capitalize on its new acquisition.

If you are a seller, your first step should be a conversation with a transportation attorney about the various laws, regulations, and permit requirements applicable to your transportation

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business and how they are being addressed by your company. Some common discussions points would be informal or formal audits by the DOT, CSA scores, run-ins with the EPA, EEOC, DOL, or other regulatory agencies, ELDs, and similar items. If you are a buyer, your transportation attorney should be working hand-inhand with your M&A team to make sure you are buying a business that can deliver the returns you are paying for in the years to come.

Once the regulatory regimes have been reviewed, examine how the company conducts its business in hot button areas such as multi-employer pension plans, driver classification concerns, and hours of service. To highlight just one common source of risk, if your company uses owner-operators, consider your Independent Contractor Agreement. You can be confident this will be one of the most carefully analyzed documents during the diligence process. Everyone is at least somewhat cognizant of employee misclassification risks thanks to the ever-present risk of class action suits from eager plaintiffs’ attorneys. Hopefully as a result you have already engaged transportation attorneys to help you craft that document. However, does your IC Agreement also adequately protect you from potential risks under the Federal Truth-in-Leasing Regulations or state fraud laws and regulations? And even if you have a well-crafted, protective IC Agreement, do your real world practices and procedures undercut all that hard work and result in no discernible difference between how you treat employees and owner-operators? If an interested buyer identifies any of these risks and you cannot provide them the comfort they need, the prudent buyer will protect itself by making adjustments to the agreement to make sure you bear the cost of that risk rather than them.

It’s important to ensure you have both mergers and acquisitions-focused counsel, as well as an experienced transportation attorney on your legal team. Attorneys from separate firms are usually happy to work together to create a multi-faceted team, however Smith Moore Leatherwood can work across our various practices to provide you with all those services internally. There are many transportation specific topics to uncover in due diligence. If you are selling or purchasing a trucking company, we welcome the opportunity to provide counsel in your deal.

SML Goes Skydiving!

On Friday, February 23, SML’s own Joseph Rohe, Stephanie Flynn, and Megan Early-Soppa, decided to jump out of a “perfectly good airplane.”

With no other takers (but a few offers to do wills), the 3 made the drive to SkyDive Carolinas in Chester County, SC. After flying to 14,000 feet, each of them made a tandem jump. This jump included a 60 second free fall before the parachute deployed allowing them to descend to the ground at 30 mph. While this was no Kilimanjaro, it did take some nerve. There were plenty of pictures and a great video of the jump.

Pictured here is Stephanie, Megan, and Joseph immediately after they all landed safely back on the ground. SML attorneys truly define the adage “work hard, play harder.”

Changing Tides

US District Court Finds Negligent Hiring Claims Against Broker Are Preempted Under FAAAA Megan Early-Soppa | megan.early@smithmoorelaw.com

A recent ruling out of the U.S. District Court for the Northern District of Illinois is likely to have a significant impact on broker defenses in litigation.

In Natalia Volkova v. C.H. Robinson Company, No. 16 C 1883, 2018 WL 741441, (N.D. IL Feb. 7, 2018) the plaintiff’s decedent’s tractor trailer crashed into another tractor-trailer, driven by Nguyen. Nguyen was making a U-turn in the middle of the highway. The plaintiff alleged that C.H. Robinson negligently hired Antioch Transport, Inc. and its driver, Nguyen. It has become common practice for plaintiffs to add brokers to cases involving significant damages in order to increase possible sources of recovery.

The plaintiff’s second amended complaint alleged that C.H. Robinson was liable under the theories of agency and negligent hiring. The plaintiff asserted that C.H. Robinson failed to “perform sufficient investigation and evaluation in hiring Antioch and Nguyen to transport the load at issue.”

(Volkova, 2018 WL 741441, at *1). The plaintiff couched her allegations on C.H. Robinson’s alleged failure to review carrier safety information, request safety reports from the motor carriers, and review proof of training and licensing of the motor carriers’ drivers. (Id. at *2).

Plaintiff cited to Mann v. C.H. Worldwide, Inc., Nos. 16 C 102, 16 C 104 & 16 C 140, 2017 WL 3191516, at **7-8 (W.D. Va. July 27, 2017) (concluding that negligent hiring claim based on injuries sustained in truck accident not preempted) (citing Montes de Oca v. El Paso-L.A. Limo Express, Inc., No. 14 C 9230, 2015 WL 1250139 (C.D. Cal. Mar. 17, 2015) (holding FAAAA did not preempt personal injury claim against transportation broker); Owens v.

