Zamalloa v. Hart, KEN-RAY

• Decision Date: 05 August 1994
• Docket Number: KEN-RAY,Nos. 93-15207,93-15461,s. 93-15207
• Citation: 31 F.3d 911
• Parties: Genevieve ZAMALLOA, a single person, Plaintiff, Counter-Defendant, v. Robert HART, Defendant, LIGON NATIONWIDE INCORPORATION, a Kentucky Corporation, Defendant, Cross-Claimant, Appellee-Cross-Appellant, v.TRUCKING CORPORATION, a Wisconsin Corporation, Defendant, Counter-Claimant, Cross-Claimant, Appellant-Cross-Appellee.
• Court: U.S. Court of Appeals — Ninth Circuit

Page 911

31 F.3d 911

Genevieve ZAMALLOA, a single person, Plaintiff, Counter-Defendant, v. Robert HART, Defendant, LIGON NATIONWIDE INCORPORATION, a Kentucky Corporation, Defendant, Cross-Claimant, Appellee-Cross-Appellant, v. KEN-RAY TRUCKING CORPORATION, a Wisconsin Corporation,

Defendant, Counter-Claimant, Cross-Claimant,

Appellant-Cross-Appellee.

Nos. 93-15207, 93-15461.

United States Court of Appeals Ninth Circuit.

Argued and Submitted June 17, 1994.

Decided Aug. 5, 1994.

Edward Farman, Schindel, Cooper & Farman, New York City, for appellant Ken-Ray Trucking Corp.

M. Byron Lewis, Jennings, Strouss & Salmon, P.L.C., Phoenix, AZ, for appellee Ligon Nationwide Inc.

Appeal from the United States District Court for the District of Arizona.

Before: GOODWIN, PREGERSON, and RYMER, Circuit Judges.

PREGERSON, Circuit Judge:

INTRODUCTION

Ken-Ray Trucking Corp. ("Ken-Ray"), a common carrier, appeals a directed verdict in favor of another common carrier, Ligon Nationwide Inc. ("Ligon"). We have jurisdiction over this diversity action under 28 U.S.C. Sec. 1332.

This case arises out of a complaint for damages stemming from an accident involving a truck leased to Ken-Ray and driven by the truck's owner, Robert Hart. Ken-Ray settled with the injured party after the trial court found that Ken-Ray was Mr. Hart's "statutory employer" under Interstate Commerce Commission ("ICC") regulations governing vehicle leases by common carriers.

The primary issue in this appeal is whether Ligon was also Hart's statutory employer at the time of the accident, and thereby could be liable to Ken-Ray for contribution and indemnification. Because we find that Ligon could be statutorily liable for the accident, we reverse.

BACKGROUND

Mr. Hart was the owner-operator of a tractor-trailer. In 1988, he leased his tractor-trailer with himself as the driver, to Appellant Ken-Ray. On August 9, 1988, Hart made a delivery for Ken-Ray. After the delivery, Ken-Ray released Hart to seek a load from another carrier for his return trip. Then Hart called Appellee Ligon to offer his truck for a "trip-lease." ¹ Ligon agreed and directed Hart to its yard in Phoenix. En route to Phoenix, Hart was delayed for repairs and called Ligon to report the delay. The substance of this conversation is disputed by the parties. Ken-Ray and Mr. Hart contend that an agreement was reached between Ligon and Hart whereby Hart would detour to pick up a load at an AT & T warehouse in Phoenix and then proceed to the Ligon yard to sign the trip-lease and pick up Ligon's placard. At trial, Hart testified that Ligon gave him a pick-up number to give to AT & T so that AT & T would release the cargo. ² Ligon denies this, and admits only that its representative agreed to meet with Hart at AT & T instead of at the Ligon yard. ³

In any case, Hart drove immediately to the AT & T yard. As Hart was turning into the AT & T yard, with Ken-Ray's placard still affixed to his trailer, Hart collided with a van driven by Genevieve Zamalloa. Ms. Zamalloa sued Hart, Ken-Ray, and Ligon. Ken-Ray cross-claimed against Ligon for indemnity and contribution. Eventually, Ken-Ray and Ms. Zamalloa settled, leaving only Ken-Ray's cross-claim for indemnity and contribution to be determined at trial.

Ken-Ray initially contended that Ligon could be held vicariously liable for Mr. Hart's actions either under the common law respondeat superior doctrine or under the ICC regulations. The district court granted Ligon's summary judgment motion as to Ken-Ray's respondeat superior theory, but it rejected Ligon's summary judgment motion as to the ICC regulations, holding that Ligon could potentially be held liable as Hart's statutory employer.

The court then bifurcated the trial and conducted a jury trial on the single issue of whether Ligon was Hart's statutory employer under the ICC regulations, reserving all other triable issues (e.g., damage, causation, indemnity, etc.) for a second trial, if necessary. At the close of evidence of this trial, the court granted Ligon's motion for a directed verdict, ruling, in essence, that Ligon could not have been Hart's statutory employer because Hart had not yet loaded up his cargo. Ken-Ray appeals the directed verdict.

