Smart Cars

Arguments heard on auto lessee, lessor liability

February 2, 2008 – 5:58 am

Are the lessor and lessee of a vehicle responsible when its negligent operation caused the plaintiff to be injured, even though the driver of the vehicle was not authorized to drive it? In Stanley Murdza v. D.L. Peterson Trust, Brown & Williamson Tobacco Corp. and PHH Fleet American Corp., (decided June 6, 2002, docket number 01-7047) the U.S.Court of Appeals was asked to decide what responsibility, if any, a lessor and lessee had in a car accident where the driver of the vehicle was not authorized to use the vehicle. After a review of the evidence, the court certified two questions to the New York State Court of Appeals in order to determine whether the owners of the leased vehicle are exempt from liability under the circumstances of the case. Case Background On December 17, 1996 the plaintiff, Stanley Murdza was hit by a van driven by one of the defendants, Robert Zimmerman. Murdza was crossing the intersection of Route 219 and Jefferson Street in Ellicottville when he was struck. (He was walking in the cross walk and had the right of way.) Brown & Williamson Tobacco Corp. (B&W), one of thedefendants, held the lease on the van driven by Zimmerman. The van was the company vehicle of Margaret Scicchitano, a sales representative of B&W. Scicchitano is also the girlfriend of Zimmerman. The van was leased to B&W by another defendant PHH Fleet America Corp., a national leasing company. The van was titled and registered in the name of the D.L. Peterson Trust. (The Trust purchases vehicles for PHH). The lease agreement between B&W and PHH does not specify any restrictions as to who may drive the vehicle. In fact neither does the documentation between the Trust and PHH. However, B&W’s employee handbook specifically states, “Brown & Williamson authorizes only you [the employee] and your licensed spouse to use the company vehicle for personal purposes.” Zimmerman knew that he was not authorized to drive the van. Specifically, he stated, “I’ve always known that her company van is for her use only.” On the day of the accident Zimmerman “impulsively decided … to take the van” to transport an antique table he and Scicchitano wanted to buy at a shop in Ellicottville. Motions For Summary Judgment The plaintiff’s motion for summary judgment against Zimmerman was granted. (This motion is not subject to appeal.) B&W moved for summary judgment on the grounds that the “owner’s consent, rebuttably implied by New York law, was fully rebutted by its employee handbook.” PHH and the Trust also moved for summary judgment asserting that the restriction set forth in B&W’s employee handbook also rebutted their implied consent. U.S. District Court for the Western District of New York Judge John T. Elfvin granted summary judgment in favor of the corporate defendants on the grounds that “an owner is not liable for negligence by one who operates a vehicle without the express or implied consent of the owner, and that B&W’s employee handbook effectively established for B&W, as well as for its lessors, that Zimmerman was acting without the owner’s consent.” The plaintiff appealed. Court Discussion In order to render a decision, the Second Circuit faced a number of questions. First the court reviewed the New York State Vehicle and Traffic Law. Under the New York Vehicle and Traffic Law Section 388(1) every owner of a vehicle used in New York State is liable and responsible 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,” see also Horvath v. Lindenhurst Auto Salvage, Inc. 104 F.3d 540, 542 (2d Cir. 1997). “The corporate defendants do not dispute that each of them was an owner within the meaning of the statute,” wrote Justice Pierre N. Leval in the decision for the court. “As construed by New York’s highest court, Section 388 gives rise to a presumption that a vehicle is operated with the owner’s consent, Leotta v. Plessinger, 8 NY2d at 461, 171 NE2d at 459, 209 NYS2d at 312. “This presumption may be rebutted by substantial evidence to the contrary.” Then the court turned to B&W’s employee handbook. The handbook specifically states that only B&W’s employee (or a licensed spouse) may use the vehicle for personal purposes. This appears to refute the implication that Zimmerman was authorized to use the vehicle. The court then reviewed Motor Vehicle Accident Indemnification Corp. v. Continental National American Group Co., 35 NY2d 260, 319 NE2d 182, 360 NYS2d 859 (1974) a case involving a leased vehicle. “Do the principles enunciated in Motor Vehicle relating to an individual retail car rental agreement apply equally where a business corporation leases vehicles for use by its employees?” Judge Leval asked. “Should the restriction in B&W’s manual be judged differently where B&W held the vehicle under lease, than would be the case if B&W owned its vehicles outright and entrusted them to employees? Did the finding in Motor Vehicle that the lessor had given ‘constructive consent’ to the use of the vehicle by a person other than the authorized renter depend on the fact that the renter knowingly permitted a third person (not authorized under the rental contract) drive the car? If so, is it necessary to determine whether the authorized employee Margaret Scicchitano permitted her boyfriend Zimmerman to drive the vehicle or whether he took the car without her approval?” The court then explored the liability of the lessor owner. “The lease under which B&W acquired the car contained no restrictions of any kind as to who was permitted to drive,” Judge Leval noted. “If Zimmerman’s driving is deemed not to have been constructively authorized by B&W by reason of B&W’s restriction in its policy manual, does B&W avoidance of liability by the restrictions it imposed redound to the benefit of B&W’s lessors, who imposed no restrictions on who was authorized to drive?” Judge Leval went on to find, “The answers to each of those questions could produce different results in this case. Our inspection of the New York statutes and interpretive case law does not tell us how the highest court of New York would answer any of them or how the law of New York should be applied in this case.” As a result, the Second Circuit certified the following questions to the New York State Court of Appeals: “(1) Did the lessee Brown & Williamson effectively rebut the presumption of consent of the owner, so as to make it immune as a matter of law from imposition of owner’s liability under Section 388(1) in these circumstances by reason of the restrictive provision in its employee manual? (2) Were the lessors PHH and the Trust immune as a matter of law from imposition of owner’s liability under Section 388(1) in these circumstances by reason of the restrictive provision in Brown & Williamson’s employee manual?”