Petition — Mustang Transportation Co. v. Ryder Truck Lines, Inc.

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Office - Supreme Court, U.S.

82-727 FILED

No. 82- OCT 27 1982

ALEXANDER L. STEVAS.

CLERK

IN THE

Supreme Court of the United States

OCTOBER TERM, 1982

MUSTANG TRANSPORTATION COMPANY, HENRY CROWDER,

AND CANAL INSURANCE COMPANY,

*. Petitioners,

RYDER TRUCK LINES, INC.,

AND LIBERTY MUTUAL INSURANCE COMPANY,

Respondents.

PETITION FOR A WRIT OF CERTIORARI TO THE

UNITED STATES COURT OF APPEALS

FOR THE THIRD CIRCUIT

THOMAS J. FINARELLI

(Counsel of Record)

LIEBERT, SHORT, FITZPATRICK

& LAVIN

Suite 1200—

One Franklin Plaza

16th and Race Streets

Philadelphia, Pa. 19103

(215/564-5800)

RICHARD W. GOLDMAN

MICHAEL B. BARR

HUNTON & WILLIAMS

1919 Pennsylvania Ave., N.W.

Washington, D.C. 20006

Counsel for Petitioners

Mustang Transportation

Company, Henry Crowder,

and Canal Insurance

Company

October 27, 1982

WILSON - Eres Printinec Co., Inc. - 789-0096 - WASHINGTON, D.C. 20001

QUESTION PRESENTED

Whether regulations of the Interstate Commerce Com-

mission impose liability upon a vehicle lessee as a matter

of law while the vehicle is being used in furtherance of

the lessee’s business?

(i)

TABLE OF CONTENTS

Page

QUESTION PRESENTED (i)

TABLE OF AUTHORITIES ..._.... eats iv

OPINION BELOW WW * 1

JURISDICTION 2

REGULATION INVOL VEP 2

STATEMENT OF THE CASE. 2

REASONS FOR GRANTING A WRIT ............ 1

— ee 11

(iii)

TABLE OF AUTHORITIES

CASES: Page

Alford v. Major, 470 F.2d 132 (7th Cir. 1972) 8

American Trucking Associations, Inc. v. United

States, 344 U.S. 298 (1953 6

Carolina Casualty Insurance Company v. Insur-

ance Company of North America, 595 F.2d 128

(3d Cir. 1979) 9

Cosmopolitan Mutual Insurance Company v. White,

336 F. Supp. 92 (D.Del. 1972) -............................ 7,8

Farmer v. Ryder Truck Lines, Inc., 245 Ga. 734,

266 S.E.2d 922, cert. denied, 449 US. 885

ß 8,9

Schedler v. Rowley Interstate Transportation Co.,

68 III. 2d 7, 368 N. E. 2d 1287 (1977) 8

Simmons v. King, 478 F.2d 857 (5th Cir. 1973) 7,8

Siz Flags Over Georgia, Inc. v. Hill, 247 Ga. 375,

276 S.E. 2d 572 (1981) 9

Transamerican Freight Lines, Inc. v. Brada Miller

Freight Systems, Inc., 423 U.S. 28 (197555 6, 7, 8

Weeks v. Kelley, 377 A2d 444 (Me. 19777 8

STATUTES:

28 U.S.C. 8 1284 (1) (1976) —

28 U.S.C. § 1291 (1976)

28 U.S.C. § 1382 (a) (1) (1976) ..............................

49 U.S.C. § 10101, et seg. (Supp. IV 1980)

49 U.S.C. § 10927 (a) (1) (Supp. IV 1980) -......

The Motor Carrier Act of 1980 §§ 2,3, 1980 U.S.

Code Cong. & Ad. News (94 Stat.) 7998

a * . & te

REGULATIONS:

49 C.F.R. § 1057.4(a) (4) (1969) 2,4,7

49 C. F. R. § 1057.12 (d) (1981) -...........................-- 2

MISCELLANEOUS:

H.R. Rep. No. 96-1069, 96th Cong., 2d Sess., re-

printed in 1980 U.S. Code Cong. & Ad. News

2283 5

IN THE

Supreme Court of the United States

OCTOBER TERM, 1982

No. 82-

MUSTANG TRANSPORTATION COMPANY, HENRY CROWDER,

AND CANAL INSURANCE COMPANY,

y Petitioners,

RYDER TRUCK LINES, INC.,

AND LIBERTY MUTUAL INSURANCE COMPANY,

Respondents.

