Sigaran v ELRAC, Inc.

[*1] Sigaran v ELRAC, Inc. 2008 NY Slip Op 52569(U) [22 Misc 3d 1101(A)] Decided on December 23, 2008 Supreme Court, Bronx County Massaro, J. Published by New York State Law Reporting Bureau pursuant to Judiciary Law § 431. As corrected in part through January 9, 2009; it will not be published in the printed Official Reports.

Decided on December 23, 2008
Supreme Court, Bronx County

Leslie De La Cruz Sigaran and LEONARDO SIGARAN, Infants by their Father and Natural Guardian, LEONARDO SIGARAN, Plaintiffs,

against

ELRAC, Inc., EDWIN FERNANDEZ and LESLIE DeLACRUZ, Defendants.



350273-2008



APPEARANCES: For Plaintiffs

Adam Ashe, Esq.

For Defendants ELRAC, Inc. and Edwin Fernandez

James M. Carman, Esq.



Dominic R. Massaro, J.



Defendant ELRAC, Inc., a corporation involved in the business of renting motor vehicles, and Defendant Edwin Fernandez, who rented a car from this corporation, move for an Order, pursuant to CPLR Rule 3211(a)(7), dismissing the instant complaint based upon Plaintiffs' failure to state a cause of action against the corporate defendant. The motion is granted.

Specifically, Movants argue that Plaintiffs failed to state a cause of action against the corporate Defendant for negligence because federal law, i.e., the "Graves Amendment" (49 USC §30106), removes jurisdiction from state courts to decide vicarious automobile negligence claims against car rental companies. According to Defendants, the Graves Amendment set forth Congress' intention to remove jurisdiction from this Court in cases involving vicarious negligence liability for vehicle rental companies and utilizes the constitutional doctrines of federal supremacy and conflict preemption to remove said jurisdiction from state courts (see, Graham v. Dunkley, 50 AD3d 55 [2nd Dept. 2008]).

Herein, Movants maintain that Plaintiffs' causes of action against ELRAC are based solely upon Vehicle & Traffic Law §388 and Congress precludes such claims under the "Safe, Accountable, Flexible, Efficient Transportation Equity Act: A Legacy for Users" (hereinafter, "Transportation Equity Act"), a comprehensive transportation law which included the Graves Amendment (see generally, Milsap v. U-Haul Truck Rental Co., 2006 U.S. Dist. Lexis 92219 [D. Ariz., 2006]). Congress entitled the specific section containing the Graves Amendment as "Rented or leased motor vehicle safety and responsibility" (49 USC §30106).

Plaintiffs oppose dismissal and argue instead that, while the Graves Amendment may [*2]apply to some extent to this automobile negligence case, separate grounds, independent of Vehicle & Traffic Law §388, exist which do not require dismissal under the federal statute. Further, Plaintiffs allege that an exemption to the Graves Amendment exists based upon the owner's negligence and possible criminal wrongdoing. Stated another way, Plaintiff asserts that, despite the Graves Amendment, ELRAC retained a duty to ensure against negligence when it rented and entrusted the vehicle to Fernandez. Plaintiffs say that negligence determination is not barred by the Graves Amendment.

Background

Plaintiffs' complaint alleges injuries from a motor vehicle accident that occurred on April 20, 2007 approximately two years after Congress enacted the Graves Amendment. Defendant Leslie De Lacruz (apparently the infant Plaintiffs' mother or other female relative) operated the vehicle in which the infants were passengers when her car was hit by a rented car driven by Fernandez.

The accident occurred near the intersection of Riverside Drive and West 153rd Street, New York County. Plaintiffs allege that Defendants were negligent in the rented car's operation and the corporation negligently rented the vehicle to Defendant Fernandez on April 13, 2007, in the regular course of its business of renting vehicles to the general public.

In their answer, Movants denied Plaintiffs' allegations generally and alleged fifteen affirmative defenses to the complaint, including the Graves Amendment. Movants also cross claimed against co-defendant Leslie A. De Lacruz for contribution and indemnification. No copy of Leslie De Lacruz's answer was submitted with the record and she filed no answering papers to the instant motion.

