Motor Carrier Claims for Negligent Entrustment, Hiring and Retention

Presenting a live 90-minute webinar with interactive Q&A Motor Carrier Claims for Negligent Entrustment, Hiring and Retention Navigating Discovery, Apportionment of Fault, Impact of Motor Carrier's Admission of Vicarious Liability, and More WEDNESDAY, AUGUST 16, 2017 1pm Eastern 12pm Central 11am Mountain 10am Pacific Today s faculty features: J. Kent Emison, Partner, Langdon & Emison, Kansas City, Mo. Patrick E. Foppe, Esq., Lashly & Baer, St. Louis Matthew Wright, Founder, Wright Law, Franklin, Tenn. The audio portion of the conference may be accessed via the telephone or by using your computer's speakers. Please refer to the instructions emailed to registrants for additional information. If you have any questions, please contact Customer Service at 1-800-926-7926 ext. 10.

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MOTOR CARRIER CLAIMS FOR NEGLIGENT ENTRUSTMENT, HIRING AND RETENTION Presenters: Patrick E. Foppe Matthew E. Wright Kent Emison

About your Presenter Patrick E. Foppe frequently defends claims involving commercial motor vehicle accidents. He conducts rapid response investigations to serious accidents as part of Lashly & Baer s Rapid Response Team. Patrick serves on the Defense Research Institute s (DRI) Trucking Law Committee s Steering Committee and is the Chair of Publications. He also serves on the Transportation Lawyers Association s (TLA) Executive Committee and is Vice-Chair of its Membership Committee. He has received numerous awards for his pro bono work, community service, and professional accomplishments. Patrick is also a regular author and is an invited speaker by many industry groups. Patrick and his wife Kate have seven children. Lashly & Baer, P.C. 714 Locust Street St. Louis, Missouri 63101 pfoppe@lashlybaer.com 314-621-2939 6

Presentation Outline I. Derivative Liability A. Elements of Various Causes of Action B. Majority and Minority Rule C. Punitive Damages Exception II. Where Does the Rubber Meets the Road? III. Discovery Strategies I. FMCSR Implications II. Key Documents and Deposition Considerations IV. Trial Strategies and Practical Tips 7

Overview of Derivative Liability Negligent entrustment, hiring, retaining, training or supervising claims Often used to introduce evidence, which is not directly related to the accident, against the motor carrier or others Seeks to hold a principal/entrustor directly liable for negligently hiring, retaining, training or supervising its agent/entrustee who causes injury to another Unlike respondeat superior liability, which simply holds a principal vicariously liable for the wrongful acts of its agent, deriviate claims mainly focus on the principal/entrustor s conduct the proximate cause of the plaintiff s injury is the principal/entrustor s negligence in entrusting, hiring, retaining, training or supervising the agent/entrustee Imposing liability on the principal/entrustor requires a finding of culpability by the agent/entrustee in causing an injury to a third party; thus, liability is derivative 8

Overview of the FMCSR The FMCSR generally apply to all employers and commercial motor vehicles, which transport property or passengers in interstate commerce. See FMCSR 390.3(a). An employer is generally a person engaged in a business affecting interstate commerce that owns or leases a commercial motor vehicle in connection with that business, or assigns employees to operate it. Id. Every employer shall be knowledgeable of and comply with all the regulations contained in the FMCSR which are applicable to that motor carrier s operations. See FMCSR 390.3(e)(1). Every driver and employee shall be instructed regarding, and shall comply with, all applicable regulations contained in the FMCSR. See FMCSR 390.3(e)(1). Whenever under the FMCSR a duty is prescribed for a driver or a prohibition is imposed upon the driver, it is the duty of the motor carrier to require observance of such duty or prohibition. See FMCSR 390.11. 9

Duties Imposed Upon Motor Carriers Under the FMCSR 383 duty to have a CDL; 382 duty to drug and alcohol test; 391.11 duty to ensure the qualifications of the driver (i.e. valid drivers license, list of violations, etc.); 391.21 duty to have a proper application for employment; 391.23 duty to do background investigation; 391.27 duty to provide a record of violations; 391.31 duty to take a road test and secure a certificate of driver s road test; 391.41 duty to secure a medical examiner s certificate; 10

