What are Plaintiffs Doing to Skirt the Graves Amendment?

The Graves Amendment, passed in 2005 and codified at 49 U.S.C. § 30106, bars an action for vicarious liability under state law against commercial lessors of motor vehicles involved in motor vehicle accidents, provided that the lessor is free from negligence or criminal wrongdoing. Courts across the country have used the Amendment to protect lessors of tractors, trailers, and intermodal chassis. New York courts have been leaders in protecting rights under the Graves Amendment, especially against New York’s infamous vicarious liability statute, Vehicle and Traffic Law § 388. So, what are the plaintiffs’ lawyers doing to avoid the Graves Amendment?

A double-truck head-on collision, and a downtown New York terrorist attack, illustrate the cleverness of the plaintiffs’ bar. The former is seen in the Illinois federal court case of Favorite v. Sakovsky (August 16, 2019). The terrorist attack is at the center of Grandelli v. City of New York, in Manhattan state court (September 24, 2019). In each horrible case the plaintiffs’ attorneys attempt to increase the pool of financially viable defendants, and to avoid the Graves Amendment.

In Favorite, widow Stephanie Favorite sued the Sakovski estate, BB Wolf, Inc., and Compass Truck Rental and Leasing, the company that leased the Sakovski truck to BB Wolf. She alleged that Compass negligently entrusted the truck to BB Wolf, and should have known that BB Wolf might employ an incompetent driver. Specious as the allegation was, the court denied Compass’s Graves Amendment motion to dismiss because there had been no discovery as yet. A full fact development might support Compass, but the bare complaint did state a cause of action for negligent entrustment.

In Grandelli, Sayfullo Saipov rented a pick-up truck from Home Depot and drove it into a crowd of pedestrians and bicyclists in lower Manhattan, killing eight people. The estate of one victim brought suit against the City and several agencies, and also against Home Depot, alleging that the truck’s lessor negligently entrusted the truck to Saipov, in spite of certain “red flags” from law enforcement publications to be on the lookout for customers who might use a truck to commit terrorist attacks. Home Depot made a Graves Amendment motion to dismiss before conducting any discovery. The court in New York County denied the motion without prejudice, on the incomplete record before it. The court held that the complaint sufficiently stated a case for negligent entrustment, which circumvents the Graves Amendment.

Only one appellate court has considered whether a negligent entrustment claim is barred by the Graves Amendment. In Carton v. GMAC (2010), the Eighth Circuit ruled that vicarious liability claims are barred, but a claim of negligent entrustment, not just negligent maintenance of a leased vehicle, can create an exception to the Graves Amendment. But in this case, the court held plaintiff’s allegations failed to rise to the level of negligent entrustment.

For now, equipment lessors will continue to face negligent entrustment claims, likely unprotected by the Graves Amendment. Lessors should be prepared to present proof of careful practices and procedures to thwart claims of negligent entrustment.

LEGISLATIVE UPDATE: Independent Contractor v. Employee

NJ: Proposed Legislation

NJ State House

It was all but certain to pass. New Jersey Governor Phil Murphy was waiting to sign it. Television ads proclaimed its virtues. But the State’s anti-independent contractor bill (similar to California’s AB5) was pulled from the last legislative session. Groups representing independent contractors in myriad occupations made forceful and practical arguments against the bill. Included were freelance writers, musicians, doctors, various independent teachers, truckers, graphic designers, bakers, and others. Many legitimate independent contractor businesspeople prefer the freedom of owning and operating their own businesses. They do not want to be artificially classified as employees, a move they say would harm their businesses. The legislation was re-introduced on January 14th, and referred to the Labor Committees of both the Senate and Assembly. We are watching developments in both New Jersey and New York, which is also considering similar legislation.

