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

No. 82-727

IN THE

SUPREME COURT OF THE UNITED STATES

October Term, 1982

MUSTANG TRANSPORTATION COMPANY, HENRY CROWDER,

AND CANAL INSURANCE COMPANY,

Petitioners

v.

RYDER TRUCK LINES, INC.,

AND LIBERTY MUTUAL INSURANCE COMPANY,

Respondents

BRIEF IN OPPOSITION

TO PETITION FOR A WRIT

OF CERTIORARI TO THE UNITED

STATES COURT OF APPEALS

FOR THE THIRD CIRCUIT

JAN E. DUBois

VICTORIA M. KOMARNICKI

Counsel for Respondents

Ryder Truck Lines, Inc.,

and Liberty Mutual

Insurance Company

Of Counsel:

WHITE AND WILLIAMS

17th Floor

1234 Market Street

Philadelphia, Pa. 19107

(215) 854-7000

November 29, 1982

TWE LEGAL INTELLIGENCER, 10th & SPRING GARDEN STREETS, PHILA, PA 19123 (215) 236-2000 -<@ie-=

QUESTION PRESENTED

Does the “control and responsibility” requirement of

the Interstate Commerce Commission's Equipment

Leasing Regulation, 49 C.F.R. §1057.4(a)(4), insulate a

lessor frorn liability for the conduct of the operator of a

leased tractor/trailer where, under the terms of the

Lease Agreement, the lessor agrees to indemnify the les-

see for all losses sustained by the lessee resulting from

the use of the leased equipment, and where the lessee’s

liability to the public and shippers is not an issue?

TABLE OF CONTENTS

Page

QUESTION PRESENTED 3 .....ccccccccccecs i

pp Ue yy 5g). Se ii

nn i. \ ab ae e uhh ebee s eewes l

EE or a a «stg ee Wale 46 60v.0r6 wt 1

REGULATION INVOLVED ........ccccccess 1

COUNTER STATEMENT OF THE CASE ..... 2

REASONS FOR DENYING A WRIT .......... 6

EE desc acreaec ete eekeecetesc ue 12

TABLE OF AUTHORITIES

Cases:

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

Allstate Insurance Company v. Alterman Transport

Lines, Inc., 465 F.2d 710 (5th Cir. 1972) ... 8

Allstate Insurance Company v. Liberty Mutual

Insurance Co., 368 F.2d 121 (3rd Cir. 1966). 8

Carolina Casualty Insurance Company v.

Insurance Company of North America, 595

ee ee EE wine bbs oc cccsases 8

Carolina Casualty Insurance Company v.

Underwriters Insurance Company, 569 F.2d

ee ee ar 8

Carolina Freight Carriers Corp. v. Ritt County

Transportation Co., 492 F.2d 243 (4th Cir.

nT Se enaw tals ay GeO « » oi: b a bee 8

Cosmopolitan Mutual Insurance Company v.

White, 336 F.Supp. 92 (D.Del. 1972) ....... 8,10

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

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

RE GR Ree eet en i Spee 8

TABLE OF AUTHORITIES — (Continued)

Cases: Page

Jones Truck Lines, Inc. v. Ryder Truck Lines, Inc.,

507 F.2d 100 (6th Cir. 1974) ............. 8

Schedler v. Rowley Interstate Transportation Co.,

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

Simmons v. King, 478 F.2d 857 (5th Cir. 1973) . .8,10

Transamerican Freight Lines, Inc. v. Brada Miller

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

4,6,7,11

Vance Trucking Co. v. Canal Insurance Co., 249

F.Supp. 33, aff'd 395 F.2d 391 (4th Cir.), cert.

denied 303 U.S. 845 (1968) .............. 8

Weeks v. Kelley, 377 A.2d 444 (Me. 1977) ...... 8,11

Statutes:

i eee o oss yg <b ¢-6.0.6 6.0'eun's l

Regulations:

49 C.F.R. §1057.4(a)(4) (1969) ........... i,1,6,8,9

49 C.F.R. §1057.12(d) (1961) ................ 1

1

BRIEF IN OPPOSITION TO

WRIT OF CERTIORARI TO THE

UNITED STATES COURT OF APPEALS

FOR THE THIRD CIRCUIT

Ryder Truck Lines, Inc., and Liberty Mutual Insur-

ance Company’ respectfully oppose the 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., is re-

ported at 523 F.Supp 1097 (E.D. Pa. 1981). The District

Court entered judgment in favor of the defendants and

against the plaintiffs. 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.

