Truck Renter's Failure to Produce Copies of Its Internal Policies and Procedures for Investigating Renter's Driving and Criminal History Found an Insufficient Basis to Deny Renter's Motion for Summary Judgment Based on Graves Amendment

AUTO – GRAVES AMENDMENT – RENTED TRUCK – RESTRICTED DRIVER'S LICENSE – FAILURE TO PRODUCE RENTAL POLICIES AND PROCEDURES – NEGLIGENT ENTRUSTMENT THEORY
Byrne v. Collins
(2nd Dept., decided 10/19/2010)

A Budget franchisee rented a Budget truck to JBG Trucking.  The rental agreement provided that any authorized employee of JBG with a valid driver's license was permitted to operate the vehicle upon presentation of a valid driver's license by the company employee who picks up the vehicle.  Jamie Collins presented a restricted driver's license to the Budget location and, while driving the rented truck, struck and killed the plaintiff's decedent, who was riding a bicycle.  Plaintiff alleged that the Graves Amendment did not apply because the Budget defendants knew or should have known from Collins' presentation of a restricted driver's license that he had a history of drug and/or alcohol related offenses.  In opposition to the Budget defendants' motion to dismiss plaintiff's complaint and for summary judgment, plaintiff argued that the Budget defendants negligently entrusted the rented truck to Collins, and that their negligence precluded application of the Graves Amendment's vicarious liability exemption.

While agreeing that the presentation of a restricted license "does not, in and of itself, compel a motor vehicle rental agent of average ken to scrutinize the renter", Kings County Supreme Court Justice Francois Rivera denied the Budget defendants' motion for summary judgment because they had not submitted their written rental policies and procedures and established that the Budget franchisee followed those policies and procedures in renting the truck to JBG.

The Budget defendants appealed that decision to the Appellate Division, Second Department, and that court REVERSED the lower court's decision, finding that there was no triable issue of fact as to whether or not the Budget defendants possessed any special knowledge concerning a characteristic or condition peculiar to Collins that rendered his use of the truck unreasonably dangerous as required to support plaintiff's negligent entrustment theory of liability.

With respect to the Budgets defendants' failure to submit copies their written rental policies and procedures and demonstrate that the Budget franchisee had followed those procedures, the Second Department further held:

Contrary to the plaintiff's contention, the appellants' failure to provide copies of any internal policies as to investigation of potential renters with restricted licenses constitutes an insufficient basis upon which to deny their motion for summary judgment.  Even if such a policy had been violated, under the circumstances of this case, such violation would not constitute actionable negligence (see Lambert v Bracco, 18 AD3d 619, 620; Newsome v Cservak, 130 AD2d 637, 638).

The first cause of action, which was based on the alleged vicarious liability of the appellants, was barred under the Graves Amendment (49 USC § 30106), as the appellants showed they are "owner[s] . . . engaged in the trade or business of renting or leasing motor vehicles" (49 USC § 30106; see Gluck v Nebgen, 72 AD3d 1023), and should also have been dismissed.

Another Graves Amendment Update -- New York

For all actions commenced on or after August 10, 2005, the "Graves Amendment" provides vehicle renters and lessors with a statutory basis for dismissing vicarious liability claims in motor vehicle accident lawsuits.  This amendment to the Safe, Accountable, Flexible, Efficient Transportation Equity Act of 2005: 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). 

For purposes of the Graves Amendment, section 30102(a)(6) of Chapter 301 of Title 49 of the United States Code, entitled Motor Vehicle Safety, defines "motor vehicle" as "a vehicle driven or drawn by mechanical power and manufactured primarily for use on public streets, roads, and highways, but does not include a vehicle operated only on a rail line."

Motor vehicle rental and leasing defendants use the Graves Amendment as a tort defense to indirect or vicarious liability under state laws such as New York's Vehicle & Traffic Law § 388.  In pertinent part, that statute provides:

§ 388. Negligence in use or operation of vehicle attributable to owner.

1. Every owner of a vehicle used or operated in this state shall be liable and responsible for death or injuries to person or property resulting from negligence in the use or operation of such vehicle, in the business of such owner or otherwise, by any person using or operating the same with the permission, express or implied, of such owner. Whenever any vehicles as hereinafter defined shall be used in combination with one another, by attachment or tow, the person using or operating any one vehicle shall, for the purposes of this section, be deemed to be using or operating each vehicle in the combination, and the owners thereof shall be jointly and severally liable hereunder.

2. As used in this section, "vehicle" means a "motor vehicle", as defined in section one hundred twenty-five of this chapter, except fire and police vehicles, self-propelled combines, self-propelled corn and hay harvesting machines and tractors used exclusively for agricultural purposes, and shall also include "semitrailer" and trailer" as defined in article one of this chapter, whether or not such vehicles are used or operated upon a public highway. For the purpose of this section, self-propelled caterpillar or crawler-type equipment while being operated on the contract site, shall not be defined as motor vehicles.

In May of this year, Rep. Bruce Braley (D-IA), the former president of the Iowa Trial (aka Personal Injury Plaintiffs’) Lawyers Association, introduced an amendment to the 2010 Motor Vehicle Safety Act that would have repealed the Graves Amendment.  The Braley Amendment did not make it out of committee onto the floor of Congress for a vote, but it may be reintroduced at some point.

From my LexisNexis Alerts on "Graves Amendment" court decisions come these, mostly recent New York cases: 

AUTO – GRAVES AMENDMENT – LEASED VEHICLE – NEW YORK CITY TRANSIT AUTHORITY
Brown v. New York City Transit Authority
(Sup. Ct., New York Co., decided 11/24/2008)

Plaintiff claimed that while a passenger on an "Access-A-Ride" vehicle he was caused to fall out of his wheelchair and sustained an injury.  Plaintiff commenced this personal injury action against the New York City Transit Authority (NYCTA), the vehicle's titled owner and lessor, the vehicle's driver, and the vehicle's registered owner, American Transit, Inc.  NYCTA cross-moved for summary judgment dismissing plaintiff's complaint on the ground that the Graves Amendment applied to exempt it from vicarious liability under New York Vehicle & Traffic Law § 388.  Plaintiff opposed that cross motion, arguing that NYCTA was not entitled to summary judgment because the NYCTA is not in the business of renting or leasing motor vehicle, and thus not within the class to which the Graves Amendment applies and/or protects.

In denying the NYCTA's cross motion,  New York County Supreme Court Justice Donna M. Mills ruled that NYCTA had not established that it was "engaged in the trade or business of renting or leasing motor vehicles":

At issue here, however, is 49 USC § 30106.  In the case at bar, plaintiffs dispute that NYCTA is in the business of renting or leasing motor vehicles.  The lease between the NYCTA and American Transit for the subject vehicle in question is not dispositive on the issue of whether the NYCTA is in the business of renting or leasing vehicles.  As such, since no other evidence has been presented by NYCTA to establish that it is in the business of renting or leasing vehicles, its cross-motion must be denied.

AUTO – GRAVES AMENDMENT – RENTED VEHICLE – MOTION TO DISMISS – INSUFFICIENT EVIDENTIARY FOUNDATION FOR AUTHENTICATING RENTAL AGREEMENT AS A BUSINESS RECORD
Merine v. Darden
(Sup. Ct., Queens Co., decided 6/8/2009)

Plaintiff alleged that he sustained personal injuries when his car was struck in the rear by the car owned by the defendant rental car company, Elrac Inc., and driven by the defendant Jermaine L. Darden.  The complaint specifically alleges that the plaintiff's injuries were a result of negligence on the part of the "defendants in that said motor vehicle was owned, operated, maintained and controlled in a careless, reckless and negligent manner, in violation of the defendants' respective duties of care[.]"  Prior to discovery, Elrac moved to dismiss the complaint against it for failure to state a cause of action pursuant to CPLR Rule 3211(a)(7). 

In denying Elrac's motion, Queens County Supreme Court Justice Devin P. Cohen held that: (1) Elrac failed to attach complete copies of the plaintiff's complaint and Elrac's answer to its motion papers; (2) Elrac failed to introduce a properly authenticated copy of the rental agreement; and (3) the complaint alleged negligent maintenance of the rental vehicle by Elrac, an exception to the Graves Amendment:

A motion to dismiss for failure to state a cause of action is a motion on the pleadings, which requires the court to analyze the sufficiency of the plaintiff's initial complaint. Here, the defendant fails to attach all of the relevant pleadings to its motion. The third page of the plaintiff's complaint is missing from the documents the defendant offers in support of its motion. Defendant also fails to attach a copy of its own answer, but does not state that its motion is one for pre-answer dismissal. Thus, the court cannot determine from defendant's papers whether the defendant asserted a failure of the plaintiff to state a cause of action or cited the Graves Amendment as a defense in its pleading. These reasons alone would be sufficient to deny defendant's motion. 