PETITION FOR A WRIT CF CERTIORARI TO THE

UNITED STATES COURT OF APPEALS

FOR THE THIRD CIRCUIT

Mustang Transportation Company, Henry Crowder

and Canal Insurance Company respectfully petition for

a Writ of Certiorari to review the judgment of the

United States Court of Appeals for the Third Circuit

entered in this proceeding on July 29, 1982.

OPINION BELOW

The opinion of the United States District Court for

the Eastern District of Pennsylvania in Mustang Trans-

portation Company v. Ryder Truck Lines, Inc. (App.

2a-19a), is reported at 523 F. Supp. 1097 (E.D. Pa.

1981). The decision of the district court was affirmed

without opinion by the United States Court of Appeals

for the Third Circuit on July 29, 1982. (App. 20a-21a).

Neither of the corporate Petitioners is related to a company

whose listing is required by Rule 28.1 of the Rules of the Supreme

Court of the United States.

JURISDICTION

This Petition for Writ of Certiorari is being filed

within the prescribed 90-day period following July 29,

1982. Jurisdiction of this Court is invoked under 28

U.S.C. § 1254(1) (1976).

REGULATION INVOLVED

The Interstate Commerce Commission (ICC) regula-

tion at issue, 49 C.F.R. § 1057.4(a) (4), has been revised

and codified in 49 C. F. R. 5 1057.12 (d). Both are re-

produced in the apendix to this petition. (App. 22a).

STATEMENT OF THE CASE

This action concerns a dispute over the ultimate liabil-

ity for damages claimed by certain individuals involved

in a motor vehicle accident in December of 1969. The

accident resulted in the death of one Edward A. Renzi

(Renzi) and in injuries to his companions Charles A.

Benedict (Benedict) and Daniel Mattia (Mattia). Two

personal injury actions ensued. Marie A. Renzi, Execu-

trix for the estate of her deceased husband, brought her

action against Henry Crowder (Crowder), the owner and

driver of the truck which collided with the Renzi vehi-

cle; Mustang Transportation Company (Mustang), the

owner of the trailer attached to Crowder’s truck; and,

R. L. Dease, Mustang’s majority shareholder. Those de-

fendants filed a third-party claim against Ryder Truck

Lines, Inc. (Ryder) to which Crowder had leased the

vehicle on the day prior to the accident date. The second

action, instituted by Benedict and Mattia, named only

Crowder and Dease as defendants, and neither defendant

filed a third party claim.

The two suits were eventually consclidated, and both

were then settled for a total of $117,500.00. Canal Insur-

ance Company (Canal), which had issued a policy pro-

viding insurance coverage to Mustang, and Liberty Mu-

nsurance Company (Liberty Mutual), which had

issued a policy providing insurance coverage to Ryder,

one half of the settlement amount. As part of

t, it was agreed that another action would

instituted in the United States District Court for the

Ryder’s liability for the damages incurred as well as

questions concerning the insurance coverage available to

them and to Crowder could be resolved simultaneously.

That agreement resulted in this litigation, with Crowder,

Dease, Mustang and Canal as plaintiff: and Ryder and

Liberty Mutual as defendants and plaintiffs on the coun-

terclaim. The jurisdiction of the district court was in-

voked under 28 U.S.C. § 1332 (a) (1) (1976) on the basis

of the diversity of citizenship of the parties. It was

stipulated by the parties that for the purposes of this

action Crowder’s operation of the vehicle would be pre-

sumed negligent and the proxi nate cause of the injuries

sustained by the accident victims.

Crowder’s relationship with Mustang was set forth in

a long-term lease agreement. According to the terms of

that agreement, Crowder or someone in his employ would

drive his truck to haul freight for Mustang, the proceeds

to be divided between them on a percentage basis. In

early December of 1968, having just completed a trip

for Mustang for its base of operations in Georgia, Crow-

der found himself in New Jersey with no freight for a

return run. At the suggestion of a third party, Crowder

contacted and entered into a second lease agreement wit!

That agreement identified Mustang as the vehicle les-

sor, and called for Crowder to haul certain regulated

commodities from New York to Michigan. As Mustang

was not authorized to transport regulated commodities

over the scheduled route, Ryder provided the ICC certifi-

cate under which Crowder operated. The trip lease also

stated that in accordance with ICC regulations Ryder

maintained exclusive possession and control over the vehi-

cle and assumed full responsibility for its operation.

