Legislative Bulletin - January 5, 2010

U.S. Court of Appeals Reverses Vicarious Liability Ruling

On December 16, 2009, the U.S. Court of Appeals for the Second Circuit reversed an earlier decision of the United States District Court for the Eastern District of New York in the Merchants Insurance Group v. Mitsubishi Motor Credit Association (MMCA) vicarious liability court case. TRALA filed an amicus brief on March 3, 2008 with the federal appellate court arguing that the Graves Amendment (49 USC 30106), passed in August 2005 as part of the Safe, Accountable, Flexible, Efficient Transportation Equity Act: A Legacy for Users (SAFETEA-LU), preempted New York law that holds vehicle owners vicariously liable for the damages arising from a lessee’s operation of the vehicle. The District Court for the Eastern District of New York initially granted Mitsubishi’s request for summary judgment, agreeing with TRALA’s assessment that the Graves Amendment preempted New York’s vicarious liability law. However, the federal Court of Appeals has reversed that decision on grounds that the original action “commenced” before the effective date of the Graves Amendment.

In vacating the District Court ruling, the Court of Appeals holds that the action against MMCA commenced in October 2003 when the appellant – Merchants Insurance Group – filed an Amended Complaint in a state court in New York seeking contribution from MMCA for a March 2003 judgment from a jury that heard the case in a New York State Supreme Court. The case was initially removed to district court, and ultimately closed in July 2005. However, the case was reopened in June 2006 and MMCA moved for summary judgment based on the Graves Amendment’s federal preemption of New York’s vicarious liability law. On September 25, 2007, over two years after enactment of the Graves Amendment, the U.S. District Court granted MMCA’s motion for summary judgment on the ground that the Graves Amendment preempts all state and local vicarious liability laws, and ruled the MMCA was not liable for any damages arising from the 1997 accident in which they were the lessor of an involved vehicle.

Importantly, this ruling by the U.S. Court of Appeals does not challenge the authority of the Graves Amendment. The Court of Appeals vacating of the District Court ruling is based solely on the timing of when the Amended Complaint was filed by Merchants Insurance Group. In the ruling, the court states, “In the instant case, there is no dispute that, if Merchant’s suit against MMCA was commenced after the Graves Amendment’s effective date, the Graves Amendment preempts New York law and precludes Merchants’ claim.”

The Merchants Insurance Group v. Mitsubishi Motor Credit Association case is one of eight vicarious liability cases in which TRALA, along with its Industry Council for Vehicle Renting and Leasing, has filed an amicus brief supporting the preemptive authority of the federal law known as the Graves Amendment. Among the courts that have agreed with TRALA’s arguments are the New York Court of Appeals, the Minnesota Court of Appeals, the Florida Court of Appeals, the Florida Supreme Court, U.S. District Court and the U.S. Court of Appeals. TRALA has most recently filed amicus briefs in cases pending before the Florida Supreme Court (Vargas v. Enterprise Leasing Company) and the Minnesota Supreme Court (Meyer v. Enterprise Rent-A-Car).

The full document containing the Summary Order from the U.S. Court of Appeals for the Second Circuit can be view here. If you have any questions, please contact Joe Sculley at jsculley@trala.org or (703) 299-9120.