Even if the defendant had attached the necessary supporting documents, the affidavit by its regional loss control manager is insufficient to authenticate the purported rental agreement between Elrac and the defendant driver as a business record. "[A] requirement of evidence of authenticity...applies to all writings whose relevancy depends upon authorship by a particular person" (Prince, Richardson on Evidence § 9-101 [Farrell 11th Ed]). Here, the affidavit states that Elrac is in the business of renting motor vehicles to the general public, that it uses rental agreements which are created in the regular course of business and that it rented the vehicle involved in the accident to Mr. Darden in the regular course of its business. However, the affidavit fails to authenticate the particular rental agreement annexed to the motion, or to state that it was created in the regular course of business. It is unclear whether this was a mere oversight, or whether the deponent did not have sufficient personal knowledge regarding the document. In either case, the purported rental agreement is not admissible as a business record. Thus, the defendant fails to establish that the subject vehicle was "rent[ed] or lease[d]...to a person," and that the collision occurred "during the period of the rental or lease" (see 49 USC § 30106[a]). Absent such a showing, the defendant fails to establish by admissible evidence that it qualifies for immunity under the Graves Amendment. 

Furthermore, had the defendant's supporting documents been adequate, the court would still find that the substance of the plaintiff's complaint is sufficient on its face. The Graves Amendment confers immunity from liability upon a rental or leasing owner only if "there is no negligence or criminal wrongdoing on the part of the owner" (see 49 USC § 30106[a]). "On a CPLR 3211 motion to dismiss, the court will accept the facts as alleged in the complaint as true, accord plaintiffs the benefit of every possible favorable inference, and determine only whether the facts as alleged fit within any cognizable legal theory" (Nonnon v. City of New York, 9 NY3d 825, 827 [2007] [quoting Leon v. Martinez, 84 NY2d 83, 87-88 (1994)]). In this case, there is no question that plaintiff's complaint alleges that Elrac was negligent in its maintenance of the vehicle in question.

AUTO – GRAVES AMENDMENT – LEASED VEHICLE – "COMMENCED" EFFECTIVE DATE
Merchants Insurance Group v. Mitsubishi Motor Credit Association
(U.S Ct. Apps, 2nd Cir., decided 12/16/2009)

In this case, the United States Court of Appeals for the Second Circuit ruled that the Graves Amendment, which applies to "any action commenced on or after the date of enactment of this section [August 10, 2005]", did not apply to this action, which was originally commenced prior to that date.

Plaintiff Merchants originally commenced this action for contribution from defendant Mitsubishi Motor Credit Association (MMCA) on October 20, 2003, prior to the August 10, 2005 effective date of the Graves Amendment.  After the action was removed to federal court, and because no judgment had yet been filed in the related underlying personal injury action by the time Merchants filed its suit for contribution, on July 11, 2005, the district court declared Merchants' suit unripe and dismissed it without prejudice to reopen "if and when a judgment is entered in the state court case and plaintiff makes a payment on that judgment."

Merchants later made payment on that judgment and requested that this action be reopened, which it was in June 2006, after the effective date of the Graves Amendment.  MMCA moved for summary judgment based on the Graves Amendment

Although neither party argued for its applicability, on September 25, 2007, the district court granted MMCA's then-pending motion for summary judgment on the ground that the Graves Amendment precluded Merchants' claims.  The district court reasoned, under state law, that although the instant action was first filed in October 2003, which was before the Graves Amendment's effective date, the suit was prematurely filed and was therefore not justiciable at that time. After acknowledging that there is "no indication on the docket sheet that a new summons and complaint was ever filed when the case was re-opened[,].... the parties to the lawsuit have remained the same, and plaintiff's claim is unchanged," the district court held that the suit "commenced" for purposes of the Graves Amendment only after it became justiciable and was reopened in June 2006.  Since June 2006 is after the effective date of the Graves Amendment, the district court found that the case was preempted by federal law and granted summary judgment in favor of MMCA.

The Second Circuit Court of Appeals disagreed and found that this action was commenced for purposes of the Graves Amendment when Merchants originally filed it in state court in October 2003.  Thus, the district court erred in granting summary judgment to MMCA based on the Graves Amendment:

Here, it was not necessary for the district court to go beyond the face of the statute to discuss the justiciability or prematurity of the suit as originally filed.  If state law applies here by virtue of our construction of the Graves Amendment, CPLR § 304(a) is unambiguous.  Although the district court's concerns about "reward[ing] plaintiff's improper filing and subvert[ing] Congress' decision to bar suits, such as the instant one," Merchants Ins. Group, 525 F. Supp. 2d at 314, are well-taken, the suit at issue commenced when it was originally filed in state court, even though it was later dismissed and then reopened.  We see no reason, moreover, that the result would not be the same with reference to federal procedural principles.  Under the Federal Rules of Civil Procedure, "[a] civil action is commenced by filing a complaint." Fed. R. Civ. P. 3.  Thus, this action "commenced" when it was originally filed in state court on October 20, 2003, and is not barred by application of the Graves Amendment.

AUTO – GRAVES AMENDMENT – LEASED TRUCK – NEGLIGENT ENTRUSTMENT CLAIM FAILS
Muller v. Gilliard
(Sup. Ct., Suffolk Co., decided 5/26/2010)

Penske Truck Leasing leased a truck to International Paper Company, which in turn allowed the defendant Gilliard, who allegely lacked a valid commercial driver's license, to drive the truck.  Plaintiff was allegedly injured when the leased truck, driven by Gilliard, struck her vehicle in the rear.  Penske moved for summary judgment dismissing the plaintiff's complaint against it based on the Graves Amendment.  Penske argued that plaintiff's negligent entrustment cause of action against it was non-cognizable because it entrusted the truck to International Paper Company, rather than to Gilliard.

In granting Penske's motion, Suffolk County Supreme Court Justice Thomas F. Whelan ruled that the Graves Amendment applied to exempt Penske from vicarious liability under New York Vehicle & Traffic Law § 388:

The Graves Amendment, now codified at 49 USC § 30106, renders the vicarious liability provisions of VTL § 388 inapplicable to an owner or affiliate owners of motor vehicles who are engaged in the trade or business of renting or leasing motor vehicles. "This statute is applicable to all actions commenced on or after August 10, 2005 and has been enforced as pre-empting the vicarious liability imposed upon commercial lessors by Vehicle and Traffic Law § 388." (Graham v Dunkley, 50 AD3d 55, 852 NYS2d 169 [2d Dept 2008]).  The applicability of the Graves Amendment to this action and to the moving defendant is not disputed.  Accordingly, those portions of Penske's motion wherein it seeks summary judgment dismissing so much of the plaintiffs' complaint that charges Penske with vicarious liability for the occurrence of the accident and the damages sued upon, are granted (see Gluck v Nebgen, 72 AD3d 1023, 898 NYS2d 881 [2d Dept 2010]).

The remaining portions of Penske's motion wherein it seeks dismissal of the plaintiffs' second cause of action wherein they seek to hold Penske liable by reason of its purported negligent entrustment of the truck are also granted. While it is clear that the Graves Amendment has no application to claims of negligence against a commercial lessor of vehicles that are not premised on the vicarious liability provisions of VTL § 388 (see Palacios v Aris, Inc., 2010 WL 933754 [ED NY 2010]), the plaintiffs' claims of negligent entrustment on the part of moving defendant Penske are not cognizable.  It is well established that claims for negligent entrustment rest upon the degree of knowledge the supplier of a chattel has or should have had concerning the entrustee's propensity to use the chattel in an improper or dangerous fashion (see Hamilton v Beretta USA Corp., 96 NY2d 222, 727 NYS2d 7 [2001); Zara v Perzan, 185 AD2d 236, 586 NYS2d 139 [1992]).

Here, it is not disputed that Penske did not entrust the subject truck to Gilliard, the operator of such truck.  Rather, Penske leased the truck to International who in turn, entrusted it to Gilliard. The moving papers sufficiently established that Gilliard was not an employee, servant or agent of Penske or otherwise known to it. The opposing papers submitted by the plaintiffs failed to raise any question of fact regarding knowledge, actual or constructive, on the part of moving defendant Penske that its entrustee, International, had a propensity to use leased vehicles in an improper or dangerous fashion. The fact that Gilliard may not have possessed a valid driver's license, pursuant to which, he could legally operate the subject truck does not warrant a denial of Penske's motion as it relates to the plaintiffs' negligent entrustment claims (see generally Hamilton v Beretta USA Corp., 96 NY2d 222, supra ; see also Cook v Shapiro, 58 AD3d 664, 871 NYS2d 714 [2d Dept 2009]; Weinstein v Cohen, 179 AD2d 806, 579 NYS2d 693 [2d Dept 1992]).

AUTO – GRAVES AMENDMENT – RENTED TRUCK – MOTION TO DISMISS – NEGLIGENT MAINTENANCE ALLEGED
Collazo v MTA-New York City Transit
(App. Div., 1st Dept., decided 6/22/2010)

In this action for personal injuries allegedly sustained when a bus in which plaintiffs were passengers was involved in a collision with a truck rented by defendant Cancel from defendant U-Haul Co. of Arizona, U-Haul appealed from Bronx County Supreme Court's denial of its motion to dismiss the complaint.

