Bits & Pieces

CAB Bits & Pieces May 2024

Hello Everyone!

May is quite the busy month! With Mother’s Day, Memorial Day, graduations, and school summer break kicking off as we usher in Q2.

It’s been a busy convention season so far. We’ve been able to see so many of you at various industry events recently and look forward to connecting with even more of you soon in person. We’ve been busy with client on-site trainings as well. Reach out to us if your team would benefit from some specific training for your team to ensure you are getting the most out of your CAB platform.

Remember, CVSA’s International Roadcheck ’24 is coming up on May 14 – 16. Remind your fleets and drivers of the event and the importance of staying on top of vehicle inspections and driver expectations. Check out last month’s Bits & Pieces for additional details should you need more information on this annual event and the link to FMCSA’s guide on tractor pressure systems.

This coming Memorial Day let’s take time to remember those heroes who fought for us.

Chad Krueger and Pam Jones

Events

CVSA International Roadcheck ’24 | May 14 – 16 | Enforcement facility (fixed and portable) near you | Remind your fleets & drivers of this event and the importance of inspection and driver preparedness

International Risk Management Institute, Inc., (IRMI) Transportation Risk Conference (TRC) | June 3 – 5 | Houston, TX

CAB Live Training Sessions

Tuesday, May 14^th | 12p EST

The Power of Precision: Utilizing CAB Data for Audience Targeting in Digital Marketing | Joe Cantu

Join us as we explore how CAB data can supercharge your digital marketing efforts across paid social, programmatic, and paid search channels.

Whether the goal is to find customers, gain market share, or prevent churn, CAB data alongside an effective digital marketing strategy can improve lead quality, increase efficiency, and drive bottom-line growth.

Tuesday, May 21^st | 12p EST

Intro to CAB: Flow & Navigation | Connor Harper

An overview of the basic flow and navigation of the CAB website.

To register for the webinars, sign into your CAB account. Then click live training at the top of the page to access the webinar registration.

Explore all of our previously recorded live webinar sessions in our webinar library.

CAB’s Tips & Tricks

Save your team time and increase your productivity with our integrations, APIs, and custom reports. Here are some platforms we have worked with and offer custom solutions as well.

THIS MONTH WE REPORT

FMCSA to make Congressionally-required changes to under-21 pilot program. The Federal Motor Carrier Safety Administration is seeking emergency approval from the White House Office of Management and Budget to amend the Safe Driver Apprenticeship Program. The spending bill included language that bars FMCSA from requiring the use of inward facing cameras or requiring a motor carrier to register an apprenticeship program with the Department of Labor as a condition for participation in the SDAP program. Read more…

FMCSA forces broker transparency from Uber Freight after double brokering scam. The FMCSA, for perhaps just the second time in its history, forced a broker to reveal what a shipper paid them after a double brokering scam on Uber Freight’s network left a carrier unpaid and complaining to the regulator. Read more…

What it takes to advocate for legal abuse reform. Addressing lawsuit abuse is a “top tier issue” for the American Trucking Association, said David Bauer, vice president of state and tax policy. Besides trying to rein in huge lawsuits and nuclear verdicts, Bauer noted that the goal of tort reform is to restore balance and fairness to the judicial process for the trucking industry, pointing out how the judicial environment has become “unbelievably skewed” against the industry. Read more…

Convoy fallout: Stiffed carrier feels freight brokers’ bond amount should vary according to company size. Small fleet owner Surinder Gill was, in part, the subject of Overdrive Executive Editor Alex Lockie’s reporting on the collapse of the Convoy broker which told the tales of owner-operators and small fleet owners who, months following the abrupt shuttering of Convoy in October 2023, remained unpaid for in some cases thousands’ worth of work hauling. Read more…

Renewable diesel a more effective tool to decarbonize trucking than BEV, report says. Research conducted by American Transportation Research Institute (ATRI) shows renewable diesel is not only a promising solution for lowering the trucking industry’s CO2 emissions, it’s also significantly cheaper than battery electric technology. Read more…

Benchmark diesel price below $4 again as war-led rally fizzles. The benchmark diesel price used for most fuel surcharges is back below $4 a gallon. A decline of 2.3 cents a gallon from the prior week’s number put the Department of Energy/Energy Information Agency price at $3.992. It’s only the second time in the past 11 weeks that the price has been below $4. Read more…

May 2024 CAB Case Summaries
These case summaries are prepared by Robert “Rocky” C. Rogers, a Partner at Moseley Marcinak Law Group LLP.

AUTO

JNM Express, LLC v. Lozano, 2024 WL 1685012, No. 21-0853 (Tex. Apr. 19, 2024). In this appeal arising from a substantial jury verdict against a motor carrier, a freight broker, and their shared owners, the Supreme Court of Texas reversed the jury verdict against the broker, finding there were insufficient facts in the record to support the verdict, and further, reversed the verdict against the owners of the trucking company and brokerage, finding that the “injustice” prong to pierce the corporate veil was not satisfied. At the time of the accident, Lauro Lozano was driving a truck owned by JNM Express, LLC, but leased to ANCA Transport, Inc, when he fell asleep and crashed into another 18-wheeler. JNM and ANCA were both owned by Jorge Marin and the two companies shared equipment and drivers. Jorge Marin and his wife owned a third company, Omega Freight Logistics, LLC, which is a freight broker. The Marins jointly manage all three companies. Following the accident, Lozano (the driver of the CMV) and his wife filed suit against JNM, ANCA, Omega, and the Marins, individually. The lawsuit alleged Lozano had been driving in violation of federal hours-of-service regulations on the trip that led to the accident and that Lozano had alerted Jorge Marin to the hours-of-service issue, but Marin requested Lozano to falsify his driver logs to continue the trip. They alleged the hours-of-service violations and lack of required rest was a cause of the accident. As an initial issue, the Supreme Court of Texas addressed whether Lozano was an employee of any of the companies, as that could affect the comparative negligence standard under Texas’s labor code. While noting that JNM and ANCA were clearly Lozano’s employer under the 49 C.F.R. 390.5 definition, the court posed whether that was the appropriate standard to apply, as opposed to the common law definition of employee, in the context of a suit by a driver against the motor carrier. In rejecting that Omega would be the employer of Lozano under either the federal statutory or common law definition, the court held the mere reference to Omega as the employer in the accident report, standing alone, was insufficient proof of employment. The court went on to hold there was no other factual support in the record to support an employment relationship, even under the broader 49 C.F.R. 390.5 definition, between Lozano and Omega. Next, the court reversed the portion of the decision that held the Marin’s individually liable under an alter ego theory of piercing the corporate veil. Under the Texas standard, “alter ego is … one of the bases for disregarding the corporate fiction. Alter ego applies when there is such unity between corporation and individual that the separateness of the corporation has ceased and holding only the corporation liable would result in injustice.” The court found the “injustice” prong was not met under the facts of the case. It found “[t]he Lozanos point to nothing in the record showing that the Marins abused the corporate form such that failing to pierce the corporate veil would result in ‘injustice’ in the sense that our alter ego cases describe that concept. One relevant consideration in the tort context is whether the corporation was ‘reasonably capitalized in light of the nature and risk of its business.’ Yet the Lozanos produced evidence at trial to demonstrate that the companies did have the resources to protect their drivers.” As such, it dismissed Omega and Ms. Marin and remanded the case for further proceedings to determine whether the damage award was excessive.

