Judge Christian R. Gullon, Case Number: 24PSCV00232, Date: 2025-03-13 Tentative Ruling

Judge: Christian R. Gullon, Case: 24PSCV00232, Date: 2025-03-13 Tentative Ruling

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DEFENDANT EAN HOLDINGS, LLC AND ENTERPRISE RENT-A-CAR COMPANY OF LOS ANGELES, LLC’S NOTICE OF MOTION AND MOTION FOR JUDGMENT ON THE PLEADINGS is SUSTAINED; as for leave to amend it is denied because as the cross-complaint fails as a matter of law due to the Graves Amendment (and Plaintiff’s reliance upon Mercury Ins. Co. is inapposite as that case was decided before the Graves Amendment was enacted).

On January 23, 2024, Plaintiff HARMINDER BADESHA filed suit against Defendants COUNTY OF LOS ANGELES (the “County”); BOARD OF SUPERVISORS COUNTY OF LOS ANGELES (“Board of Supervisors”), and KAIDI PENG (“Peng”) for negligence.

On May 2, 2024, the County filed a cross-complaint (CC) against Peng and Roe Defendants for:

On May 29, 2024, DEFENDANT, COUNTY OF LOS ANGELES, ERRONEOUSLY NAMED AND SERVED AS THE BOARD OF SUPERVISORS COUNTY OF LOS ANGELES filed its ANSWER TO PLAINTIFF'S Complaint.

On July 10, 2024, a STIPULATION TO SET ASIDE DEFAULT AS TO THE BOARD OF SUPERVISORS COUNTY OF LOS ANGELES was filed.

On October 7, 2024, EAN Holdings, Inc. (“Ean Holdings”) was named as Roe 1 and Enterprise Rent-A-Car (“Enterprise”) was named as Roe 2.

On October 17, 2024, Peng was dismissed. (The court notes that default was entered as to Peng on 5/22/24, but that default was not set aside.)

On December 10, 2024, Ean Holdings and Enterprise filed their answer to the County’s CC.

On December 10, 2024, Ean Holdings and Enterprise (collectively, “Defendants”) filed the instant motion.

Defendants move for judgment on the pleading on the predominant grounds^{^[1]} that under federal law, a rental car company and its affiliates cannot be held vicariously liable for the negligent acts of its customers. (Motion p. 2, citing 49 U.S.C. § 30106 (known as the “Graves Amendment”).) A rental car company and its affiliates are only liable for damages caused as a result of an independent act of negligence of that company. As here the Defendants are only named in the CC as the owners and rental agency of the at-issue vehicle driven by Peng at the time of the subject auto-collision and there are otherwise no allegations of independent negligence by Defendants, then the Graves Amendment bars liability for Plaintiff’s injuries.

Here, after a review of Defendants’ authority, the court agrees with Defendants that the CC does not state facts sufficient to constitute a cause of action against Defendants.

On August 10, 2005, the Safe, Accountable, Flexible, Efficient Transportation Equity Act: A Legacy for Users (SAFETEA-LU), a comprehensive transportation bill, was signed into law. (Graham v. Dunkley, 852 N.Y.S.2d 169 (App. Div. 2d Dep't 2008).) SAFETEA-LU includes a provision colloquially known as the Graves Amendment^{^[2]} codified at 49 U.S.C.A. § 30106, which deals with rented or leased motor vehicle safety and responsibility and essentially prohibits states from imposing vicarious liability on owners or lessors where such liability is the sole basis for bringing them into a civil suit. Specifically, the Graves Amendment states the following.

(a) In General. - An owner of a motor vehicle that rents or leases the vehicle to a person (or an affiliate of the owner) shall not be liable under the law of any State or political subdivision thereof, by reason of being the owner of the vehicle (or an affiliate of the owner), for harm to persons or property that results or arises out of the use, operation, or possession of the vehicle during the period of the rental or lease, 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).

(b) Financial Responsibility Laws. - Nothing in this section supersedes the law of any State or political subdivision thereof - (1) imposing financial responsibility or insurance standards on the owner of a motor vehicle for the privilege of registering and operating a motor vehicle; or (2) imposing liability on business entities engaged in the trade or business of renting or leasing motor vehicles for failure to meet the financial responsibility or liability insurance requirements under State law. (emphasis and underline added.)

