Important decision concerning car sharing services limits liability under the Graves Amendment

Moreau v. Josaphat, N.Y. Law Journal, December 3, 2013 (Sup.Ct. Kings Cty. 2013)

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The Graves Amendment applies to "car sharing services", a New York Court has held. This means that car sharing services, such as Zipcar, are entitled to the same protections afforded to rental car companies under that federal statute.

A two-car accident led to a personal injury suit by passengers of one car against the drivers of both vehicles, the owner of the vehicle they were riding in, and Zipcar, Inc. Zipcar had rented the vehicle to one of its members in New York City in the ordinary course of its business pursuant to its standard "Zipcar Membership Contract".

Zipcar, for those unfamiliar, 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."

Zipcar moved to dismiss the complaint on the grounds that the Graves Amendment (49 USC § 30106) bars claims for vicarious liability against automobile rental companies. In the motion, we submitted documentary evidence and an affidavit demonstrating that no mechanical defect or maintenance failure caused or contributed to the accident. Thus, Zipcar could only be vicariously liable, which the Graves Amendment bars.

In a 20-page decision, the Honorable David Schmidt of New York State Supreme Court granted Zipcar's motion to dismiss, finding that it had demonstrated that no mechanical defect or maintenance failures caused or contributed to the accident. The vehicle had been serviced as part of a regularly scheduled maintenance program; there had been no complaints about the condition or maintenance of the vehicle in its history; and it had been rented 53 times in the preceding month, without incident.

Most significantly, the decision holds that the Graves Amendment makes no distinction between companies like Zipcar and traditional car rental companies (such as Avis, Enterprise, etc.) and other vehicle leasing companies.

Opponents had argued that when a company holds itself out as a "car sharing program" the statute does not apply. Not so, wrote Justice Schmidt:

"[I]nasmuch as Zipcar is in the business of allowing use of their cars in exchange for a fee just like traditional rental car companies, this Court also finds that they must be considered in the trade or business of renting or leasing motor vehicles under the plain words of [the Graves Amendment]. Similarly, in light of the statute's purpose, the statute is properly interpreted to apply to Zipcar despite the fact, as [counsel for a co-defendant] notes, that it is a car sharing service and has been referred to as such in two of the cases he cites [in opposition to the motion].

One court has arrived at the same conclusion, see Minto v. Zipcar New York, Inc., Index 15401/2009 (Sup.Ct. Queens Cty. 2010), but no appellate court has yet examined the issue in a reported decision.

AGF&J partner Glenn A. Jacobson and associate James E. Kimmel briefed and argued the motion.