Butler v. Adorno, 2024 WL 1312477, C.A. No. 5:21-cv-182 (M.D. Ga. March 27, 2024). In this personal injury action arising from a motor vehicle accident, a motor carrier prevailed in obtaining summary judgment on negligent hiring, retention, and training causes of action. The defendant driver had two periods of employment with the motor carrier, initially between August 2018 and December 2018, and then again from April 2019 through the date of the accident. The motor carrier employed a third-party company that ran background checks and verified past employment for potential driver hires. The motor carrier also obtained a MVR going back seven years. Initially, in 2018, the driver’s MVR revealed two incidents: (1) a 2015 ticket for speeding in a non-CMV; and (2) a 2017 citation for hauling a trailer with in inoperative slack adjuster. The motor carrier reviewed these violations at the time, determined they were not disqualifying, and hired the driver. The driver had been involved in a 2008 accident while working for another motor carrier, but the 2008 accident was not contained in the MVR, which only went back seven years. It likewise was not revealed by the third-party investigator’s inquiries to prior companies. The motor carrier further required all its drivers to have two years of driving experience and provided training, including a written test on the FMCSRs, training using the Smith System, and road testing. When the driver came back to work in 2019, the motor carrier again ran his background check but did not require him to undergo additional training. In addressing the negligent hiring and retention causes of action, the Court found they presented no issue of material fact. It held there was no evidence the motor carrier knew the driver had been in another rear-end collision at the time he was hired. Further, the court noted there was no evidence that the motor carrier failed to comply with the FMCSRs, and in fact, “went beyond them” by obtaining a seven-year MVR as opposed to a three-year MVR. The motor carrier did request information from the driver’s former employers for the three years preceding the application, consistent with FMCSR requirements. The Court further found that even had the motor carrier done a complete re-investigation at the time of the driver’s re-hire in 2019, there was no evidence to suggest the 2008 accident would have been discovered. Accordingly, there was no evidence to sustain the negligent hiring and retention claims and those were dismissed. With respect to the negligent training cause of action, the Court found there was no supporting evidence, having previously excluded plaintiffs’ expert opinions for “lack of reliable data and methodology.” Additionally, it found there were no federal regulations or “other authority” mandating such training, the violation of which could support the cause of action. Accordingly, the Court likewise dismissed the negligent training cause of action. Finally, the Court dismissed the negligent maintenance cause of action, finding there was no evidence in the record establishing the tractor-trailer involved in the accident was defective in any way and/or that any such defect played a role in the accident. However, the Court denied summary judgment to the driver on the negligence claim and denied summary judgment to the motor carrier on the vicarious liability claim premised upon the driver’s negligence.

Cardenas v. Moody, 2024 WL 1257423, C.A. No. 23-cv-001048 (D. Colo. March 25, 2024). In this personal injury action, a motor carrier obtained, via a motion to dismiss at the pleadings stage, dismissal of negligent hiring, training, and supervision causes of action. The operative pleading included allegations that the motor carrier should have a training program that ensured drivers knew how to safely operate CMVs in accordance with FMCSRs and should exercise reasonable care in hiring, training, retention, and supervision of its drivers, which it was alleged the motor carrier failed to do in this instance. However, in addressing the negligent hiring cause of action, the Court noted the pleading “lacks any factual allegations that [the motor carrier] knew or should have known when it hired [the driver] that his use of its truck would pose an unreasonable risk of harm to anyone. They allege no facts concerning [the driver’s] driving history or characteristics to support a reasonable inference that he was an incompetent driver when [the motor carrier] hired him. Nor do Plaintiffs allege that [the motor carrier] failed to conduct an appropriate inquiry into [the driver’s] background or follow up on any apparent issues in connection with his hiring or that a more searching inquiry would have revealed he had dangerous propensities.” With respect to the negligent training claim, the Court found the pleading “lacks allegations that [the motor carrier] knew or should have known [the driver] presented some undue or unreasonable risk to third parties such as Plaintiffs. Nor do Plaintiffs make any factual allegations about the type of training [the driver] received, how it was deficient, or how it played a role in causing the accident.” Last, with respect to the negligent supervision claim, the Court found “[t]he lack of factual allegations that [the motor carrier] knew or had reason to know that [the driver], because of his qualities, was likely to harm others in view of the work entrusted to him is fatal to this claim as well.” Stated simply, the Court found the conclusory allegations of duties, paired with the fact the accident occurred, was insufficient to support these direct liability claims against the motor carrier.

Heath v. J.S. Helwig & Son, LLC, 2024 WL 1361873, C.A. No. 3:21-cv-119 (M.D. Ga. March 29, 2024). In this personal injury action, the motor carrier successfully had claims for negligent hiring, training, retention, supervision, and entrustment dismissed via summary judgment. Helwig, the motor carrier, hired Black as a company driver in October 2019. Helwig requires its drivers to be a minimum age; to have been driving on a Class-A CMV for at least one year in the past 3 years; and no driver can have more than three moving violations in a three-year period, no more than two moving violations in a 12-month period, and no Department of Transportation (“DOT”) reportable accidents within a period of one year. Black underwent Helwig’s hiring procedure before receiving his offer of employment which included completing Helwig’s online application and signing disclosures for background checks from consumer reporting agencies, the Federal Motor Carrier Safety Administration, the DOT, and his criminal history. On his application, Black disclosed his previous employment as a truck driver with eight other trucking companies since 2008. He reported one termination ten years before, in 2009, for a failed alcohol test. The application instructed him to disclose moving or traffic violations within the DOT’s required previous three-year-period. Black reported he had no violations within that time period, but he did include one speeding ticket for travelling nine miles over the speed limit in March 2016. Black stated he had not been involved in any accidents within the past five years, had no criminal record, and no convictions for any alcohol, drug, or driving violations. Helwig utilized third-party vendors to conduct independent investigations into Black’s background in accordance with the DOT’s three-year look-back period. The investigations included following up with Black’s previous employers for references and inquiring about any employment issues, pulling his Motor Vehicle Report, conducting criminal background checks, and obtaining a drug screening. The reports Helwig received reflected no issues with drugs or alcohol; indeed, Black’s previous employers stated Black had no issues with drugs or alcohol. Black’s drug test was negative in all respects. Black’s Motor Vehicle Report showed one violation and subsequent license suspension in 2014 for failing to pay a traffic ticket in 2013. His license was reinstated in 2015. No other violation was reflected on his record. Thus, his record reflected no moving violations in the applicable three years before his date of hire; the only moving violation reflected in his file was his self-reported speeding ticket in 2016. His record reflected no previous accidents. Before hiring Black, Helwig required, as it does every prospective employee, to complete a road test, which exceeds the Department of Transportation’s requirements. Helwig also required its new hires, including Black, to complete over 10 training modules conducted by online training vendor Infiniti-I which Black had to pass or continue retaking until he passed before driving on the road. Black passed the road test and completed each training module. Considering the foregoing evidence, the Court found plaintiff could not support each of the direct negligence claims against Helwig as required under Georgia law. Accordingly, it granted summary judgment to Helwig on the negligent training, hiring, retention, supervision, and entrustment causes of action.