Anthony, No. 2:11-cv-33, 2011 WL 6056409, at *3 (M.D. Tenn. Dec. 6, 2011) (“The Court agrees with the numerous courts which have found that personal injury negligence claims are not preempted by the FAAAA.”); Jimenez-Ruiz v. Spirit Airlines, Inc., 794 F. Supp. 2d 344 (D.P.R. June 16, 2011) (concluding that plaintiff’s claim for personal injuries sustained while disembarking an aircraft was not preempted by the ADA).

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To read more go to www.smithmoorelaw.com/TNL2018Q2-FAAAA

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Drivers Must Show “Concrete Damage” To Have Standing For Claims Based on Inaccurate Information in Database Emily Bridges | emily.bridges@smithmoorelaw.com On January 12, 2018, in OwnerOperator Independent Drivers Association v. United States Department of Transportation, the United States Court of Appeals for the District of Columbia Circuit held that drivers did not have standing when they were unable to assert they suffered a concrete injury based on inaccurate information simply existing in a government database. The Court held, however, that two drivers who had inaccurate information released to prospective employers did have standing to assert claims because there was a sufficient allegation of concrete injury.

The Federal Motor Carrier Safety Administration maintains the Motor Carrier Management Information System, which is a database of commercial truck drivers’ safety records. This database requires

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collaboration federal

between

authorities,

and

Pre-Employment Screening Program.

entities

In order to ensure the information

state

and

seeking to hire truck drivers can access

is

certain information in the database,

Transportation established a method

including commercial vehicle accident

accurate,

the

Department

of

by which drivers could challenge

reports, inspection reports, and driver-

inaccurate information.

related safety violation reports. This

To read more go to www.smithmoorelaw. com/TNL2018Q2-PreEmployment

information is available through a

South Carolina Court Rules MCS90 Endorsement Is Not “Stackable”

of the Dodge (“McWilliams”). It was

Rocky Rogers | rocky.rogers@smithmoorelaw.com

sued the owners of the trailer (“Murray”

A recent South Carolina decision should prove favorable to insurers of interstate motor carriers. In Trustgard Insurance Company v. Brown, the United States District Court for the District of South Carolina ruled where there is liability insurance available to another defendant in at least the minimum amount required under the federal financial responsibility regulations, the public policy of the Motor Carrier Act to ensure there is a least a certain level of recovery for an injured plaintiff is met and therefore an MCS-90 Endorsement

cannot be “stacked” on top of the liability policy to provide more recovery for the injured plaintiff.

and “One Stop Towing Company”).

In the case, the plaintiff was a passenger in a van that struck the rear of a cartrailer (“the trailer”) being towed by a 2014 Dodge Tow Truck (“the Dodge”).

The plaintiff alleged the trailer lights were not properly maintained and were not operating at the time of the accident. As a result of the accident, the plaintiff allegedly sustained bodily injuries. The plaintiff sued the driver

plaintiff alleged McWilliams, Murray,

Smith Moore Leatherwood

uncontested

McWilliams

was

the

owner of the Dodge. The plaintiff also

The plaintiff also named as a defendant a motor carrier (“the motor carrier”). The One Stop Towing, and the motor carrier were all owners and operators of the Dodge and trailer at the time of the accident. The plaintiff acknowledged the motor carrier and its equipment were not involved in the accident.

To read more go to www.smithmoorelaw. com/TNL2018Q2-MCS-90

THE COLLATERAL SOURCE RULE And Its Possible Use For Impeachment Purposes JEss Green | jess.green@smithmoorelaw.com On February 7, 2018, the United States Court of Appeals for the Eleventh Circuit affirmed a district court’s decision to admit evidence of collateral source payments in ML Healthcare Services, LLC v.

Publix Super Markets, Inc. 881 F.3d 1293 (11th Cir. 2018). Evidence of payments by third parties is normally prohibited by the collateral source rule, which “gives [a plaintiff] the right to recover damages undiminished by collateral benefits. It refuses credit to the benefit of a tortfeasor of money or services received by the plaintiff in reparation of the injury or damage caused which emanate from sources other than the tortfeasor.” ML Healthcare Services, LLC, 881 F.3d at 1298 (quoting Polito v. Holland, 258 Ga. 54, 55 (1988)). However, the Circuit Court held that, while still uncommon, the application of this rule will largely depend on the laws of the state from which the case originated and why the evidence is being introduced.