In AFFIRMING the order appealed from, the First Department ruled that the lower court properly denied U-Haul's motion becauase the plaintiffs' complaint alleged negligent maintenance of U-Haul's truck:

The motion was properly denied because while the Federal Transportation Equity Act of 2005 (49 USC § 30106) (Graves Amendment) bars negligence claims against car-rental companies based solely on a theory of vicarious liability (see Hernandez v Sanchez, 40 AD3d 446, 447 [2007]), here, the complaint alleges, inter alia, negligent maintenance of U-Haul's truck. Such claim is not barred by the Graves Amendment since the statute does not absolve leasing companies of their own negligence (see Novovic v Greyhound Lines, Inc., 2008 WL 5000228, *3, 2008 US Dist LEXIS 94176, *7-9 [ED NY 2008]).

AUTO – GRAVES AMENDMENT – LEASED VEHICLE – RETAINED DEFENSE COUNSEL FOR BOTH LESSOR & DRIVER – CONFLICT OF INTEREST
Vinokur v. Raghunandan
(Sup. Ct., Kings Co., decided 6/25/2010)

Following the case law precedent set by Kings County Supreme Court Justice Wayne Saitta in Meigel v. Schulman and Graca v. Krasnik, Kings County Supreme Court Jack M. Battaglia denied the defendant car lessor's motion for summary judgment with leave to renew within 30 days after substitution of counsel for the defendant vehicle driver:

In its Supplemental Affirmation, the Law Firm contends, among other things, that it does not have a conflict of interest since any liability as against PV Holding (the leasing company) would only have been vicarious through Vehicle and Traffic Law § 388, which is barred by the Graves Amendment. In this regard, the Law Firm contends that the other causes of action alleged against PV Holding, i.e., negligent entrustment and respondeat superior, were not addressed in Plaintiff's Bill of Particulars, and do not have any merit. (See e.g. Drake v Karahuta, (2010 WL 376388, *3 [WDNY 2010] ["Plaintiff's failure to allege any basis for independent negligence against [the leasing company] (other than vicarious liability under NY Vehicle and Traffic Law § 388) negates any possibility of independent liability by [the leasing company]. Therefore, defense counsel does not have a conflict of interest in asserting a Graves Amendment defense.") 

The Rules of Professional Conduct, which were promulgated as joint rules of the Appellate Divisions of the Supreme Court, effective April 1, 2009, and which supersede the former Part 1200 (Disciplinary Rules of the Code of Professional Responsibility), govern the resolution of the issue of the Law Firm's potential conflict of interest. Rule 1.7(a) of the Rules of Professional Conduct provides that, "Except as provided in paragraph (b), a lawyer shall not represent a client if a reasonable lawyer would conclude that . . . the representation will involve the lawyer in representing differing interests." (Rules of Professional Conduct [22 NYCRR 1200.0] Rule 1.7 [a].) Paragraph (b) sets forth necessary conditions that allow an attorney to represent parties with differing interests.

The first question, then, is whether, under the circumstances of this case, a reasonable lawyer would conclude that the Law Firm's representation of both the driver Mario Regina and the leasing company PV Holding will involve the Law Firm in "representing differing interests".  In its Supplemental Affirmation, the Law Firm suggests that this determination should be made as of the time when the issue of the potential conflict of interest is raised, i.e., as of now.  In this regard, the Law Firm points out that the issue was raised by the Court sua sponte after disclosure was complete, and only after the Law Firm brought a motion for summary judgment. 

Nonetheless, the language of Rule 1.7(a) requires that the determination be made as of the time it becomes apparent to a reasonable lawyer that the dual representation "will involve the lawyer in representing differing interests." For reasons that will follow, in this case a reasonable lawyer should have been aware of the conflict of interest upon receipt of Plaintiff's Complaint. (See e.g. Graca v Krasnik,20 Misc 3d 1127[A], 2008 NY Slip Op 51640[U], *3 [Sup Ct, Kings County, Saitta, J.]["The conflict exists at the point the attorney recognizes that one of their two clients may have a Graves Amendment defense.")

*  *  *  *  *

In Drake v Karahuta, (2010 WL 376388), a federal magistrate held, under similar circumstances, that a law firm representing both the driver and leasing company does not have a conflict of interest in asserting a Graves Amendment defense where "discovery is complete, and plaintiff has neither alleged nor sought to prove any basis other than vicarious liability for its claim against [the leasing company]." (See id. at *2.)

Although neither Graca, Meigel, nor Drake analyzed the issue of the potential conflict of interest under the new Rules of Professional Conduct, they are still persuasive on the question of potential conflict of interest under the facts presented here. Indeed, it has been noted that the Rules of Professional Conduct "include[s] approximately three-quarters of the former [Code of Professional Responsibility], with the remaining one quarter coming from the ABA's Model Rules", and that the new rules do not necessarily eviscerate the holdings in cases decided based upon the Code of Professional Responsibility. (See Delorenz v Moss, 24 Misc 3d 1218 [A], 2009 NY Slip Op 51519[U], *2 [Sup Ct, Nassau County, Palmieri, J.] 

Graca and Meigel stand for the proposition that a law firm representing both the leasing company and the driver has an inherent conflict of interest where the law firm seeks to move for dismissal of the complaint only as against the leasing company since the driver would be left bearing full liability. Drake stands for the proposition that a law firm, representing both the leasing company and the driver, that raises the Graves Amendment defense to dismiss the action against the leasing company has a conflict of interest only where there are allegations asserted against the leasing company other than vicarious liability under Vehicle and Traffic Law § 388, presumably because the Graves Amendment bars the imposition of liability against the leasing company solely "by reason of being the owner of the vehicle" (see 49 USC § 30106[a].)

This Court agrees with Graca and Meigel that a law firm has an inherent conflict of interest in representing both the leasing company and the driver, regardless of whether the only claim against the leasing company is vicarious liability based upon Vehicle and Traffic Law § 388. As noted in Graca, the fact that a party asserts a Graves Amendment defense does not mean that the driver would have no basis to oppose that party's summary judgment motion. (See Graca v Krasnik, 20 Misc 3d 1127[A], 2008 NY Slip Op 51640[U], at *3.) In this regard, a party asserting the Graves Amendment as a basis for summary judgment dismissal of a Vehicle and Traffic Law § 388 cause of action must establish prima facie that it was engaged in the business of leasing vehicles, a fact which a driver having independent counsel may challenge. (See id. at *3.)

*  *  *  *  *

Even though this Court has concluded that the Law Firm has a concurrent conflict of interest since "a reasonable lawyer would conclude that . . . the representation will involve the lawyer in representing differing interests"(see Rules of Professional Conduct [22 NYCRR 1200.0] Rule 1.7 [a]), the Law Firm may still represent both clients if conditions set forth in Rule 1.7(b) of the Rules of Professional Conduct are met. Rule 1.7(b) provides that, "Notwithstanding the existence of a concurrent conflict of interest under paragraph (a), a lawyer may represent a client if: (1) the lawyer reasonably believes that the lawyer will be able to provide competent and diligent representation to each affected client; (2) the representation is not prohibited by law; (3) the representation does not involve the assertion of a claim by one client against another client represented by the lawyer in the same litigation or other proceeding before a tribunal; and (4) each affected client gives informed consent, confirmed in writing." (Rules of Professional Conduct [22 NYCRR 1200.0] Rule 1.7 [b].)

In its Supplemental Affirmation, the Law Firm fails to even address the criteria set forth Rule 1.7(b).  In any event, it is clear that the conditions specified in Rule 1.7(b) have not been met because the Law Firm failed to, among other things, attach any writing demonstrating that Mario Regina gave his "informed consent, confirmed in writing." Even if the Law Firm were to have submitted such a writing, it may not be possible, under circumstances here, to show that "the lawyer reasonably believes that the lawyer will be able to provide competent and diligent representation to each affected client", or that the "the representation does not involve the assertion of a claim by one client against another client represented by the lawyer in the same litigation." (See e.g. Graca v Krasnik, 20 Misc 3d 1127[A], 2008 NY Slip Op 51640[U], at *4 ["Here, the issue giving rise to the conflict of interest, the dismissal of the claim against one defendant shifting liability to the other, rises to a level that full disclosure and consent would not cure."]; see also generally Greene v Greene, 47 NY2d 447, 451-52 [1979] ["Because dual representation is fraught with the potential for irreconcilable conflict, it will rarely be sanctioned even after full disclosure has been made and the consent of the clients obtained]; Tavarez v Hill, 23 Misc 3d 377, 382 [Sup Ct, Bronx County 2009, Victor, J.].) 

