Tuesday, October 7, 2008

When Two Cabs Collide -- Graves Amendment Held Not to Apply to Leased NYC Taxi Medallion

Lexington Ins. Co. v. G&K Taxi Inc.
(Sup. Ct., New York Co., decided 9/22/2008)

Since August 10, 2005, the "Graves Amendment" has provided vehicle lessors with a statutory basis for dismissing vicarious liability claims in motor vehicle accident lawsuits. In this case, the court held that the Graves Amendment does not apply to taxi medallions that are leased.

Two NYC taxicabs collided and crashed into a building insured by Lexington. Lexington paid $106,399.38 in damage to to the building and commenced this subrogation action against both taxicab owners. One moved for summary judgment, asserting that the Transportation Equity Act of 2005 (49 U.S.C. § 30106) or so called "Graves Amendment," preempts the New York Vehicle and Traffic Law § 388.

In denying that motion, New York Supreme Court Justice Paul Wooten held:
The New York Vehicle and Traffic Law § 388, imposes vicarious liability upon the lessor of a vehicle for the negligence of the driver. The Graves Amendment, 49 U.S.C. rents or leases the vehicle to a person (or an affiliate of the owner) shall not be liable under the law of any State or political subdivision thereof, by reason of being the owner of the vehicle (or an affiliate of the owner), for harm to persons or property that results or arises out of the use, operation, or possession of the vehicle during the period of the rental or lease if -(1) the owner (or an affiliate of the owner) is engaged in the trade or business of renting or leasing motor vehicles; and (2) there is no negligence or criminal wrongdoing on the part of the owner (or an affiliate of the owner).’’

There can be no question that the Graves Amendment preempts Vehicle and Traffic Law § 388 which imposes vicarious liability on businesses that rent or lease motor vehicles in certain circumstances. First, by the Application of the Supremacy Clause of Article IV of the United States Constitution (U.S.C.A. Const. Art. VI GI. 2; Graham v Duckley, 852 NYS2d 169 [2 Dept 20081, appeal dismissed, 10 NY3d 835 [2008]). Second, the New York State Court of Appeals has held to enforce the preemption of Vehicle and Traffic Law § 388 by the Graves Amendment (see Graham v Duckley, supra; Johnson v Kling, 854 NYS2d 648 [2 Dept 20081, reversed on other grounds, 10 NY3d 887 [2008]; Hernandez v Sanchez, 836 NYS2d 577 [1 Dept 2007]; Kuryla w Halabi, 835 NYS2d 230 [2 Dept 2007]; Jones v Bill, 825 NYS2d 508 [2 Dept 20063, reversed on other grounds, 10 NY3d 550 [2008]). Third, this Court is further guided by the recent Federal Court decision in Flagler v Budget Rent a Car Systems, 538 F. Supp. 2d 557 [E.D.N.Y. 2008], citing United States v Locke, 529 US. 89, 109, 120 [2000], which found the Graves Amendment Constitutional.

However, the “Graves Amendment” does not apply to taxi medallions which are leased. New York Administrative Code Sec. 19-530(1) provides in part that the owner of the taxicab medallion, is fully responsible for the operation of the taxicab (see, James v. R & G Hacking Corp., 39 A.D.3d 385 [1 Dept 2007]; Piaseczny v. Bartolo, 271 A.D.2d 267 [1 Dept 2000]).
The medallion's leased. Not the taxicab.  No Graves Amendment.

To read most posts about New York cases involving the Graves Amendment, click here.   

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