BROKER

Morales v. OK Trans, Inc., 2024 WL 1349874, C.A. No. 2:19-cv-00094 (S.D. Tex. March 29, 2024). In this personal injury action arising out of an accident involving a tractor-trailer, the Court granted Penske summary judgment finding it could not be held liable for the purported negligence of the operator of the tractor-trailer. On or about December 26, 2018, in Bee County, Texas, Satnam Singh Lehal was driving a tractor-trailer owned and operated by OK Transport, Inc. (“OK Trans.”). At some point, the tractor-trailer jackknifed, crossed into the oncoming lane, and collided with a pick-up truck driven by Lyndon Dean Meyer, who died on impact. Penske previously moved for summary judgment on the basis that it acted only as a broker and not a motor carrier and therefore could not be held liable for the alleged injuries to the decedent. The Court denied that motion, finding fact issues existed as to whether Penske operated in the capacity as a broker or motor carrier. Penske subsequently moved for summary judgment, contending that even assuming arguendo it operated as a motor carrier, there was no basis for liability because it could not be the statutory employer of the driver of the tractor-trailer. Insofar as the plaintiffs did not allege employment under 49 C.F.R. part 390.5, the sole issue before the court was whether the driver was Penske’s statutory employee under the “responsibility and control” test as developed under Texas law. Under that test, the Court explained that an entity is a statutory employer if: (1) the entity is a motor carrier and not a broker; (2) it does not own the vehicle involved; (3) it is using the vehicle in interstate commerce; and (4) it does not employ the driver. Only the “interstate commerce” element was at issue in the pending motion. The Court found, consistent with various federal regulations, that a motor carrier (which Penske was assumed to be for the purpose of the motion) cannot use a vehicle in interstate commerce unless it has an arrangement with the owner or driver of the vehicle, which was absent under the facts of this case. Penske contended it could not be the driver’s statutory employer because there was no written or oral lease, or any other arrangement between Penske and the driver or OK Trans. Penske, instead, contended it contracted with Penske Transportation Management LLC (“PTM”) to broker the shipment to Liberty Lane; Liberty Lane contracted Liberty Commercial, LLC, to sub-broker the shipment to OK Trans; and OK Trans employed Lehal to drive the shipment. Penske argues that five steps removed is four steps too many; absent a “direct arrangement,” it cannot be vicariously liable for the driver’s negligence. In addressing this argument, the Court cited 49 U.S.C. § 14102(a) and found “[t]he intent of the amendments was to ensure that interstate motor carriers would be fully responsible for the operation of leased vehicles and the supervision of drivers, thus protecting the public from motor carriers who might otherwise attempt to shirk financial responsibility for accidents.” The “responsibility and control” test under Texas law developed out of the regulations applicable to leases for interstate motor carriers. The Court explained that courts applying § 14102 and the responsibility and control regulations regularly impose statutory-employer liability on motor carriers when the carrier has a direct arrangement with the owner or driver of the vehicle at issue. Conversely, the Court found no cases where a court imposed statutory-employer liability absent an arrangement between the motor carrier and the vehicle’s owner or driver. Accordingly, while the Court agreed with plaintiff that the failure to adhere to the written lease regulations would not absolve a motor carrier from statutory-employer liability, here Penske had no arrangement with OK Trans or the driver at all—not that it had an arrangement but did not formalize it via a written or oral lease. Thus, the Court reasoned “considering the text of § 14202, the responsibility and control regulations, and the relevant case law . . . an arrangement must exist between the motor carrier and the owner or driver of the vehicle at issue to trigger statutory-employer liability.” The Court went on to find that under the facts, there existed no evidence to support such an arrangement between Penske and the driver or OK Trans. As such, it granted summary judgment to Penske.

CARGO

Shaw v. United Parcel Service Inc., 2024 WL 469336, C.A. No. 3:23-cv-01996 (N.D. Tex. Apr. 4, 2024). In this case arising from an alleged refusal of UPS to pick up and make deliveries from plaintiff’s location, the Court denied the plaintiff’s motion for remand. UPS removed the case based on federal question jurisdiction under 28 U.S.C. §§ 1337 and 1445 because Carmack preempted plaintiff’s claims and the amount in controversy exceeded $10,000. Plaintiff’s original complaint alleged monetary relief for “no less than $70,000.” In his motion to remand, plaintiff offered to stipulate to damages less than $10,000, but the court rejected this as a basis to remand the case, noting that the amount contained in the active pleading was the operative amount to consider. The court further held the plaintiff’s claims fell within the purview of the Airline Deregulation Act, which provided a separate basis for federal question jurisdiction. As such, it denied the plaintiff’s motion to remand.

Flynt v. Coleman Worldwide Moving, LLC, 2024 WL 1337356, C.A. No. 4:23-cv-00327 (E.D. Tex. March 28, 2024). In this action arising from a delayed interstate move, the court granted the plaintiffs’ motion to remand. According to the plaintiffs’ Complaint, the defendants are moving service companies hired by plaintiffs for their move from Texas to Kansas. Plaintiffs’ claims arise out of defendants’ alleged failure to arrive to move plaintiffs’ belongings as scheduled. On April 27, 2022, plaintiffs and defendants entered into an Estimate and Order for Service Agreement (“the Agreement”) that defendants would arrive at plaintiffs’ residence in Lewisville, Texas on July 18, 2022, and load plaintiffs’ belongings. Defendants would then deliver plaintiffs’ belongings to plaintiffs’ new residence in Manhattan, Kansas between July 19, and July 27, 2022. Plaintiffs allege that defendants never arrived on July 18, 2022, and that defendants “admitted to improperly calendaring” plaintiffs’ move. Plaintiffs allege that because of defendants’ misrepresentations, plaintiffs were forced to make other arrangements leading to a delayed move out and additional fees to set up a rush move out with alternative company, being forced to move out without power and air conditioning in the summer heat of Texas. Further, the plaintiffs allege they had to rearrange various delivery and installation appointments at their new home, causing weeks of delays for some of their appointments and missed work. On October 11, 2022, plaintiffs sent defendants a demand letter for $9,630.63 in damages. When the demand was not met, plaintiffs filed suit on December 29, 2022, in Texas state court. Plaintiffs thereafter filed an Amended Complaint in state court on April 5, 2024. Defendants filed a Notice of Removal on April 14, 2024, and thereafter filed a Motion to Dismiss on April 18, 2024, on various grounds, including Carmack preemption. In arguing for remand, plaintiffs contended: (1) defendants were not subject to Carmack preemption because they never “received” the goods in question and therefore did not act as a motor carrier; and (2) the Notice of Removal was untimely because defendants were aware prior to the Amended Complaint that plaintiffs were seeking more than $10,000. In addressing the first argument, the Court agreed with plaintiffs. It found it lacked subject matter jurisdiction under the Carmack Amendment because the Carmack Amendment did not apply to plaintiffs’ claims. Specifically, the Court held the statute sets out three categories of carriers that may be potentially liable under the Carmack Amendment when a shipper suffers a loss: “(A) the receiving carrier, (B) the delivering carrier, or (C) another carrier over whose line or route the property is transported[.]” Here, it found the defendants did not meet any of the three categories because (1) they did not “receive” plaintiffs’ property because they never “took possession” of the property; (2) did not serve as the “delivering carrier” because defendants “did not deliver [p]laintiff’s property” and did not “connect ‘any other carrier that delivers the property’”; and (3) the property did not travel over defendants’ “line or route.” The Court likewise rejected the defendants’ argument that by “entering into the Agreement” they were providing “services related to ‘transportation’” and therefore fell within Carmack’s purview. The Court rejected that the Agreement constituted a “service related to that movement.” The Court went on to distinguish other case authorities cited by defendants on the basis that defendants never “retrieved” or “transported” plaintiffs’ items, and consequently “did not issue a bill of lading.” Accordingly, the Court granted plaintiffs’ Motion to Remand. However, they rejected the plaintiffs’ request for attorneys’ fees related to the Motion to Remand, accepting defendants’ argument that it was not until a March 30, 2023, email between the respective counsel that the plaintiffs first clearly identified they were seeking damages in excess of $10,000 dollars insofar as all pleadings prior to that did not contain a specific claimed amount. As such, it found the Notice of Removal was timely. Considering the various arguments on Carmack preemption, the Court also agreed the defendants’ removal was not “objectively unreasonable.” As such, it denied plaintiffs’ requests for attorneys’ fees and costs.

