An Illinois appellate court has upheld a seven figure verdict against a logistics provider in the case of McHale v. Kiswani Trucking, Inc. On August 14, 2015, the Illinois First Appellate District upheld an $8 million judgment against Transfreight, Kiswani Trucking, Inc. and Russell Kleppe after Kleppe’s semi struck and killed Stacey McHale. This alert addresses some of the key findings that affect the logistics industry.

Transfreight provided logistics and transportation services for Toyota Motor Manufacturing and contracted with Kiswani to transport certain auto parts at the time of the incident. Under the terms of their contract, Kiswani had the "sole responsibility" for Department of Transportation compliance, to hire and train its drivers, and to assign and remove its drivers from Toyota routes. The contract also specified Kiswani "shall have sole and exclusive control over the manner in which its employees and subcontractor(s) perform Transportation Services," with the understanding that "such person(s) shall be considered to be solely the employees and subcontractor(s)" of Kiswani. The liability aspect of the trial focused on Transfreight’s liability after the driver and motor carrier admitted fault.

Transfreight's appeal was based upon a number of alleged errors that occurred during the course of the trial. We address a few. Notably, the trial court permitted Plaintiff's transportation expert, Lew Grill, to testify that Kleppe was an "employee" of Transfreight under section 390.5 of the Federal Motor Carrier Safety Regulations. Transfreight argued that Grill provided a legal conclusion on whether Kleppe was an agent of Transfreight. The appellate court disagreed:

Grill, a trucking expert, provided the jury specialized knowledge regarding the relationship of the parties in the context of the trucking industry in which they operated. He did not state an opinion regarding the ultimate issue in the case, whether Kleppe was an agent of Transfreight. He did not opine that an "employee" under the regulations is an agent or an employee at common law. Grill merely determined that, under section 390.5 of the regulations, as a result of Transfreight's ownership of the trailer involved in the accident, Transfreight was a "motor carrier" and thus the "ultimate employer" of "employee" Kleppe as understood in the trucking industry.

The court also emphasized that the trial court admonished that the witness was not using "any terms such as agent, employee and so on in a legal sense," and the jury was to decide whether an individual was an agent or employee. In addition, Transfreight had hired its own expert "without waiving its objections" to Grill's testimony, which the appellate court determined "balanced" any error by permitting Grill's opinions.

Transfeight also argued the trial court erred by permitting Kiswani's manager to testify that his company [the motor carrier] was an agent of Transfreight. The trial court determined and the appellate court concurred that any error associated with this testimony was corrected with an admonition from the bench.  Numerous other issues were addressed by the appellate court including an indemnity issue between the logistics provider and motor carrier.

The McHale opinion follows a continuing line of Illinois cases imposing liability upon logistics providers. The plaintiff, trial court and appellate court pointed to language in Transfreight’s contract and activity and interactions with the motor carrier where Transfreight purportedly controlled the driver’s and motor carrier’s activities. The evidence was sufficient to create a question of fact and permit the case to get to the jury and avoid reversal. In practice, we continue to believe that deep pockets matter.

This case serves as a reminder that actions by the logistics provider or freight broker matter, especially when the underlying motor carrier has minimal insurance coverage limits in high exposure cases.  Practically, logistics providers must continue to minimize what can be perceived as control of motor carriers and drivers and be careful what they promise their customers contractually and in practice.