Transportation Minute: The Structural Recalibration of the Transportation Industry After Montgomery v. Caribe Transport II and Recent FMCSA Regulatory Actions
Written By: David Jencks, Esq., Jencks Law, P.C.
The trucking industry is now experiencing a convergence of forces that together may fundamentally alter the transportation sector. Regulatory tightening, immigration-related CDL restrictions, heightened enforcement of driver qualification rules, shrinking carrier capacity, rising spot-market rates, and the United States Supreme Court’s decision in Montgomery v. Caribe Transport II, LLC collectively suggest that the transportation industry is entering a structurally different era rather than merely another freight cycle.
The Supreme Court’s unanimous ruling in Montgomery is particularly significant because it removes what many brokers viewed as their strongest federal shield against state-law negligent hiring litigation. In practical terms, freight brokers must now assume that carrier-selection decisions may be litigated under fifty different state negligence regimes. The resulting insurance, underwriting, compliance, and operational consequences may substantially reshape the freight brokerage market and, by extension, the transportation factoring industry.
The issue is not simply whether brokers can now be sued. The issue is what happens to transportation credit markets when freight intermediation becomes materially more expensive, more regulated, and more legally exposed.
The Freight Market Is Tightening Because Capacity Is Leaving the Industry
The trucking industry spent much of 2022 through 2024 in a prolonged freight recession characterized by excess capacity, falling spot rates, carrier failures, and widespread margin compression. During that period, the prevailing assumption was that any eventual freight recovery would be driven by increased industrial demand and economic expansion. Instead, the present tightening cycle increasingly appears to be driven by the removal of capacity itself.
That distinction is critically important.
Historically, freight recoveries caused by demand growth tend to normalize once additional trucks and drivers re-enter the market. A recovery caused by structural contraction in available drivers, operating authorities, and compliant carriers is materially different. Such a market can produce sustained pricing pressure and long-duration tightening.
The available data increasingly supports that conclusion.
National average van rates are climbing above $2.50 per mile before fuel. Reefer and flatbed markets similarly continue to strengthen.
The current freight environment is one marked by sustained carrier attrition and declining truck availability. Tender rejection indexes have risen materially from late-2024 lows, while spot-market pricing has strengthened for consecutive quarters despite only moderate freight-volume expansion. More importantly, the actual number of operating carriers appears to be declining at a meaningful pace.
FMCSA revocation data throughout late 2025 and early 2026 reflected elevated levels of authority deactivations and carrier exits. Small fleets and owner-operators continue to leave the market because of:
increased insurance costs,
fuel volatility,
equipment financing pressure,
immigration and CDL restrictions,
English-language enforcement,
and increasingly aggressive compliance scrutiny.
The trucking industry now appears to be entering a period in which compliance itself becomes a barrier to survival.
Regulatory Enforcement Is Functionally Reducing Driver Supply
A substantial portion of the current tightening appears directly connected to federal regulatory enforcement initiatives and immigration-related CDL restrictions.
The Federal Motor Carrier Safety Administration has dramatically increased scrutiny of:
non-domiciled CDLs,
English-language proficiency,
driver qualification documentation,
operating-authority transfers,
and fraudulent carrier-registration practices.
FMCSA has also publicly warned that USDOT and MC numbers cannot lawfully be bought, sold, leased, or transferred outside legitimate corporate transactions. These enforcement initiatives are designed to reduce fraud and identity manipulation within the trucking sector, but they also materially raise barriers to entry and increase operational risk for smaller carriers.
Perhaps even more consequential are the 2026 changes to non-domiciled CDL eligibility.
The revised framework significantly narrowed the immigration statuses eligible for non-domiciled commercial driver licensing, largely limiting eligibility to H-2A, H-2B, and E-2 visa holders while excluding many categories previously capable of obtaining or renewing commercial licenses.
The operational significance of those rules is frequently misunderstood.
The rule does not merely affect future applicants. Existing non-domiciled CDL holders remain vulnerable at renewal, transfer, upgrade, and reinstatement events. In practical terms, the industry may continue losing qualified drivers incrementally over time even absent mass immediate revocations.