*  *  *  *  *

Similarly, as to the third prong set forth in Rule 1.7(b), although neither the driver Mr. Regina nor the leasing company PV Holding has asserted claims against one another, one cannot say that, had they each had separate counsel, they would not have done so under the facts of this case. In any event, the Court need not offer any opinion as to whether "the representation does not involve the assertion of a claim by one client against another client represented by the lawyer in the same litigation or other proceeding before a tribunal" since two of the other prongs have not been met. 

*  *  *  *  *

Since here the Court raised the issue of disqualification on its own, and respecting the general rule that a party is entitled to be represented by counsel of its own choosing (see Dominguez v Community Health Plan of Suffolk, 284 AD2d 294, 294 [2d Dept 2001]), the Law Firm shall, at this time, only be disqualified from representing defendant driver Mario Regina. 

Over at his New York Personal Injury Law Blog, Eric Turkewicz gives his views on this decision. 


AUTO – GRAVES AMENDMENT – RENTAL CAR – SUMMARY JUDGMENT GRANTED
Scopelliti v. Flakowitz
(Sup. Ct., New York Co., decided 6/29/2010)

Defendant ELRAC moved for summary judgment dismissing plaintiff's complaint based on the Graves Amendment.  In support of its motion, ELRAC submitted an affidavit from a regional risk manager for ELRAC, and a copy of the rental agreement between defendant Flakowitz and ELRAC.  The regional risk manager's affidavit stated that ELRAC d/b/a Enterprise Rent-A-Car, was an automobile rental organization engaged in the business of renting motor vehicles at the time of the accident.

In granting ELRAC's motion for summary judgment, New York County Supreme Court Justice George J. Silver ruled:

The Graves Amendment, regarding rented or leased motor vehicle safety and responsibility, “bars vicarious liability actions against professional lessors and renters of vehicles," as would otherwise be permitted under Vehicle and Traffic Law § 388 (see Graham v Dunkley, 50 AD3d 55 [2008] ). The statute provides in pertinent part: (a) An 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).  The Graves Amendment thus preempts state statutes to the extent that they hold owners in the business of renting or leasing motor vehicles vicariously liable for the negligence of drivers, except when there is negligence or criminal wrongdoing on the part of the owner in actions commenced after August 10, 2005 (see Graham v Dunkley, 13 Misc.3d 790, 792 [2006], Keating v SS & R Management Co., 59 A.D.3d 176,872 N.Y.S.2d 459 [lst Dept 2009]).  Accordingly, Defendants' motion for summary judgment is granted, dismissing Plaintiffs summons and complaint against Defendant ELRAC. 

AUTO – GRAVES AMENDMENT – LEASED CAR – FAILURE TO PLEAD GRAVES AMENDMENT AS AFFIRMATIVE DEFENSE IN ANSWER
Strauss v. BMW Fin. Servs. Veh. Leasing
(Sup. Ct., Kings Co., decided 7/29/2010)

Does the failure to plead the immunity contained in the Graves Amendment (49 USC 30106) in the defendant's answer waive said immunity?  This court holds that the defendant did not waive the affirmative defense of the Graves Amendment by failing to plead it in its answer because the plaintiff had not been prejudiced by any surprise and had had a full opportunity to litigate the issue before the court.

Defendant BMW Financial Services Vehicle Leasing d/b/a Financial Services Vehicle Trust (BMW Financial) moved for summary judgment based on the Graves Amendment.  This action arises out of a motor vehicle accident.  One of the vehicles involved in the accident was leased from BMW Financial by defendant, David Kim. There were no specific allegations of negligence on the part of BMW Financial and BMW was not charged with any criminal acts in connection with the accident or this action. Plaintiff argued that because BMW Financial failed to plead the immunity contained within the Graves Amendment  as an affirmative defense in its answer, that defense was waived.  Plaintiff, however, did not dispute that the Graves Amendment encompasses the defendant had BMW Financial plead it in its answer. 

In granting BMW Financial's motion for summary judgment notwithstanding the lack of a Graves Amendment affirmative defense in its answer, Kings County Supreme Court Justice Herbert Kramer held:

The Graves Amendment precludes liability of an owner of a vehicle who leases or rents a vehicle to another if (1) the owner (or an affiliate of the owner) is engaged in the trade or business of renting or leasing motor vehicles; and there is no negligence or criminal wrongdoing on the part of the owner (or an affiliate of the owner). Plaintiff asserts that as the Graves Act should be considered an affirmative defense that if not plead is waived. 

In support of his contentions Plaintiff relies upon cases in which the discovery of an immunity was made on the eve of, or during trial.  Further, the immunity was not proven in the cases which plaintiff relies upon.  Defendant opposes the plaintiff's motion on the basis that there is no surprise to the plaintiff, federal law preempts state law and that the Graves Act should not be considered a waivable defense. 

In this case the Summons and Complaint were filed on April 4, 2009.  BMW timely answered, but made no assertion of the Graves Act as an affirmative defense.  By correspondence dated October 15, 2009 BMW Financial alerted plaintiff to the applicability of the Graves Act and requested the plaintiff to execute a stipulation of discontinuance based thereon. Plaintiff refused and the instant summary judgment motion was brought by defendant. 

Plaintiff has not claimed any surprise from BMW Financial's invocation of the Graves Amendment.  Rather plaintiff asserts that raising the defense is technically inappropriate at this juncture.  For the foregoing reasons the defendant's motion is granted.  First, simply by the name of defendant "BMW Financial Services Vehicle Leasing d/b/a Financial Services Vehicle Trust" it is apparent or at least not surprising that BMW Financial is in the business of leasing vehicles.  Second, because BMW alerted plaintiffs early in the litigation of their protected status the plaintiffs can make no viable claim of surprise.  Lastly, because BMW Financial raised the affirmative defense in connection with the instant motion the plaintiff has had a full and fair opportunity to address the defense and any prejudice appurtenant to raising this defense for the first time on a motion has been ameliorated. 

This court finds that the defendant BMW Financing has not waived the defense of the immunity contained within the Graves Act. The summary judgment motion is granted as to defendant BMW Financing only. The action is severed as to the remaining defendants.

For all posts on this blog about New York court decisions involving the Graves Amendment, click here.

Graves Amendment Held to Exempt Car Sharing Company from Vicarious Liability

PERSONAL AUTO – GRAVES AMENDMENT – VICARIOUS LIABILITY – VEHICLE & TRAFFIC LAW § 388
Minto v. Zipcar New York, Inc.
(Sup. Ct., Queens Co., decided 6/15/2010)

For all actions commenced on or after August 10, 2005, the "Graves Amendment" provides persons or companies engaged in the trade or business of renting or leasing motor vehicles with a statutory basis for dismissing vicarious liability claims in motor vehicle accident lawsuits.  This amendment to the Safe, Accountable, Flexible, Efficient Transportation Equity Act of 2005: 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). 

For purposes of the Graves Amendment, section 30102(a)(6) of Chapter 301 of Title 49 of the United States Code, entitled Motor Vehicle Safety, defines "motor vehicle" as "a vehicle driven or drawn by mechanical power and manufactured primarily for use on public streets, roads, and highways, but does not include a vehicle operated only on a rail line."

Motor vehicle rental and leasing defendants use the Graves Amendment as a tort defense to indirect or vicarious liability under state laws such as New York's Vehicle & Traffic Law § 388.  In pertinent part, that statute provides:

§ 388. Negligence in use or operation of vehicle attributable to owner.

1. Every owner of a vehicle used or operated in this state shall be liable and responsible for death or injuries to person or property resulting from negligence in the use or operation of such vehicle, in the business of such owner or otherwise, by any person using or operating the same with the permission, express or implied, of such owner. Whenever any vehicles as hereinafter defined shall be used in combination with one another, by attachment or tow, the person using or operating any one vehicle shall, for the purposes of this section, be deemed to be using or operating each vehicle in the combination, and the owners thereof shall be jointly and severally liable hereunder.

2. As used in this section, "vehicle" means a "motor vehicle", as defined in section one hundred twenty-five of this chapter, except fire and police vehicles, self-propelled combines, self-propelled corn and hay harvesting machines and tractors used exclusively for agricultural purposes, and shall also include "semitrailer" and trailer" as defined in article one of this chapter, whether or not such vehicles are used or operated upon a public highway. For the purpose of this section, self-propelled caterpillar or crawler-type equipment while being operated on the contract site, shall not be defined as motor vehicles.

This case addresses the question of whether a car sharing business, such as Zipcar,  can be said to be "engaged in the trade or business of renting or leasing motor vehicles" within the meaning of the Graves Amendment.  In the opinion of Queens County Supreme Court Justice Roger Rosengarten, it can and it is.

This personal injury action arose from a May 25, 2009 motor vehicle collision, in which plaintiff Leslie Minto alleged that his vehicle was rear-ended while stopped at a red light by a vehicle driven by defendant Dale Douglas.  Douglas had the use and possession of his vehicle pursuant to his membership in defendant Zipcar New York, Inc.  Zipcar is a membership-based business that, after an application process and pursuant to a “membership contract,” provides cars to its members for an hourly or daily charge.  Gas and insurance are included in the hourly or daily charge.  Zipcar had leased the vehicle Douglas was driving from its title owner, non-party Union Leasing.

