Trucking Trial Success

Elisban Bazan v. Elite Fleet Hauling LLC & Eric Gonser

Cass County, Nebraska

Judge Michael Smith

CI 22-31

 Last week, Matt Quandt and Tom Culhane defended a trucking company and driver at trial in Cass County, Nebraska. The rearend accident occurred on Interstate 80 in January 2020.

 Plaintiff Bazan was represented by Pesek Law LLC. In discovery, they alleged $12,509,424 in total damages. They alleged a traumatic brain injury, chronic post-traumatic headaches, and a permanent neck injury. One week before trial, they proposed a $3,500,000-1,500,000 high-low agreement. At trial, Plaintiff’s counsel put on over two days of evidence, including four fact witnesses and three medical experts, and asked for over $2,010,000 million in closing.

 One week before trial, defendants offered $70,000. At trial, Matt and Tom admitted liability, put on less than two hours of evidence, and suggested $45,000.

 After only two hours of deliberation, the unanimous jury returned a verdict for only $100,000.

Piercing the Corporate Veil - Can you collect from the individuals that own the company that owes you money?

If you obtain a judgment against a company, you can collect that judgment from the company's owners under certain circumstances. This is a legal concept called piercing the corporate veil. It comes up with corporations, LLCs, and other types of limited liability companies (businesses formed to protect owners from liability for business debts). However, it is the exception to the general rule that owners of a limited liability business are not liable for the business’s debts. Specific facts must be proven to pierce the corporate veil. The Nebraska Supreme Court recently reviewed these in the case of 407 N 117 Street, LLC v. Harper et al.

A Nebraska court may pierce the corporate veil to hold owners liable “only where the corporation has been used to commit fraud, violate a legal duty, or perpetrate a dishonest or unjust act in contravention of the rights of another.” 407 N 117 Street, 314 Neb. 843, 849 (2023)(citation omitted). Often, fraud is alleged as the grounds for piercing. Nebraska courts will consider the following factors to determine whether to disregard the corporate entity based on fraud:

1. Was there grossly inadequate capitalization of the company?

2. Was the company insolvent at the time the debt was incurred?

3. Did a shareholder/owner divert company funds or assets for their own use or other improper use?

4. Was the company a mere façade for the personal dealings of the shareholder/owner, and were company operations conducted by the shareholder disregarding the corporate entity?

Because this is the exception to the general rule of limited liability, the party seeking to collect against the shareholders/owners must prove these facts. While possible, it can be challenging to establish absent clear, strong evidence of the above, as the recent case described here shows. The court entered summary judgment in favor of the individual owners and did not pierce the corporate veil. The result in cases like this can be that the creditor does not recover any of its judgment at all, where a company has little or no assets remaining to collect. Early strategies in litigation and collection efforts can be developed in many cases to ensure against this kind of result. On the other hand, legal advice from an experienced attorney in this field can help business owners be sure they will not become subject to claims to pierce the corporate veil of their business and hold them individually liable for company obligations.

Trucking Accidents, Brokers, and Federal Preemption

In catastrophic trucking accidents, plaintiffs don't just limit their claims to the driver. More commonly, they try to sue the motor carrier, shipper, broker(s), etc. However, recent federal court rulings provide some insight and strategy for dismissing claims against brokers.

In Gillum v. High Standard, LLC, 2020 WL 444371 (W.D. Tex. Jan. 27, 2020), Scott Gillum was hit by a tractor-trailer and sued the driver, the motor carriers involved in hiring and training the driver, and the freight broker that selected the motor carriers. The freight broker, which Gillum accused of negligently hiring the motor carriers, moved to dismiss under the argument that federal law completely preempts state common law negligence claims against a freight broker. The federal district court agreed, concluding that the Federal Aviation Administration Authorization Act (FAAAA) completely preempts simple and gross negligence claims related to a freight broker’s services.

There was a split amongst courts that previously addressed this issue. The court considered the existing authority, looked at the plain language of the pertinent federal statutes, the limited statutory exceptions, Congressional intent, etc. The court held that “the FAAAA completely preempts Plaintiff's negligence claims . . . where that negligence ‘relates to’ the services the broker provides.”2020 WL 444371 at *7.

