Julie Stratton was killed in 2009 on the New York State Thruway, near Pembroke, when her car was hit by a leased tractor-trailer truck operated by Thomas Wallace, who was watching pornography at the time.
Julie Stratton was killed in 2009 on the New York State Thruway, near Pembroke, when her car was hit by a leased tractor-trailer truck operated by Thomas Wallace, who was watching pornography at the time. (RNEWS)

A federal law intended to shield car rental companies against vicarious liability will not protect the corporate owner of leased truck operated by a driver who was watching pornography on his laptop when the truck barreled into a disabled car, a judge in Buffalo has held.

Western District Judge Richard Arcara (See Profile), bemoaning the poor craftsmanship and lack of legislative debate that resulted in the controversial “Graves Amendment,” rejected a magistrate judge’s recommendation and held that the owner of the vehicle can be held vicariously liable for the alleged negligence of an affiliate.

Stratton v. Wallace, 11-cv-74, stemmed from a 2009 incident on the New York State Thruway.

Records show that Julie Stratton, 33, had struck a deer near Pembroke, rendering her car inoperable. She was killed when a truck driven by Thomas Wallace struck her vehicle. Wallace is serving a 3-to-9-year state prison sentence for second-degree manslaughter.

Stratton’s husband brought an action against the driver of the truck, the driver’s employer, the owner of the tractor-trailer and the parent company of both the employer and the vehicle owner. In this case, the owner of the tractor-trailer is a company that had leased the vehicle to the employer, one of its affiliates.

The owners sought summary judgment under the Graves Amendment, a nine-year-old law designed to end-run vicarious liability statutes in New York and a handful of other states.

In New York, under Vehicle & Traffic Law §388 the owner of a vehicle can be held vicariously liable for accidents involving the vehicle, even if was being operated by someone else.

Rental car companies had long objected to the law, and similar statutes in a few other states, on the grounds that they cannot legally turn away a qualified customer yet were being held liable for the conduct of a driver over whom they had no control.

Years of lobbying the New York State Legislature and other statehouses proved largely unsuccessful, and the rental industry turned to Congress.

In 2005, Congress inserted the so-called “Graves Amendment” into the Safe, Accountable, Flexible Efficient Transportation Act to preempt the state vicarious liability laws (see 49 U.S.C. § 30106).

The defendants in Stratton cited Graves in seeking summary judgment.

Western District Magistrate Judge H. Kenneth Schroeder Jr. (See Profile) agreed with the defendants that Graves overrode New York’s vicarious liability statute and recommended granting summary judgment to the owner of the tractor-trailer, Great River Leasing. Great River had leased the vehicle to the employer, Millis Transfer, one of its affiliates.

But Arcara had a different view—influenced by the fact that in this case the lessor and lessee are owned by the same parent—- and rejected the magistrate’s recommendation. The judge included a diagram in his decision to illustrate the corporate relationships and support his conclusion that, on these facts, the Graves shield will not protect the defendants from New York’s law.

“Run-of-the-mill Graves Amendment cases—where the vehicle owner and operator are related only by an arm’s length contract—are generally simple,” Arcara wrote. “However, what differentiates this case from the ordinary Graves Amendment case is the fact that, here, the lessor and lessee are related by more than just a lease agreement; in this case, the lessor and lessee are owned by the same parent company.”

Arcara said the amendment contemplates that situation by specifically applying to the vehicle owner’s “affiliate.”

He said the Graves applies when “the owner (or an affiliate) of the owner” is in the 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).”

Arcara said that in this case the employer, Millis, is specifically accused of negligence. Arcara said the amendment would apply only if there was no allegation of negligence or criminal misconduct on the part of either of the affiliated companies.

But Arcara also acknowledged that Congress provided little guidance with a statute “which is not a model of clarity.” So, with the statute itself offering little insight, Arcara turned to the legislative history, and found even less direction.

“[T]o the extent that legislative history should be relevant to the task of statutory construction, this case is a poor candidate for doing so,” Arcara wrote. “There were no committee hearings or reports to give meaning to the Graves Amendment, nor was there any open debate that might shed light on the amendment’s awkward construction. To the contrary, the entire substance of the amendment’s legislative history is contained in three pages of floor debate in the Congressional Record, at least half of which is objections, immediately before the House voted.”

Arcara said that even if the “scant legislative record” was sufficient to reveal the amendment’s purpose, both sides of this dispute “have been able to quote passages of the limited legislative debate that are entirely consistent with their arguments.”

Francis Letro, an attorney in Buffalo who represents the plaintiff, said that trucking companies have reconfigured to bring their operations under Graves. He said it is not unusual for large companies to set up smaller affiliates that then lease to a sister company within the same corporate family in an effort to fall within the amendment and evade New York’s vicarious liability statute.

Letro said Arcara’s finding is crucial because the amendment cannot overcome the so-called “master-servant” rule, recognized in both common and civil law, that an employer is responsible for the actions of an employee.

“Since the operator of the tractor-trailer is the employee of the affiliate, by operation of law the affiliate bears negligence—albeit passive negligence, but falling under the doctrine of respondeat superior and not under the lessor-lessee relationship,” Letro said.

Joel Schechter of Bennett Schechter Arcuri & Will in Buffalo who represents Millis Transfer, said he is contemplating an appeal, but declined further comment.