Duties Imposed Upon Motor Carriers Under the FMCSR 391.51 duty to maintain driver qualification file; 391.53 duty to maintain driver investigation history file; 392.3 duty to drive while not ill or fatigued; 392.4 duty to drive while not under the influence of drugs; 392.6 duty to provide schedules to conform with speed limits; 395.3 duty to conform to hours of service rules or maximum driving time; 395.8 duty to maintain driver logs; 396.3 duty to maintain inspection, repair, and maintenance records ; and 396.11 duty to maintain driver vehicle inspection reports. 11

Negligent Entrustment - Elements 1. The entrustee (driver) was incompetent by reason of age, inexperience, habitual recklessness or otherwise; 2. The entrustor (motor carrier or others) knew or had reason to know of the entrustee s incompetence; 3. There was entrustment of the chattel (tractor and/or trailer); and 4. The negligence of the entrustor concurred with the conduct of the entrustee to cause the plaintiff s injuries. Restatement (2nd) of Torts 390: One who supplies directly or through a third person a chattel for the use of another whom the supplier knows or has reason to know to be likely because of his youth, inexperience, or otherwise, to use it in a manner involving unreasonable risk of physical harm to himself and others whom the supplier should expect to share in or be endangered by its use, is subject to liability for physical harm resulting to them. 12

Negligent Entrustment - Considerations Generally, an employer-employee relationship need not be proven. Implicit is that the harm must have resulted from the use of the tractor (or trailer?). Entrustment can be shown through the giving of express or implied permission. Rainey by & Through Rainey v. Pitera, 651 N.E.2d 747 (1st Dist. 1995). Plaintiff must generally prove that entrustor actually knew or had reason to know the driver was incompetent or reckless in driving. Halford v. Alamo Rent-a-Car, LLC, 921 So. 2d 409 (Ala. 2005). In theory, a driver is not required to have a spotless driving record to be considered a competent driver. See e.g., Askew v. R & L Transfer, Inc., 676 F. Supp. 2d 1298 (M.D. Ala. 2009). 13

Negligent Entrustment - Considerations Typically, the plaintiff must prove that the entrustor knew or should have known of the driver s incompetence by showing evidence of precious acts of negligent or reckless driving... previous accidents, or previous acts of driving while intoxicated. Id. In the context of a trucking case, the driver s driving record becomes central to the analysis as motor carriers have an obligation under the FMCSRs to investigate their driver s records (more later). In a case where the claims against the driver are the only claims in the lawsuit, his driving record may not be admissible as it is prejudicial character evidence. However, where the claims against the employer are joined with those against the driver, the driving record may be admissible notwithstanding the potential for prejudice. See Bruck v. Jim Walter Corp., 470 So. 2d 1141 (Ala. 1985). 14

Negligent Hiring/Retention - Elements 1. The employer knew or should have known that the employee had a particular unfitness for the position so as to create a danger of harm to third persons; 2. Such particular unfitness was known or should have been known at the time of the employee s hiring or retention; and 3. This particular unfitness proximately caused the plaintiff s injury. See e.g., Van Horne v. Muller, 705 N.E.2d 898 (Ill. 1998). 15

Negligent Hiring/Retention - Considerations Implicit to cause of action for negligent hiring and retention is a threshold requirement that plaintiff prove that employer-employee relationship existed between the employer and negligent driver. Some jurisdictions require the negligent driver to be acting within the course and scope of his/her employment to pursue these claims. Other States, like Missouri, only require employer to have played some role in bringing the offending employee into contact with the injured party. Hare v. Cole, 25 S.W.3d 617 (Mo. App. W.D. 2000). In some jurisdictions, the particular unfitness language is replaced by dangerous proclivity. The particular unfitness element is particularly important: the tortious conduct of the driver must be consistent with the known particular unfitness/dangerous proclivity. 16

Negligent Supervision Elements Some jurisdictions use the same basic elements as negligent retention/hiring above. Other States simply require the plaintiff to prove that: (1) an employer had a duty to supervise its employees, (2) the employer negligently supervised an employee, and (3) such negligence proximately caused the plaintiff's injuries. See e.g., Mueller v. Community Consolidated School District 54, 678 N.E.2d 660 (1st Dist. 1997). Still other States have adopted the Restatement (2 nd ) of Torts 317: A master is under a duty to exercise reasonable care so to control his servant while acting outside the scope of his employment as to prevent him from intentionally harming others or from so conducting himself as to create an unreasonable risk of harm to them, if: The servant is using a chattel of the master; and The master knows or has reason to know that he has the ability to control his servant; and The master knows or should know of the necessity and opportunity for exercising such control. See e.g., Truck Ins. Exch. v. Prairie Framing, LLC, 162 S.W.3d 64, 82 (Mo. App. W.D. 2005). 17