In essence, Plaintiff claims that [the broker] was negligent in arranging for the transportation of property between motor carriers. These allegations “go to the core of what it means to be a careful broker.” Krauss, 2018 WL 2063839, at *5 (holding FAAAA completely preempted claim against freight broker under negligent hiring theory because careless selection of a carrier is a core service of a freight broker); see also Georgia Nut Co. v. C.H. Robinson Co., No. 17 C 3018, 2017 WL 4864857 (N.D. Ill. Oct. 26, 2017) (“While the services of a freight broker do not include the actual transportation of property, they are focused on arranging how others will transport the property; these services, therefore, fall within the scope of the FAAAA preemption.”).

. . .

The Court finds most persuasive the line of cases that have held negligence claims against freight brokers are preempted under the FAAAA because “[e]nforcing state negligence laws that would have a direct and substantial impact on the way in which freight brokers hire and oversee transportation companies would hinder” the objective of the FAAAA in deregulating the shipping and transportation industry.

. . .

Plaintiff's claims against [the freight broker], therefore, seek to enforce a duty of care related to how Defendant arranged for the transportation of property between [the motor carriers], which—Plaintiff admits—are the very “services” Defendant provides as a federally-licensed freight broker. Such a claim “falls squarely within the preemption of the FAAAA.” Creagan, 354 F. Supp. 3d at 813.

. . .

Such a holding comports with the impetus behind the FAAAA's preemption provision because, in essence, Plaintiff is seeking “to reshape the level of service a broker must provide in selecting a motor carrier to transport property.” Miller v. C.H. Robinson Worldwide, No. 17-cv-408, 2018 WL 5981840, at *4 (D. Nevada Nov. 14, 2018), appeal docketed, No. 19-15981 (9th Cir. May 7, 2019). To avoid negligence liability, a broker like Defendant would need to inspect each motor carrier's background and the ways in which the motor carrier investigates, hires, and trains its own drivers, and “such additional inspection would result in state law being used to, at the least indirectly, regulate the provision of broker services by creating a standard of best practices, and ultimately contravening Congress's deregulatory objectives in enacting the FAAAA.” Id. (citing Rowe, 552 U.S. at 370).

Gillum, 2020 WL 444371 at *4, 5, 6.

Erickson | Sederstrom was recently involved in a similar case. The Southern District of Iowa held:

Plaintiffs’ negligence claim against NTC Logistics relates directly to NTC Logistics’ services as a broker and their arrangement of the transportation of property. Thus, the [Federal Aviation Administration Authorization Act] preempts it. Further, the FAAA’s safety regulation authority exception does not apply to Plaintiffs’ claim because the claim does not constitute a regulation of motor vehicles. Because Plaintiff’s claim against NTC Logistics falls under preemption provision of the FAAA and the safety regulatory exception to preemption does not apply, Plaintiffs fail to state a claim upon which relief may be granted.

Eugene Flanagan v. BNSF Railway Co. et al, No. 1:21-cv-00014-RGE-HCA (S.D. Iowa Nov. 19, 2021).

There is still a divide among some federal district courts, but current trends seem to be giving freight brokers detailed and persuasive preemption opinions to use for dismissal.

Matt Quandt is a member of Erickson | Sederstrom’s experienced litigation group. His practice concentrates on catastrophic trucking accidents. Mr. Quandt is a member of TIDA (the Trucking Industry Defense Association) and offers rapid response services. He is licensed in state and federal courts in Nebraska, Iowa, Missouri, and Kansas.

Erickson | Sederstrom represented at the Trucking Industry Defense Association’s annual meeting

Erickson | Sederstrom partner Matthew D. Quandt recently attended TIDA’s Annual Seminar in Philadelphia, PA.  The Trucking Industry Defense Association (TIDA) is a nonprofit association that is devoted to sharing knowledge/resources for defense of the trucking industry and committed to reducing the cost of claims and lawsuits. This year’s seminar featured presentations regarding the state of the industry, accident reconstruction experts, orthopedic experts, fraudulent claims, fleet management, jury psychology, and more.

 From the initial accident investigation, following a rapid response team call in the middle of the night, to pre-suit negotiations and litigation of catastrophic injury and wrongful death cases through discovery and trial, Matt handles all aspects of trucking and transportation litigation. He is committed to making sure his clients are comfortable with the litigation process and emphasizes early resolution of all claims in an efficient, cost-effective manner whenever possible.