In this case, Plaintiff was shopping at a Publix in McDonough, Georgia

on July 24, 2012, when she slipped and fell on an unspecific liquid in the dairy aisle. Id. at 1296-97. Plaintiff claimed the liquid had been left in the aisle, and that the fall caused serious

The Purposes of North Carolina’s Employee Fair Classification Act Alex Maultsby alex.maultsby@smithmoorelaw.com The State of North Carolina made a splash in the Bermuda Triangle of employers-employees-independent

medical injuries. Id at 1297. Prior to

contractors in 2017, with passage of

bringing a lawsuit, ML Healthcare, a

the Employee Fair Classification Act. A

“litigation investment company that

few months in, this is a good time to

contracts with doctors to provide

take stock of the Act and its aftermath.

medical care for injured people with viable tort claims who lack medical insurance,”

purchased

Plaintiff’s

medical debt at a discounted rate

Here is what the law does: •

the Industrial Commission, called

from her health care providers.

the

Id. In exchange, it guaranteed its rights to reimbursement for the full

in favor of the soon-to-be plaintiff.

Id. While benefiting the Plaintiff

Employee

Classification

Section, with a Chairman of the Section and adequate staff.

cost of the medical care out of any subsequent settlement or judgment

Creates a new state office within

•

Authorizes the Section to: ○○

Receive

reports

and

upfront, ML Healthcare’s contract

inquiries about businesses

contained provisions that state that

treating an individual who

the injured party will be personally

should be an employee as a

liable for the full amount of the bills

contractor instead

if she doesn’t win or doesn’t win enough. Id. at 1301-02.

To read more go to www. smithmoorelaw.com/TNL2018Q2MLHealthCare

○○

Investigate the substance of those reports and inquiries

To read more go to www. smithmoorelaw.com/TNL2018Q2-EFCA

Transportation & Logistics Team to Attend DRI Trucking Conference We hope to see you at the DRI Trucking Conference in Chicago on April 26 & 27.

The conference, “Turning the Tables on Plaintiffs in Trucking Litigation,” will feature Kurt Rozelsky leading the “Trial Dos and Don’ts” program on Thursday afternoon. Tom Chase, Joseph Rohe, and Marc Tucker will also attend. The firm is a proud Wireless Access sponsor of the conference.

For more information, go to: http://dri.org/docs/default-source/eventbrochures/2018/trucking-law/2018_0215_truckinglaw_int2.pdf?sfvrsn=2 Smith Moore Leatherwood

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T H E ROAD A H EAD Fredric Marcinak will speak on cargo contracts and broker liability at the TIDA Cargo Seminar on April 4 in Tempe, AZ. While sitting in a little desert sun, Rob Moseley will present “Is There a Weak Link in Your Logistics Chain?” at the Transportation Intermediaries Association Capital Ideas Conference in Palm Desert, CA, on April 11.

Jesse Elison will attend the National Tank Truck Carrier’s 70th Annual Conference & Exhibits on April 15-17 in Toronto, Canada.

The SC Trucking Association has invited Rob Moseley to attend their Call on Washington visit on April 24-25.

Kurt Rozelsky will present “Trial Do’s and Don’ts” at the DRI Trucking Conference, “Turning the Tables on Plaintiffs in Trucking Litigation,” on April 26-27 in Chicago, IL. Marc Tucker, Joseph Rohe, and Tom Chase will also attend.

Fredric Marcinak will chair the freight claims committee meeting and attend the executive committee meeting at the Transportation Lawyers Association Annual Conference on May 2-5 in Orlando, FL. On May 5, the Greenville Transportation team will work in the community at “Hands on Greenville” through the United Way. David Lin, Jess Green, and Megan Early-Soppa will attend the National Minority Trucking Association’s TOP Expo Conference on May 11-12 in Atlanta, GA.

Jesse Elison will attend the 2018 GMTA Annual Convention on June 17-19 in Fernandina Beach, FL. Fredric Marcinak, Rob Green, and Rocky Rogers will attend the Conference of Freight Counsel Summer Meeting on June 23-24 in Alexandria, VA. Rob Moseley will speak on brokerage issues at the SMC3 Collaborative Supply Chain Intelligence Conference on June 25-27 at the Greenbrier in White Sulphur Springs, WV.

May 15 marks the next installment of the SML Transportation Webinar Series. Save the date and watch for a link to register!

Topic to be announced.

June 7-10 marks the SC Trucking Association Annual Meeting at Myrtle Beach. Rob Moseley will attend the conference and the Board of Directors meeting.

Making Tracks Rob Moseley attended the Conference of Freight Counsel Winter Meeting in Tucson, AZ on January 6–8.

David Lin attended the TLA Chicago Regional Seminar on January 19.

Jesse Elison led a session on trucking company negotiations with SAAS vendors at SMC3 Jump Start in Atlanta, GA on January 22-24. Rob Moseley also led a contract and freight claims seminar there and Rocky Rogers attended as well.

Jesse Elison presented to a group from Marsh Transportation on February 1.

Rob Moseley presented on liability and contract issues during the South Carolina Timber Producers Association Annual Meeting in Myrtle Beach, SC, on February 9–11.