Majority vs. Minority Rule Majority rule: an employer s admission of an agency relationship with the driver (respondeat superior liability) bars a plaintiff from seeking any other theory of derivative liability The rationale: once liability is imputed through agency, other theories serve no real purpose other than to waste the court s time and energy and introduce potentially inflammatory evidence. Minority rule: an admission of agency does not preclude a separate claim brought under other theories of derivative liability The rationale: those other theories are distinct from agency in that they are not derivative of the employee s negligence 18

Majority vs. Minority Rule Jurisdictions MAJORITY RULE Citation MINORITY RULE Citation Missouri McHaffie v. Bunch, 891 S.W.2d 822 (Mo. banc 1995) Indiana Tindall v. Enderle, 320 N.E.2d 764 (Ind. Ct. App. 1974) Georgia Florida Bartja v. National Union Fire Ins. Co. of Pittsburgh, 463 S.E.2d 358 (Ga. 1995) Clooney v. Geeting, 352 So. 2d 1216 (Fla. 2d DCA 1977) Texas Arrington s Estate v. Fields, 578 S.W.2d 173 (Tex. Civ. App. 1979) Washington LaPlant v. Snohomich Cty., 271 P./3d 254, 357 (Wash. App. 2011) Arkansas Elrod v. G. & R. Constr. Co., 628 S.W.2d 17 (Ark. 1982) Kansas Minnesota Marquis v. State Farm Fire & Cas. Co., 961 P.2d 1213 (Kan. 1998) Lim v. Interstate Sys. Steel Div., Inc., 435 N.W. 830 (Minn. Ct. App. 1989) New Jersey Di Cosala v. Kay, 450 S.2d 508 (N.J. 1982) Ohio Clark v. Stewart, 185 N.E. 71 (Ohio 1933) South Carolina James v. Kelly Trucking Co., 661 S.E.2d 329 (S.C. 2008) Tennessee Ali v. Fisher, 145 S.W.3d 557 (Tenn. 2004) Alaska Pagenkopf v. Chatham Elec., Inc., 165 P.3d 634 (Alaska 2007) *This is only a partial list of jurisdictions. Some States have yet to rule either way. 19

The Punitive Damages Exception Some jurisdictions that follow the majority rule allow those other claims to proceed should they plead sufficient facts to support a claim for punitive damages against the entrustor/principal. See e.g., Wilson v. Image Flooring, LLC, 400 S.W.3d 386, 392-93 (Mo. App. W.D. 2013). Some courts allow allegations of willful and wanton or gross negligence to proceed. See e.g., Locket v. Bi-State Transit Authority, 445 N.E.2d 310 (Ill. 1983); Adams Leasing Co. v. Knighton, 456 S.W.2d 574 (Tex. Civ. App. 1970). Jurisdictions that allow the punitive damages exception include: Missouri, Illinois, Texas, Indiana, Georgia and North Carolina The entrustor/principal s conduct should be willful and wanton Can a principal be held vicariously liable for an agent s punitive conduct? Complicity rule under Restatement (2 nd ) of Torts 909 20

Example Employer Found Liable Boyd v. L.G. DeWitt Trucking Co., Inc. 405 S.E.2d 914 (N.C. Ct. App. 1991) Driver had two convictions for DUI, three convictions for reckless driving, and six speeding convictions. Driver had worked for employer off and on for about 20 years. The night of the incident, the driver had been drinking. He drove his rig into the back of a pickup truck, instantly killing the decedent and a young passenger. The court held that a reasonable jury could find that the employer knew or should have known that the driver posed a danger to the driving public, and the employer was negligent in entrusting the truck to him. Further, due to the severity and number of the driver s offenses, the evidence was sufficient to find that the employer s entrustment of a truck to the driver was willful or wanton, thus supporting punitive damages. 21