No Recovery for Alleged Demotion of Military Servicemember Upon Return from Deployment

A former Union Pacific employee wasn’t entitled to judgment as a matter of law (i.e., a ruling in his favor) or attorneys’ fees after a job change following his return from military deployment, the U.S. 8th Circuit Court of Appeals (which covers Nebraska employers) recently decided, reversing the lower court’s opinion.

Facts

Rodolfo Quiles began working for Union Pacific as a general manager of safety analysis in 2014. He supervised other employees and received “D-band” level compensation. With A-band pay being the lowest, his salary slotted him just below E-band (or executive-level) compensation.

Quiles served in the U.S. Marine Corps Reserve and left Union Pacific in 2015 for voluntary deployment. While deployed, the company underwent a reduction in force (RIF), which eliminated all general manager titles, reclassifying many of them as directors instead. In addition, the company:

·         Adjusted the general director position to require five years of field experience; and

·         Hired a new employee for the position of general director of safety analysis, who Quiles believed was intended to be his replacement.

After the deployment, Quiles returned to work at Union Pacific under a new role as director of safety analysis. Although he received the same benefits and his compensation remained at the D-band level, he viewed the new job as a demotion. He claimed he was given less responsibility and status than in his previous position as general manager.

Quiles didn’t qualify for the general director job because he lacked the five years of field experience necessary to meet the new requirement for the position.

Unhappy with the new job title, Quiles became insubordinate, and his work performance declined, leading to his termination from Union Pacific in 2016. He then sued the company claiming it violated the Uniformed Services Employment and Reemployment Rights Act (USERRA) by effectively demoting him during his military leave.

How USERRA works

Under USERRA, military servicemembers are entitled to reemployment when they return from service that doesn’t exceed five years. Upon returning to work, they’re entitled to return to a job based on the “escalator position” principle, which places them in the job they “would have attained with reasonable certainty if not for the absence due to uniformed service.” The principle covers pay, benefits, seniority, and other job perks they would have attained if not for the period of service.

There are exceptions to the rule. You don’t have to reemploy a servicemember if:

·         The company’s circumstances “have so changed as to make such reemployment impossible or unreasonable”;

·         Employment would “impose an undue hardship” on your company; or

·         The servicemember’s previous employment was “for a brief, nonrecurrent period” with no reasonable expectation it would continue for a significant length of time.

The district court ruled in Quiles’ favor, finding Union Pacific demoted him upon his return in violation of USERRA and awarding attorneys’ fees. The case proceeded to trial on the remaining claims, and the jury returned a verdict in the employer’s favor, concluding Quiles was fired for cause and not entitled to any damages.

8th Circuit’s ruling

After the favorable jury verdict, Union Pacific appealed the district court’s grant of judgment as a matter of law and award of attorneys’ fees to Quiles. In reversing the lower court’s decision, the 8th Circuit held it was impossible to reemploy him to his previous position because:

·         It had been eliminated; and

·         A reasonable jury could find “Union Pacific attempted to fit Quiles into an appropriate job within the corporation’s reorganized structure upon his return from deployment” in accordance with the escalator-position principle and for which he was qualified.

Because Quiles wasn’t entitled to judgment as a matter of law, the court further held he didn’t qualify as a prevailing party for purposes of attorneys’ fees. Quiles v. Union Pac. R.R. Co., Inc., No. 19-3489 (8th Cir., July 6, 2021).

Bottom line

You should take care in responding to servicemembers’ requests for leave and be aware of USERRA’s strict requirements. When in doubt, call your employment law attorney.

Bonnie Boryca is one of Erickson Sederstrom’s employment attorneys and can be reached at boryca@eslaw.com or 402-397-2200. This article was written with assistance of law clerk Ali Clark, who will be joining the firm as an associate in the fall of 2022.

Nebraska Supreme Court Clarifies the Duties of Mental Health Professionals

The Nebraska Supreme Court recently clarified duties of mental health professionals to warn and protect third parties from their patients.  In Rodriguez v. Lasting Hope Recovery Ctr. of Cath. Health Initiatives, the court held that mental health professionals owe no duty as a matter of law to third parties for physical injuries caused by a patient who has not “actually communicated” such a threat to their mental health professionals.  The court further determined that a mental health professional’s duty to warn or protect may be met by reasonable efforts to communicate the threat to the third party and law enforcement. 