Plaintiff moved for summary judgment on the issue of liability against both Douglas and Zipcar.  In opposition to plaintiff's motion, Zipcar initially argued that it could not be held vicariously liable under New York Vehicle & Traffic Law § 388 because it was not the "owner" of that vehicle, as that term is defined in Vehicle and Traffic Law § 128.  The court rejected that argument, finding that Zipcar had obtained exclusive use of the vehicle from Union Leasing pursuant to the vehicle's lease.  In the opinion of the court, the fact that Zipcar relinquished exclusive use of the vehicle to its members did not alter that conclusion.

Zipcar also argued that the Graves Amendment applied to exempt it from vicarious liability under Vehicle & Traffic Law § 388 because it was in the "business of renting or leasing motor vehicles".  In response to that argument, plaintiff pointed out that Zipcar's own website distinguishes its vehicles from "traditional rental cars", telling prospective customers that being a Zipcar member is “more convenient, cost-effective and more fun than renting” and “you could rent a car (but that would be silly)”.  On that point, the court found, however, that "these marketing statements do not resolve the question presented by Plaintiff’s motion. That Zipcar advertises itself by drawing contrasts to 'traditional rental cars,' does not foreclose the possibility that it is nevertheless also in the rental car business, although not of a traditional sort."

Turning to the question of whether Zipcar's car sharing business could be said to be the "renting or leasing vehicles" within the meaning of the Graves Amendment, Justice Rosengarten held:

In determining whether the Graves Amendment applies to a car-sharing company such as Zipcar, the Court begins with the statutory text. Maraia v. Orange Regional Med. Center, 63 A.D.3d 1113 [2d Dept. 2009].  The Graves Amendment does not define “the trade or business of renting or leasing motor vehicles,” or its constituent terms “renting” and “leasing.”  The consistent and established understanding of “leasing” is the “transfer of the right to possession and use of goods for a term in return for consideration.” UCC 2-A-103(j); see also First Franklin Sq. Assocs., LLC v. Franklin Sq. Prop. Account, 15 A.D.3d 529, 532 [2d Dept. 2005] (“The central distinguishing characteristic of a lease is the surrender of absolute possession and control of property to another party for an agreed-upon rent.”); Black’s Law Dictionary (8th Ed., 2004) (“To grant the possession and use of (land, buildings, rooms, movable property, etc.) to another in return for rent or other consideration.”)  Black’s Law Dictionary defines “rent,” used as a noun, as the “[c]onsideration paid, usu. periodically, for the use or occupancy of property (esp. real property).” (8th Ed., 2004.) “When used as verbs, the words ‘lease’ and ‘rent’ are synonymous.” Zizersky v. Life Quality Inc., 21 Misc. 3d 871, 878 [N.Y. Sup. 2008] (citing Richards v. Princeton Ins. Co., 178 F Supp 2d 386, 395 [SD NY 2001]).  Zipcar’s contract with Douglas allowed him to “use Zipcar’s vehicles, to the extent available, in accordance with the terms of this Contract and subject to paying the corresponding fees.” (Supp. Opp., Exh. C.)  This bargain – use of a car in exchange for a fee – appears little different from “traditional rental car[ ]” companies, notwithstanding Zipcar’s marketing statements that contrast it with those companies. The Court finds that Zipcar is in “the trade or business of renting or leasing motor vehicles” as those words are traditionally and plainly understood.

The court also found that the allegation in plaintiff's complaint that Zipcar was negligent “in the manner they rented their vehicles to the people” did not preclude summary judgment from being granted to Zipcar.  While acknowledging that the Graves Amendment does not preempt such claims of direct negligence, the court noted that plaintiff did not attempt to offer any evidence or argument in support of these allegations in its moving papers:

The only relevant evidence offered is by Zipcar, which states in a sworn affidavit from a company official that its policies require a valid driver’s license for at least one year and no record of an alcohol violation for at least seven years prior to renting, and that these policies were followed before renting to Douglas. (Zipcar Opp. Exh. A.) With the record containing no conflicting evidence, the Court finds Plaintiff’s claim for direct negligence cannot withstand summary judgment.

In light of the plaintiff's attempted use of Zipcar's marketing statements to disqualify it from the Graves Amendment's vicarious liability exemption in this case, will Zipcar change its website statements to distance itself less from traditional car rental businesses? 

To read more Coverage Counsel posts about New York cases involving the Graves Amendment, click here.

Second Department Reaffirms Its Finding that Graves Amendment is Constitutional -- Personal Injury Action Against Trustee of Vehicle Lessor Is Dismissed

GRAVES AMENDMENT – VICARIOUS LIABILITY – "AFFILIATE" OF THE VEHICLE OWNER – CONSTITUTIONALITY
Gluck v. Nebgen
(2nd Dept., decided 4/27/2010)

In  Graham v Dunkley, 50 AD3d 55 (2nd Dept. 2008), the Appellate Division, Second Department, held that "the Graves Amendment was a constitutional exercise of congressional power pursuant to the Commerce Clause of the United States Constitution."  Since that decision was issued, injured parties have continued to challenge both the constitutionality and application of the Graves Amendment to New York personal injury actions against vehicle renters and lessors.

The Graves Amendment exempts an "owner (or an affiliate of the owner) ... engaged in the trade or business of renting or leasing motor vehicles" from vicarious liability for injuries or damages caused by the negligent operation of the rented or leased vehicle.  The question addressed in this case is whether the Graves Amendment applies to an entity that it not the offending vehicle's actual owner and lessor, but is affiliated with and related to the owner/lessor.

Gluck was a passenger in defendant Nebgen's car, which collided with a vehicle operated by defendant Turco.  Turco's motor vehicle allegedly was leased from defendant NILT, Inc., which was the title owner of that vehicle.  NILT, Inc. is the trustee of of Nissan-Inifinit LT, a Delaware statutory trust.  Gluck brought this personal injury action, and NILT moved to dismiss plaintiffs' complaint pursuant to CPLR Rule 3211(a)(7), asserting that it could not be held vicariously liable for Turco's alleged negligence by reason of the Graves Amendment, which preempted New York Vehicle & Traffic Law § 388.  Plaintiffs opposed NILT's motion on two grounds: (1) that the Graves Amendment did not apply because NILT neither itself leased the Turco vehicle nor is in the business of leasing vehicles; and (2) that the Graves Amendment violates the Commerce Clause of the United States Constitution. 

An employee of Nissan North America testified at an examination before trial that NILT, Inc., was a subsidiary of Nissan North America, and that NILT, Inc., was the trustee of NILT Trust, the owner of Nissan-Infiniti LT.  He also testified that NILT Trust is owned by Nissan Motor Acceptance Corporation, which relies on dealers to originate leases directly to and with consumers.  Once a consumer leases a vehicle, the lease is purchased by Nissan-Infiniti LT.  The Nissan employee testified that as trustee for Nissan-Infiniti LT, NILT, Inc., was not directly involved in the practice of leasing automobiles to the ultimate consumer.  NILT, Inc.'s main purpose was to acquire motor vehicle titles from Nissan Motor Acceptance Corp. in order to allow it to raise capital for the funding of the lease finance business.  After Turco leased her vehicle from Smithtown Nissan, the lease was assigned to Nissan-Infiniti LT, who by way of the NILT Trust, is owned by NILT, Inc.

In an affidavit submitted in support of NILT, Inc.'s 3211(a)(7) motion, it was explained that the primary purpose of the "originating" or "titling" trusts commonly utilized in the automotive leasing industry is to isolate the ownership of the lease contracts in the event of creditors rights actions against a non-bank corporation engaged in the manufacture or leasing of motor vehicles, and that without such trusts, the funding of motor vehicle lease contracts to consumers would be considerably more expensive or unavailable. 

In granting NILT's motion to dismiss plaintiffs' complaint against it, Suffolk County Supreme Court Justice Peter Mayer held:

Here, deposition testimony by Alan Hunn indicates that NILT is the owner of Nissan-Infiniti LT whose primary role is to purchase customer leases directly from Nissan dealerships. Mr. Hunn testified that by purchasing the motor vehicle titles, NILT allows Nissan-Infiniti LT to raise capital for the funding of the lease financing business. NILT's expert explained that as an "originating trust", NILT is indispensable to the leasing trade since it lowers Nissan-Infiniti's costs to consumers.  Plaintiffs' restrictive interpretation of the Act, as relating only to those businesses which directly lease a car to the consumer, is belied by the Act's attempt to effect an industry-wide reformation and deliver lower costs to the consumer.  Plaintiffs' interpretation of the Act would negate its broad aim and ignore NILT's integral role in the assumption of leases from Nissan dealerships. Under these circumstances NILT is unmistakably among those affiliates targeted by the Act.  Moreover, the instant action is distinguishable from Zizerski v Life Quality Motor Sales, NYLJ October 27, 2008, Kings County. Unlike Zizerski where the Court refused to extend the protection of the Graves Act to the defendants because they provided defendants with a loaner rather than a leased vehicle, here it is undisputed that the car provided to defendant Turco was a leased motor vehicle.  