At the same time, FMCSA and state enforcement authorities have increased focus on English-language proficiency under 49 C.F.R. § 391.11(b)(2). Violations increasingly carry out-of-service implications during roadside inspections.
Collectively, these developments appear to be shrinking the eligible driver pool while simultaneously increasing compliance costs for the carriers that remain.
Montgomery v. Caribe Transport II Changes Freight Brokerage Permanently
Against this tightening capacity backdrop, the United States Supreme Court issued what may become the most important freight-broker liability decision in modern transportation law.
In Montgomery v. Caribe Transport II, LLC, the Court unanimously held that negligent hiring claims against freight brokers are not preempted by the FAAAA because such claims fall within the statute’s “safety exception.”
The facts are well known throughout the transportation industry. Shawn Montgomery suffered catastrophic injuries after a tractor-trailer struck his parked vehicle on an Illinois highway. Montgomery sued not only the motor carrier and driver, but also the freight broker that selected the carrier, alleging negligent carrier selection.
The broker argued that the FAAAA broadly preempts state-law claims “related to a price, route, or service” of brokers and carriers under 49 U.S.C. § 14501(c). The key issue became whether negligent hiring claims nevertheless survive under the statute’s exception preserving state “safety regulatory authority . . . with respect to motor vehicles.”
The Supreme Court answered that question decisively.
The Court concluded that negligent hiring claims sufficiently relate to motor-vehicle safety to fall within the statutory safety exception. The practical consequence is straightforward: freight brokers now face potential negligent hiring exposure under fifty separate state negligence frameworks. The significance of the ruling extends far beyond litigation itself. The decision fundamentally changes the economics of freight brokerage risk.
Broker Insurance Costs May Become the Most Important Economic Consequence of Caribe
The most significant impact of Montgomery may not occur in courtrooms. It may occur in the insurance market.
For years, freight brokers operated under the assumption that federal preemption materially reduced catastrophic personal-injury exposure arising from carrier selection. Insurance pricing, underwriting models, and operational structures evolved around that assumption.
Following Montgomery, that assumption no longer exists.
Insurers must now evaluate freight brokers as entities potentially exposed to catastrophic bodily-injury litigation across dozens of jurisdictions applying varying negligence standards, jury tendencies, and evidentiary rules. The underwriting question is no longer simply whether a broker arranged transportation. The underwriting question now becomes whether the broker can defend every carrier-selection decision made anywhere in the country.
A broker’s insurance carrier will now inevitably ask:
What safety metrics were reviewed?
Was the carrier conditional-rated?
Were there recent out-of-service issues?
Were there prior crashes?
Was there inadequate insurance?
Was there a history of unsafe driving?
Was the carrier recently reinstated?
Did the broker continue tendering freight after warning signs appeared?
Those questions are not merely operational anymore. They are now litigation questions. And litigation questions become underwriting questions.
The result is likely to be dramatic upward pressure on broker insurance costs, particularly for small and mid-sized brokers without sophisticated compliance infrastructures.
The practical economic consequences could be enormous.
Small brokers traditionally operated with relatively low barriers to entry. Many smaller brokerages competed effectively because brokerage historically required limited hard assets and relatively modest overhead compared to motor-carrier operations. A small brokerage with strong shipper relationships could survive and even thrive despite thin margins.
That environment may no longer exist.
If broker insurance costs rise materially following Montgomery, smaller brokers may find themselves squeezed between:
higher insurance premiums,
increased carrier-vetting expenses,
expanded compliance obligations,
rising defense costs,
and more restrictive underwriting requirements.
At some point, many smaller brokerages may conclude that the economics no longer work.
That is where the decision becomes significantly important to transportation factors.
Freight May Move “Upstream” to Large Institutional Brokers
If smaller brokers begin exiting the market because of insurance pressure and litigation risk, freight will not disappear. Instead, it will likely consolidate into larger institutional brokerages capable of absorbing compliance costs and leveraging scale.
Large brokers possess advantages smaller brokers simply do not:
dedicated compliance departments,
in-house legal teams,
sophisticated carrier-monitoring platforms,
enterprise-level insurance purchasing power,
integrated onboarding systems,
and substantial balance-sheet strength.