The legislative history of the Graves Amendment indicates that it was expected to nullify laws imposing vicarious liability on owners and sometimes lessors of motor vehicles in fifteen states and the District of Columbia. (Johnson v. Agnant , 480 F. Supp. 2d 1 (D.D.C. 2006) [the legislative history clearly demonstrates that 49 U.S.C. § 30106 was intended to repeal District of Columbia law holding car rental companies vicariously liable for accidents. 109 Cong. Rec. H1199–1202 (daily ed. March 9, 2005) (“[T]he amendment offered by the gentleman from Missouri (Mr. Graves) regarding vicarious liability for rental car companies ... if passed, would nullify the laws of 15 States and the District of Columbia ....”); see also Reply p. 7, citing 151 Cong Rec. H1200 (daily ed. Mar. 9, 2005) (statement of Rep. Graves).) The motivation in doing so was likely that vicarious liability statutes/laws have been used to reach the deep pockets of motor vehicle and leasing companies, even where the renters and lessees have insurance coverage. (Kenneth J. Rojc, Karoline E. Kreuser, End of the Road for Vicarious Liability , 64 Bus. Law. 617, 618 (2009).)

With that, by its express language, the Graves Amendment preempts all state statutory and common law to the extent those laws hold owners in the business of renting or leasing motor vehicles vicariously liable for the negligence of drivers, except when there is negligence or criminal wrongdoing on the part of the owner. Many courts have determined that the Graves Amendment preempts all state statutory and common law to the extent those laws hold owners in the business of renting or leasing motor vehicles vicariously liable for the negligence of drivers, except when there is negligence or criminal wrongdoing on the part of the owner, is constitutional.^{^[3]}

In opposition, the County focuses on two California state vehicle code sections. First, is Veh. Code 17150 which provides that “Every owner of a motor vehicle is liable and responsible for injury to person resulting from a negligent or wrongful act or omission in the operation of the motor vehicle by any person using or operating the same with the permission, express or implied, of the owner." This code section applies to hold the owner of a rental vehicle liable and responsible for injuries sustained by other motorists due to the negligence of owner's permissive driver. The second statute the County relies upon is section 171751 subdivision (a) which provides, in part, that in the absence of a principal and agent relationship, vehicle owner liability "is limited to the amount of fifteen thousand dollars ($15,000.00) for the death of or injury to one person in any one accident and, limited to the amount of thirty thousand dollars ($30,000.00) for the death of or injury to more than one person in any one accident and is limited to the amount of five thousand dollars ($ 5,000.00) for damage to property of others in any one accident." The County interprets the latter as a financial responsibility law. But, as noted in reply, Section 17150, et. seq. is not a Financial Responsibility Law.

The court turns to Garcia v. Vanguard Car Rental USA, Inc., 510 S.Supp.2d 821 (M.D.Fla. 2007) as the first case that analyzed the preemptive scope of the Graves Amendment. (Defendants heavily rely upon Garcia.) As here, the plaintiffs in Garcia argued that the Graves Amendment does not erase the vehicle owner’s liability because Florida’s vehicle code section 324.021(9)(b)(2) is a financial responsibility law that creates a separate cause of action against lessors of motor vehicles. The court disagreed. The court acknowledged that since the Graves Amendment does not define “financial responsibility laws,” Congress must have intended to give that term its ordinary meaning. (Id. at p. 830.) In turn, relying upon Blacks Law Dictionary, the court defined financial responsibility laws as those “requiring an owner and/or operator of a motor vehicle to possess and have proof of minimum levels of insurance.” (Ibid.)^{^[4]} And though not argued by Defendants, California’s definition is similar. Under California's financial responsibility laws, every owner and operator of a vehicle must be able to establish at all times financial responsibility through liability insurance or its functional equivalent. If not, the owner or operator who fails to comply with these laws is generally barred by Proposition 213 from recovering noneconomic damages in a personal injury action arising from a motor vehicle accident. Proposition 213, known as The Personal Responsibility Act of 1996, was passed in an attempt to encourage compliance with the financial responsibility laws. (Allen v. Sully-Miller Contracting Co., 28 Cal. 4th 222, 225 (2002).) Vehicle owners and operators typically comply with the financial responsibility laws by purchasing insurance, or, such as by depositing $35,000 cash with the DMV before operating a vehicle. (See Veh. Code section 16021.)