Plaintiffs appealed the dismissal of their complaint against NILT, Inc., and the Appellate Division, Second Department, AFFIRMED, holding:

The Supreme Court properly granted that branch of the motion of the defendant NILT, Inc. (hereinafter the respondent), which was to dismiss the complaint insofar as asserted against it pursuant to CPLR 3211(a)(7). The respondent showed that it was an "owner (or an affiliate of the owner) . . . engaged in the trade or business of renting or leasing motor vehicles" (49 USC § 30106). Since there are no allegations of negligence or wrongdoing on its part, the respondent was entitled to dismissal of the complaint insofar as asserted against it for failure to state a cause of action (see 49 USC § 30106; Graham v Dunkley, 50 AD3d 55, 58). The plaintiffs' cross motion also was properly denied.

The Second Department also rejected "[t]he plaintiffs' remaining contention [as being] without merit (see Graham v Dunkley, 50 AD3d at 58)."  That remaining contention was the plaintiffs' additional argument that the Graves Amendment is unconstitutional.  By citing page 58 of its 2008 decision in Graham v. Dunkley, the Second Department implicitly reaffirmed its finding that the Graves Amendment is a constitutional exercise of congressional power pursuant to the Commerce Clause of the United States Constitution.

Question of Fact on Whether Rental Car Company Verified Facial Validity of Renter's Driver's License Precludes Summary Judgment on Graves Amendment

AUTO – GRAVES AMENDMENT – RENTAL COMPANY'S NEGLIGENCE – FACIALLY VALID DRIVER'S LICENSE
Palacios v. Aris, Inc.
(EDNY, decided 3/11/2010)

On November 4, 2007, Aris, Inc., rented a 2007 Toyota Camry to Bursztyn and Azriel.  Azriel had asked Bursztyn to help him rent a car because Azriel did not have a credit card with insurance and thus lacked the ability to rent a car by himself.  Bursztyn's license was already on file at Aris from prior rentals, so he was not required to present a license at the time of rental. When Aris rented the car to Bursztyn, Bursztyn informed Aris that Azriel would be driving the vehicle.  Because he would be driving the vehicle, Azriel provided Aris with a paper that was asserted to be an Israeli driver's license that was in Hebrew and contained no photograph.  Upon being shown that document, Aris rented the vehicle to Bursztyn and Azriel. Azriel left with the Camry, but Bursztyn departed separately.

Later that same day, while Azriel was driving the Camry, there was a collision between the Camry and another vehicle.  The impact of the collision caused one of the cars to land on the nearby sidewalk on top of a pedestrian, plaintiff Palacios.

At the scene, Azriel was issued a ticket for being an "unlicensed operator." Azriel did not appear in court to answer the ticket, and on June 16, 2008, the New York State Department of Motor Vehicles suspended Azriel's privilege to operate a motor vehicle in New York State for his failure to appear in court.  On October 21, 2009, Azriel appeared in court to answer the "unlicensed operator" charge against him and pled guilty to the charge. Plaintiff asserted in this action that as of November 4, 2007, the date of the accident, Azriel's privilege to operate a motor vehicle in New York State had been suspended six times on five different dates.

Aris moved for summary judgment based on the Graves Amendment, a federal statute which exempts vehicle lessors and renters from liability 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 the owner is engaged in the trade or business of renting or leasing motor vehicles and there is no negligence or criminal wrongdoing on the part of the vehicle's owner.  49 U.S.C. § 30106(a)

In opposition to Aris's motion, plaintiff argued that Aris was negligent because it failed in its statutory duty not to rent a vehicle to an individual who did not have a valid driver's license or did not have the privilege to drive in New York State under Vehicle & Traffic Law § 250.  

In denying Aris's motion, United States District Court Judge Joseph Bianco held that

with respect to Aris's reliance on the Graves Amendment, plaintiff has presented evidence that Azriel, when renting the car from Aris, presented a document purporting to be an Israeli driver's license that was in Hebrew and contained no photograph. No other identification was presented. Moreover, there is a factual dispute as to whether the Israeli license presented by Azriel was valid. The Court recognizes there is no duty under New York law for rental car companies, once they determine that the lessee has a facially valid driver's license, to conduct an investigation of the renter, including his or her driving history. However, after reviewing the record in the light most favorable to plaintiff, the Court concludes that plaintiff has raised genuine issues of material fact as to whether the license was valid, whether Aris was negligent in failing to determine whether the purported Isareli license was valid on its face, and whether, given the lack of a photograph, the license presented belonged to the person who was seeking to rent the vehicle. Thus, under the particular circumstances of this case, summary judgment under the Graves Amendment is unwarranted.

*  *  *  *  *

Although foreign drivers may operate vehicles in the United States, "[a]n entity can be held liable for knowingly allowing an unlicensed driver to operate a vehicle." Pacho v. Enterprise Rent-A-Car Co., 572 F. Supp. 2d 341, 352 (S.D.N.Y. 2008). Thus, even though the Graves Amendment may allow a rental car company to escape vicarious liability for another's negligence, by the Graves Amendment's very terms, the rental car company will still be liable if the company itself is negligent. Accordingly, a rental company may be liable if it allows an unlicensed driver, or a driver without a valid license, to operate a vehicle.  Although this obviously requires that rental car companies assess the facial validity of a driver's license before renting to that driver or otherwise allowing that driver to operate a vehicle, this duty does not require the company to investigate a renter's driving record where that renter has presented a valid driver's license. See, e.g., Sigaran v. Elrac, Inc., 22 Misc. 3d 1101[A], 875 N.Y.S.2d 824, 2008 NY Slip Op 52569[U], 2008 WL 5381494, at *6 [N.Y. Sup. Ct. 2008] (finding failure to state a cause of action when "[p]laintiffs failed to cite any legal authority that ELRAC was under an obligation to check Fernandez's driver's record beyond verifying that he had a valid driver's license"); Vedder v. Cox, 18 Misc. 3d 1142[A], 859 N.Y.S.2d 900, 2008 NY Slip Op 50408[U], 2008 WL 595857, at *1-2, 4 [N.Y. Sup. Ct. 2008] finding no evidence or legal basis from which to conclude that rental company had a duty to investigate the driving record of a defendant who had a "history of suspended driving privileges," particularly without proof that the company rented the vehicle to the defendant "during a time that his driving privileges were suspended"); accord Barksdale v. Nat'l Bank of Detroit, 186 Mich. App. 286, 463 N.W.2d 258, 260-61 (Mich. App. 1990); Osborn v. Hertz Corp., 205 Cal. App. 3d 703, 710, 252 Cal. Rptr. 613 (Cal. App. 1988). However, if Aris was negligent in failing to exercise reasonable care to determine that the license was facially valid and belonged to Azriel, then the Graves Amendment would not protect Aris from liability.

Interestingly, the court also denied Bursztyn's motion for summary judgment, who argued that he had only assisted Azriel in renting the car and owed no duty to the plaintiff:  

Under the particular circumstances of this case, the Court cannot determine as a matter of law on summary judgment whether Bursztyn negligently entrusted this vehicle to an unsafe or unlicensed driver.  At Aris, in the presence of Bursztyn, Azriel presented a temporary license that was written in Hebrew and lacked a photograph of its holder. There is a material issue of fact regarding whether, in light of the circumstances of this transaction--the fact that Bursztyn had just met Azriel that day, was unaware whether Azriel had a valid driver's license, and saw Azriel procure a temporary foreign license without a photograph on it--Bursztyn should have been reasonably concerned about entrusting Azriel with a vehicle and was negligent in doing so.  Based on the information in the record, it cannot be determined on summary judgment as a matter of law whether Bursztyn knew, or should have known in the exercise of reasonable care, that permitting Azriel to drive the vehicle "represented an unreasonable risk of harm to that person or to others because of [Azriel's] incompetence to handle it safely." See Good, 564 N.Y.S.2d at 952. Viewing these facts in a light most favorable to the plaintiff and drawing all reasonable inferences therefrom, plaintiff has put forth sufficient evidence to survive summary judgment on this issue.

To read most posts on this blog about New York court decisions involving the Graves Amendment, click here.

A Graves Amendment Update -- New York

For all actions commenced on or after August 10, 2005, the "Graves Amendment" provides vehicle renters and lessors with a statutory basis for dismissing vicarious liability claims in motor vehicle accident lawsuits.  This amendment to the Safe, Accountable, Flexible, Efficient Transportation Equity Act of 2005: 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). 

For purposes of the Graves Amendment, section 30102(a)(6) of Chapter 301 of Title 49 of the United States Code, entitled Motor Vehicle Safety, defines "motor vehicle" as "a vehicle driven or drawn by mechanical power and manufactured primarily for use on public streets, roads, and highways, but does not include a vehicle operated only on a rail line."