Scheuer v. Rado Express Logistics, Inc., 2024 WL 1328818, C.A. No. 23-cv-00531 (N.D. Ill. Mar. 28, 2024). In this case arising from an “interstate move gone wrong,” the court partially granted defendants’ motion to dismiss. Plaintiffs contacted Trinity Relocation Group, LLC (“Trinity”), a broker for shippers and interstate carriers, regarding a move from their Ohio residence to their Florida residence. The plaintiffs provided Trinity with detailed dates and times that the move would need to be completed by due to a pending sale of their Ohio residence and their anticipated arrival at their Florida residence. Trinity provided plaintiffs with a binding estimate for $13,381.41 for 1,496 cubic feet of property (the “Binding Estimate”). In its capacity as a broker, Trinity researched carrier options and ultimately recommended Defendant Rado to plaintiffs as the interstate carrier that would perform the move. After Rado had loaded most of the plaintiffs’ possessions onto the truck, the Rado movers approached plaintiffs to renegotiate Rado’s Interstate Bill of Lading Contract (“Rado Contract”), now that they had a “better feel” of the amount of property they were moving. The re-negotiated Rado Contract charged Plaintiffs $34,132.30, nearly three times the Binding Estimate, based in part upon an updated volume of items amounting to 3,800 cubic feet. The Rado movers told plaintiffs that this price was “final” if they “wanted their belongings delivered.” In addition, the Rado movers told Mr. Scheuer that his belongings would not arrive to his Florida residence by September 1, 2022, as previously promised. As a result, “out of fear” that their possessions would not arrive on time, plaintiffs agreed to a $5,700 “expedited delivery charge.” Despite the expedited delivery charge, plaintiffs’ property did not arrive in Florida on September 1, 2022. Instead, it arrived two days later and with no crew to unload it. The unloading crew arrived the next day, September 4, 2022, demanding the full balance of the Rado Contract, including the expedited delivery charge, before any property would be unloaded. Left with little option, plaintiffs complied and paid the full balance demanded. Adding insult to injury, while unpacking their belongings, plaintiffs discovered that various items had been damaged. Plaintiffs thereafter filed suit against Rado for violations of 49 C.F.R. § 375.401 et seq. (Count I), the Carmack Amendment, 49 U.S.C. 14706 (Count II), and the Illinois Consumer Fraud and Deceptive Business Practices Act (“ICFA”), 815 ILCS 505/1 et seq. (Count IV), and for fraudulent misrepresentation (Count III), and breach of contract (V). Rado moved to dismiss all claims against it. The court held that Count I under 49 C.F.R. § 375.401 was not preempted by Carmack Amendment, whose preemptive scope only extended to state common law causes of action but not “other federal claims.” However, the Court did find Carmack preemption “clearly” applied to the plaintiffs’ breach of contract claim. While a closer call in the Court’s view, it found Carmack likewise preempted the fraudulent misrepresentation and ICFA claims because they were not “sufficiently distinct from the contract of carriage.” Accordingly, it allowed plaintiff’s claims under 49 C.F.R. 375.401 and the Carmack Amendment claim to survive the motion to dismiss.

COVERAGE

Smallwood v. ACE Property & Casualty Ins. Co., 2024 WL 1742240, C.A. No. 3:23-cv-67 (E.D. Va. April 23, 2024). This declaratory judgment insurance coverage action arose from an accident in which the plaintiff was injured when an individual was attempting to unload materials from a trailer. Plaintiff was hired to oversee the transportation and delivery of materials to an Express Oil Change location that was under construction. Plaintiff was acting in that capacity when he requested Alstop Trucking provide a flatbed tractor trailer and driver to assist him in picking up and transporting construction materials to the jobsite. Due to limited space at the jobsite, each trailer had to be offloaded one side at a time. In connection therewith, the “site supervisor” (non-Alstop employee) utilized a Bobcat skid steer to offload materials from the Alstop trailer. While attempting to unload the materials from the Alstop trailer, the site supervisor caused the Bobcat to overturn and the materials fell off the Bobcat onto Plaintiff. ACE insured Alstop under a Commercial Auto Liability Policy and the involved Alstop tractor trailer was insured under the ACE Policy. Plaintiff made a claim for UM benefits under the ACE Policy. The Court, in addressing potential UM coverage under the ACE Policy, found Plaintiff did not qualify as an “insured” under the ACE Policy because Plaintiff was not “using” or “occupying” the Alstop tractor or trailer at the time of the Accident. Specifically, the Court found Plaintiff was not “using” the Alstop tractor trailer at the time of the Accident. It noted Plaintiff was around 10 feet from the tractor trailer when the Bobcat tipped and was involved in transportation separate from—and nonessential to the use of—the tractor trailer. Similarly, the Court found Plaintiff was not “occupying” the Alstop tractor trailer because he away from the tractor trailer and his actions in directing the Bobcat “were not ‘immediately related to the occupancy’ of the Alstop tractor trailer.” As an additional or alternative ground, the Court held that the Bobcat was not an “uninsured motor vehicle” sufficient to trigger coverage under the ACE Policy’s UM endorsement. For each of these reasons, the Court held the ACE Policy did not afford UM coverage under its clear terms, and accordingly dismissed the DJ action against ACE.

Pious Trans, Inc. v. Certain Underwriters at Lloyd’s London, 2024 WL 1710171, Case No. 23A-PL-3044 (Ind. Ct. App. Apr. 22, 2024). In this insurance coverage dispute, the Indiana Court of Appeals affirmed summary judgment in favor of the insurer under a physical damage insurance policy to the motor carrier. In July of 2020, Pious Trans, Inc., which is owned and operated by Gagandeep Singh, hired Yadwinder Singh (“Singh”), who had been issued a New York Class A commercial driver’s license (“CDL”) approximately sixteen months previously. In December of 2020, Certain Underwriters at Lloyd’s, London (“Underwriters”), issued a physical-damage insurance policy to Pious (“the Policy”). In April of 2021, Pious added Singh and a tractor-trailer with a gross weight of over 26,001 pounds (“the Freightliner”) to their Policy coverage. In August of 2023, Singh was operating the Freightliner and was involved in a collision with another tractor-trailer. After Underwriters denied Pious’s claim arising from the collision, Pious, Gagandeep, and Singh (“Appellants”) sued the other driver for negligence and Underwriters and Pious’s insurance agent for breach of contract and bad-faith denial of their claim. Underwriters moved for summary judgment on the questions of coverage and bad faith, which motion the trial court granted. The Underwriters Policy at issue included specific requirements for coverage, including that the vehicle be operated by a driver “who at inception of this Policy or at the date of hire, whichever is the later, provides documented evidence of an MVR not more than 60 days old or not older than the date of loss if the driver is involved in a claim showing that they: [….] 2. Have a minimum two (2) years (twenty-four (24) consecutive months) of Commercial Driver’s License experience, at the time of policy inception or date of hire, whichever is the later, driving similar equipment to that insured under this Policy.” When Pious added the Freightliner as a scheduled vehicle and Singh as a scheduled driver, it incorrectly listed his hire date as April 1, 2021, instead of July 6, 2020. Underwriters denied the claim arising from the August 3, 2021, accident, citing the lack of required 2 years CDL experience by Singh at the time the Policy issued. The Court found that the Policy was not ambiguous in defining “commercial driver’s license” and that Singh’s Class E New York license was not equivalent to a CDL. As such, Underwriters was entitled to deny coverage for the Accident and the appellate court affirmed the summary judgment ruling in favor of Underwriters.

Harco Nat’l Ins. Co. v. Knowles, 2024 WL 979231, Case No. A23A1263, A23A1264 (Ga. Ct. App. March 7, 2024, review denied March 26, 2024). In this insurance coverage declaratory judgment action, the Court agreed with the insurer that the loss was excluded from coverage under the automobile and CGL policies because it involved a work-related injury that fell within the exclusions within the respective policies. The undisputed record shows that in the spring of 2018, Popwell began working for EKI as a “cut down man” in a commercial logging operation. His job was to operate a machine called a feller buncher to cut trees in a controlled manner so that they could be loaded onto trucks. He reported to work when and where directed by EKI, and he was paid every week based on the weight of the wood he cut. Walter Knowles was Popwell’s supervisor. With respect to the details of the accident, Popwell testified that on May 3, 2018, he was working at a wooded job site along with Knowles and other personnel. Knowles determined the hours Popwell worked, which fluctuated depending on when they finished loading trailers with logs. According to Popwell’s deposition, around mid-day, he stopped work to eat lunch. He got in his personal vehicle to drive to a nearby store that sold fried chicken, and as he was leaving the logging area on a dirt road, he soon noticed that Knowles was operating a skidder and pushing a loaded truck that needed extra traction to navigate the unpaved road. Popwell put his vehicle in park (facing the skidder) to wait for the operation to finish; when Knowles got the loaded truck moving sufficiently, he turned the skidder around and headed in Popwell’s direction. As Popwell remained stationary in his vehicle, Knowles accidentally drove the skidder into and onto Popwell’s vehicle, causing multiple injuries to him. Popwell initially received workers’ compensation payments from Forestry (EKI’s carrier) for a few weeks, but thereafter, a dispute arose regarding workers’ compensation coverage, and Popwell sued EKI and Walter Knowles. To get clarity as to its coverage obligations, Harco filed the present action seeking: a declaration that Popwell was acting within the scope of his employment at the time he was injured, that his injuries are compensable under the Workers’ Compensation Act (“the WCA”), and that Harco’s WCA exclusions in the policies issued to EKI preclude coverage. The Court’s opinion focused upon Georgia-specific rules for injuries during a mid-shift lunch break. It explained “[t]he Supreme Court of Georgia has clarified that even though eating lunch is not the actual work an employee is hired to do, an ordinary mid-day lunch break on the employer’s premises is still considered to be ‘in the course of’ employment for purposes of the WCA. This is because eating lunch at the workplace is an activity incidental to work and ‘reasonably necessary to sustain [an employee’s] comfort at work.’” The Court noted the unrefuted testimony established that Popwell was sitting in his vehicle in the process of leaving the job site to go to lunch when he was hit by the skidder that was being operated in connection with the logging operations. It further noted that Popwell had “not yet” left the logging area. Putting all this together, the Court determined Popwell was “still in the logging area on his lunch break and was not otherwise engaged in a personal activity outside the scope of his employment.” The collision was “a risk ‘reasonably incident’ to Popwell’s employment in the logging operation.” As such, the injuries fell within the exclusions to coverage under the Harco policies.

