Robinson v. Jiffy Executive Limousine Co.

• Citation: 4 F.3d 237
• Decision Date: 09 September 1993
• Docket Number: No. 92-5649,92-5649
• Parties: Thomas P. ROBINSON, Executor of the Estate of Raymond P. Robinson, deceased, Appellant, v. JIFFY EXECUTIVE LIMOUSINE CO.; Best Executive Limousine Service; Rizzo DeCecco, Administrator of the Estate of Richard A. DeCecco, Deceased; Atlantic City Showboat, A Wholly Owned Subsidiary of Ocean Showboat, Inc. and Showboat, Inc., and all of these, t/a The Showboat Casino Hotel.
• Court: United States Courts of Appeals. United States Court of Appeals (3rd Circuit)

Page 237

4 F.3d 237

Thomas P. ROBINSON, Executor of the Estate of Raymond P.

Robinson, deceased, Appellant, v. JIFFY EXECUTIVE LIMOUSINE CO.; Best Executive Limousine

Service; Rizzo DeCecco, Administrator of the Estate of

Richard A. DeCecco, Deceased; Atlantic City Showboat, A

Wholly Owned Subsidiary of Ocean Showboat, Inc. and

Showboat, Inc., and all of these, t/a The Showboat Casino Hotel.

No. 92-5649.

United States Court of Appeals, Third Circuit.

Argued June 23, 1993.

Decided Sept. 9, 1993.

Slade H. McLaughlin (argued), Law Offices of Stanley P. Kops, Philadelphia, PA, for appellant.

Jeffrey B. McCarron (argued), Swartz, Campbell & Detweiler, Philadelphia, PA, for appellees.

Before: STAPLETON, MANSMANN and HUTCHINSON, Circuit Judges.

OPINION OF THE COURT

MANSMANN, Circuit Judge.

These consolidated diversity actions arise from a fatal car accident which took the lives of the appellant's father and of the driver of a limousine hired by a casino to transport one of its patrons from the Philadelphia airport. The main issue we address is whether, under New Jersey law, one (such as the casino) who hires an independent contractor who is uninsured, or financially unable to pay tort judgments, as was the limousine company and its driver, is liable in tort for that independent contractor's negligence under New Jersey's "incompetent contractor" exception to the general rule against such imputed liability. We addressed this issue in Becker v. Interstate Properties, 569 F.2d 1203 (3d Cir.1977), cert. denied, 436 U.S. 906, 98 S.Ct. 2237, 56 L.Ed.2d 404 (1978), holding that the "incompetent contractor" exception extends to financial incompetence. The district court declined to follow Becker 's majority opinion.

We must also review the sufficiency of the evidence of the casino's alleged direct negligence based on actual or constructive knowledge of the independent contractor's physical incompetence to drive. Finally, this appeal also raises the issue of whether the casino's deviation from its own self-imposed internal hiring criteria, or the fact that it failed to ascertain that the hired independent contractor was not currently registered with the Interstate Commerce Commission, constitutes direct negligence.

The district court granted summary judgment in favor of Showboat on October 20, 1992, and entered an order on December 15, 1992, directing the entry of a final judgment in accordance with Fed.R.Civ.P. 54(b). ¹ This is an appeal from that order.

I.

The tragic events giving rise to this suit occurred on November 29, 1988, when Richard DeCecco, the driver of the independent contractor limousine service hired by Showboat to transport a patron, Augusto Jorge, from the Philadelphia International Airport, suffered a fatal heart attack en route from the airport, causing the limousine to swerve into oncoming traffic on the New Jersey side of the Walt Whitman Bridge. The ensuing accident was also fatal to Raymond Robinson, the driver of the car which collided head-on with the limousine. Augusto Jorge was severely injured in that accident as well.

DeCecco had a history of heart disease, and the evening before the accident, he visited the emergency room of the Atlantic City Medical Center with chest pains. He was released, however, with a prescription to treat gastritis, an apparent misdiagnosis. Before leaving the airport with Jorge the following day, DeCecco expressed the fact that he was not feeling well and told Jorge that he needed to place a telephone call. DeCecco entered the airport terminal, presumably to locate a telephone booth, but Jorge did not actually witness DeCecco placing the alleged call, nor did he hear any of the alleged telephone conversation. While it appears likely that DeCecco in fact placed a call, perhaps to Showboat, it remains unclear whether DeCecco indicated to Showboat that he was ill, how seriously ill he was feeling at the time, and whether he requested assistance.

An Interstate Commerce Commission investigation subsequent to the accident revealed that the limousine was not insured or ICC approved at the time of the accident, and was thus in service in violation of federal law. We must decide initially whether Showboat's failure to assure that the independent contractor limousine service was insured and thus "financially competent" renders Showboat liable, either imputedly or directly, to the uncompensated victims of the contractor's negligence on the theory of having knowingly engaged an incompetent contractor.