Critically, large institutional brokers also increasingly effectively offer financial products that directly compete with traditional transportation factoring.
This may become one of the most important developments in transportation finance over the next decade.
Historically, transportation factoring thrived in fragmented brokerage markets populated by thousands of independent brokers paying carriers on 30- to 45-day cycles. Factors solved the working-capital problem created by delayed freight payments.
Large institutional brokers increasingly attempt to internalize that financing relationship themselves.
Many now offer:
Quick-pay products,
dynamic discounting,
fuel-card integrations,
freight-payment platforms,
and “Factoring as a Service” structures embedded directly into freight ecosystems.
In effect, the broker increasingly becomes not merely a freight intermediary, but also a financing platform. That creates a potential structural threat to traditional transportation factoring.
If freight consolidates into fewer, larger brokers, those brokers may:
control payment timing,
shorten carrier-payment cycles internally,
embed financing directly into their freight platforms,
and reduce the need for independent third-party factors.
In other words, Montgomery may indirectly accelerate vertical integration within transportation finance itself.
Will Brokers Continue Using Conditional-Rated Carriers?
One of the most important practical questions after Montgomery concerns whether brokers will continue utilizing carriers with imperfect safety histories – many of whom utilize factoring.
Historically, many brokers continued using carriers operating under conditional ratings, elevated CSA scores, or imperfect inspection histories so long as the carrier remained legally authorized to operate by FMCSA.
That calculus may now change substantially.
A plaintiff’s attorney litigating a negligent hiring case after Montgomery will almost certainly focus on whether the broker ignored identifiable warning signs. A conditional safety rating, repeated out-of-service violations, recent crashes, or problematic inspection histories may now become centerpiece evidence in catastrophic injury litigation.
As a result, many brokers may increasingly treat negative safety indicators not merely as operational concerns, but as litigation exposure. The practical consequence may be the emergence of significantly stricter private-market carrier-selection standards than those technically required by FMCSA itself.
Although FMCSA may legally permit a conditional-rated carrier to continue operating, brokers and insurers may independently determine that the litigation risk associated with using such carriers is unacceptable.
In practice, insurers may increasingly pressure brokers to avoid:
conditional-rated carriers,
recently reinstated authorities,
carriers with significant crash histories,
elevated out-of-service percentages,
or carriers lacking substantial operational history.
The result may be a kind of private-market safety enforcement regime driven not by FMCSA disqualification, but by insurance underwriting and litigation exposure.
That dynamic may further tighten available freight capacity because carriers that are technically legal to operate may nevertheless become commercially unusable within large portions of the brokerage market. Further, that dynamic may hurt transportation factors as their carriers struggle to access loads and stay in business.
Transportation Credit Markets Are Entering a Structurally Different Era
The trucking industry increasingly appears to be moving away from the ultra-fragmented, low-barrier environment that characterized much of the post-deregulation era.
Regulatory enforcement is tightening. Driver pools are shrinking. Insurance costs are rising. Carrier selection now carries materially greater litigation exposure. Capacity contraction is producing sustained pricing pressure. Institutional participants are gaining advantages through scale and compliance sophistication.
The Supreme Court’s decision in Montgomery did not create these trends by itself. Rather, it accelerated forces already reshaping the transportation industry.
For transportation factors, lenders, insurers, and freight intermediaries, the implications are substantial. The issue is no longer merely whether freight rates rise or fall in the next quarter. The more important question is whether the underlying structure of transportation risk itself has permanently changed.
About the Author:
David Jencks is an attorney with more than 25 years of experience in transportation and transportation finance. He represents factors and transportation companies in both transactional matters and litigation. David is a member of the Transportation Lawyers Association and serves as co–general counsel to the International Factoring Association. For nearly two decades, he has been a featured keynote speaker at the IFA’s Annual Conference and its Transportation Factoring Meeting. He has also led numerous trainings and webinars on all facets of transportation factoring, including account management, credit, technology issues, fraud prevention, risk management, problem-load resolution, billing practices, and legal compliance. David can be reached at davidjencks@jenckslaw.com.
The views expressed in the Commercial Factor website are those of the authors and do not necessarily represent the views of, and should not be attributed to, the International Factoring Association.