Principal-Agent Theory Fails Against Shipping Company

May 2024

Jeffrey F. Clement

In Cornejo v. Dakota Lines, Inc., 2023 IL App (1st) 220633, the First District Court of Appeals declined to impose vicarious liability on a shipping broker because the broker exercised very little control over the driver or transportation company involved in a trucking accident. Without an adequate showing of such control, there was no evidence to support the jury’s finding of a principal-agent relationship.

The plaintiff in Cornejo was struck by an 18-wheel tractor-trailer while standing near his family’s vehicle on the shoulder of a highway. The driver was employed by carrier Dakota Lines (“Dakota”) and was driving under Dakota’s operating authority. Alliance was the shipping contractor that hired Dakota to haul automotive parts. The jury answered a special interrogatory by finding that Dakota was Alliance’s agent at the time of the accident. Thus, the jury’s $18,150.750 verdict was entered against the driver, Dakota and Alliance.

On appeal, the question was whether the driver was an agent of Alliance or was a mere independent contractor. The Cornejo court noted that a principal-agent relationship provides an exception to the general rule that injured persons must seek a remedy from the person who caused the injury. A principal is thus vicariously liable for the conduct of its agent but not the conduct of an independent contractor. The key difference between an agent and an independent contractor is defined by the principal’s level of control over the manner of work performed. An independent contractor undertakes to produce a given result but, in the actual execution of the work, is not under the order or control of the person for whom he does the work.

Some non-exclusive factors courts consider when determining the issue of “control” include (1) the question of hiring, (2) the right to discharge, (3) the manner of direction of the servant, (4) the right to terminate the relationship, and (5) the character of the supervision of the work done.

The Cornejo panel reversed the judgment against Alliance because there was insufficient evidence of control. Specially, Dakota (and not Alliance) hired and paid the driver, Alliance did not communicate with the driver, Dakota dispatched the driver, Dakota had full control over its personnel, and Alliance only specified the overall hauling task to be performed.

In reaching its conclusion, the court distinguished several other decisions, including Sperl v. C.H. Robinson Worldwide, Inc., 408 Ill. App. 3d 1051 (2011) and Powell v. Dean Foods Co., 2013 IL App (1st) 082513-B. In Sperl, there was evidence of control because the shipping broker imposed an “impossible fine-enforced schedule” on the drivers, which required the driver to violate federal hours-of service regulations to deliver the load on schedule. In Powell, there were numerous indicia of control, including the shipper’s ownership of the trailer, use of the shipper’s logos on the trailer, and a shared driving manual between the shipper and the transportation company.

The Cornejo decision reaffirms that the key determination of “control” will hinge on the specific facts of a case. While the shipping broker in Cornejo maintained sufficient separation between its operations and the operations of the transportation company, the opposition conclusion was reached in Sperl and Powell. Thus, when assessing the liability of a shipping company, each individual circumstance must be carefully scrutinized, including the contractual language, the history of the companies, use of logos, exclusivity of relationships, imposition of penalties, and shared training materials.