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Truck leasing companies not protected from driver actions, court says

James Jaillet & Kevin Jones | August 27, 2014
Penske is not involved in the case at question. However, the Graves Amendment was designed to protect companies like Penske and Ryder in their leasing operations. The statute is the legal question in the Stratton case.

Penske is not involved in the case at question. However, the Graves Amendment was designed to protect companies like Penske and Ryder in their leasing operations. The statute is the legal question in the Stratton case.

A federal appeals court in New York this week ruled this month that carriers who lease trucks to drivers can be held liable for the actions of those drivers and are not protected by the Graves Amendment.

The ruling’s impact for other carriers, however, seems minimal, said American Trucking Associations’ Senior VP and General Counsel Prasad Sharma. But the group is delving further into the legal implications of the case, Sharma said.

Further, the court did not rule on the merits or claims of either the plaintiff or the defendant, but solely answered the legal question involving the Graves Amendment.

Judge Richard Arcara in the Western District of New York made the ruling Aug. 1 in a case brought by Michael Stratton, whose wife was killed in a crash in 2009 involving a truck owned by Great River Leasing but leased to driver Thomas Wallace.

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Stratton sued Wallace, Millis Transfer (for whom Wallace was employed) and Great River Leasing. He also sued Midwest Holding Group, who owns both Great River and Millis.

Great River and Midwest had argued they were protected from liability by the Graves Amendment, a federal statute that protects vehicle owners from the actions of those who lease their vehicles. Arcara, however, ruled otherwise, saying the Graves Amendment does not hold up in the Stratton case, as the companies involved are affiliates of one another.

The Graves Amendment, Arcara wrote, is designed to protect companies whose only connection to lessees is at simple lease agreement.

Great River, Millis and Midwest are connected by more than that, Arcara says, thus voiding Graves’ applicability.

Arcara ruled the case sent back to Magistrate Judge Schroeder to hear the case itself.

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The plaintiff’s attorneys labeled the case a “landmark decision,” but that may be a bit of a stretch, Sharma says.

His “first blush” impression is that the ruling will not likely have a large impact on most motor carrier operations.

Essentially, few carriers likely are structured around the liability protections of the Graves Amendment, which is designed for leasing operations such as Penske and Ryder.

Typically, an owner-operator who is leased to a carrier operates under the carrier’s authority and is already considered to be an affiliate.

“It’s hard to envision situations where this going to be a big issue for trucking companies,” Sharma said.

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