JURISDICTION

This Brief in Opposition to the Petition for Writ of

Certiorari is being filed within the prescribed thirty (30)

day period following October 27, 1982. Jurisdiction of

this Court has been invoked by Petitioners under 28

U.S.C. §1254(1) 1976.

REGULATION INVOLVED

The Interstate Commerce Commission (ICC) Regu-

lation at issue, 49 C.F.R. §1057.4(a)(4), has been re-

vised and codified in 49 C.F.R. §1057.12(d). Both have

been reproduced in the Appendix to the Petition for Writ

of Certiorari (App. 22a).

1. Neither of the corporate respondents is related to a company

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

Court of the United States.

2

COUNTERSTATEMENT OF THE CASE

This suit was brought to resolve questions of liabil-

ity and insurance coverage arising out of an accident in-

volving a tractor/trailer and an automobile which oc-

curred on December 7, 1969, in Juniata County,

Pennsylvania. The tractor/trailer was operated by Henry

Crowder (“Crowder”). Crowder owned the tractor; Mus-

tang Transportation Company (“Mustang”) owned the

trailer. The automobile with which the tractor/trailer col-

lided was owned and operated by Charles A. Benedict

(“Benedict”). Daniel Mattia (“Mattia”) anc Edward A.

Renzi (“Renzi”) were riding in the automobile as pas-

sengers. Renzi was killed; Benedict and Mattia were in-

jured. At the time of the accident the tractor/trailer was

being operated under a One-Way Lease Agreement be-

tween Crowder and Mustang, as lessors, and Ryder

Truck Lines, Inc. (“Ryder”), as lessee.

Separate actions were started in the United States

District Court for the Eastern District of Pennsylvania to

recover damages sustained in the accident. Marie Renzi,

Administratrix of the Estate of Edward A. Renzi, de-

ceased, brought suit against R.L. Dease (“Dease”), Vice

President and Secretary of Mustang, Crowder and Mus-

tang. Ryder was joined as a third party defendant in that

suit. Benedict and Mattia brought a separate suit against

Crowder and Dease to which Ryder was not a party. The

two cases were consolidated for trial before the Honor-

able Clifford Scott Green and were then settled for

$117,500.00. Canal Insurance Company (“Canal”),

Mustang's insurer, and Liberty Mutual Insurance Com-

pany (“Liberty Mutual”), the insurer of Ryder, each

agreed to contribute one-half of the setthement fund and

to litigate in a separate proceeding questions relating to

insurance coverage and liability of the lessors and lessee.

The within action was brought by Mustang, Dease,

Crowder and Canal against Ryder and Liberty Mutual,

claiming that Ryder and Liberty Mutual owed the entire

3

settlement proceeds. Ryder and Liberty Mutual filed a

Counterclaim in which they set forth their position that

Mustang, Dease, Crowder and Canal owed the entire

proceeds of settlement. The jurisdiction of the District

Court was based upon diversity of citizenship of the par-

ties. 28 U.S.C. §1332(a)(1)(1976).

For purposes of determining the issues of liability

and insurance coverage the parties stipulated that

Crowder’s acts or omissions were the proximate cause of

the injuries and damages allegedly sustained by the

plaintiffs in the underlying suits. The stipulation also

provided as follows:

The One-Way Lease Agreement was executed on

December 6, 1969, by Crowder, on his behalf and on be-

half of Mustang as lessors, and by Ryder, as lessee. At

that time, Crowder’s tractor was under a long term in-

definite lease to Mustang for approximately 75-80% of

his work. The lease to Ryder covered a single trip to

Michigan and was entered into by Crowder, on behalf of

Mustang, as was Mustang’s practice, so as to avoid re-

turning to Mustang’s place of business, Atlanta, Georgia,

with an empty trailer.

The Lease contained an indemnity provision in

which Crowder and Mustang, lessors, agreed to indem-

nify Ryder, lessee, for all losses sustained by Ryder re-

sulting from the use of the tractor/trailer. That clause

reads as follows:

It is agreed that Lessor |Mustang and Crowder] will

carry acceptable Public Liability and Property Dam-

age Insurance. Lessor |Mustang and Crowder]

agrees to reimburse and otherwise indemnify Les-

see [Ryder] for any and all losses sustained by Les-

see [Ryder] resulting from the use of the aforesaid

equipment. (Brackets added. )

By order dated September 28, 1981, the Honorable

Clifford Scott Green, sitting without a jury, granted

judgment in favor of the defendants, Ryder and Liberty

»

4

Mutual, on the claims of Mustang, Dease, Crowder and

Canal. Liberty Mutual and Ryder were also awarded

$58,750.00, the amount claimed on their Counterclaim

against Mustang, Crowder and Canal.

