The Supreme Court Gets One Right

The specific issue may seem a bit arcane, the liability of freight brokers when they select unsafe trucking companies, but it a big deal, and hopefully we will see it further expanded to see the liability extended to other industries where contractors are used to deflect responsibility for the big actors.  

At issue is the Federal Aviation Administration Authorization Act (FAAAA) which preempts most state regulation of transportation, things like rates and scheduling, but the law does give the states authority to regulate safety and required insurance.

The lower courts appeared to ignore the black letter law on this, and conclude that the brokers were indemnified, but the Supreme Court actually went with the actual law on this one.

The U.S. Supreme Court unanimously held Thursday that federal law does not preempt a state lawsuit claiming a shipping broker hired an unsafe trucking company, leading to a crash and severe injuries.

The court said the 1994 Federal Aviation Administration Authorization Act preempts most state regulation of the trucking industry but contains a carve-out for state safety regulations "with respect to motor vehicles."

Justice Amy Coney Barrett, writing for the entire court, stated that the exception includes a state lawsuit accusing a shipping broker of negligently hiring a trucking company.

The decision revives a suit by Shawn Montgomery, who was on the side of an Illinois highway when his vehicle was struck by a Mack truck, leading to the amputation of a leg and other permanent injuries. Montgomery sued the driver, Yosniel Varela-Mojena; the trucking company, Caribe Transport II; and the broker that coordinated the shipment, C.H. Robinson Worldwide.

Montgomery alleged the broker knew or should have known about Caribe's poor safety rating from a federal regulator and that an accident was likely to occur.

A federal district court found that Montgomery's negligent hiring claim against C.H. Robinson was preempted by the FAAAA, a decision upheld by the U.S. Court of Appeals for the Seventh Circuit.

The Supreme Court said applying the language of the federal law's safety exception to Montgomery's claim was "straightforward."

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

Of note here, as significant proportion of Amazon delivery drivers are contractors, even though Amazon specifies the routes to the second and foot, hence the infamous Amazon piss bottles, and so this should apply to Amazon as well.

I would like to see this applied top subcontracting more generally, there are numerous instances where contractors are used to skirt wage and safety laws, but I'm not too hopeful.

Interesting Ruling

The Supreme Court has affirmed a fraud conviction even though that there was no direct economic harm.

The short version is that a contractor was convicted of fraud for falsifying its compliance with the diversity requirements in its contract.

The substance of the appeal was that even if they lied, there was no actual monetary loss.

In a 9-0 decision, the Supreme Court (IMHO correctly) called bullsh%$ on this.

There was a criminal taking here, the contract that would have otherwise gone to some other contractor:

The Supreme Court on Thursday upheld the fraud conviction of a Philadelphia-area government contractor. Stamatios Kousisis was found guilty, along with Alpha Painting and Construction, after they failed to comply with a contract provision intended to promote diversity. Prosecutors insisted that federal wire fraud laws apply equally to cases in which the defendant uses deception to enter into a transaction that doesn’t harm the victim financially. On Thursday, the justices agreed.

The court in recent years has resisted what it sees as the federal government’s overly expansive readings of federal fraud laws, so Thursday’s decision was a relatively rare victory for federal prosecutors in that area.

Kouisisis, Alpha, and their business partners won contracts on two major construction projects in the Philadelphia area: a bridge over the Schuylkill River and repairs at Amtrak’s 30th Street Station. As part of the contracts, they were required to work with “disadvantaged business enterprises.”

Alpha indicated that it would use a paint supplier, Markias, that was a DBE. But Markias was merely a pass-through that did not supply any paint to the projects. Instead, other suppliers sent Markias invoices; Markias then added a small mark-up and sent its own invoices to Alpha.

Alpha and Kousisis were indicted on federal wire fraud charges. The government relied on a theory known as “fraudulent inducement” – the idea that Kouisisis and Alpha obtained the contracts by making deceptive promises to use a disadvantaged business enterprise.

Alpha and Kousisis countered that under the fraudulent inducement theory, the government must show that they intended to harm the victim financially – which they did not do. But the lower courts disagreed. The U.S. Court of Appeals for the 3rd Circuit stressed that participation by a disadvantaged business enterprise was “an essential part of the contract.”

Kousisis was convicted and sentenced to 70 months in prison, while Alpha was required to pay a $500,000 fine and forfeit its profits from the contracts.

In an opinion by Justice Amy Coney Barrett, the Supreme Court on Thursday upheld the 3rd Circuit’s decision, rejecting the argument by Kousisis and Alpha that they could not be held liable unless the government had suffered a financial loss. “The fraudulent-inducement theory,” Barrett wrote, “is consistent with both the text of the wire fraud statute and our precedent interpreting it.” 

I am surprised.that the Supreme Court ruled this way, particularly unanimously, but it's a win for good government.

Elections Have Consequences

The NLRB has ruled that non-disparagement and secrecy clauses in severance agreements are illegal.

Not only is the sort of thing that would never have happened under Reagan,Bush I, Bush II, or Trump.

None of them would have supported labor rights like this:

The National Labor Relations Board has ruled that it is generally illegal for companies to offer severance agreements that prohibit workers from making potentially disparaging statements about the employer or from disclosing details of the agreement.

The ruling by the board, which has a Democratic majority, overturns a pair of 2020 decisions, when the board was controlled by Republicans and found that such severance agreements were not illegal on their face. It continues the labor board’s worker- and union-friendly trajectory under appointees of President Biden.

The earlier decisions held that the severance agreements were illegal only if accompanied by other circumstances making them suspect, such as the possibility that they were being used to cover up the illegal firing of employees who tried to form a union.

Still, Anne Lofaso, a professor of labor law at West Virginia University, said the latest decision was limited to rights under the National Labor Relations Act, such as employees’ rights to draw attention to unsafe working conditions, or to engage in other activities that protect or benefit workers as a group.

She said an employer could still offer workers a severance agreement requiring them to give up their right to sue over, say, race discrimination under the Civil Rights Act of 1964.

In the ruling, issued Tuesday, the board said it was returning to longstanding precedent. The 2020 standard, it said, ignored the fact that a severance package with confidentiality or nondisparagement provisions could on its own “unlawfully restrain and coerce” workers’ labor rights.

………

Charlotte Garden, a professor of labor law at the University of Minnesota, said the 2020 approach had effectively tried to “narrow the rule to situations where an employer was trying to cover up their own previous unlawful activity and prohibit employees from talking about it.” The current ruling, she added, takes a broader view of when employees have the right to speak out.

The ruling could have a direct impact on severance agreements that seek to prevent former employees from publicly discussing sexual harassment or sexual assault accusations. The labor board is likely to consider those agreements illegal.

This is good, but what will really make a change is the willingness of federal prosecutors to frog-march senior executives out of their offices in handcuffs for breaking the law.

That is not under the purview of the of the NLRB, but I can dream of the day when the Department of Justice does this.

And the Award for Creative Use of an NDA against Your Now Former Employer Goes To………

This is an epic invocation of a non-disclosure agreement.

If you don't want to read the whole story, and I recommend that you do, the author was working at a truly horrible employer, and was fired, effective immediately.

At the exit interview, he was told to turn over his notes.

He refused, noting that he was a former employer, and under the term of his NDA he was forbidden to share his notes with them for.

Legal was brought in, and much hilarity ensues.

They never got his notes, and it was only 17 days until the event that they were hosting.

It did not go well for his now-former employer.

Personally, I prefer to keep any separation from my employer amicable, and that would be my advice to any person wishing to quit, but I still find this intensely amusing.