We note preliminarily that Internal Operating Procedure 9.1 reflects our tradition that reported panel decisions are binding on subsequent panels, and in banc consideration is required before overruling such decisions. However, when we are applying state law and there is persuasive evidence that it has undergone a change, we are not bound by our previous panel decision if it reflected our reliance on state law prior to its modification. Smith v. Calgon Carbon Corp., 917 F.2d 1338, 1343 (3d Cir.1990). This is such a case in that two appellate decisions of the New Jersey courts, handed down subsequent to our Becker decision, have rejected the Becker extension of the "incompetent contractor" exception. We, as a panel, are thus not bound by Becker 's view of New Jersey law.

II.

Faced with the issue of whether liability in tort for the negligence of a financially incompetent independent contractor falls on the hiring entity, the New Jersey Supreme Court noted that "ordinarily where a person engages a contractor, who conducts an independent business by means of his own employees, to do work not in itself a nuisance ..., he is not liable for the negligent acts of the contractor in the performance of the contract." Majestic Realty Associates, Inc. v. Toti Contracting Co., 30 N.J. 425, 153 A.2d 321, 324 (1959) (citations omitted). The court further noted that this general rule of employer nonliability gives way under certain limited circumstances. The only traditionally recognized exception relevant to the present case is where the employer knowingly engages an "incompetent contractor." Id. See also Terranella v. Union Bldg. & Const. Co., 3 N.J. 443, 70 A.2d 753 (1950); Izhaky v. Jamesway Corp., 195 N.J.Super. 103, 478 A.2d 416 (1984). In dictum which would expand the "incompetent contractor" exception beyond all precedent, however, the court suggested that "in the application of concepts of distributive justice perhaps ... a loss arising out of the tortious conduct of a financially irresponsible contractor should fall on the contractee." Id. 153 A.2d at 325. Thus, the court indicated its potential amenity to holding a contractee duty bound, before hiring independent contractors, to determine the independent contractor's financial capacity to respond to tort claims. The court, however, was not poised to issue a dispositive statement on this matter and expressly reserved it. Id.

We were called upon to evaluate the Majestic court's dictum in Becker v. Interstate Properties, 569 F.2d 1203 (3d Cir.1977), cert. denied, 436 U.S. 906, 98 S.Ct. 2237, 56 L.Ed.2d 404 (1978), and to address the question which the New Jersey Supreme Court reserved. Our task was to predict what the New Jersey Supreme Court would do, in light of Majestic and informed by the "doctrinal trends," public policies and judicial precedence which formed the applicable state law, if confronted with the facts of Becker. Id. at 1206. We noted that "the liability of employers [for the tortious acts of independent contractors] has emanated from the exceptions articulated in [Majestic ]." Becker, 569 F.2d at 1207. Based upon the suggestions of the Majestic court regarding the application of distributive justice, we concluded that the New Jersey Supreme Court would be likely to hold that employing a financially irresponsible or uninsured independent contractor is tantamount to hiring an "incompetent contractor," and thus places the employer outside the scope of any immunity to tort damages. Id at 1209. We justified the novelty of this holding by adverting to contemporary business practice and industry conditions, which reflect the wide availability of insurance, and thus warrant a normative judicial policy of shifting the burden of the loss from the tortious negligent conduct of a "judgment proof" contractor onto the party best able to compensate the victim.

The Becker opinion produced a strong dissent which argued primarily that the majority's decision was not an apt estimate of what the New Jersey courts would likely hold. Id. at 1215. The dissent characterized the Majestic court's controversial dictum as merely " 'an emanation of the oral argument,' " not nearly sufficiently indicative that the New Jersey Supreme Court was poised to articulate a novel standard of tort liability--one which had not until then been adopted in any other jurisdiction in the country. Id.

Since our decision in Becker, the Superior Court of New Jersey, Appellate Division has twice rejected the Becker majority holding. In Cassano v. Aschoff, 226 N.J.Super. 110, 543 A.2d 973, certif. denied, 113 N.J. 371, 550 A.2d 476 (1988), the employee of an independent contractor tree removal company brought suit against landowners for an injury he sustained during a tree removal operation conducted on the landowner's property. The plaintiff based his claim for liability against the landowners on the allegation that the landowners negligently hired an independent contractor who was financially insecure, and hence knowingly engaged an incompetent contractor. On the facts of the case, the court could not impute to the landowners any knowledge, actual or constructive, of the contractor's financial incompetence. Explicitly confronting our holding in Becker and the Majestic dictum, the court also, as a matter of law, unambiguously rejected Becker 's characterization of financial irresponsibility as a category of incompetence. The court held,

Although no cou...