The findings of the Lower Court may be summa-

rized as follows:

First, the Court held that Crowder was Mustang's

agent at the time of the accident, whereas the relation-

ship of Ryder and Crowder was that of principal and in-

dependent contractor. 523 F.Supp. 1102, Appendix to

the Petition, 4a-1 la.

Second, the Court found that the indemnity agree-

ment in the One Way Lease Agreement, in which

Crowder and Mustang, lessors, agreed to indemnify

Ryder, lessee, for all losses sustained by Ryder resulting

from the use of the tractor/trailer, was valid and enforce-

able in accordance with this Court's ruling in

TransAmerican Freight Lines, Inc. v. Brada Miller

Freight Systems, Inc., 423 U.S. 28 (1975). Id. 1104, Ap-

pendix, 12a-13a.

Third, the District Court held that the “Truckmen’s

Endorsement” in the Liberty Mutual policy, extending

coverage to a leased vehicle in certain situations, did not

apply in the within case because Canal’s policy did not

contain reciprocal coverage for the vehicles Mustang

leased from other trucking companies. Id. 1106-07, Ap-

pendix, 14a-18a.

Fourth, because the District Court found that Mus-

tang was the sole employer of Crowder at the time of the

accident, and in view of the stipulation that Crowder was

the primary tortfeasor, the District Court held that Ryder

was not liable for contribution or indemnity. The plain-

tiffs, Mustang, Dease, Crowder and Canal, conceded

that, if Crowder were the sole employee of Mustang,

Ryder would not be liable for contribution or indemnity.

. Id. 1107, Appendix 18a-19a.

Lastly, because the District Court found that Mus-

tang was the sole employer of Crowder, the District

2

Court found that the Gross Receipts Endorsement in

Mustang's insurance policy provided coverage for the

accident, including the Counterclaim of Ryder and Lib-

erty Mutual. Id. 1107, Appendix, 19a.

Mustang, Crowder and Canal sought review of the

District Court’s Opinion 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.

6

REASONS FOR DENYING A WRIT OF CERTIORARI

It is the position of the respondents that this case is

not one which requires the exercise of this Court’s ex-

traordinary and discretionary jurisdiction. The decision

of the District Court, as affirmed by the United States

Court of Appeals for the Third Circuit, was correct and

in accordance with this Court’s recent decision in

Transamerican Freight Lines, Inc. v. Brada Miller

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

Petitioners argue that certiorari should be granted

because the case involves a significant federal question,

the interpretation of an Interstate Commerce Commis-

sion Regulation, 49 C.F.R. §1057.4(a)(4), and conflicts

with the decisions of Courts of Appeals for the Fifth and

Seventh Circuits and the Supreme Courts of Georgia, Il-

linois and Maine. That position is incorrect and com-

pletely disregards the real issues in this case.

The District Court, as affirmed by the Third Circuit,

beginning at page | ia of the Appendix to the Petition,

correctly held that 49 C.F.R. §1057.4(a)(4) is totally in-

applicable to the present case because the liability of

Ryder, the lessee, to members of the public and to ship-

pers who were damaged by Crowder’s negligence, was

not an issue in the case. Rather, as Judge Green said, the

question before the Court was how financial liability for

the accident was to be divided ultimately among the les-

sors and the lessee and their insurers who are not pro-

tected by the ICC regulations.

The ICC regulations require that Ryder, as lessee,

assume exclusive possession, control and use of the

tractor/trailer as well as full responsibility for its opera-

tion. The lease with Ryder complied in all respects with

such regulations. The pertinent part of the Lease pro-

vided as follows:

It is understood that the lease equipment under this

agreement is in the exclusive possession, control,

7

and use of the authorized carrier Lessee |Ryder]

and that the Lessee [Ryder] assumes full responsi-

bility in respect to the equipment it is operating to

the public, the shippers, and the Interstate Com-

merce Commission. (Brackets added. )

The District Court correctly held that the ICC regu-

lations do not prohibit a lessor and a lessee from agree-

ing between themselves to allocate financial risk in a

certain manner and that is what was done in this case in

the One-Way Lease Agreement. Under the terms of the

Lease, Mustang and Crowder, lessors, were required to

indemnify Ryder, lessee, for all losses resulting from the

use of the leased equipment. In upholding the indem-

nity agreement the District Court relied upon this

Court’s recent decision in Transamerican Freight Lines,

Inc. v. Brada Miller Freight Systems, Inc., supra, in

which this Court held that the ICC regulations do not

prohibit an indemnification provision in a lease agree-

ment between the lessor and the lessee, where, as in this

case, the lessee does not absolve itself from the duty to

the public and to shippers imposed upon it by the Com-

mission's regulations. 423 U.S. at 39-41. The following

language, at 41, is particularly pertinent:

An indemnification provision with respect to

the lessor’s negligence does not necessarily tend to

lessen operational safety. On the contrary, it may

increase it. The lessor, as a general rule, is the party

more familiar with the equipment it leases and with

the experience, ability and record of the driver it fur-

nishes. Any agreement placing the ultimate finan-

cial responsibility upon the negligent lessor thus

may have a tendency to provide greater protection to

the public and to shippers. (Emphasis added. )

Moreover, at least four Courts of Appeals, including

the Third Circuit, have held that indemnification claus-

es in one-way lease agreements, similar to the one in-

volved in the within matter are valid and do not violate

the ICC regulations. Carolina Casualty Insurance Com-

pany v. Insurance Company of North America, 595 F.2d

128, 130 (3rd Cir. 1979); Carolina Casualty Insurance

Company v. Underwriters Insurance Company, 569

F.2d 304, 313 (Sth Cir. 1978); Jones Truck Lines Inc. v.

Ryder Truck Lines, Inc., 507 F.2d 100, 102 (6th Cir.

1974); Carolina Freight Carriers Corp. v. Ritt County

Transportation Co., 492 F.2d 243, 246 (4th Cir. 1974);

Allstate Insurance Company v. Alterman Transport

Lines, Inc., 465 F.2d 710, 713 (5th Cir. 1972); Vance

Trucking Co. v. Canal Insurance Co., 249 F.Supp. 33,

39, affd 395 F.2d 391 (4th Cir.), cert. denied 393 U.S.

845 (1968); Allstate Insurance Company v. Liberty Mu-

tual Insurance Co., 368 F.2d 121, 125 (3rd Cir. 1966).

Only one Court of Appeals, in a case upon which pe-

titioners rely, found such indemnity provisions to be

contrary to public policy. See Alford v. Major, 470 F.2d

132 (7th Cir. 1972). That case was overruled by Trans-

american Freight Lines, Inc. in which this Court re-

versed a decision of the Court of Appeals for the Seventh

Circuit that had followed Alford v. Major. 423 U.S. at

33-34. Therefore, the decision of the District Court in

the instant case, cannot be considered in conflict with

the Court of Appeals for the Seventh Circuit.

The main argument of the petitioners beginning at

page 6 of the Petition is that, until the Opinion of the

District Court in this case, Lower Courts have held a ve-

hicle lessee liable to the public and to shippers as a mat-

ter of law under 49 C.F.R. §1057.4(a)(4), and that Judge

Green’s opinion was to the contrary. See Simmons v.

King, 478 F.2d 857 (5th Cir. 1973); Cosmopolitan Mu-

tual Insurance Company v. White, 336 F.Supp. 92 (D.

Del. 1972); Farmer v. Ryder Truck Lines, Inc., 245 Ga.

734, 266 S.E.2d 922, cert. denied, 449 U.S. 885 (1980);

Schedler v. Rowley Interstate Transportation Co., 68

Ill.2d 7, 368 N.E.2d 1287 (1977); Weeks v. Kelley, 377

A.2d 444 (Me. 1977). That simply is not what the Dis-

trict Court decided in this case because that issue was

]

not before the court. Moreover, none of those cases dealt

with tractor/trailer leases with indemnity provisions;

they dealt only with the requirement of the ICC Regula-

tion, §1057.4(a)(4) that the lessee assume “full respon-

sibility . . . to the public”.

As stated u: the District Court Opinion beginning at

page 18a of the Appendix, the stipulation of the parties

under which the within case was tried provided that the

ultimate liability of Ryder was to be determined on the

basis of the pleadings in the underlying actions, that is,

that Ryder was not named as a party in one of the

underlying actions and was only a third-party defendant

in the other. Therefore, because plaintiffs in the

underlying actions never had a direct claim against

Ryder, the District Court never considered the question

whether Ryder should be found liable to the public as a

matter of law and, instead, concluded that it was con-

cerned only about how financial liability for the accident

was to be divided among the lessors and the lessee and

their insurers under the terms of the Lease Agreement

and the pertinent facts.