CA: Preliminary Injunction Granted

Much to the relief of many, on January 16th, Judge Benitez granted a preliminary injunction to the California Trucking Association, temporarily stopping the enforcement of AB5 upon motor carriers. In his decision, Judge Benitez writes, “…there is little question that the State of California has encroached on Congress’ territory by eliminating motor carriers’ choice to use independent contractor drivers, a choice at the very heart of interstate trucking. In so doing, California disregards Congress’ intent to deregulate interstate trucking, instead adopting a law that produces the patchwork of state regulations Congress sought to prevent. With AB-5, California runs off the road and into the preemption ditch of the FAAAA.”

CA Federal Court Restrains Enforcement of “ABC Test” for Motor Carriers

Edward J. Schwartz United States Courthouse

A federal district court in southern California issued a temporary restraining order on New Year’s Eve barring the enforcement of the state’s Assembly Bill 5, set to go into effect on New Year’s Day. AB 5 adopted the “ABC test” to determine if a particular worker is an independent contractor or an employee. The test hits particularly hard on the motor carrier industry, because many trucking companies use legitimate independent contractors – owner-operators – as part of their business model. The court’s decision was compelled largely because under the Federal Aviation Administration Authorization Act (“FAAAA”), states are not to enact or enforce their own laws related to a price, route, or service of any motor carrier regarding transportation of property. The TRO applies only to the motor carrier industry.

The ABC test presumes that a worker is an employee, not an independent contractor. The hiring party can rebut that presumption only if it can establish each of three factors:

  • The person is free from the control and direction of the hiring party in connection with the performance of the work, both under the contract for the performance of the work and in fact.
  • The person performs work that is outside the usual course of the hiring entity’s business.
  • The person is customarily engaged in an independently established trade, occupation, or business of the same nature as that involved in the work performed.

Rebutting the presumption is virtually impossible for a motor carrier, because it cannot meet Prong B. The owner-operator will always be within, not outside, the usual course of business of the hiring motor carrier. Thus, the California Trucking Association and several members of the industry brought the legal challenge.

Judge Benitez granted the TRO, holding that the plaintiffs had met their burden to show 1) they are likely to succeed on the merits, 2) they are likely to suffer irreparable harm in the absence of relief, 3) the balance of the equities tips in their favor, and 4) the requested relief is in the public interest.

Although this is a very preliminary victory, it signals what may come from Judge Benitez on the motion for a preliminary injunction and, ultimately, the outcome of the case at the trial level. There is still a long road to travel, but this outstanding beginning sends a signal to the states that the Congress has a preemptive role in motor carriers’ business regulation. Notably, New Jersey has just enacted legislation adopting the ABC test, and for the same reasons as are evident in California. Will New Jersey’s legislation, too, be found to interfere with Congressional regulation of motor carriers? We will be watching.

John Lane Reflects Upon a Great TIDA Annual Seminar Amid a Gathering of National Heroes

photo by Louise Lane

I recently attended the 27th Annual Seminar of the Trucking Industry Defense Association, in Tampa, Florida, gathering with wonderful friends from across the county. As a bonus, we shared our hotel with some of the most inspiring Americans – recipients of the Congressional Medal of Honor at their annual meeting.

The two-day educational program was kicked off by a state-of-the-industry presentation by Randy Guillot, the new chairman of American Trucking Associations. Mr. Guillot gave specific descriptions of how the siege of lawsuits against trucking companies affects the profitability of companies because of the expense of defending lawsuits, payments of settlements and judgments, and increasing insurance premiums from a downsizing of the insurance market. He gave a call to arms to those of us who defend truckers every day.

That address was followed by a discussion by a panel of insurance, trucking, and legal experts, of the view that more cases need to be tried, rather than settled, to help stem the tide of lawsuits. A well-known plaintiffs’ attorney gave his views of trucking cases from his side of the lawsuits, while the remainder of the first day saw excellent presentations on technology and whether advancements are creating additional standards of care, the potential tensions between safety and claims departments, and regulatory compliance, with a final panel devoted to urging a commitment to the sharing of information and ideas through an open forum to assist all who work in and who defend trucking companies.

