Florida Federal Courts Split On Whether Federal Repeal Of Vehicle Lessor Vicarious Liability Is Constitutional

Three recent Florida Federal District Court decisions have reached differing conclusions on whether Congress exceeded its Commerce Clause power in enacting the Graves Amendment to the Transportation Equity Act.  The Graves Amendment was signed into law in 2005 and provides that vehicle lessors may not be held vicariously liable for the negligence of those who rent from them.  This federal law preempts state law, repealing laws that are contrary, like those in New York and Florida.

The Florida cases, all involving automobile accident lawsuits in which a car rental company was alleged to be vicariously liable for damages caused by automobile renters, have analyzed the constitutionality of the Graves Amendment under the Commerce Clause.  Congress’ Commerce Clause power encompasses three general categories of power: the power to regulate the channels of interstate commerce; the power to regulate and protect the instrumentalities, persons or things in interstate commerce; and the power to regulate activities that substantially affect interstate commerce.  If Congress has acted within any one of the above three prongs of power, its actions are constitutional.  

The first decision, rendered in March of 2007 by the Middle District of Florida, Garcia v. Vanguard Car Rental USA, Inc., 510 F. Supp. 2d 821, held the Graves Amendment valid under all three prongs of Congress’ Commerce Clause power.  Garcia first addressed whether the Graves Amendment regulated the channels of interstate commerce.  “Channels” are transportation routes through which persons and goods move.  The court noted that vicarious liability lawsuits arise following accidents on roads, streets and highways, which are all channels of commerce.  Moreover, a large number of leased vehicles travel interstate over such channels.  Thus, since the Graves Amendment determines liabilities for accidents that occur on the channels of commerce, it is a valid exercise of Congress’ Commerce Clause power.

Second, the court found the Graves Amendment constitutional because it regulates the use of motor vehicles, which are the “quintessential instrumentalities of modern interstate commerce.”  Additionally, just as federal courts had ruled that Congress could regulate railroad boxcars that traveled only intrastate because of their inherent mobility and connection to interstate commerce, so too could Congress here regulate all leasing of motor vehicles, regardless of whether they in fact traveled interstate.

Finally, the amendment was constitutional under the third, broadest prong of Congress’ Commerce Clause power.  Where regulated activity is only local and does not reach out of state, it may still be regulated by Congress if that activity exerts a substantial economic effect on interstate commerce.  When the activity in question is an economically based one, such as the renting of cars, a court need only ask whether a rational basis exists for Congress’ conclusion that such activity affects interstate commerce.  Here, the court noted that legislation regulating the costs associated with motor vehicle renting must necessarily have an impact upon interstate commerce regardless of whether a particular transaction was wholly intrastate.  

Vanguard Car Rental USA, Inc. v. Huchon, 06-10082-CIV, a September 2007 decision by the Southern District of Florida, reached a different conclusion than Garcia, finding the Graves Amendment unconstitutional.  Huchon first examined whether the law was a valid regulation of the channels of interstate commerce, and disagreed with Garcia because it found the legislation to regulate tort liability primarily and the channels of interstate commerce only secondarily.  

Huchon then examined whether the law was a regulation of the instrumentalities of interstate commerce.  The court recognized that courts have held cars to be instrumentalities of interstate commerce; however, here, the court held that the law regulated tort liability and not cars or their use.  Therefore, the law was not a regulation of the instrumentalities of interstate commerce. 

Finally, Huchon examined whether Congress was regulating activities substantially related to interstate commerce.  The court noted that there are four factors that courts consider in determining whether a regulated activity substantially affects interstate commerce:  existence of Congressional findings concerning impact of the activity on commerce, express jurisdictional limits contained within the law, the commercial nature of the activity, and the closeness of the connection between the activity and its effect on interstate commerce.  The court noted that there were no official Congressional findings on the impact the law would have on the interstate dealings of car rental companies nor did the law have a jurisdictional element, such that it would only reach cars used in interstate travel.  The court conceded that the law has a commercial impact; however, it found that impact to be attenuated.  Therefore, the court ruled that the law did not substantially affect interstate commerce.  Since the law did not fall within any prong of Congress’ Commerce Clause Powers, the law was unconstitutional. 

Dupuis v. Vanguard Car Rental USA Inc., 510 F. Supp. 2d 980, decided in September, 2007, by the Middle District of Florida, agreed with Garcia, holding that the Graves amendment was constitutional.  The court held that the amendment was an economic regulation since it regulated the conditions under which motor vehicle lessors operate their businesses.  Further, the amendment regulated cars and cars are generally considered instrumentalities of interstate commerce.  Since the law was economic in nature and regulated the instrumentalities of interstate commerce, it was a proper exercise of Congress’ Commerce Clause power. 

Garcia and Dupuis appear the better reasoned decisions, since the Graves amendment does seemingly reach economic activity and since courts have time and again held cars to be instrumentalities of interstate commerce.  Moreover, if Garcia and Dupuis are correct on even one of the three prongs of Commerce Clause analysis, the law is constitutional.  See also Bechina v. Enterprise Leasing Co., 2007 WL 4322303 (Fla. App. Ct. 2007) (state decision siding with Garcia); Castillo v. Bradley, 2007 WL 2874960 (N.Y. Sup. 2007) (also siding with Garcia).  However, the amendment’s constitutionality will be clearer once a U.S. Court of Appeals renders a decision on the issue.  Insurance companies and vehicle rental companies await such a decision with great anticipation.  We will provide an update when further developments occur.