Discussion

On a CPLR Rule 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 (see, Luma v ELRAC, Inc., 19 Misc 3d 1138A [Sup Ct. Kings 2008]). While affidavits may be considered, if the motion has not been converted to a summary judgment motion, such affidavits are generally intended to remedy pleading defects and not to offer evidentiary support for properly pleaded claims. Where a defendant submits evidentiary material on a motion to dismiss, "it may be considered in assessing the viability of a complaint, although the complaint should not be dismissed unless the defendant demonstrates that a material fact alleged by the plaintiff is not a fact at all' and that no significant dispute exists regarding it'." (Pechko v Gendelman, 20 AD3d 404, 406-07 [2nd Dept. 2005] [quoting Guggenheimer v Ginzburg, 43 NY2d 268, 275[1977)]. Stated simply, CPLR Rule 3211(a)(7) provides that a party may move for judgment dismissing one or more causes of action asserted against him upon the ground that the pleadings fail to state an actionable cause of action. On a Rule 3211 dismissal motion, pleadings are afforded a liberal construction (see, CPLR §3026). For purposes of the instant motion, all Plaintiffs' factual averments in their complaint must be accepted as true and the complaint liberally construed in the pleader's favor (see, Salles v. Chase Manhattan Bank, 300 AD2d 226 [1st Dept.2002]).[FN1]

At issue here is the effect of the Graves Amendment (49 U.S.C. § 30106) and whether this statute bars Plaintiffs' cause of action against ELRAC, Inc., which is based upon Vehicle & [*3]Traffic Law §388.

Vehicle & Traffic Law § 388

Clearly, no dispute exists that Plaintiffs state a cause of action actionable under Vehicle & Traffic Law §388 against the corporate defendant. Section 388(1) provides, in relevant part, that "(e)very 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." Enacted in 1924, this section imposes vicarious liability upon the owner of any vehicle involved in an accident (see generally, Stampolis v. Provident Auto Leasing Co., 2008 US Dist. Lexis 91024 (ED NY 2008]); Hall v. Elrac, Inc., 52 AD3d 262 [1st Dept. 2008] [Graves Amendment is constitutional]).

.As relevant here, Plaintiffs allege that ELRAC, Inc., was negligent under Vehicle & Traffic Law §388 and, further, because the corporation knew (or should have known) that Fernandez had a history of operating vehicles in an unsafe, careless, and reckless manner (see, Complaint ¶¶10 to 12).

Graves Amendment

On August 10, 2005, President Bush signed the Safe, Accountable, Flexible, Efficient Transportation Equity Act: A Legacy for Users ("SAFETEA-LU"), Pub.L. No. 109-59, 119 Stat. 1144. Included in this law are provisions codified at section 30106, subchapter I, Chapter 301, Part A, Subtitle VI, of Title 49, United States Code (the "Graves Amendment") which expressly preempts all state vicarious liability schemes that impose liability on lessors of motor vehicles where the vehicle is involved in an accident through no fault of the lessor (see generally, Garcia v. Vanguard Car Rental USA, Inc., 510 F. Supp. 2d 821 [MD Fla., 2007], aff'd, 540 F.3d 1242 [11th Cir. 2008] [also discusses effect of Graves Amendment's "financial responsibility laws" provision]).

The Graves Amendment [FN2] provides, in relevant part, that an owner of a motor vehicle that rents or leases the vehicle to an individual shall not be liable under the law of any State, by reason of being the vehicle's owner, for harm to persons or property that results out of the use, operation, or possession of the vehicle during the period of the rental, provided that:

(1) 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 owner's part of the owner.

(49 U.S.C. § 30106[a)][1]) and [a][2]).

As the statute's title indicates, the Graves Amendment was not part of either the original [*4]House or Senate versions of the Safe, Accountable, Flexible, Efficient Transportation Equity Act; but instead was offered by Congressman Sam Graves of Missouri and adopted during House consideration of the original bill (see, Zizersky v. Life Quality Motor Sales, Inc., 21 Misc 3d 871 [Sup. Ct. King 2008], citing 151 Cong. Rec. No. 27, March 9, 2005, at H1199-H1203 and US Code Cong. & Admin. News, 109 Cong., 1st Sess. [2005] 452, et seq.). President Bush made no reference to the Graves Amendment when he signed the Transportation Equity Act on August 10, 2005 (see, 41 PD 1271 [2005]) and no guidance exists in the floor debate or in the Conference Report on the issues before the Court (see, Zizersky v. Life Quality Motor Sales, Inc., supra .).