WORKERS COMPENSATION

Shock v. LAC Logistics, LLC, 2024 WL 1653528, C.A. No. 1:24-cv-83 (N.D. Ind. Apr. 16, 2024). In this action arising from an alleged on-the-job injury and alleged retaliatory discharge, the court granted plaintiff’s motion to remand, finding it lacked subject matter jurisdiction over the dispute. Plaintiff was employed by defendant as a CDL driver. Plaintiff claimed that in June 2023 he sustained an on-the-job injury for which he sought workers compensation benefits. Defendant denied the workers compensation claim. Thereafter, in August 2023, defendant directed plaintiff to drive a route from Ohio to North Carolina. Plaintiff alleges he refused, citing that he was over on his hours of service (“HOS”) and was required to rest. Plaintiff claims defendant advised him to run the route under the agricultural exemption to the HOS. Plaintiff claims the load did not fall within the agricultural exemption and again refused the load, following which the defendant fired him. Plaintiff filed a lawsuit in Indiana state court alleging two counts: (1) wrongful termination under the Indiana Workers Compensation Act; and (2) wrongful termination for refusing to engage in unlawful conduct. The defendant removed the action to federal court, citing the Motor Carrier Safety Act, 49 U.S.C. § 31101 et seq., as the sole basis of removal. The federal court sua sponte requested briefing on the issue of federal jurisdiction. Plaintiff likewise moved to remand the case to state court. Defendant acknowledged “Plaintiff has relied exclusively on state law in bringing this action,” but nevertheless contended federal question jurisdiction exists because plaintiff’s refusal to accept the route was based on plaintiff’s belief that doing so would violate federal regulations. Noting that the nature of plaintiff’s claims was solely for wrongful discharge under Indiana state law and that defendant’s “potential assertion that it complied with federal law is of no consequence” because defenses do not establish federal question jurisdiction, the court remanded the action to state court.

JNM Express, LLC v. Lozano

NOTICE: THIS OPINION HAS NOT BEEN RELEASED FOR PUBLICATION IN THE PERMANENT LAW REPORTS. UNTIL RELEASED, IT IS SUBJECT TO REVISION OR WITHDRAWAL.

Supreme Court of Texas.

JNM EXPRESS, LLC, ANCA Transport, Inc., Omega Freight Logistics, LLC, Jorge Marin, and Silvia Marin, Petitioners,

Lauro LOZANO Jr. and Irene Lozano, Respondents

No. 21-0853

OPINION DELIVERED: April 19, 2024

Synopsis

Background: Injured tractor-trailer driver and his wife brought action against trucking and brokerage companies for whom driver worked and companies’ owners for negligence and gross negligence, arising out of accident in which driver fell asleep and crashed into another tractor-trailer. The 93rd District Court, Hidalgo County, Fernando G. Mancias, J., entered judgment on jury verdict in favor of driver and wife, in combined amount of over $5 million in actual damages and in the amount of $25 million in exemplary damages against each company individually, and then subsequently granted companies and owners’ motion to modify judgment and reduced the exemplary damages to approximately $2.9 million per company, resulting in a total judgment of over $13.7 million. Companies and owners appealed. The Corpus Christi – Edinburg Court of Appeals, 627 S.W.3d 682, affirmed in part, reversed portion of judgment holding owners jointly and severally liable for the exemplary damages, and rendered judgment holding the owners not jointly and severally liable on the exemplary damages awards. Owners filed petition for review, which was granted.

Holdings: The Supreme Court held that:

^[1] defense counsel preserved for appellate review the argument that state common-law definitions of “employer” and “employee,” rather than definitions from Federal Motor Carrier Safety Regulations, applied to the action;

^[2] evidence was legally insufficient to support finding that driver was employee of brokerage company under either federal regulations or state’s common law; and

^[3] “injustice” prong for piercing the corporate veil of trucking companies was not satisfied.

Judgment of Court of Appeals reversed in part, rendered in part, and remanded.

West Headnotes (13)

[1] Workers’ Compensation

Under section of Workers’ Compensation Act governing employee’s personal-injury action against his or her employer, when the employer is a nonsubscriber under the Act, a nonsubscriber employer is not entitled to a jury question on its employee’s alleged comparative responsibility. Tex. Labor Code Ann. § 406.033.

[2] Carriers

Federal Motor Carrier Safety Regulations impose various duties on motor carriers who classify their drivers as independent contractors in order to avoid liability for the drivers’ negligence. 49 U.S.C.A. § 31132(2, 3); 49 C.F.R. § 390.5.

[3] Appeal and Error

Counsel for trucking and brokerage companies preserved for appellate review their argument that state common-law definitions of “employer” and “employee,” rather than definitions from Federal Motor Carrier Safety Regulations, applied in negligence and gross negligence action brought by tractor-trailer driver and his wife to recover for injuries sustained by driver in accident; although companies’ arguments on appeal were more nuanced, defense counsel objected at jury charge conference to use of federal regulations’ definitions and argued that state pattern jury charge should have been used, counsel alternatively objected to specific application of federal regulations’ definitions to brokerage company, and companies repeatedly made similar arguments both before and after charge conference. 49 U.S.C.A. § 31132(2, 3); Tex. R. Civ. P. 274; 49 C.F.R. § 390.5.

[4] Trial

Pattern jury charges are not themselves the law, and courts must depart from a pattern jury charge when doing so is necessary to accurately state the law or submit a question to the jury.

[5] Labor and Employment

Evidence was legally insufficient to support finding that tractor-trailer driver, who was injured in accident, was employee of brokerage company, which matched truck loads with trucking companies, under either Federal Motor Carrier Safety Regulations or state’s common law, in driver and his wife’s action against brokerage company and trucking companies for negligence and gross negligence, although crash report from the accident listed brokerage company as driver’s employer; report did not explain basis for the employer reference, nothing in record confirmed provenance or accuracy of the report’s employer reference, there was no evidence that brokerage company had assigned driver to any drive, and driver acknowledged that he was not working for brokerage company at time of crash. 49 U.S.C.A. § 31132(2, 3); 49 C.F.R. § 390.5.

[6] Carriers

Definition of “employee” under Federal Motor Carrier Safety Regulations eliminates the common law employee/independent contractor distinction in order to discourage motor carriers from using the independent contractor relationship to avoid liability exposure at the expense of the public. 49 U.S.C.A. § 31132(2, 3); 49 C.F.R. § 390.5.

[7] Corporations and Business Organizations

“Injustice” prong for piercing corporate veil on alter ego theory was not satisfied with regard to trucking companies for which injured tractor-trailer driver was working at time of accident, and thus alter ego theory did not provide basis for piercing corporate veil and holding trucking companies’ owner and his wife individually liable in driver and his wife’s action for negligence and gross negligence, although companies had opted out of workers’ compensation; nothing in record indicated that owner or wife abused the corporate form, and there was evidence that companies had the resources to protect their drivers. Tex. Labor Code Ann. § 406.002(a).