The case was submitted to the district court sitting

without a jury on the basis of stipulated facts and the

deposition testimony of Mr. Dease. Disregarding the re-

sponsibility imposed upon Ryder by the ICC’s regulation:

and assumed by Ryder under the lease, and ignoring the

fact that Crowder was hauling freight for Ryder under

the authority of an ICC certificate held by Ryder, the dis-

trict court found Crowder to have been acting solely in

the employ of Mustang at the time of the accident. Con-

sequently, the court found Mustang alone vicariously

liable for Crowder’s acts of negligence. The court also

ruled that neither Crowder nor Mustang was entitled

to coverage under the Liberty Mutual policy. Since

Canal had conceded that Mustang qualified for cover-

age under its policy, the court entered judgment in favor

of Ryder and Liberty Mutual as defendants and as plain-

tiffs on the counterclaim against Crowder, Mustang and

Canal for the full amount at issue.

Mustang, Crowder and Canal sought review of the

district court’s decision in the United States Court of

Appeals for the Third Circuit pursuant to 28 U.S.C.

§ 1291 (1976). On July 29, 1982, the Third Circuit en-

tered an order affirming, without opinion, the district

court’s judgment.

REASONS FOR GRANTING A WRIT

The opinion of the district court, as affirmed by the

United States Court of Appeals for the Third Circuit,

presents this Court with a clear example of a case

worthy of certiorari. It involves a federal question of

significance—the effect of ICC regulations designed to

cure certain ills besetting the nation’s trucking indus-

2 49 C. F. R. § 1057.4(a) (4) (1969) (App. 22a).

quirement was retained in the Act. 49 U.S.C. § 10927

(a) (1) (Supp. IV 1980).

Thus, highway safety remains an important govern-

mental interest, as it was at the time the predecessor

American Trucking Associations, Inc. v. United States,

344 U.S. 298 (1953), noted the kinds of which the

In Tran american Freight Lines, Inc. v. Brada Miller

Freight Systems, Inc., 423 U.S. 28 (1975), this Court

again recognized the problem which the ICC sought to

address in 49 C.F.R. 1057.4:

It is apparent, therefore, that sound

and of

fixing financial responsibility for damage and in-

juries to shippers and members of the public, were

the significant aims and guideposts in the develop-

exception that the effect of 49 C. F. R. § 1057.4(a) (4) is

to impose liability upon à vehicle lessee as a matter of

law while the vehicle is being used in furtherance of his

business. Thus, the United States District Court for the

District of Delaware ruled in Cosmopolitan Mutual In-

surance Company v. White, 336 F. Supp. 92, 99 (D.Del.

1972), that “the ICC carrier’s liability for equipment

and drivers covered by leasing arrangements is not gov-

erned by the traditional common law doctrines of master-

servant relationships and respemdeat superior.” One year

later the United States Court of Appeals for the Fifth

Circuit noted its agreement with that conclusion, and ex-

plained further:

The deliberate fulfillment of these statutory pre-

requisites by the parties must be viewed as giving

rise to a statutory relationship, since these regula-

tions have the force and effect of law, Cox v. Bond,

[53 NJ. 186, 249 14 579, 586 Ar Since

was vicariously liable as a matter of law for the

negligence of King.

Simmons v. King, 478 F.2d 857, 867 (5th Cir. 1973).

Simmons was followed by Transamerican Freight Lines,

Inc., in which this Court also discussed the relationship

of the lessor and lessee to the vehicle driver:

It is to be acknowledged, to be sure, that the les-

sor’s furnishing of a driver allows an aspect of con-

trol, in a sense, to remain in the lessor. But this

is ministerial control, not control of a kind with

which the Commission was concerned in Ex Parte

No. MC-43. Its concern, as we have notei, was with

operating authority, with routes and destinations

and classes of freight, with the integrity of certifi-

cations, «nd with that ultimate control in the lessee

that makes and keeps it responsible to the public,

the shipper, and the Commission.

423 U.S. at 39. It is clear, therefore, that until the dis-

trict court’s decision in this case, the federal courts had

consistently held that the ICC regulations have the force

of law, that they place full responsibility for the negligent

operation of a vehicle upon the lessee, and that the policy

behind them is effectuated by deeming the vehicle opera-

tor to be the employee of the lessee as a matter of law.“

Decisions of the state courts which have addressed this

question are in accord. Most recently, the Georgia Su-

preme Court faced a nearly identical factual setting in

Farmer v. Ryder Truck Lines, Inc., 245 Ga. 734, 266 S. E.

