The Graves Amendment: Does it Shield Membership-Based Car Sharing Services from Vicarious Liability?

untitled (10)By Greg Johnson. Does the Graves Amendment apply to membership-based car-sharing companies like Zipcar? In a previous post, I provided an overview of the Transportation Equity Act of 2005 (49 USC § 30106) (a/k/a “Graves Amendment”), a federal law which preempts state law imposing liability on vehicle owners engaged in the business of renting or leasing motor vehicles absent negligence on the part of the vehicle owner. (See “Leasing, Renting & Vicarious Liability: An Overview of the Graves Amendment”).

Zipcar is a membership-based car-sharing company that provides short term car rentals to its members, where members pay fees and usage fees that are billable by the hour or day. Rental rates include gas, insurance, and roadside assistance-as outlined in the membership contract. Members can reserve vehicles online, over the phone, or through Zipcar’s mobile applications.

In Moreau v. Josaphat, 42 Misc. 3d 345, 975 N.Y.S.2d 851(Sup. Ct. 2013), the court addressed the issue of whether the Graves Amendment applied to Zipcar. In that case, the plaintiffs were injured in a two-car accident while passengers in a 2010 Nissan Altima operated by Josaphat. The Altima had been owned by Donlen Corporation (Donlan) which leased the vehicle to Zipcar under a long-term lease. Zipcar, in turn, rented it to Josaphat pursuant to a “Zipcar Membership Contract.”

The plaintiffs commenced a lawsuit against the two drivers, Zipcar and Donlen.  One of the claims against Zipcar (and Donlen) was based on the New York owner liability statute (Vehicle and Traffic Law § 388), one of a dozen jurisdictions which impose vicarious liability upon the owner of a vehicle for the negligence of the driver. Vehicle and Traffic Law § 388(1) makes every owner of a vehicle liable for injuries resulting from negligence “in the use or operation of such vehicle by any person using or operating the same with the permission, express or implied, of such owner.” Murdza v. Zimmerman, 99 N.Y.2d 375, 379, 756 N.Y.S.2d 505, 786 N.E.2d 440 (2003) (quoting statute). The statutory definition of owner included “A person, other than a lien holder, having the property in or title to a vehicle … and also includes any lessee or bailee of a motor vehicle or vessel having the exclusive use thereof, under a lease or otherwise, for a period greater than thirty days.” The statute “altered the common-law rule that a vehicle owner could only be held liable for the negligence of a permissive driver under agency or respondeat superior theories.” Id. (citing Morris v. Snappy Car Rental, Inc., 84 N.Y.2d 21, 27, 614 N.Y.S.2d 362, 637 N.E.2d 253 (1994)).

Zipcar sought dismissal based on the Graves Amendment contending the statute prohibits claims for vicarious liability against a motor vehicle owner who rents vehicles. The plaintiffs focused on Zipcar’s advertising, which described itself as a car-sharing service, not a rental car company.  Thus, plaintiffs argued that Zipcar was not “in the trade or business of renting or leasing motor vehicles,” as required by the Graves Amendment.

The court disagreed, holding Zipcar was shielded from vicarious liability by the Graves Amendment. The court noted that Zipcar members pay for their use of vehicles and the company competes with traditional car-rental companies and serves a similar consumer need. This bargain-use of a car in exchange for a fee appeared little different from traditional rental car companies, notwithstanding Zipcar’s marketing statements that contrasted it with those companies. Inasmuch as Zipcar is in the business of allowing use of their cars in exchange for a fee just like traditional rental car companies, they must be considered “in the trade or business of renting or leasing motor vehicles” under the plain words of the Graves Amendment.  Although application of the Graves Amendment to Zipcar would frustrate the State’s policy of compensating accident victims, neither the statutory language nor its intent allowed another conclusion.

This blog is for informational purposes only.  By reading it, no attorney-client relationship is formed.  The law is constantly changing and if you want legal advice, please consult an attorney licensed in your jurisdiction. © All rights reserved. 2010.

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