Motor vehicle rental and leasing defendants use the Graves Amendment as a tort defense to indirect or vicarious liability under state laws such as New York's Vehicle & Traffic Law § 388.  In pertinent part, that statute provides:

§ 388. Negligence in use or operation of vehicle attributable to owner.

1. Every owner of a vehicle used or operated in this state shall be liable and responsible for death or injuries to person or property resulting from negligence in the use or operation of such vehicle, in the business of such owner or otherwise, by any person using or operating the same with the permission, express or implied, of such owner. Whenever any vehicles as hereinafter defined shall be used in combination with one another, by attachment or tow, the person using or operating any one vehicle shall, for the purposes of this section, be deemed to be using or operating each vehicle in the combination, and the owners thereof shall be jointly and severally liable hereunder.

2. As used in this section, "vehicle" means a "motor vehicle", as defined in section one hundred twenty-five of this chapter, except fire and police vehicles, self-propelled combines, self-propelled corn and hay harvesting machines and tractors used exclusively for agricultural purposes, and shall also include "semitrailer" and trailer" as defined in article one of this chapter, whether or not such vehicles are used or operated upon a public highway. For the purpose of this section, self-propelled caterpillar or crawler-type equipment while being operated on the contract site, shall not be defined as motor vehicles.

AUTO – GRAVES AMENDMENT – RENTED TRUCK – RESTRICTED DRIVER'S LICENSE – FAILURE TO PRODUCE RENTAL POLICIES AND PROCEDURES PRECLUDES SUMMARY JUDGMENT – NEGLIGENT ENTRUSTMENT THEORY
Byrne v. Collins
(Sup. Ct., Kings Co., decided 11/24/2009)

A Budget franchisee rented a Budget truck to JBG Trucking.  The rental agreement provided that any authorized employee of JBG with a valid driver's license was permitted to operate the vehicle upon presentation of a valid driver's license by the company employee who picks up the vehicle.  Jamie Collins presented a restricted driver's license to the Budget location and, while driving the rented truck, struck and killed the plaintiff's decedent, who was riding a bicycle.  Plaintiff alleged that the Graves Amendment did not apply because the Budget defendants knew or should have known from Collins' presentation of a restricted driver's license that he had a history of drug and/or alcohol related offenses.  In opposition to the Budget defendants' motion to dismiss plaintiff's complaint and for summary judgment, plaintiff argued that the Budget defendants negligently entrusted the rented truck to Collins, and that their negligence precluded application of the Graves Amendment's vicarious liability exemption. 

While agreeing that the presentation of a restricted license "does not, in and of itself, compel a motor vehicle rental agent of average ken to scrutinize the renter", Kings County Supreme Court Justice Francois Rivera ruled that the Budget defendants had not carried their burden of establishing their entitlement to summary judgment because they had not submitted their written rental policies and procedures and established that the Budget franchisee followed those policies and procedures in renting the truck to JBG:

However, at this juncture we cannot find that the moving defendants are entitled to summary judgment as a matter of law. Upon searching the record, the Court finds that triable issues of material fact remain regarding whether Perfect possessed special knowledge of any propensity by Collins to operate the subject truck in an unreasonably dangerous way. Specifically, the moving defendants have not tendered any evidence establishing that Perfect followed the proper policies and procedures required of Budget rental locations before renting vehicles to drivers.^[FN9] Nor does the moving defendants' reply address their failure to produce such documents. Although we decline to impose upon motor vehicle rental agents any obligation to check a renter's driving record beyond verifying that he or she has a valid driver's license, absent further evidence of the unsuitability of the renter and the agent's knowledge thereof, we need also conclude that such precautions are not part of Budget's internal policies and procedures before granting summary judgment to the moving defendants. The moving defendants have not persuaded us of that fact with their showing. Having failed to eliminate all material issues of fact from the case, they do not meet their prima facie burden of establishing that they had no reason to doubt Collins' ability to operate a motor vehicle properly and safely. The Court need not examine the sufficiency of the supporting evidence in plaintiff's opposition papers.

Editor's Note (December 15, 2010) ~~ The Appellate Division, Second Department, reversed this decision on October 19, 2010 and granted the Budget defendants' motion for summary judgment, holding that "[c]ontrary to the plaintiff's contention, the appellants' failure to provide copies of any internal policies as to investigation of potential renters with restricted licenses constitutes an insufficient basis upon which to deny their motion for summary judgment. Even if such a policy had been violated, under the circumstances of this case, such violation would not constitute actionable negligence (see Lambert v Bracco, 18 AD3d 619, 620; Newsome v Cservak, 130 AD2d 637, 638)."

AUTO – GRAVES AMENDMENT – RENTED VEHICLE – NO OBLIGATION TO VERIFY VALID STATUS OF RENTER'S DRIVER'S LICENSE
Tedesco v. Warner
(Sup. Ct., Suffolk Co., decided 12/23/2009)

Elrac, Inc. (Enterprise Rent-A-Car) rented a car to Jennifer Warner on March 10,2006.  Warner presented her driver's license and information regarding her automobile insurance coverage. The car rental agreement that Warner signed included a provision requiring the driver to certify that her driver’s license was valid.  Erlac's regional loss manager testified that although Elrac employees input information appearing on the face of a customer’s driver's license into its computer system, Elrac had no computer system which would have enabled an Elrac employee at a rental location to determine whether a customer's driver’s license was suspended. Elrac argued that its business practice of requiring customers to both present facially valid drivers’ licenses and to confirm that the licenses were valid by having the customer sign the acknowledgment section of the rental agreement satisfied its obligation under Vehicle & Traffic Law § 509(4) ("No person shall knowingly authorize or permit a motor vehicle owned by him or in his charge to be operated [by an unlicensed driver].") to ensure that it rented only to competent drivers.

In granting summary judgment to Elrac, Suffolk County Supreme Court Justice Peter Mayer rejected plaintiff's argument that Elrac violated Vehicle & Traffic Law § 509(4) and held:

Plaintiff's sole cause of action against Elrac is for negligence premised upon its alleged duty to investigate the status of Warner’s driver’s license. The so-called Graves Amendment (USC § 30106[a][1] and [a][2]) provides that an owner of a rental vehicle shall not be liable under state law for harm to persons or property resulting from the use, operation or possession of the vehicle during the rental period.  Plaintiff, by her cause action, seeks to impose a duty upon Elrac to research its customers’ driving histories beyond verifying the existence of a valid driver’s license. Inasmuch as no such obligation exists, plaintiff's complaint, as to Elrac, must be dismissed.

AUTO – GRAVES AMENDMENT – RENTED TRUCK – QUESTION OF FACT ON RENTER'S NEGLIGENCE PRECLUDES SUMMARY JUDGMENT
Ballatore v. Hub Truck Rental Corp.
(Sup. Ct., Suffolk Co., decided 1/4/2010)

Defendant Hub Truck Rental Corp. rented a commercial truck that was involved in a motor vehicle accident.  The Graves Amendment's vicarious liability exemption does not apply if there is negligence or criminal wrongdoing on the part of the rented or leased vehicle's owner or an affiliate of the owner.  In denying defendant's motion for summary judgment pursuant to the Graves Amendment, Suffolk County Supreme Court Justice Peter Fox Cohalan ruled that Hub had failed to carry its initial motion burden of establishing that it was not negligent:

Vicarious liability is not abrogated where the injury or damages results from the negligence of the owner’s employee in the operation or maintenance of the vehicle, nor where it seems the owner was negligent in entrusting the vehicle to the operator (see, Byrne v Collins, 25 Misc 3d 1232 [A]; 2009 NY Slip Op 52395U [2009]; Luma v Elrac, lnc., 19 Misc 3d 1138 [A], 862 NYS2d 81 5 [2008]).

Here, Hub has failed to establish its entitlement to judgment as a matter of law. In his October 26, 2007 EBT testimony, Hayes Conn, Ill., Hub’s vice president of maintenance, stated that, prior to renting the subject truck to Nuzzolese on August 3, 2005, a pre-trip inspection including brakes was conducted on the truck and that one of Hub’s employees would check “air pressure leaks” in the brake system and would walk around the truck to make sure that all requirements of the inspection were properly performed. In his May 7, 2008 EBT Butler testified that, prior to the impact with the plaintiffs’ vehicle, he “put [his] foot onto the brake” and knew that he “wasn’t going to stop” because the truck he was operating had “no brakes.” There are triable issues of fact as to whether the accident was caused by the alleged brake failure and thus as to Hub’s possible contribution to the accident (see, Suitor v Boivin, 219 AD2d 799, 631 NYS2d 960 [1995]). Hub has failed to sustain its initial burden of establishing a prima facie entitlement to judgment as a matter of law.

AUTO – GRAVES AMENDMENT APPLICABLE TO LEASED TRAILER
Yoon Young Lee v. Rivera
(Sup. Ct., New York Co., decided 1/26/2010)

In Zawatsky v. Barker Materials, Ltd., 22 Misc 3d 1132(A) (Sup. Ct., Suffolk Co., 1/29/2009), the court ruled that the Graves Amendment's vicarious liability exemption applies to leased trailers.  This decision concludes the same.