[8] Corporations and Business Organizations

Alter ego applies, supporting piercing of corporate veil, when there is such unity between corporation and individual that the separateness of the corporation has ceased and holding only the corporation liable would result in injustice.

[9] Corporations and Business Organizations

The “injustice” prong of the alter ego basis for piercing the corporate veil requires more than a judge’s or juror’s subjective perception of unfairness in holding only the corporation liable.

[10] Corporations and Business Organizations

The “injustice” prong of the alter ego basis for piercing the corporate veil references the kinds of abuse that the corporate structure should not shield, like fraud, evasion of existing obligations, circumvention of statutes, monopolization, criminal conduct, and the like; such abuse is necessary before disregarding the existence of a corporation as a separate entity.

[11] Corporations and Business Organizations

To satisfy the “injustice” prong of the alter ego basis for piercing the corporate veil, a plaintiff must prove that he has fallen victim to a basically unfair device by which a corporate entity has been used to achieve an inequitable result.

[12] Corporations and Business Organizations

In determining whether the “injustice” prong of the alter ego basis for piercing the corporate veil has been satisfied, one relevant consideration in the tort context is whether the corporation was reasonably capitalized in light of the nature and risk of its business.

[13] Corporations and Business Organizations

Standing alone, a corporate employer’s choice not to participate in workers’ compensation system cannot compel the unrelated finding of “injustice” necessary to satisfy the injustice prong of the alter ego analysis for piercing employer’s corporate veil. Tex. Labor Code Ann. § 406.002(a).

On Petition for Review from the Court of Appeals for the Thirteenth District of Texas

Attorneys and Law Firms

Gail Brownfeld, Hector J. Torres, Aaron Ian Vela, Laura P. Haley, Donna Peavler, for Petitioners.

Brandy Wingate Voss, Ricardo Pumarejo Jr., Raymond L. Thomas Jr., McAllen, Melissa G. Thrailkill, for Respondents.

Opinion

PER CURIAM

*1 Following a jury trial, the district court rendered a substantial judgment for a truck driver and his wife against several trucking companies and their owners. The court of appeals largely affirmed that judgment. We reverse in part, render judgment in part, and remand for the court of appeals to consider the remaining issues in accordance with this opinion.

While driving an eighteen-wheeler from Texas to Maryland in May 2015, truck driver Lauro Lozano fell asleep and crashed into another tractor-trailer. He was flown to an area hospital, where he stayed for about a month with severe injuries, including multiple fractured and shattered bones. At the time of the accident, Mr. Lozano was driving a truck owned by JNM Express, LLC, but leased to ANCA Transport, Inc. JNM and ANCA are both solely owned by Jorge Marin, and the two companies share equipment and drivers. Mr. Marin and his wife, Silvia, jointly own a third business relevant to this lawsuit, Omega Freight Logistics, LLC. Omega is a brokerage company; it matches truck loads with companies like JNM and ANCA but claims that it neither owns trucks nor employs truck drivers. Mr. and Mrs. Marin both manage each of the three companies.

Mr. Lozano and his wife, Irene, sued JNM, ANCA, Omega, and the Marins individually.¹ The Lozanos alleged that Mr. Lozano had been driving in violation of federal hours-of-service regulations on the trip that led to the accident—and that Mr. Lozano had alerted Mr. Marin to this problem when Mr. Marin asked him to make the trip. Mr. Marin’s response, the Lozanos said, was to instruct Mr. Lozano to falsify his logbook to make it reflect that he had taken the required off-duty hours. According to the Lozanos, Mr. Lozano complied with this directive out of concern that he would otherwise lose his job. They also alleged that the accident occurred because Mr. Marin pressured Mr. Lozano to drive without the required rest.

The Lozanos asserted negligence and gross negligence claims against both Mr. and Mrs. Marin and the companies. The Lozanos sought actual damages from all defendants and exemplary damages from JNM and Mr. Marin.² The Lozanos further asked the court to pierce the corporate veil and hold the Marins jointly and severally liable with each other and with the three companies.

After a trial, the jury found that Mr. Lozano was acting as an employee for all three companies and that the negligence and gross negligence of all three companies proximately caused the accident. The jury awarded Mr. Lozano nearly $3.9 million in damages for past and future physical pain and mental anguish, loss of earning capacity, disfigurement, and physical impairment, as well as medical expenses paid by Blue Cross Blue Shield.³ The jury also awarded Mrs. Lozano over $1.1 million in damages for past and future loss of household services and past and future loss of consortium.⁴ The jury awarded $25 million in exemplary damages from each of the three companies, totaling $75 million; no question was submitted about exemplary damages for Mr. or Mrs. Marin.⁵ Finally, the jury also pierced the corporate veil as to both Mr. and Mrs. Marin with respect to each of the companies. The jury was not, however, asked to make any finding about whether the companies were alter egos of each other.

*2 The trial court rendered judgment in accordance with the jury’s verdict, holding all five defendants—both of the Marins and each of the companies—jointly and severally liable for all actual-damages awards. The court held the Marins jointly and severally liable with each respective company for the award of exemplary damages against that company, but no company was held jointly and severally liable for the exemplary damages awarded against any other company. The court later amended the judgment to reduce the exemplary damages to approximately $2.9 million per company under Section 41.008(b) of the Civil Practice and Remedies Code. This resulted in a total judgment, not including prejudgment interest, of over $13.7 million.

With one exception, the court of appeals affirmed the trial court’s judgment. The exception was to eliminate the Marins’ joint and several liability for the exemplary damages awarded against the companies.⁶ 627 S.W.3d 682, 703 (Tex. App.—Corpus Christi–Edinburg 2021). In otherwise affirming, the court concluded the evidence was sufficient to support the jury’s “finding that all three of the [companies] were the employers of [Mr. Lozano]” and to support the “jury’s alter ego finding and hold the Marins jointly and severally responsible for the actions of the [companies].” Id. at 694, 701. The Marins petitioned for this Court’s review.

^[1]The Marins and the companies argue that the court of appeals erred in numerous respects as to whether they could be held liable at all and, if so, whether the damages awarded were excessive. Several issues, however, depend to some degree on the first step of the analysis: resolving whether Mr. Lozano was an employee. The answer to this question, for example, may determine whether the companies and the Marins were entitled to a comparative-negligence instruction,⁷ which would have allowed the jury to assess whether Mr. Lozano himself bore some responsibility for choosing to continue driving despite being fatigued. See Tex. Lab. Code § 406.033(a)(1).⁸ This issue in turn implicates other questions related to liability and whether the damages were excessive.

^[2]Petitioners contend that Mr. Lozano was not the companies’ employee. They argue that (1) the trial court improperly defined “employer” and “employee” in the jury charge by using the definitions from the Federal Motor Carrier Safety Regulations (“federal regulations”)⁹ rather than using the state common-law definitions; and (2) properly defined, neither JNM, ANCA, nor Omega was Mr. Lozano’s employer. JNM and ANCA were clearly Mr. Lozano’s employer under the federal regulations’ definitions. See 49 C.F.R. § 390.5; see also 49 U.S.C. § 31132(2)-(3) (statutory basis for the federal regulations). Several points, however, are less obvious, including (1) whether the federal regulations impose a duty on motor carriers that runs to their drivers rather than only members of the public whom such drivers might injure,¹⁰ which implicates whether the federal regulations’ definitions may properly be used in a tort suit brought by a driver; and (2) whether the federal regulations’ definitions of “employer” and “employee” preempt the state-law analysis for determining employment status for purposes of the workers’-compensation system and state tort law.¹¹

*3 The court of appeals did not reach these issues. It held that petitioners failed to preserve their objection to using the federal regulations’ definitions because their objection did not explain their reasoning for why the common-law definitions should apply instead. 627 S.W.3d at 692. According to the court, petitioners only “complained that the definition did not apply to Omega,” and their “objection made no mention of ANCA or JNM.” Id. But, the court concluded, “none of the objections to the charge raised on appeal comport with the objections appellants made to the trial court.” Id.

