Investors reacted Friday to the giant nuclear verdict out of a Texas court directed at C.H. Robinson and what it might mean for the brokerage industry with a selloff of 3PL stocks.
C.H. Robinson (NASDAQ: CHRW) fell $19, or 9.25%, to $186.50. Two days earlier, it had hit a 52-week high at $210.33.
RXO (NYSE: RXO) felt the impact of the decision as well, dropping 7.71% or $2.14 to $25.63. That stock hit its own 52-week high Tuesday at $29.90.
Landstar (NYSE: LSTR) declined $7.65 or 3.68% to $200.32. Its 52-week high was last month at $228.46 on June 8.
The S&P 500 was marginally higher on the day.
Falling dominoes
The research team at TD Cowen summed up the pessimistic view of the investors dumping their 3PL shares in the wake of the decision in Lipe vs. Lupus Superior with a short report entitled “The First Domino to Fall?”
“C.H. Robinson faces the first post-Montgomery ruling nuclear verdict,” the report said. “We view this as a negative for brokers.”
In the Dallas County court system case, a group of plaintiffs sued several companies and individuals connected to a 2021 crash that killed three people and the employee driver of carrier Lupus Superior, which was hired by C.H. Robinson to move the load of beverages from Arizona Beverages.
The jury Thursday handed down a compensatory damages award of approximately $604 million that is structured to most likely fall on the back of C.H. Robinson for payment. The company has said it plans to appeal.
The previous defense in such a case–that 3PLs are protected under the safety exception of the Federal Aviation Administration Authorization Act (F4A)–disappeared in May’s unanimous Supreme Court ruling in Montgomery vs. Caribe Transport II that rejected that interpretation of the law. C.H. Robinson had been an original defendant in that case, but both a district court and appellate court had invoked F4A to take the company out of the litigation.
Won’t be quick
In a commentary on the case…
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