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TORT REFORM - ON HOLD FOR NOW
By: Michael A. Callinan, Esq.

FOR THE DEFENSE

TORT REFORM - ON HOLD FOR NOW

By: Michael A. Callinan, Esq.
Bruno, Gerbino & Soriano, LLP
Melville, New York


In August 2005, President Bush, along with the Republican controlled Congress, enacted a key piece of legislation that advanced the sound agenda of Tort Reform in the United States. The legislation, entitled “Safe, Accountable, Flexible and Efficient Transportation Equity Act of 2005,” codified at 49 UCS §30106, preempted many States’ vicarious liability laws. Prior to the enactment of this legislation, States, including New York, allowed for the owners of leased and rental vehicles to be vicariously liable for the negligent acts of the operators of the leased or rented vehicles. In New York, that liability was unlimited. With no cap on damages, it created a lottery for the plaintiffs’ bar. In many instances in New York, plaintiffs’ attorneys were able to secure multi-million dollar judgments against the owners of the leased and rented vehicles based solely on the fact that they were the actual owners of the vehicles in question, even thought these “owners” played no part in the harm that was sustained by the plaintiffs.

Prior to the enactment of the Federal Legislation, section 388 of the New York Vehicle and Traffic Law, which is the vicarious liability statute, placed the owners of leased and rented vehicles in a precarious position. After years of being forced to pay multi-million dollar judgments based upon vicarious liability, several leasing companies and rental businesses ceased doing business in the State of New York. With the enactment of the Federal Legislation, to the applause of many seeking Tort Reform, rental and leasing companies once again started doing business in New York.

The enactment of the Federal Legislation, while generally applauded by conservative minded individuals seeking Tort Reform, raised strong concerns with the States’ Rights faction of the conservative ideology. At the same time, the enactment of the Federal Legislation was seen by the plaintiffs’ bar has a handicap to windfall judgments of days gone past. Opposition to the Federal Legislation was presented by two separate and seemingly incompatible groups: conservative minded States’ Rights advocates and the often liberal leaning plaintiffs’ bar.

While the two diametrically opposite groups were not supporters of the Federal Legislation, the similarities end there. The States’ Rights faction wanted to limit the power of the Federal Government on issues that have long been under the sole discretion of the States. The oft at times omnipotent plaintiffs’ bar saw the Federal Legislation as a new means of Tort Reform that was enacted solely to the benefit of big business, to their disdain.

In New York, many sensed that the plaintiffs’ bar would quickly challenge the legitimacy of the Federal Legislation. In a decision that is sure to reverberate from Albany to Washington, the Honorable Thomas V. Polizzi issued a decision in the case Graham v. Dunkley and Nilt, Inc., 2006 NY Slip Op 26358 (N.Y. Sup. Ct., Queens County, September 11, 2006) that struck down, on constitutional grounds, the applicability of the Federal Legislation to New York’s Vicarious Liability Law.

Justice Polizzi held in a well-reasoned decision that it “is evident that Vehicle and Traffic Law § 388 is recognized as integral to New York State’s substantive law of torts. The expansion of the definition of vicarious liability by the New York State Legislature in 1924 was a lawful exercise of the legislature’s inalienable power over the substantive law of civil tort actions and a lawful exercise of its inherent police power, which allows the states’ great latitude in protecting the general public welfare, including the protection of life and limb and the economic welfare of the people generally.” (internal citations omitted). Id. at 8.

In the opinion, Justice Polizzi commented that the “substantive law of torts law has traditionally been part of the common law of the states, and the federal courts have looked to the states for the substantive law of torts since Erie R. Co. v. Tompkins, 304 U.S. 64, 58 S. Ct. 817, 82 L. Ed. 1188 (1938), wherein the United States Supreme Court recognized that ‘Congress has no power to declare substantive rules of common law applicable in a state whether they be local in nature or general,\' be they commercial law or a part of the law of torts’ (Id. at 78).” Id. at 7.

In enacting the Federal Legislation, Congress utilized the Commerce Clause in preempting the States’ vicarious liability tort law. However, Justice Polizzi opines “[a] state court of original jurisdiction bears the responsibility of protecting the civil liberty of citizens to seek recompense from torts inflicted on them, and to apply the substantive law of torts as defined by common law, precedent and state statute. This state court recognizes that Congress must heed the warning issued to it by the United States Supreme Court in NLRB v. Jones & Laughlin Steel, 301 U.S. 1, 57 S. Ct. 615, 81 L. Ed. 893, that the interstate commerce power ‘must be considered in the light of our dual system of government and may not be extended so as to embrace effects upon interstate commerce so indirect and remote that to embrace them, in view of our complex society, would effectually obliterate the distinction between what is national and what is local and create a completely centralized government.’ (Id. at 37).” Id. at 8.

In holding the Federal Legislation unconstitutional, Justice Polizzi held that the “court cannot conclude that New York State Vehicle and Traffic Law § 388 has a ‘substantial effect’ on interstate commerce unless it agrees with the proposition that every civil lawsuit that results in a monetary judgment, and involves an insured, has a substantial effect on interstate commerce. An analysis and conclusion such as this threatens to sweep all other substantive laws of torts into federal regulatory reach, and create a federal police power over this jurisprudence. New York State Vehicle and Traffic Law § 388 does not concern a commodity or instrumentality of interstate commerce, such as in Gonzales v. Raich, 545 U.S. 1, 125 S. Ct. 2195, 162 L. Ed. 2d 1 or Wickard v. Filburn, 317 U.S. 111, 63 S. Ct. 82, 87 L. Ed. 122, but rather, it is simply a statute in derogation of common law which codifies one aspect of New York State\'s substantive tort doctrine of imputed liability: vicarious liability attributable to motor vehicle owners.” Id. at 9. (internal citations omitted)

In the most stirring paragraph of the opinion for States’ Rights advocates, Justice Polizzi opines that “New York State Vehicle and Traffic Law § 388 is a legislative act within the New York State Legislature’s inherent authority pursuant to the United States Constitution, Tenth Amendment, and that 49 USC § 30106 is an unconstitutional exercise of congressional authority under the Commerce Clause of the United States Constitution, Article I, § 8 [and that] [t]he substantive law of torts is not to be faintly acquiesced to legislation by Congress, particularly when there is no preponderance of constitutional authority to support such a conclusion.” Id. at 9.

While the Federal Legislation did give a brief reprieve to the onslaught of the plaintiffs’ bar and gave a glimmer of hope to those who espouse the virtues and need for Tort Reform, it is clear that from the decision of Justice Polizzi that said reform will need to come from the state level. With appeals to the Appellate Division, Court of Appeals and the United States Supreme Court all but certain, the question of federal preemption of state tort law will not be resolved for years to come.

Michael A. Callinan, Esq., is a 2002 graduate of Hofstra University School of Law and an associate at Bruno, Gerbino & Soriano, LLP, located in Melville, New York.

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