Rob Moseley was invited to attend the prestigious Stifel Transportation Conference in Miami, FL, on February 13-14, where he listened to pitches for private equity financing.

Fredric Marcinak spoke during the Specialized Transportation Symposium on February 27– March 2 in St. Louis, MO. This meeting focused on bringing together members and regulatory officials to promote uniformity in regulatory policy.

Marc Tucker, Jack Riordan, Kori Flake, and Rob Moseley attended the Great West Leadership Conference in Knoxville, TN, on March 7–8.

Rob took part in a mock trial.

Rob Moseley spoke on the importance of compliance at the Lytx Users Conference in San Diego, CA on February 26-28.

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Team Directory Eri k A l bri g ht

F r e dric M arcina k

Emi ly B rid g e s

a l e x mau ltsb y

T o m C has e

K e v in M c C arr e l l

R ic k C o u g h l in

Rob Moseley

Greensboro, NC | 336.378.5368 erik.albright@smithmoorelaw.com

Greenville, SC | 864.751.7618 emily.bridges@smithmoorelaw.com

Greenville, SC | 864.751.7636 tom.chase@smithmoorelaw.com

Greensboro, NC | 336.378.5471 rick.coughlin@smithmoorelaw.com

Greenville, SC | 864.751.7691 fredric.marcinak@smithmoorelaw.com

Greensboro, NC | 336.378.5331 alex.maultsby@smithmoorelaw.com

Greenville, SC | 864.751.7652 kevin.mccarrell@smithmoorelaw.com

*TEAM LEADER* Greenville, SC | 864.751.7643 rob.moseley@smithmoorelaw.com

M e g a n E a r ly- S o p pa

B o b P e rs o ns

J u l i e Earp

Patti R ams e ur

J e ss e E l is o n

J o hn R e is

K o ri F l a k e

J ac k R i o rdan

Greenville, SC | 864.751.7627 megan.early@smithmoorelaw.com

Greensboro, NC | 336.378.5256 julie.earp@smithmoorelaw.com

Atlanta, GA | 404.962.1024 jesse.elison@smithmoorelaw.com

Atlanta, GA | 404.962.1017 kori.flake@smithmoorelaw.com

Atlanta, GA | 404.962.1075 bob.persons@smithmoorelaw.com

Greensboro, NC | 336.378.5304 patti.ramseur@smithmoorelaw.com

Charlotte, NC | 704.384.2693 john.reis@smithmoorelaw.com

Greenville, SC | 864.751.7638 jack.riordan@smithmoorelaw.com

J e ss Gr e e n

R o c k y R o g e rs

R o b Gr e e n

J o s e ph R o h e

J ay H o l l and

Kurt R o z e l s k y

D av id Lin

M arc T uc k e r

Raleigh, NC | 919.755.8763 jess.green@smithmoorelaw.com

Greenville, SC | 864.751.7617 robert.green@smithmoorelaw.com

Wilmington, NC | 704.384.2641 jay.holland@smithmoorelaw.com

Atlanta, GA | 404.962.1041 david.lin@smithmoorelaw.com

Greenville, SC | 864.751.7610 rocky.rogers@smithmoorelaw.com

Greenville, SC | 864.751.7668 joseph.rohe@smithmoorelaw.com

Greenville, SC | 864.751.7624 kurt.rozelsky@smithmoorelaw.com

Raleigh, NC | 919.755.8713 marc.tucker@smithmoorelaw.com

Welcome Tom Chase and Kori Flake!

Tom Chase joined our Greenville office last month and has nearly 25 years of front-line litigation experience in state and federal trial and appellate courts.

He’s a graduate of Furman University and the University of South Carolina School of Law. Kori Flake re-joined our Atlanta office in February after a twoyear relocation to Indiana. She will work with our transportation clients on both litigation matters and contracts.

Kori graduated from the University of Georgia and the University of Georgia School of Law. We’re excited to welcome them to the Transportation team and the SML family!

Smith Moore Leatherwood LLP Attorneys at Law 2 West Washington Street Suite 1100 Greenville, SC 29601 T 864.751.7600 F 864.751.7800 www.smithmoorelaw.com

G o Gr e e n

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Emergency Response Team As part of the array of transportation services provided to firm clients, our 24/7 emergency response team is standing by to serve clients with urgent needs following a catastrophic accident. The team has handled numerous night time and weekend emergencies for our clients.

Members of the emergency response team take responsibility for preserving physical and electronic evidence, taking driver and witness statements, making arrangements for cargo salvage, and managing relations with law enforcement. Additionally, firm clients benefit from the team’s knowledge of substantive experts and criminal defense counsel. smithmoorelaw.com/emergencyresponseteam

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