The final day concentrated on controlling and reducing damage awards, countering the Reptile attack of the industry by plaintiffs’ lawyers, and some good news of some recent successful verdicts. A strong appeal was made for the defense bar to help respond to the onslaught of media advertising by the other side, especially targeted at trucking companies.

Our hotel was also home to the 2019 annual meeting of the Congressional Medal of Honor Society, an affair that lasted all week and brought together 46 of the 70 living recipients of the Medal of Honor. (The ranks grew to 71 on October 31, 2019, when President Trump awarded the Medal to Sergeant Matthew O. Williams). Only two date back to World War II. A third, Francis Curry, had passed away less than two weeks before the gathering. Some 3500 Medals of Honor have been awarded by presidents of the United States since the Civil War, many posthumously. The 71 living honorees form an extremely exclusive group. To have had the opportunity to speak with some of the attendees, shake their hands and say “Thank you, sir,” was awe-inspiring.

John

Of Course Unreimbursed Medical Expenses are Recoverable…Aren’t They?

Traditionally, New Jersey’s no-fault statute was interpreted to allow a plaintiff in a personal injury suit to recover unreimbursed medical expenses that exceeded his PIP coverage.  This was not an issue when all policies carried a required $250,000 in PIP coverage.  Over the years, however, the state legislature tweaked the PIP requirements, allowing insureds to purchase automobile liability policies with lower PIP limits to combat the rising cost of policy premiums.  Today, insureds can designate their health insurer as their primary PIP carrier, or purchase auto policies with PIP coverage as low as $15,000.  The courts, however, continued to view any medical expenses exceeding an insured’s PIP coverage recoverable, except where those expenses were paid by a private health insurer.            

In March 2019, all that changed when the New Jersey Supreme Court, in Haines v. Taft, ruled that a plaintiff could recover only those medical expenses in excess of $250,000.  Thus, under the Haines decision, a plaintiff carrying $15,000 in PIP coverage, would be barred from recovering any medical expenses that fell between $15,000 and the $250,000.

In response to the Supreme Court’s decision, the New Jersey state legislature passed a bill that was subsequently signed into law by Governor Murphy, effectively overturning Haines.  The new law, however, allowed for the recovery of any medical expenses exceeding an insured’s PIP coverage, even if those medical bills had been paid by private insurance, thus, allowing for a double recovery.   After signing the bill into law, Governor Murphy realized the possibility of a double recovery, and a second bill was quickly enacted and signed into law.  The second bill includes the term “unreimbursed” medical expenses, eliminating recovery of any medical bills exceeding no-fault that were paid for by another insurer, except where the insurer has a statutory right to be reimbursed, such as with Medicare. 

Thus, the law returns to its pre-Haines status, allowing a plaintiff to recover unreimbursed medical expenses to the extent they exceed the plaintiff’s chosen PIP coverage.

Does Admiralty Law Permit Punitive Damages in a Seaman’s Injury Claim Based on Unseaworthiness?

The Supreme Court rules that it does not, in Dutra Group v. Batterton, decided on June 24, 2019.

“This case asks whether a mariner may recover punitive damages on a claim that he was injured as a result of the unseaworthy condition of the vessel.” With that introduction, Justice Alito began a fascinating history of maritime personal injury claims on behalf of merchant seamen. In maritime and admiralty cases, the federal courts sitting as courts of admiralty “proceed in the manner of a common law court,” as instructed by the Constitution. In Batterton, the Court exercised its jurisdiction to decide that punitive damages are not available in a mariner’s personal injury claim based upon unseaworthiness of the vessel.

Christopher Batterton worked as a deckhand on vessels owned by Dutra Group. His hand was injured when it was caught between a bulkhead and a hatch that blew off as a result of unventilated air accumulating and pressurizing with the compartment. Batterton alleges this was an unseaworthy condition causing his injuries, for which the owner is strictly liable under federal admiralty law. He seeks compensatory and punitive damages.

