IN A CASE OF FIRST IMPRESSION, NORTHERN DISTRICT OF TEXAS IMPLIES THAT CLAIMS OF NEGLIGENT ENTRUSTMENT AGAINST LESSORS ARE NOT PREEMPTED BY THE GRAVES AMENDMENT

March 20, 2019

Last week, in a case of first impression, the Northern District of Texas implied, but did not expressly hold, that claims of negligent entrustment against lessors are not preempted by the Graves Amendment. In O’Donnell v. Diaz, No. 3:17-CV-1922-S, 2019 WL 1115715 (N.D. Tex. [Dallas Division] March 11, 2019, mem. op.), O'Donnell was a passenger in a vehicle involved in a motor vehicle accident. The driver of the other vehicle, the alleged at-fault driver, was driving a rental vehicle leased to him by Avis Budget Car Rental, LLC (“Avis”). O’Donnell sustained injuries as a result of the accident and sued Avis alleging a claim of negligent entrustment. In response, Avis moved for summary judgment contending that the Graves Amendment preempted and prohibited a claim of negligent entrustment against Avis.

The Graves Amendment (49 U.S.C. § 30106(a)) provides that “[a]n owner of a motor vehicle that rents or leases the vehicle to a person . . . shall not be liable under the law of any State . . . by reason of being the owner of the vehicle . . . for harm to persons or property that results or arises out of the use, operation, or possession of the vehicle.” The Graves Amendment preempts state law in the area of vicarious liability for owners engaged in the business of renting or leasing motor vehicles. However, the Graves Amendment contains a saving clause that allows an owner of a leased vehicle to be found directly liable for the owner’s negligence or criminal wrongdoing.

Because the issue was one of first impression, the Northern District of Texas looked to the Eighth Circuit – the only circuit court to have addressed the issue. In Carton v. Gen. Motor Acceptance Corp., 611 F.3d 451 (8th Cir. 2010), the Eighth Circuit Court concluded that the district court erred in finding that the Graves Amendment only permitted claims of negligent maintenance against lessors, and not claims of negligent entrustment. The Carton court reasoned that there was no statutory basis for narrowing the definition of the broad term “negligence” contained in the saving clause of the Graves Amendment, or giving it any definition other than its ordinary meaning.”  

Based on the Eighth Circuit’s decision and reasoning, the Northern District of Texas – without concluding whether the Graves Amendment preempts negligent entrustment claims against lessors such as Avis – conducted its summary-judgment analysis as though O'Donnell’s claim of negligent entrustment against Avis was not preempted. In the end, the court granted Avis’ motion as there was no evidence to support O'Donnell’s claim.