^[3] ^[4]We disagree with the court of appeals’ conclusion on preservation. At the charge conference, defense counsel objected to the use of the federal regulations’ definitions at all, arguing that the trial court should have used the Texas Pattern Jury Charge instead.¹² Counsel alternatively objected to the specific application of the federal regulations’ definitions to Omega.¹³ The trial court overruled these objections. Petitioners’ arguments on appeal are more nuanced than at the charge conference, but the upshot is the same: the jury charge should have used the common-law definitions from the Pattern Jury Charge, not the federal regulations’ definitions.¹⁴

Petitioners repeatedly made similar arguments both before and after the charge conference, using common-law considerations (not the federal regulations’ definitions) to argue that no defendants, and certainly not all, were Mr. Lozano’s employer. Their answer to the Lozanos’ petition also stated that Mr. Lozano was not their employee. This sufficiently put the trial court on notice of the objection. See Tex. R. Civ. P. 274; Thota v. Young, 366 S.W.3d 678, 689 (Tex. 2012) (“[T]he procedural requirements for determining whether a party has preserved error in the jury charge are explained by one basic test: whether the party made the trial court aware of the complaint, timely and plainly, and obtained a ruling.” (internal quotation marks omitted)).

*4 The point of this discussion is that, because of the court of appeals’ mistaken view of preservation, that court has not yet considered the merits of whether the trial court correctly used the federal regulations’ definitions in the jury charge. We remand the case to that court so that it may do so in the first instance. If the federal regulations’ definitions should not have been used, then the court of appeals should address whether JNM and ANCA constitute an “employer” under state law and in the context of this case.¹⁵ See Waste Mgmt. of Tex., Inc. v. Stevenson, 622 S.W.3d 273, 277-80 (Tex. 2021) (applying the common-law right-to-control test to determine employment status under the Workers’ Compensation Act).

Properly resolving Mr. Lozano’s employment status is particularly important because it may affect several additional issues, most prominently whether petitioners were entitled to a comparative-negligence defense, which in turn would implicate the alleged excessiveness of damages and perhaps even whether any defendant may be liable for damages at all.¹⁶ In addition, the court of appeals’ analysis of whether petitioners owed a tort duty to Mr. Lozano rests on the applicability of the federal regulations’ duty to drivers (not just to the public), as well as the characterization of Mr. Lozano as an employee. Because of the issues the employer–employee determination may implicate, it is premature for this Court to address most of the remaining issues, which we therefore leave to the court of appeals to address to the extent needed.

^[5] ^[6]We may resolve two issues now, however, which will narrow the scope of the case on remand. First, we hold that the evidence is legally insufficient for a finding that Mr. Lozano was Omega’s employee under either the federal or common-law definition of “employee.” The federal regulations’ definition, on which the trial court relied, broadly defines “[e]mployee” as

any individual, other than an employer, who is employed by an employer and who in the course of his or her employment directly affects commercial motor vehicle safety. Such term includes a driver of a commercial motor vehicle (including an independent contractor while in the course of operating a commercial motor vehicle), a mechanic, and a freight handler.

49 C.F.R. § 390.5 (emphasis added). This definition “eliminat[es] the common law employee/independent contractor distinction” in order “to discourage motor carriers from using the independent contractor relationship to avoid liability exposure at the expense of the public.” See Consumers Cnty. Mut. Ins. Co. v. P.W. & Sons Trucking, Inc., 307 F.3d 362, 366 (5th Cir. 2002).¹⁷

But the employee must still be “employed by” the employer, either directly or as an independent contractor. See 49 C.F.R. § 390.5. Drivers who work “on a load-by-load basis” for the employer, see Consumers Cnty., 307 F.3d at 363, or who work “occasionally” for the employer, see Ooida Risk Retention Grp., Inc. v. Williams, 579 F.3d 469, 474 (5th Cir. 2009) (discussing Consumers Cnty., 307 F.3d at 363-64, and 49 C.F.R. § 390.5), could qualify as being “employed by” the employer. See also Independent Contractor, Black’s Law Dictionary (11th ed. 2019) (“Someone who is entrusted to undertake a specific project but who is left free to do the assigned work and to choose the method for accomplishing it.”).

*5 Here, however, the only evidence supporting an employment relationship of any kind between Omega and Mr. Lozano at the time of the accident is the crash report from the accident. The report listed Omega as Mr. Lozano’s employer and as the vehicle’s owner, and the report stated Omega’s US DOT number. This third-party crash report, standing alone, does not reveal the nature of a potential employment relationship between Omega and Mr. Lozano. The report does not explain the basis of its reference to Omega, and we have been presented with nothing in the record that confirms that reference’s provenance or accuracy.¹⁸ It amounts to an ipse dixit and thus constitutes legally insufficient evidence.

The court of appeals determined that an employment relationship existed by approaching the matter in another way. That court observed that “Omega, as the dispatcher, had the opportunity to assign a different driver to this particular drive but instead assigned [Mr. Lozano].” 627 S.W.3d at 694. The Lozanos assert this point in their merits brief. We need not decide whether this point would be sufficient if the record supported it because the only record basis that the Lozanos cite is Mr. Marin’s general testimony about Omega, which does not support the assertion at all. Mr. Marin testified that Mr. Lozano “never worked for Omega,” at least not before the accident. Nowhere on the cited pages does Mr. Marin say that Omega assigned Mr. Lozano to the particular drive or, for that matter, to any drive. The Marins, moreover, direct us to Mr. Lozano’s testimony, in which he (1) acknowledged that he was not working for Omega at the time of the crash and (2) struggled to explain why he was even suing Omega.

The parties have not identified any other evidence, and the evidence that we have just described is legally insufficient to establish an employment relationship under either the federal regulations’ definition of “employee” or our common law, which retains the independent-contractor distinction. See Waste Mgmt. of Texas, Inc. v. Stevenson, 622 S.W.3d 273, 277 (2021) (“[The] test to determine whether a worker is an employee rather than an independent contractor is whether the employer has the right to control the progress, details, and methods of operations of the work.” (quoting Limestone Prods. Distrib., Inc. v. McNamara, 71 S.W.3d 308, 312 (Tex. 2002))). Without other evidence to support any liability against Omega apart from its supposed status as Mr. Lozano’s employer, we render judgment that the Lozanos take nothing against Omega. Omega, therefore, should not be part of further proceedings in the lower courts.

^[7] ^[8]Second, the court of appeals erred in affirming the jury’s alter ego finding as justification for piercing the corporate veil. See Castleberry v. Branscum, 721 S.W.2d 270, 272 (Tex. 1986) (observing that “alter ego is … one of the bases for disregarding the corporate fiction”). “Alter ego applies when there is such unity between corporation and individual that the separateness of the corporation has ceased and holding only the corporation liable would result in injustice.” Id. (emphasis added). We confine our analysis to whether the Lozanos have satisfied the “injustice” prong and conclude that they have not.

*6 ^[9] ^[10] ^[11]The “injustice” prong requires more than a judge’s or juror’s “subjective perception of unfairness.” SSP Partners v. Gladstrong Invs. (USA) Corp., 275 S.W.3d 444, 455 (Tex. 2008). Instead, it references “the kinds of abuse … that the corporate structure should not shield,” like “fraud, evasion of existing obligations, circumvention of statutes, monopolization, criminal conduct, and the like.” Id. “Such abuse is necessary before disregarding the existence of a corporation as a separate entity.” Id. A “plaintiff must prove that he has fallen victim to a basically unfair device by which a corporate entity has been used to achieve an inequitable result.” Lucas v. Tex. Indus., Inc., 696 S.W.2d 372, 375 (Tex. 1984).

