Friday, April 3, 2009

Graves Amendment Found Constitutional, Again

Green v. Toyota Motor Credit Corp.

(EDNY, decided 3/25/2009)

The United States District Court for the Eastern District of New York has again ruled that the Graves Amendment was a constitutional exercise of Congress's commerce powers.  The Second Circuit and United States Supreme Court have yet to rule on this issue. 

Enacted on August 10, 2005, this amendment to the Safe, Accountable, Flexible, Efficient Transportation Equity Act: A Legacy for Users ("SAFETEA") provides in relevant part that:
[a]n owner of a motor vehicle that 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).  49 U.S.C. § 30106(a). 
The Graves Amendment applies to all actions commenced on or after August 10, 2005, even if the conduct or harm occurred before the enactment date.

Having found the Graves Amendment to be constitutional and preempt the application of New York's vicarious liability laws against motor vehicle rental and leasing companies, the court dismissed plaintiff's claims against Toyota Motor Credit Corporation.  The court did, however, deny TMCC's motion for Rule 11 sanctions against the plaintiff and plaintiff's counsel, finding that "[g]iven the unsettled state of the law prior to submission of the dismissal motion for decision, plaintiff was clearly entitled to her day in court."  In denying  TMCC's motion for Rule 11 sanctions, District Judge Vitaliano also noted:
Frankly, if anything, the motion made by TMCC for Rule 11 sanctions against plaintiff's counsel itself comes closer to warranting sanctions under Rule 11. * * *  The Court strongly disapproves of what skates close to the line of in terrorem litigation tactics on the part of TMCC.
For other posts on the Graves Amendment, click here.

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