In construing statutes, congressional intent is controlling, and the Court's function is to discern and apply the legislature's will (see generally, Matter of Brown v. Wing, 93 NY2d 517 [1999]) The most direct way to effectuate the will of the legislature in this case Congress is to give meaning and force to the statute's wording (see generally, Jones v. Bill, 10 NY3d 550 [2008] [case interpreting the Graves Amendment's effective date only]). As a general proposition, our Court of Appeals teaches that a Court need not look further than the unambiguous language of a statute to discern its meaning (Id. at 554). Applying the above methodology, the Graves Amendment, by its express language, preempts all state statutory and common law to the extent those laws 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 vehicle's owner (see, Garcia v. Vanguard Car Rental USA, Inc., supra .) (see also, Merchants Insurance Group v. Mitsubishi Motor Credit Association, 2008 US Dist. Lexis 4755 [ED NY 2008]).

Critical Question

Distilled, the question presented is whether the corporation's alleged failure to discover Fernandez's driving history is negligence sufficient to remove this case from the penumbra of the Graves Amendment. Restated, is the corporation's failure sufficient to remove ELRAC from the Graves Amendment's protection. In this respect, Defendants argue for dismissal because Plaintiffs' allegations against the corporation do not state a cause of action because the allegations, if true, are barred by federal law. Defendants reject the notion that Plaintiffs allege a cause of action independent of Vehicle & Traffic Law §388.

Before the enactment of the Graves Amendment, New York Courts consistently held that owners of leased vehicles were vicariously liable under Vehicle & Traffic Law §388 for the negligent operation of those vehicles (see generally, Sullivan v. Spandau, 186 AD2d 641 [2nd Dept. 1992) (holding that defendant lessor, who leased vehicle for a term of twenty-two months, was an owner under § 128 and jointly and severally liable under § 388). Subsequently, no dispute exists that the Graves Amendment preempted state laws, including New York's, that imposed vicarious liability on businesses that rent or lease motor vehicles (see generally, Merchants Insurance Group v. Mitsubishi Motor Credit Association, 525 F. Supp. 2d 309 [ED NY 2007]).

The Court finds that the terms of the Graves Amendment validly apply here because the statute regulates and protects things in interstate commerce and because it regulates activity that substantially affected interstate commerce. Congress has legitimate authority under the Commerce Clause to regulate liability imposed upon a rental car company and the Graves Amendment constitutionally preempted state laws that imposed vicarious liability on rental car companies (see, Garcia v. Vanguard Car Rental USA, Inc., 540 F.3d 1242 (11th Cir. 2008); Flagler v. [*5]Budget Rent a Car Systems, Inc., 538 F. Supp. 2d 557 [ED NY 2008]).[FN3] [FN4][FN5]

Clearly, the Graves Amendment voids Vehicle & Traffic Law §388 to the extent that the Transportation Equity Act applies (see, Hall v. ELRAC, Inc., 52 AD3d 262 [1st Dept. 2008]); Hernandez v. Sanchez, 40 AD3d 446 [1st Dept. 2007]; Graham v. Dunkley, 50 AD3d 55 [2nd Dept. 2008]; Jones v. Bill, 34 AD3d 741 [2nd Dept. 2006], rev'd, 10 NY3d 550 [2008] [reversed on effective date of the amendment]; Williams v. White, 2007 Slip Op 02227 [3rd Dept. 2007]; Castillo v. Bradley, 17 Misc 3d 1107(A) [Sup. Ct. Kings 2008]; Infante v. U-Haul Co. of Fla., 11 Misc 3d 529 [Sup. Ct. Queens 2006]).

Basing their claim upon the Graves Amendment, Defendants say the complaint against the corporation fails to state a cause of action because the allegations, if true, are barred by the statute. In this regard, Defendants focus their attack upon Plaintiffs' allegation that ELRAC, Inc. was negligent because the corporation knew (or should have known) Fernandez's history of operating vehicles in an unsafe, careless, and reckless manner (see, Complaint ¶¶10 to 12).