 Facts of Rodriguez

 In Rodriguez, the Omaha police placed a patient under emergency protective custody and transported him to Lasting Hope because he expressed intentions of killing his mother.  Upon arrival, the patient was assigned a treating psychiatrist.  The patient’s psychiatrist determined the patient was paranoid, homicidal, delusional, and posed a risk for harm to others outside the hospital environment.  The psychiatrist’s determination was based on the patient’s previously expressed intentions of killing his mother.  Therefore, the psychiatrist recommended for the patient five to seven days’ hospitalization for stabilization and safety, and Lasting Hope called the patient’s mother to warn her of his threats.  

 During the patient’s hospitalization, his girlfriend visited and expressed that she no longer wished to be his girlfriend.  The girlfriend was not afforded the same warning as his mother because the patient had not expressed a similar threat against his girlfriend. 

 After six days of compliance with medication and hospitalization by the patient, the psychiatrist concluded the patient was ready to be released.  Further, the patient no longer expressed an intent to harm his mother.  In fact, the patient stated to his psychiatrist that he “had a good conversation” with his mother over the telephone during his hospitalization, and he committed to “not act to harm anyone.”

 The former girlfriend’s body was discovered the following day.  Investigators concluded that the patient strangled his former girlfriend.  The decedent’s parents brought action against Lasting Hope claiming that it was responsible for wrongful death. 

 Duty to Warn & Protect

 The Nebraska Mental Health Practice Act and the Nebraska Psychology Practice Act both contain limits on practitioners’ duties regarding treating patients with mental illness.  These limits were enacted in response to the California Supreme Court's decision in Tarasoff v. Regents of University of California.  There, the court held that a mental health professional “who knows or should know that a patient poses a serious danger of violence to a third party owes a duty to exercise reasonable care to warn and protect that third party.”   

 In the case of Munstermann v. Alegent Health, the Nebraska Supreme Court determined that:

 [A] psychiatrist is liable for failing to warn of and protect from a patient’s threatened violent behavior, or failing to predict and warn of and protect from a patient’s violent behavior, when the patient has communicated to the psychiatrist a serious threat of physical violence against himself, herself, or a reasonably identifiable victim or victims.  The duty to warn of or to take reasonable precautions to provide protection from violent behavior shall arise only under those limited circumstances . . . and shall be discharged by the psychiatrist if reasonable efforts are made to communicate the threat to the victim or victims and to a law enforcement agency.

 Like the Munstermann rule, the Mental Health Practice Act and the Psychology Practice Act explicitly require that for a duty to warn to arise, a serious threat of physical violence against a reasonably identifiable victim must be “actually communicated” to a mental health professional.  “Actual communication” requires the patient to verbally express or convey to the psychiatrist their prediction to commit physical violence either against themself or a reasonably identifiable victim.

 The only reasonably identifiable victim the patient “actually communicated” an intent to physically harm was his own mother.  Based on these verbal expressions of threats, the psychiatrist ordered Lasting Hope staff to call the patient’s mother to warn her.  By the time the psychiatrist had ordered the patient’s discharge, she knew that Omaha police were aware of the patient’s threats of physical violence against his mother because Lasting Hope staff had discussed the threats with law enforcement officers, who also warned the patient’s mother.  The patient never actually communicated to his psychiatrist that he intended to harm his former girlfriend; therefore, the psychiatrist had no duty to warn her.

 Under the Munstermann rule, psychiatrists owe no duty as a matter of law to third parties for physical injuries caused by a patient who have not “actually communicated” a threat of physical violence.  Once an “actual communication” has taken place, any duty to warn or protect on the part of the psychiatrist can be discharged by reasonable efforts to communicate the threat to the victim and a law enforcement agency.  Here, the patient’s lack of communicated threats against his former girlfriend meant that no duty to warn or protect was triggered for the psychiatrist.  The former girlfriend’s death was not legally attributable to a breach of duty by the psychiatrist or Lasting Hope because the patient never “actually communicated” that he intended to harm his former girlfriend. 

 Future Developments

 When faced with a patient who “actually communicates” a serious threat of physical violence against a reasonably identifiable individual, mental health professionals have a duty to both warn and protect that individual.  However, these duties shall be discharged by the psychiatrist if reasonable efforts are made to communicate the threat to both the individual and to a law enforcement agency.

 Erickson | Sederstrom has provided counsel to mental health and other practitioners for decades.  Please consult with one of our attorneys if you have questions regarding impact of the Rodriguez decision and how mental health practitioners can minimize their legal risks.