^[12] ^[13]The court of appeals erred because it did not address the injustice prong. Had it done so, it would have recognized that the evidence here does not satisfy that prong’s standard. The Lozanos point to nothing in the record showing that the Marins abused the corporate form such that failing to pierce the corporate veil would result in “injustice” in the sense that our alter ego cases describe that concept. One relevant consideration in the tort context is whether the corporation was “reasonably capitalized in light of the nature and risk of its business.” Id. Yet the Lozanos produced evidence at trial to demonstrate that the companies did have the resources to protect their drivers.¹⁹

In short, the court of appeals and the Lozanos relied on evidence that is legally insufficient to pierce the corporate veil between either of the Marins (especially Mrs. Marin, who was not an owner) and JNM or ANCA. Further proceedings should therefore not involve alter ego considerations. This conclusion also means that Mrs. Marin should be removed as a defendant. The Lozanos allege that Mr. Marin, not Mrs. Marin, instructed Mr. Lozano to falsify the logs on the trip in question. The Lozanos point to no evidence that Mrs. Marin’s own negligence caused the accident. Without alter ego liability, there is no possibility that Mrs. Marin could be held individually liable. We therefore render judgment that the Lozanos take nothing from Mrs. Marin.

The outcome on remand will implicate many other issues here, such as the preservation issues about whether the damages were excessive. It is therefore premature for this Court to opine on any other currently disputed matters. Accordingly, without hearing oral argument, we grant the petition for review, reverse the court of appeals’ judgment, render judgment in part, and remand the case to the court of appeals for further proceedings consistent with this opinion. See Tex. R. App. P. 59.1.

All Citations

— S.W.3d —-, 2024 WL 1685012

Footnotes

Petitioners in this Court are JNM, ANCA, and Omega (the “companies”), Mr. Marin, and Mrs. Marin. Mr. and Mrs. Lozano are the respondents.
The trial court ultimately awarded exemplary damages against each company.
The breakdown of these damages is as follows: (1) past physical pain and mental anguish: $300,000; (2) future physical pain and mental anguish: $700,000; (3) past loss of earning capacity: $46,000; (4) future loss of earning capacity: $550,000; (5) past disfigurement: $500,000; (6) future disfigurement: $600,000; (7) past physical impairment: $250,000; (8) future physical impairment: $750,000; and (9) medical expenses paid by Blue Cross Blue Shield: $184,006.34.
This number includes: (1) past loss of household services: $100,000; (2) future loss of household services: $200,000; (3) past loss of consortium: $275,000; and (4) future loss of consortium: $550,000.
Petitioners complained below that the trial court erred in submitting jury charge questions about ANCA’s and Omega’s alleged gross negligence and liability for exemplary damages, as the Lozanos had not asked for exemplary damages against those two companies in their pleadings. The court of appeals concluded this issue was waived. See 627 S.W.3d 682, 693 (Tex. App.—Corpus Christi–Edinburg 2021). In their merits brief in this Court, petitioners include this issue among the issues presented but do not address or analyze it until their reply brief. We conclude the issue is not properly before us. Should the court of appeals decide that a new trial is required, see infra note 15, the trial court would again have to determine how to submit the case to the jury, and the parties would be able to present their respective arguments about whether and against whom exemplary damages may be sought.
Respondents have not challenged that portion of the judgment below, which we leave undisturbed.
While we analyze the definitions of “employer” and “employee” that the trial court used in the jury charge, it is premature for this Court to resolve, and we express no opinion regarding, the instructions, definitions, or questions (if any) to which the companies and the Marins were entitled.
“Labor Code § 406.033, which is part of the Workers’ Compensation Act, governs an employee’s personal-injury action against his or her employer, when the employer is a nonsubscriber under the Act.” Kroger Co. v. Keng, 23 S.W.3d 347, 349 (Tex. 2000). A “nonsubscribing employer is not entitled to a jury question on its employee’s alleged comparative responsibility.” Id. at 352. As the court of appeals in this case observed, petitioners “do not dispute that the [companies] are nonsubscribing employers.” 627 S.W.3d at 693.
Without commenting on their legal merits, we note that Texas state courts have dealt with these federal regulations in the context of state-law tort actions. See, e.g., Pilgrim’s Pride Corp. v. Burnett, No. 12-10-00037-CV, 2012 WL 381714, at *9 (Tex. App.—Tyler Feb. 3, 2012, no pet.) (“[S]everal Texas cases have held that a violation of an administrative regulation such as the FMCSRs, in appropriate cases, serves as a basis for a negligence finding.”); Omega Contracting, Inc. v. Torres, 191 S.W.3d 828, 839 (Tex. App.—Fort Worth 2006, no pet.) (“Several Texas cases consider sections of the FMCSR in the negligence per se context ….”). Our analysis does not reach so far; it is limited to the applicability of the federal regulations’ definition of “employee” within the context of this case.
The federal regulations “impose various duties on motor carriers who classify their drivers as independent contractors in order to avoid liability for the drivers’ negligence.” Gonzalez v. Ramirez, 463 S.W.3d 499, 502 (Tex. 2015).
See, e.g., Simpson v. Empire Truck Lines, Inc., 571 F.3d 475, 476-77 (5th Cir. 2009) (holding that the federal regulations and a particular statutory provision did not preempt a related provision regarding employment status for motor carriers and owner–operators in the Texas Workers’ Compensation Act).
“Question No. 1, Your Honor, I object to the use of those three instructions that are following Question No. 1…. It defines ‘employee’—if I could hand this to the Court, Your Honor, and a copy for [plaintiffs’ counsel]. That’s 10.1 of the Pattern Jury Charge. The definition that it uses is for ‘employee,’ but [plaintiffs’ counsel] has put on there some—a different definition for ‘employee,’ an instruction for ‘employer,’ and another instruction that he added, and we object to all of those.”
“[A]nd then [plaintiffs’ counsel has] got some case law. Your Honor, [his] cases here have to do with motor carriers and their drivers under the Federal regulations. Omega Freight, which is the last one on the list is not a motor carrier. It’s not a driver. It’s a broker. So, these definitions would not apply to Omega Freight. So, that’s my further objection, Your Honor.”
It is certainly true that pattern jury charges are not themselves the law, and courts must depart from a pattern jury charge when doing so is necessary to accurately state the law or submit a question to the jury. See Ford Motor Co. v. Ledesma, 242 S.W.3d 32, 45 (Tex. 2007). But asking a trial court to follow them is hardly out of the ordinary. “[O]ur trial courts routinely rely on the Pattern Jury Charges in submitting cases to juries, and we rarely disapprove of these charges.” Id. The Lozanos acknowledge that “Petitioners proffered Pattern Jury Charge 10.1.” See also supra note 12. The objection to the Lozanos’ proposed charge preserved for appeal the issue of whether the pattern jury charge was the correct expression of the law.
If the court of appeals determines that incorrect definitions were used, that court may further determine whether a new trial is necessary to address related questions like whether the entities are “employers” (or if a new trial is necessary because of the consequences of the entities being “employers” under state law, such as the need for a jury to consider previously unavailable defenses). This opinion neither compels nor forecloses the need for—or outcome of—a new trial.
See Tex. Civ. Prac. & Rem. Code § 33.001 (“In an action to which [the proportionate-responsibility statute] applies, a claimant may not recover damages if his percentage of responsibility is greater than 50 percent.”).
“Section 390.5 provides the only definition of the term ‘employee’ used in the federal motor carrier safety regulations, a subchapter of the Department of Transportation regulations.” Consumers Cnty., 307 F.3d at 366 n.4 (citing 49 C.F.R. §§ 350-399).
From our independent review of the record, we note that Mr. Marin also testified about a “bill of lading” that may have identified Omega as the motor carrier. In their brief’s statement of the facts, the Lozanos observe that although the “packet for this trip did not include the bill of lading,” Mr. Marin admitted “the bill of lading could have included Omega as the motor carrier.” Yet in their argument, when they contend that Omega was Mr. Lozano’s employer, the Lozanos do not rely on a “bill of lading.” In any event, even assuming that such a bill exists and even if it did identify Omega as the motor carrier receiving goods, combining that bill with the crash report would still be insufficient to provide evidence of the far different question of whether Mr. Lozano was an Omega employee under any standard. Even so, no such bill has been cited to us and we have not independently found it in the record.
The fact that the companies opted out of workers’ compensation does not change this result. Standing alone, an employer’s choice not to participate in that system cannot compel the unrelated finding of “injustice” necessary to satisfy that prong of the alter ego analysis. See Tex. Lab. Code § 406.002(a) (generally permitting employers to decide whether to obtain workers’ compensation coverage).

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