The District Court correctly pointed out in its Opin-

ion at page 19a of the Appendix that, because Ryder was

not named as a direct defendant in the underlying cases,

it could only be liable to the original defendants, Mus-

tang and Crowder, for contribution in the Renzi case in

which it was named a third-party defendant. Further,

Ryder could be found liable for contribution only if it

were determined that Mustang and Ryder were joint

employers of Crowder, again because Ryder was not

named a direct defendant. On that issue, the District

Court held, applying state law, that under the terms of

the lease between Mustang and Crowder, Mustang ex-

ercised such control over Crowder that it, Mustang, was

Crowder’s sole master or employer at the time of the ac-

cident. That part of the District Court Opinion involved

only an interpretation of the lease between Mustang and

10

Crowder, and in no way can be said to impact on the

question of Ryder’s liability to the public.

The cases cited by petitioners, among them Cosmo-

politan Mutual Insurance Company v. White, are not to

the contrary. Although such cases stated that an ICC

carrier’s liability for equipment and driver is not gov-

erned by traditional common law doctrines of master-

servant relationships and respondeat superior, those

cases involved the public or shippers and were not con-

cerned with the issue in this case — how financial liabil-

ity for the accident was to be divided ultimately among

the lessors and the lessee and their insurers.

Petitioners state at page 9 of the Petition that once

the District 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 ulti-

mate responsibility to the public. That statement is in-

correct. First of all, the Court decided that the policy of

Liberty Mutual, the lessee’s insurer, provided no cover-

age because of the absence of reciprocity. Appendix to

the Petition, 14a-18a. Secondly, the Court did not deter-

mine that there was no coverage under the policy of Ca-

nal, the lessor’s insurer, for Crowder — it never reached

that issue. The District Court simply stated petitioners

conceded that if the Court were to find Mustang, the les-

sor, was the sole employee of Crowder at the time of the

accident, there would be coverage for the accident under

Mustang’s insurance policy. Appendix to the Petition,

19a.

It is also significant that nothing in any of the cases

cited by the petitioners suggests that the ICC regula-

tions automatically protect the lessor from liability under

state law concepts of vicarious liability or contractual li-

ability under an indemnification agreement in a lease. In

fact, Simmons v. King, the Fifth Circuit case upon which

petitioners place great reliance, concluded that:

[A]lthough [the lessee] is liable for [the driver's]

acts as a matter of law, [the lessor] could still be like-

11

wise liable under applicable common [law] ...

standards... . This is not as incongruous as might

be supposed. ICC can mandate a positive legal re-

sponsibility which we uphold in the only way it

would be meaningful — to give protection to the in-

jured member of the public. At the same time [the

lessor] has, or may have, a practical control over

[the driver] of a kind which would not allow it to ob-

tain an automatic insulation from liability from

the mere terms of a lease between two parties. (Em-

phasis added and brackets added. )

478 F.2d at 867. The case was remanded to the District

Court for a new trial on that issue.

In Weeks v. Kelley, another case cited by petitioners,

the Supreme Court of Maine recognized that this Court,

in Transamerican Freight Lines, Inc., upheld an indem-

nification agreement in a tractor/trailer lease and then

noted that only “in the absence of any indemnification

agreement in the lease providing otherwise, the lessee

remains contractually (as well as statutorily ) responsible

for injuries sustained by the travelling public as a resuit

of the negligent operation of the equipment.” (Emphasis

added.) 377 A.2d 444, 447. Likewise, because of the in-

demnity agreement in the present case, as between les-

sor and lessee, the regulations providing for “full respon-

sibility” in the lessee are inapplicable.

It follows therefore that the decision of the District

Court, as affirmed by the United States Court of Appeals

for the Third Circuit, was entirely correct and in accor-

dance with this Court’s decision in Transamerican

Freight Lines, Inc. v. Brada Miller Freight Systems, Inc.

and does not conflict with any other decisions. Of equal

importance, the decision does not in any way upset the

regulatory scheme embodied in the ICC regulations be-

cause this case did not, in any way, involve a lessee’s li-

ability to members of the public or to shippers. The sole

and only proposition for which the present case stands is

12

that the ICC regulations do not prohibit a lessor and a

lessee from agreeing between themselves to allocate fi-

nancial risk by way of an indemnity provision in a lease

agreement.

CONCLUSION

For all above reasons, the Petition for Writ of Certio-

rari should not be granted.

RESPECTFULLY SUBMITTED,

Jan E. DuBois

Victoria M. Komarnicki

White and Williams

17th Floor

1234 Market Street

Philadelphia, Pa. 19107

215 854-7000

Counsel for Respondents

Ryder Truck Lines, Inc.,

and Liberty Mutual

Insurance Company

November 29, 1982