Failure to State a Cause of Action

As stated, to survive a Rule 3211(a)(7) dismissal motion, a pleading need only state allegations from which damages attributable to Defendant's conduct may reasonably be inferred (see generally, Voluto Ventures, LLC v. Jenkens & Gilchrist Parker Chapin LLP, 46 AD3d 354 [1st Dept. 2007]). A motion for dismissal under this rule will be denied where, from the complaint's four corners, factual issues are discerned which taken together manifest any cause of action cognizable at law (see, Polonetsky v. Better Homes Depot, Inc., 97 NY2d 46 [2001]). [*6]

Construing liberally, as it must, Plaintiffs urge that the Court find that a claim is stated against the corporation because the complaint alleges a cause of action under an exception to the Graves Amendment, i.e., actual negligence (49 U.S.C. § 30106[a][2]). In this regard, by the statute's plain reading, while the Graves Amendment absolves rental car companies of vicarious liability, it does not absolve rental car companies for their own negligence (see generally, Novovic v. Greyhound Lines, Inc., 2008 US Dist. Lexis 94176 [ED NY 2008]) (see also, American Association for Justice, AAJ Annual Convention Reference Materials, 2 Ann 2007 AAJ-CLE 1873 [2007]).

To decide whether ELRAC falls under the "own negligence" exception, the Court must decide whether the corporation was under an obligation to check Fernandez's driving record and whether failure to carry out such duty places this case under the exemption provided by 49 USC §30106(a)(2) ("no negligence or criminal wrongdoing on the part of the owner").

Hereinbefore noted, the Graves Amendment prohibits states from imposing vicarious liability on owner-lessors only where the lessor is not negligent (see generally, Merchants Insurance Group v. Mitsubishi Motor Credit Association, supra .). In this case, Plaintiffs allege negligence in rental procedures, and, therefore, seek to place in issue the actual liability exclusion to Graves Act protection existing under section 30106(a)(2) (but see generally, Berkan v. Penske Truck Leasing Can., Inc., 535 F. Supp. 2d 341 [WD NY 2008] [no evidence adduced that rental company engaged in any negligence or criminal wrongdoing]).

Plaintiffs' allegations are limited to the following: (1) the corporate defendant had a duty to ensure that any vehicle rented by it would be operated in a safe manner; (2) the corporate defendant has a duty to determine whether any drivers to whom it rented vehicles did not have a history of operating vehicles in a careless way, and (3) ELRAC was negligent in renting to Fernandez (Complaint ¶¶ 9 to 11). Beyond that, no specifications were made concerning the nature of Fernandez's driving record that should have alerted ELRAC not to rent to him.

In their answering papers, Plaintiffs generally argue that ELRAC was, in essence, guilty of "negligent entrustment," but cite no basis or any specifics for claiming that ELRAC was under a duty to check Fernandez's driving record.

Decision

At common law, owners could be held liable if they knowingly entrusted their car to an incompetent driver. "One who supplies a chattel for the use of another whom the supplier knows or has reason to know to be likely because of his youth, inexperience, or otherwise, to use it in a manner involving unreasonable risk of physical harm to himself and others may be liable for negligent entrustment" (see, Pacho v. Enterprise Rent-A-Car Co., 572 F. Supp. 2d 341 [SD NY 2008]) The Pacho Court found "negligent entrustment" applied to the rental company's failure in that case to properly process the co-defendant's driver's license. However, in this case, no allegations exist that the corporate defendant failed to check Fernandez's license.[FN6] Therefore, the Court must conclude that Plaintiffs failed to state a cause of action that the corporate defendant knew, or should have known, that Fernandez was unlicensed, incompetent, or reckless. Further, Plaintiffs 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 [*7]driver's license (see generally, Vedder v. Cox, 18 Misc 3d 1142 [A] (Sup. Ct. Nassau 2008]).

Based upon the foregoing, the Court finds that Plaintiffs failed to state a cause of action against the corporate Defendant. Likewise, the Court determines that Plaintiffs' did not allege a claim independent of Vehicle & Traffic Law §388.[FN7]

WHEREFORE, based on the foregoing, it is

ORDERED that Defendants ELRAC, Inc., and Edwin Fernandez's motion, seeking an Order, pursuant to CPLR Rule 3211(a)(7), dismissing the complaint as to ELRAC, Inc., based upon Plaintiffs' failure to state a cause of action, is GRANTED.

The foregoing constitutes the decision and order of this Court.

Dated: Bronx, New York

December 23, 2008

___________________________________Hon. DOMINIC R. MASSARO

Justice of the Supreme Court Footnotes

Footnote 1: Concerning timeliness of this motion, a motion to dismiss a complaint for legal insufficiency may be made at any time (see generally, Pace v. Perk, 81 AD2d 444 [2nd Dept. 1981]). This motion was submitted following Defendants' answer.

