Action Dismissed Under The Graves Amendment

April 15, 2009

London Fischer LLP congratulates Clifford B. Aaron and Matthew K. Finkelstein on obtaining a dismissal in favor of NILT Inc. based upon the doctrine of Federal Preemption in the case Gluck v. NILT Inc., et al., venued in Supreme Court, Suffolk County.

The Gluck action arose out of a two vehicle accident which occurred on August 20, 2005, in which Markus Gluck, a front-seat passenger, was directly impacted by a Nissan motor vehicle driven by Yvonne Turco. As a result of the accident, plaintiff allegedly sustained serious injuries, including several fractured vertebrae, a lacerated liver, an intracranial hemorrhage and traumatic brain injury, resulting in motor dysfunction and permanent speech impairment. Plaintiff’s theory against NILT Inc. was vicarious liability, pursuant to Section 388 of the Vehicle and Traffic Law (VTL), as the owner/lessor of the vehicle leased to defendant Turco at the time of the accident.

Attorneys Clifford B. Aaron and Matthew K. Finkelstein served a motion to dismiss for failure to state a cause of action, on the grounds that the Transportation Equity Act, codified at 49 U.S.C § 3016 (a/k/a: the “Graves Amendment), enacted on August 10, 2005, preempted Section 388 of the VTL for owners or affiliates of an owner “engaged in the trade or business of renting or leasing motor vehicles.” In opposition to the motion, plaintiff contended that NILT Inc. is not entitled to protection under the Graves Amendment because it neither leased the vehicle nor is engaged in the trade or business of leasing motor vehicles.

Plaintiff’s argument was based upon the structure of the lease transactions for Nissan vehicles. The Nissan dealership entered into the lease agreement with Turco and subsequently assigned it to a titling trust, Nissan Infiniti LT. NILT Inc.’s main purpose to serve as a trustee for the titling trust, and in New York, was listed on the vehicle title as the owner of the leased vehicle. Plaintiff argued that NILT Inc., as holder of title to leased vehicles, is not “engaged in the trade or business of renting or leasing motor vehicles.” Plaintiff claimed that the Graves Amendment requires that the “owner” of the leased vehicle is only entitled to protection from vicarious liability if it “actively” leases the vehicle to the ultimate consumer.

In anticipation of plaintiff’s novel argument, attorneys Aaron and Finkelstein retained an expert in securitization to explain the business purpose of a titling trust, and to demonstrate that the use of a titling trust and trustee for structured lease transactions of automobiles is common in the automotive industry, and that NILT Inc. is an integral part of the business of leasing Nissan motor vehicles.  Justice Peter H. Mayer’s decision cited the expert affidavit as proof that NILT Inc. is “engaged in the trade or business of renting or leasing motor vehicles,” and thus is entitled to protection under the Graves Amendment. The court was further persuaded by defendant’s showing that plaintiff’s restrictive interpretation of the language of the Graves Amendment would “negate its broad aim”, and granted NILT Inc.’s motion to dismiss.