Photo by Pixabay on Pexels.com

Historically, maritime law was largely judge-made, protecting seamen as “wards of the admiralty,” because they led “miserable lives.” Unlike the common law, many admiralty cases in the Supreme Court are named for the ship involved, because in true maritime claims the ship is a defendant in the court action. In The Resolute (1897), named for the ship involved, the Supreme Court held that the Constitution’s grant of admiralty jurisdiction includes “the power to dispose of a case as justice may require.”

Before any federal legislation on maritime personal injuries, the law of admiralty created two remedies for seamen, found in no other field of law. The first, arising in the 12th and 13th centuries, is “maintenance and cure,” requiring a ship’s master to provide food, lodging, and medical services to a seaman injured while serving the ship – a sort of medieval worker’s compensation. The second, “much more recent development,” is a claim for unseaworthiness, which grew out of causes of action unrelated to personal injury. For example, a seaman could collect his wages even if he refused to board an unseaworthy ship. The Cyrus (Pa. 1789). Unseaworthiness of the vessel was held to be a defense to criminal charges of refusal to obey the master’s orders. And a claim of unseaworthiness could be asserted by a shipper for cargo damage, or by an insurer to deny coverage when the poor condition of the ship resulted in damage to or loss of the cargo. The Caledonia (U.S. 1895).

In 1903, the Supreme Court decided The Osceola, concluding that “the vessel and her owner are liable to an indemnity for injuries received by seamen in consequence of the unseaworthiness of the ship.” Lower court rulings put limitations on this landmark decision, holding that there would be no recovery based on negligence that does not render the vessel unseaworthy, and requiring a seaman to show that the owner of a vessel had failed to exercise due diligence in ensuring the ship was seaworthy condition.

In 1920 Congress passed the Jones Act, which enables an injured seaman to sue for damages resulting from the negligence of the owner, master or crew of the vessel. The Act provides recovery for compensatory damages, but is silent on punitive damages. Importantly, the seaman was granted a jury trial under the Act, something not available in an unseaworthiness claim. It became common for injured seamen to include counts for negligence under the Jones Act, and unseaworthiness claims under the general maritime law. The latter provides for strict liability without proof of negligence. The former, the Jones Act, provides a jury trial.

Traditionally, maritime law does not provide for punitive damages in any kind of claim. That history controlled the Court’s decision in this case: “Punitive damages are not a traditional remedy for unseaworthiness. The [cases] promoting uniformity in maritime law . . . [prevent] us from recognizing a new entitlement to punitive damages where none previously existed. We hold that a plaintiff may not recover punitive damages on a claim of unseaworthiness.” Thus, stare decisis continues in the ancient and venerable field of maritime law.

John Lane Named Co-Chair of the Transportation ADR Council

John has been named co-chair of the Transportation ADR Council, an arm of the Transportation Lawyer’s Association, a nationwide organization of attorneys in corporate, government, and private practice in the field of transportation law. Together with the ADR Council’s other newly-named co-chair, Dan Fulkerson, Esq., of Houston, John will manage the arbitration/mediation apparatus for resolution of legal disputes arising in the transportation industry.

Recognizing the value of alternate dispute resolution and the benefit it would avail to members of the transportation industry, John along with several other TLA members, sought to create a body of rigorously-trained arbitrators and mediators who are experts in transportation law, and a system of arbitration procedures that accommodate the parties. Under the leadership of Steve Uthoff, Esq. and Eric Benton, Esq., they formed the Transportation ADR Council.

In addition to his role with the ADR Council, John is a member of the American Arbitration Association, the New Jersey Association of Professional Mediators, the Garibaldi Inn of Court for Alternative Dispute Resolution, the Dispute Resolution Sections of the New Jersey and New York State Bar Associations, and has recently been accepted as an arbitrator for the Financial Industry Regulatory Agency, FINRA. John also serves as a mediator in the Superior Court of New Jersey.

Learn more about the TLA and the ADR Council at https://translaw.org.