2d 922, cert. denied, 449 U.S. 885 (1980). That court

held the ICC regulations rendered the vehicle operator

the employee solely of the lessee for workmen’s compensa-

tion purposes. The Supreme Judicial Court of Maine, re-

lying on Cosmopolitan Mutual Insurance and Simmons,

has also expressed agreement with the view that liability

was imposed by operation of the ICC regulations, and was

not premised upon master-servant or employer-employee

relationships. Weeks v. Kelley, 377 A.2d 444 (Me. 1977).

The Illinois Supreme Court carried the point one step

further in Schedler v. Rowley Interstate Transportation

Co., Inc., 68 III. 2d 7, 368 N. E. 2d 1287 (1977), by im-

posing liability as a matter of law even though the vehicle

was not being operated in the furtherance of the lessee’s

business, a position not being advocated here.

The United States Court of Appeals for the Seventh Circuit ex-

pressed similar views in Alford v. Major, 470 F.2d 132 (7th Cir.

1972), a case which involved the effect of the ICC’s regulations on an

indemnity provision in the contract between the lessor and lessee.

Such provisions, however, are not at issue here.

The district court’s justification for ignoring this au-

thority was based upon the false assumption that “Ryder’s

responsibility to the public or to any shipper is not at

issue in this case.”* (App. lla). It appears that the

court was confused by the presence of the two insurance

companies as parties to the litigation. But once the dis-

trict court determined that the vehicle operator was not

an insured individual under the terms of either policy,

it had to decide the question of the trucker’s ultimate re-

sponsibility to the public. Having erroneously found the

federal case law to be inapplicable, the district court ap-

plied state law, in this case that of Georgia, according to

which it ruled that the lessor was the operator’s sole em-

ployer. The case turned on that finding since, as Liberty

Mutual conceded on appeal, the vehicle operator would

have been an insured individual under its policy if he

were found to be the lessee’s employee. (Brief for Ap-

pellees at 20).

If allowed to stand, the Court of Appeal’s affirmance

of the district court’s decision in this case will have the

* This phrase had its origin in Carolina Casualty Insurance Com-

pany v. Insurance Company of North America, 596 F.2d 128 (3d

Cir. 1979), a case in which the responsibility for the acts of a

negligent driver was not at issue. In that case, a jury had deter-

mined that both the lessor and the lessee of the vehicle were respon-

sible for the accident which was caused by poorly maintained equip-

ment. The only question faced by the Court of Appeals in Carolina

Casualty was which of the two insurance carriers provided coverage

under these circumstances.

5 It should be noted that the district court also erred in its inter-

pretation of Georgia law. The Court based its decision on Siz Flags

Over Georgia, Inc. v. Hill, 247 Ga. 375, 276 S.E. 2d 572 (1981) a

case which involved a construction site accident, choosing to ignore

the same Court’s determination of employment in Farmer v. Ryder

Truck Lines, Inc., a truck leasing arrangement almost identical to

that presented here.

effect of severely disrupting the regulatory scheme estab-

lished by the ICC and upheld by this Court in its prior

decisions. The approach taken by the district court ig-

nores the uniform allocation of responsibility established

by the ICC’s rules. Since the leasing arrangement

at issue in this case is 2 common one, the result of the

district court’s opinion could well be an emasculation of

the requirement that the lessee assume full responsibility

for its vehicles to the public. The very ill that the ICC’s

regulations were designed to cure would again exist, with

carriers hiding behind the employment status of the ve-

hicle operators to avoid carrying out their responsibility

to provide well maintained, safely operated equipment.

In affirming the opinion of the district court, the Court

of Appeals for the Third Circuit has not only ignored the

obvious implication of this Court’s decision in Trans-

american Freight Lines, Inc. and placed itself in conflict

with the Court of Appeals for the Fifth Circuit and the

Seventh Circuit as well as the courts of last resort of the

states of Georgia, Illinois, and Maine, but also may have

set the regulation of the nation’s trucking industry back

nearly twenty years.

CONCLUSION

For the reasons stated, the Petition for Writ of Cer-

tiorari should be granted.