If the vehicle’s owner demonstrates that it falls within the Graves Amendment’s purview, liability under state laws―including the statute at issue in Garcia, G.L. c. 231, §85A―is preempted.

In Garcia v. Steele, a decision published June 27, 2023, the Supreme Judicial Court of Massachusetts affirmed a trial court decision holding that the federal Graves Amendment shields automotive dealerships from vicarious liability when a customer commits torts or is responsible for an accident that occurred in a courtesy “loaner” vehicle.

The Graves Amendment

The Graves Amendment (49 U.S.C. § 30106) preempts state law vicarious liability claims for torts committed when a customer is driving a rental or leased vehicle if:

(1) the owner (or an affiliate of 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 part of the owner (or an affiliate of the owner).

Accordingly, the owner of the vehicle in question, whether a dealership or rental company, must have rented or leased the car in exchange for consideration. If the vehicle’s owner demonstrates that it falls within the Graves Amendment’s purview, liability under state laws―including the statute at issue in Garcia, G.L. c. 231, §85A―is preempted.

Garcia v. Steele

In Garcia, a New Jersey-based auto dealership provided a courtesy loaner vehicle while servicing a customer’s vehicle. The customer provided a valid driver’s license, signed loaner and courtesy vehicle forms, agreed not to drive the vehicle more than 100 miles from the dealership, and to return the vehicle once the repair was complete. The forms confirmed that the customer was responsible for all third-party claims stemming from his use of the loaner vehicle. The forms further stated that customer was the only person authorized to drive the vehicle.

While visiting Boston, outside of the 100-mile radius, the customer illegally parked the vehicle and left the engine running with his then-wife in the passenger seat as he conducted an errand. The passenger did not have a license and was not an authorized driver, but was told by a parking officer that the car had to be moved. After moving to the driver’s seat, the wife pressed a button causing the vehicle to roll forward through a red light striking the plaintiff walking in a crosswalk who was seriously injured.

The plaintiff sued the automotive dealership under Section 85A which permits vicarious liability actions against the owners of vehicles because they presumptively control the vehicle. The plaintiff also asserted direct negligence claims against the dealership based on its administration of the courtesy program. At summary judgment, the dealership argued that the Graves Amendment preempted vicarious liability under Section 85A. The plaintiff contended that because the automotive dealer provided the vehicle as a courtesy without consideration and was negligent in administering the courtesy program, the Graves Amendment did not apply. The trial court granted summary judgment in favor of the dealership. The plaintiff appealed and the Supreme Judicial Court unilaterally transferred the case from the Appeals Court.

In affirming the trial court’s decision, the Supreme Judicial Court held that the dealership provided consideration as part of a servicing transaction with the defendant to perform repair work on his vehicle and provided the courtesy vehicle as further inducement. Pursuant to the Graves Amendment, absent negligence or criminal wrongdoing on the part of the owner who rents or leases a vehicle, no vicarious liability attaches.

While the plaintiff argued that the dealership was negligent by failing to verify the customer’s driver’s license was valid beyond accepting his presentation of a facially valid license and failing to train its employees to orally instruct drivers on the restrictions for using the courtesy vehicles, the Supreme Judicial Court disagreed.

Regardless of whether the dealership should verify a license validity, no rational jury could find that the failure to verify the defendant’s license resulted in the plaintiff’s injuries. The mileage and driver restrictions were set forth in writing and the customer understood the restrictions. The court again found that no reasonable jury could conclude the dealership’s alleged failure to train employees on orally confirming the written loaner vehicle restrictions caused the plaintiff’s injuries.

Despite letting the automotive dealer off the hook, the driver of the courtesy vehicle could be found liable for negligent entrustment because illegally parking the car and leaving it running could constitute implicit permission or consent for his wife to move or drive the car if necessary.

Takeaways

Rental companies, auto dealerships and other vehicle lessors have long argued that the Graves Amendment preempts state vicarious liability where rental, leased or courtesy loaner vehicles are involved in accidents. Numerous courts in Massachusetts and other jurisdictions have already agreed with this position. But this is the first time the Supreme Judicial Court explicitly addressed the issue. Now rental companies and vehicle lessors can more confidently assert the Graves Amendment in instances where rental, leased or courtesy loaner vehicles are involved in accidents in Massachusetts.

For More Information

If you have any questions about this Alert, please contact Michael T. Grant, Angela J. Benoit, any of the attorneys in our Transportation, Automotive and Logistics Industry Group or the attorney in the firm with whom you are regularly in contact.

Disclaimer: This Alert has been prepared and published for informational purposes only and is not offered, nor should be construed, as legal advice. For more information, please see the firm's full disclaimer.