In rejecting the special referee's post-hearing report and recommendation and granting Jiffy Trucking Company's motion for summary judgment, New York County Supreme Court Justice Paul Wooten held:

In support of its motion to renew and reargue defendant Jiffy Trucking Company argues that under 49 U.S.C.A.§ 13102, the term motor vehicle is defined as a: 

vehicle, machine, tractor, trailer, or semi-trailer, propelled or drawn by mechanical power...

Defendant Jiffy Trucking Company argues that at the time of the subject accident, Jiffy Trucking Company’s trailer was attached to Ponce Dynasty Corporation’s tractor, thus being “drawn by mechanical power”.  As such, the trailer is a motor vehicle pursuant to 49 U.S.C.A.§ 13102 and the Graves Amendment is applicable.  

In opposition, plaintiff argues, inter alia, that Jiffy Trucking Company’s “delivery equipment” does not qualify as a trailer as defined under the Graves Amendment.  Accordingly, defendant Jiffy Trucking Company is not in the business of leasing motor vehicles and is not afforded the protection under the Graves Amendment.

It is undisputed that Jiffy Trucking Company is an affiliate of General Trading Company Grocery and Dairy and is the owner and lessor of the trailer, that was leased to defendant Ponce Dynasty Corporation and attached to the tractor that was operated by defendant Rivera, at the time of the subject accident. Thus, pursuant to 49 U.S.C.A. § 13102, defendant Jiffy Trucking Company’s trailer qualifies as a motor vehicle and Jiffy Trucking Company is an “affiliate of the owner of the tractor-trailer, engaged in the business of renting or leasing motor vehicles” (49 U.S.C. § 30106).

Accordingly, the plaintiffs claims against Jiffy Trucking are “barred by operation of the Graves Amendment” and the case must be dismissed as to defendant Jiffy Trucking Company (Berkan v. Penske Truck Leasing Can., Inc., 535 F. Supp. 2d 341, 345-346 [WDNY 2008]; see Flagler v Budget Rent A Car System, Inc., 538 F. Supp. 2d 557 [EDNY 2008] ).

The question I have about this and the Zawatsky decision, which is light on analysis, is this:  does the definition of "motor vehicle" found in section 13102(16) of Chapter 131 of Part B of Subtitle IV of Title 49 of the United States Code, which includes a reference to a trailer, override or supersede the definition of "motor vehicle" found in section 30102(a)(6) of Chapter 301 of Part A of Subtitle VI Title 49 of the United States Code -- the Chapter in which the Graves Amendment (49 USC § 30106) appears -- which does not mention trailers?  Was Congress' omission of any reference to trailers or semi-trailers in section 30102(a)(6) deliberate, since it included those terms in section 13102(6)?  Why the different definitions in the same title, but different subtitles?  Or, is it enough that a leased or rented trailer be "drawn by mechanical power" to qualify it as a "motor vehicle" under section 30102(a0(6) and the Graves Amendment?  Or, still yet, does it not matter because New York Vehicle & Traffic Law § 388(2) includes semitrailers and trailers within the ambit of that statute?  I'm not sure this issue is settled in New York.

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

Permanent Stay of Uninsured Motorists Coverage Claim Arbitration Granted -- Liability Coverage for Leased Trailer Found to Apply to Tractor

UM – AUTO – GRAVES AMENDMENT – TRACTOR TRAILER LIABILITY – VEHICLE & TRAFFIC LAW § 388
Matter of State Farm Mut. Auto. Ins. Co. v. Morales
(Sup. Ct., Nassau Co., decided 10/22/2009)

State Farm's insured, Jose Morales, claimed injuries from an accident in which his vehicle was struck in the rear by a tractor trailer.  An accident report indicated that the offending vehicle was owned by Tuscan Lehigh Dairies and insured by Ace American Insurance Company.  Morales made a claim to State Farm for uninsured motorists (UM) coverage benefits after Ace presumably disclaimed or denied coverage. State Farm commenced this special proceeding pursuant to CPLR Article 75 for a permanent stay of the UM claim arbitration, contending that there was liability coverage for the tractor trailer, and naming both Tuscan and Ace as proposed additional respondents.

In an opposing attorney's affirmation, Tuscan alleged that it owned only the trailer, and not the tractor.  The tractor allegedly was owned by Action Transport and being driven by one of Action's employees at the time of the accident.  Tuscan also submitted an opposing affidavit of a Kathy Weaver, the human resources manager of Dean NE, LLC, which purportedly was associated with Tuscan.  Weaver's affidavit stated that Tuscan was in the business of renting or leasing trailers to haulers under hauling agreements for the purpose of moving its products from on point to another and, as such, was exempt from vicarious liability under New York's Vehicle & Traffic Law § 388 by operation of the Graves Amendment. Her affidavit also stated there was an agreement between Dean NE, LLC and Action Transport for the purpose of hauling products of Tuscan, and that agreement required Action Transport to assume full responsibility for the trailer including any claims by third parties.

A hearing was conducted at which the parties stipulated that: (1) the trailer owned by Tuscan was insured on the accident date; (2) State Farm could not prove any policy of insurance was issued to Action Transport for the operation of its tractor on the accident date; (3) the trailer itself did not come into contact with Morales' vehicle; and (4) the only issued to be determined in this proceeding was whether the insurance policy on Tuscan's trailer would provide coverage for and negligence on the part of the tractor pulling the trailer.

Although Suffolk Supreme had previously held in Zawatsky v Barker Materials, Ltd., that the Graves Amendment does apply to leased trailers, Nassau County Supreme Court Justice Antonio Brandveen rejected Tuscan's Graves Amendment argument and granted State Farm's petition to permanently stay Morales' UM coverage claim arbitration:

The affidavit of Kathy Weaver stating she is the Human Resources Manager of DEAN NE, LLC which is associated with TUSCAN and Garelick Farms was not notarized and can not be considered by this court. Further, the purported affidavit asserting that Dean NE, LLC is "associated" with TUSCAN is vague and imprecise, that standing alone, is insufficient to establish a connection between the two entities to give TUSCAN standing to assert the application of the Graves Amendment in this action.

*  *  *  *  *

It is clear that the provisions of VTL § 388(1) provide that when a tractor and trailer are being operated in combination the owners shall be jointly and severally liable.  VTL § 388(2) clearly defines a vehicle for purposes of this statute to include a semitrailer and a trailer.

In MOUNT VERNON FIRE INSURANCE COMPANY v. THE TRAVELERS INDEMNITY COMPANY, 63 A.D.2d 254, 255 the court held:

Section 388 of the Vehicle and Traffic Law imposes joint and several liability on owners of tractors and trailers used in combination with one another, for injuries occasioned by such vehicles. Subdivision 4 thereof mandates "All... policies of insurance issued to the owners of any vehicle subject to the provisions of this section shall contain a provision for indemnity or security against the liability and responsibility provided in this section . This statute, which has as its objective the protection of injured plaintiffs, does not differentiate between primary and excess policies but directs that "All" policies of insurance are to provide the required coverage. (Emphasis added).  See, also (Employers Mut. Liability Ins. Co. Of Wis. v Indemnity Ins. Co. Of North America 37 Misc.2d 839)

Accordingly, the court finds that pursuant to VTL § 388 the insurance policy covering the trailer owned by TUSCAN is required to provide coverage for any negligence on the part of the tractor operated in combination with trailer. The petition by STATE FARM is granted.

Justice Brandveen was correct in rejecting the unnotarized affidavit submitted in support of Tuscan's Graves Amendment argument.  But even if that affidavit been notarized (and certificated pursuant to CPLR § 2309(c) if executed outside of New York State), would the result have been different?  A motor vehicle lessor's coverage responsibility is not always congruent with its liability exposure. 

In Antwi v. HVT, Inc., 24 Misc 3d 1250(A) (Sup. Ct., Bronx Co., decided 9/11/2009), the court allowed HVT to renew its Graves Amendment-based motion for summary jugdment with a new affidavit that could have been but was not submitted in support of HVT's original motion.  If Tuscan were to try the same thing here -- to move to renew based on a properly executed and notarized affidavit of Kathy Weaver -- would the result be any different?  Probably not.  A fair reading of the Graves Amendment is that while it exempts motor vehicle lessors from the vicarious liability imposed by subsection 1 of Vehicle & Traffic Law § 388, it does nothing to affect or excuse lessors from their coverage responsibilities under subsection 4 of that statute.  

In other words, the fact that Tuscan may not be held liable under VTL § 388(1) to Morales for his injuries by operation of the Graves Amendment does not necessarily mean its trailer's liability policy with Ace does not cover the tractor's operation.  Liability exposure?  No.  Coverage responsibility?  Yes.  New York personal auto insurers facing UM claims stemming from accidents with leased tractors or trailers should bear this in mind.

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