Month: January 2020

What are Plaintiffs Doing to Skirt the Graves Amendment?

John C. Lane

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

The Lane Law Letter

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

John C. Lane
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:

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