Negligent Entrustment - Frohardt v. Bassett, 788 N.E.2d 462 (Ct. App. Ind. 2003), Plaintiff s brought a claim for negligent entrustment against Penske Truck Leasing (not a motor carrier). Penske s rental agent did not question Bassett about his health, request a medical certification, require him to take a driving test or demonstrate his driving skill before renting him the truck. The Frohardts were injured by Basset when their car slowed for traffic congestion and Bassett rear-ended them with the rented truck. Upon rental of the truck, Bassett presented a valid driver s license to Penske. Bassett did not appear to be intoxicated and seemed to be a competent adult... Bassett testified that he had driven a similar truck before and knew the difference between a car and a truck of this size. The Court dismissed the Frohardts negligent entrustment claims against Penske, reasoning that the Frohardts failed to show Penske entrusted the rental truck to Bassett with actual and immediate knowledge he was incompetent to drive. 22

Example Employer Found Not Liable Interim Personnel of Central Virginia v. Messer 559 S.E.2d 704 (Va. 2002) A driver was twice convicted of DUI, failed to pay fines or attend counseling, and was declared a habitual offender. Employer hired him to do administrative work as well as make short deliveries to the post office. The driver hid his criminal offenses from the employer. The driver stole a third party s truck, operated the truck while intoxicated for his own frolic, and crashed into the plaintiff s vehicle, injuring her. The employer was held NOT LIABLE because the prior acts would not place a reasonable employer on notice or make it foreseeable that the driver would steal a truck, drive it while intoxicated, and cause an accident distant from his place of work. 23

Graves Amendment Protections Against the Mere Owner of Equipment The Graves Amendment, 49 U.S.C. 30106(a) generally bans the imposition of vicarious liability on owners/lessors of motor vehicles for harm resulting from the operation of the vehicles. See e.g., Windmill Distrib. Co. L.P. v. Hartford Fire Ins. Co., 449 F. App x 81, 82 (2nd Cir. 2012); United States v. Mandel, 647 F.3d 710, 722 (7th Cir. 2011). The Graves Amendment provides in part: An owner of a motor vehicle that rents or leases the vehicle to a person (or an affiliate of the owner) shall not be liable under the law of any state or political subdivision thereof, by reason of being the owner of the vehicle (or an affiliate of the owner), for harm to persons or property that results or arises out of the use, operation, or possession of the vehicle during the period of the rental or lease, if: The owner (or an affiliate of the owner) is engaged in the trade or business of renting or leasing motor vehicles; and There is no negligence or criminal wrongdoing on the part of the owner (or an affiliate of the owner). 24

Graves Amendment Savings Clause Application of the savings clause : Carton v. GMAC, the Eighth Circuit stated, Although the Graves Amendment prohibits vicarious liability claims against owners of leased vehicles, the Graves Amendment contains a savings clause which allows an owner of a leased vehicle to be found directly liable for the owner s negligence or criminal wrongdoing. 611 F.3d. 451, 457 (8th Cir. 2010). The Eighth Circuit concluded that Plaintiff s negligent entrustment claim would be allowed as a direct claim against the equipment owner under Iowa law. Id. at 457-59. However, in some states like Missouri, claims for negligent hiring, supervision, retention or negligent entrustment are all various forms of vicarious liability. See e.g., Coomer v. Kansas City Royals Baseball Corp., 437 S.W.3d 184, 205-06 (Mo. banc 2014). 25

Graves Amendment Considerations Can protect owners of trailers. See 49 U.S.C.A. 30102(a)(6). See e.g., Yoon Young Lee v. Rivera, 27 Misc. 3d 1201(A), 910 N.Y.S.2d 409, Slip Op. 50517(U) (Sup. Ct. 2010); Johnson v. Xtra Lease, LLC, No. 08 C 5042, 2010 WL 706037 (N.D. Ill. Feb. 24, 2010). Summary judgment granted to lessor where plaintiffs failed to adduce any evidence of lessor's negligence, including lessor's failure to maintain brakes on 2003 Freightliner tractor-trailer. Berkan v. Penske Truck Leasing Canada, Inc., 535 F.Supp.2d 341 (W.D.N.Y.2008). Granting lessor's motion to dismiss where plaintiff failed to supply any legal authority imposing a legal duty on lessors to investigate lessees' driving records. Vedder v. Cox et al., 859 N.Y.S.2d 900 (N.Y.Sup.Ct.2008). 26