To the extent that the County argues Defendants’ cite to “a plethora of inapplicable federal court decisions” (Opp. p. 8:22-23), not necessarily. Though state courts are not bound to lower federal courts’ interpretations of federal law, their interpretations still serve as persuasive authority. (See Central Bank v. Superior Court (1973) 30 Cal.App.3d 962, 967.) The use of persuasive authority is apt in cases like this when there is no binding authority in California interpreting the Graves Amendment.^{^[5]}

To the extent that the County argues that the court should apply Vehicle Code section 17150 and hold akin to that of Mercury Ins. Co. v. Entezprise Rent A Car Co. of Los Angeles (2000) 80 Cal.App.4th 41 that the owner of a rental vehicle is liable and responsible for the injuries sustained by plaintiff due to the alleged negligence of the rental car owner's permissive driver, as noted by Defendants, Mercury was decided five years prior to the Graves Amendment’s enactment.

Additionally, as noted in Reply, the court in Goodson v. Perfect Fit Enterprises, Inc. (1998) 67 Cal.App.4th 508 expressly held that “sections 17150–17151 are not part of the Financial Responsibility Laws….” (Id. at p. 514.)

Moreover, as noted by Defendants in Reply, the Vehicle Code contains sections entitled “Financial Responsibility” and “Civil Liability.” Vehicle Code section 16056–which places minimum insurance/bond requirements–is listed under “Financial Responsibility” whereas sections 17150 and 17151 are listed under “Civil Liability.” In fact, the court in Ruttenberg v. Department of Motor Vehicles (1987) 194 Cal.App.3d 1277 deemed the financial responsibility law as governing vehicle code sections 16000-16075. (Id. at p. 1280.)

All in all, a review of Defendants’ authority provides that the Graves Amendment bars teh County from holding Defendants vicariously liable for the actions of the driver of its rental vehicle as Vehicle Code section 17150 is not a financial responsibility law.

^{^[1]} Defendant also argues that the CC fails consist of conclusory allegations. The court need not reach that issue.

^{^[2]} lagler v. Budget Rent A Car System, Inc., 538 F. Supp. 2d 557 (E.D. N.Y. 2008).

^{^[3]} See e.g., (See e.g., Second Circuit (Flagler v. Budget Rent A Car System, Inc., 538 F. Supp. 2d 557 (E.D. N.Y. 2008); Berkan v. Penske Truck Leasing Canada, Inc., 535 F. Supp. 2d 341 (W.D. N.Y. 2008)); Third Circuit (Jasman v. DTG Operations, Inc., 533 F. Supp. 2d 753, 29 A.L.R. Fed. 2d 715 (W.D. Mich. 2008)); Eleventh Circuit (Dupuis v. Vanguard Car Rental USA, Inc., 510 F. Supp. 2d 980 (M.D. Fla. 2007); Garcia v. Vanguard Car Rental USA, Inc., 510 F. Supp. 2d 821 (M.D. Fla. 2007); Seymour v. Penske Truck Leasing Co., L.P., 2007 WL 2212609 (S.D. Ga. 2007).)

^{^[4]} See also Reply citing Garcia v. Vanguard Car Rental USA, 540 Fed.3d 1242, 1247 (11th Cir. 2008) [“...[T]he most common legal usage of the term “financial responsibility” is to refer to state laws which require either liability insurance or a functionally equivalent financial arrangement. Florida law is representative in providing that the owner of a motor vehicle “may prove his or her financial responsibility” by furnishing proof of liability insurance, posting a bond, furnishing a certificate showing a deposit of cash or securities, or furnishing a certificate of self-insurance. Fla. Stat. § 324.031. These other financial arrangements, like insurance, provide “proof of ability to respond in damages on account of crashes arising out the use of a motor vehicle,” which is Florida law's definition of “proof of financial responsibility….Again, we see the ubiquitous association of ‘financial responsibility’ with insurance requirements.”].)

^{^[5]} To the extent there is binding authority, the County has not provided such authority, and the court’s research also has yielded no results.