STANDARD OF REVIEW

We review de novo the district court's grant of a directed verdict. Montiel v. City of Los Angeles, 2 F.3d 335, 342 (9th Cir.1993). "A directed verdict is proper when the evidence permits only one reasonable conclusion as to the verdict." Rudiger Charolais Ranches v. Van De Graaf Ranches, 994 F.2d 670, 672 (9th Cir.1993). We must view the evidence in the light most favorable to appellant and draw all possible inferences in favor of appellant. Miller v. Fairchild Industries, Inc., 885 F.2d 498, 503 (9th Cir.1989).

ANALYSIS

The question before us is whether Ligon was Hart's statutory employer under the ICC regulations at the time of the accident and thereby potentially liable for Hart's allegedly tortious acts. Ligon asserts two arguments in support of its contention that it was not Hart's statutory employer. First, it contends that under the ICC regulations there can be only one statutory employer at a time. Second, it argues that it never established a statutory employment relationship with Hart. ⁴

I. Statutory and Regulatory Background

The statutory and regulatory provisions that have been interpreted to create liability based on statutory employment are contained in 49 U.S.C. Sec. 11107 and 49 C.F.R. Sec. 1057. These provisions regulate common carrier leases of trucks and tractor-trailers from other common carriers as well as from truck owners who are not common carriers. They were enacted by Congress to protect the public by preventing common carriers from evading liability for accidents caused by drivers. Planet Insurance v. Transport Indemnity 23 F.2d 285, 287 (9th Cir.1987). See Empire Fire and Marine Insurance v. Guaranty National Insurance, 868 F.2d 357, 362 (10th Cir.1989) (discussing past confusion about who was financially responsible for accidents caused by the drivers of leased trucks).

49 U.S.C. Sec. 11107(a)(4) authorizes the Interstate Commerce Commission to require a carrier to

have control and be responsible for operating [the vehicle] in compliance with requirements prescribed by the Secretary of Transportation on safety of operations and equipment, and with other applicable law as if the [vehicle] were owned by the motor carrier.

(Emphasis added).

The ICC regulations implementing Sec. 11107(a)(4) require any contract between truck owners or contractors and common carriers ("carrier lessees") to include a written lease. 49 C.F.R. Sec. 1057.11(a). The lease must provide that the carrier lessee has "exclusive possession, control, and use" of the vehicle and that the carrier lessee "assume[s] complete responsibility for the operation of the equipment." 49 C.F.R. Sec. 1057.12(c)(1). The first dispute between the parties concerns whether this requirement is consistent with there being more than one statutory employer at a time. We address this issue in Section II.

In addition to the written lease requirement, the carrier lessee must also comply with other formalities evidencing the carrier lessee's control over the truck driver and its consequent vicarious responsibility for tortious acts by the driver. Most significantly, the lessee must obtain a receipt for the truck, and the carrier's name and ICC number must at all times be visibly displayed on the leased vehicle. 49 C.F.R. Sec. 1057.11(a)-(d). It is undisputed that where each of these requirements are met the carrier becomes the statutory employer of the driver. See Planet, 823 F.2d 285. But the parties differ about what happens when the carrier fails to abide by some or all of the regulations. We address this issue in Section III.

II. Multiple Statutory Employers

Ligon contends that Ken-Ray's admission that Ken-Ray was Hart's statutory employer precludes it from claiming that Ligon was also Hart's statutory employer. The force of Ligon's argument derives from the language of the regulations requiring a common carrier to take "exclusive possession" and "complete responsibility" for the operation of the vehicle once a contract is formed between the common carrier and the lessor (in this case the driver). See 49 C.F.R. Sec. 1057.12(c)(1). Ligon contends that such complete responsibility is inconsistent with any additional responsibility on the part of others. The district court disagreed, holding that the framework of the law and regulations, the policies animating their adoption, and the caselaw were all in accord that there can be more than one statutory employer. This is a close question, but we agree with the district court.

By our reading, the regulations establish that, as between the contracting lessor (in this case the owner-driver ) and the common carrier, the carrier must accept "complete responsibility" for the vehicle. ⁵ But we do not read the regulations to preclude sharing of control or responsibility among common carriers. As discussed below: (1) the regulations are consistent with our reading; (2) caselaw has not interpreted the "complete responsibility" language of the regulations to prevent more than one carrier from being held liable for the tortious acts of drivers; and (3) allowing drivers to have more than one statutory employer is consistent with the statute's intent to protect the public.

A. Regulations

Ligon's strongest argument is that the plain words of the regulations require a carrier to undertake "exclusive" control and "complete" responsibility, and that this is inconsistent with two or more carriers sharing responsibility at the same time. But this argument loses much of its force because under certain conditions it is clear that more than one common carrier can share ownership and control of leased vehicles. See Lease and Interchange of Vehicles by Motor Carriers E & L Transport Company, Metro Auto Transport,...