Footnote 2: For a discussion of the Graves Amendment's legislative history, see Martin, Commerce Clause Jurisprudence and the Graves Amendment: Implications for the Vicarious Liability of Car Leasing Companies, 18 U. Fla. J.L. & Pub. Policy 153 (2007). See also, Validity, Construction, and Application of Graves Amendment Governing Rental or Leased Motor Vehicle, 29 ALR Fed 2d 223 [2008]). See generally, Resnick, Lessons in Federalism from the 1960s Class Action Rule and the 2005 Class Action Fairness Act: "The Political Safeguards" of Aggregate Translocal Actions, 156 U. Pa. L. Rev. 1929, at 1954 (2008).

Footnote 3: Local courts in two states, other than New York, consider the Graves Amendment's constitutional: (1) Connecticut (see, e.g., Mitchell - Mckenna v. Tick, 2008 Conn. Super Lexis 228 [Superior Ct. 2008])and (2) Florida(see, Kumarsingh v. PV Holding Corp., 983 So. 2d 599 (Fla. Ct. App. 3rd Dist 2008);and Bechina v. Enter. Leasing Co., 972 So. 2d 925 [Fla. Ct. App. 3rd Dist 2007]). At least one Florida Court indicated dispute with the Bechina case (see, Brookins v. Ford Credit Titling Trust, 2008 Fla. App. Lexis 10881 [Ct. App. 4th Dist. 2008]).

Footnote 4: Thus far, neither the United States Supreme Court nor the Second Circuit have issued decisions addressing the constitutionality of the Graves Amendment (see, Stampolis v. Provident Auto Leasing Co., 2008 US Dist Lexis 91024 [ED NY 2008]). The Eleventh Circuit held the Graves Amendment constitutional (see, Garcia v. Vanguard Car Rental USA, Inc., 540 F.3d 1242 [11th Cir. 2008]. Various federal district courts have held the Graves Amendment constitutional (see, e.g., Stampolis v. Provident Auto Leasing Co., 2008 US Dist Lexis 91023 [ED NY 2008]; Flagler v. Budget Rent a Car Systems, 538 F. Supp. 2d 557 [ED NY 2008]; Berkan v. Penske Truck Leasing Canada, Inc., 535 F. Supp. 2d 341 (WD NY 2008); Noll v. Avis Budget Group LLC, 2008 US Dist Lexis 76588 [ED NY 2008]); Mechs. Ins. Group v. Mitsubishi Motor Credit Ass'n, 525 F. Supp. 2d 309 (ED NY 2007]).

Footnote 5: At least one federal district court found the Graves Amendment's vicarious liability provision unconstitutional. This is the trial court in Vanguard Car Rental USA, Inc. v. Drouin, 521 F. Supp. 2d 1343 (SD Fla 2007).See also, Vanguard Car Rental USA, Inc. v. Huchon, 532 F. Supp. 2d 1371 [SD Fla. 2007] [financial responsibility provision of 49 USC §30106[b] unconstitutional]). The District Court in Myron v. Rodriguez, 2008 US Dist Lexis 13302 [MD Fla 2008] decided to issue a stay until the 11th Circuit heard the appeal in Garcia v. Vanguard Car Rental USA, 510 F. Supp. 2d 821 (M.D. Fla. 2007); the Circuit Court found the Graves Amendment constitutional at 540 F.3d 1242 (11th Cir. 2008) undermining both Drouin and Huchon.

Footnote 6: ELRAC's employee, Halene Holland, submitted a copy of Fernandez's lease agreement which showed that the corporate defendant determined that Fernandez had a Florida driver's license (Plaintiff's Exhibit C).

Footnote 7: This case is distinguishable from Luma v. ELRAC, Inc., 19 Misc 3d 1138(A) (Sup. Ct. Kings 2008) where the Luma Court denied ELRAC's motion to dismiss (based upon the Graves Amendment) and permitted Plaintiff to amend its complaint to raise negligent entrustment against ELRAC. The Luma Defendant failed to rebut the allegations that ELRAC was guilty of negligent maintenance. Further, to the extent that the Luma Court permitted amendment of the complaint, this Court finds that the facts here compel a contrary result because Fernandez was not an ELRAC employee, a situation different from the employer/employee relationship presented in Luma. Id.