Opinion
Case No. 1:01-CV-175
June 25, 2003
OPINION
This matter is before the Court on Defendant Greenfield Leasing's Motion for Summary Judgement. Upon review of the briefing, this Court will grant Defendant Greenfield Leasing's Motion and issue a declaratory judgement limiting its liability to $20,000. The Court has reviewed the pleadings filed by the parties and does not believe oral argument is necessary. L. Civ. R. 7.2(d).
I. Background
Mahavir Shah came to the United States with five other actors to perform a two-month acting tour. Defendant Trivedi provided transportation for the group and leased a 2000 Dodge van from Defendant Greenfield Leasing for that purpose. Defendant Trivedi purchased collision insurance, but did not purchase supplemental liability insurance. Pursuant to the leasing contract, liability coverage automatically arose by operation of law in any jurisdiction that statutorily imposes such coverage. Paragraph ten of Defendant Trivedi's lease agreement provides in pertinent part:
Third party liability protection in the event that coverage is imposed by operation of law for the benefit of any person other than Renter, then limits of such coverage shall be equal to the minimum financial responsibility limits established by the Financial Responsibility Law or other applicable statute of the state or other jurisdiction in which accident occurred. Renter and Additional Renter(s) hereby indemnify and hold Daily Rental Company, its agents and employees harmless from and against all loss, liability and expense whatsoever in excess of limits of liability protection provided for herein as a result of bodily injury, death or property damage caused by/or arising from use or operation of vehicle . . .
(Pl.'s Ex. 3). Thus, if an accident and resulting lawsuit occurred, lessor liability laws of the state resolving the dispute would control the litigation. Under Michigan law, Defendant Trivedi had liability coverage up to $20,000 as a result of bodily injury or death of one person in any one accident and $40,000 as a result of bodily injury to or death of two or more persons in any one accident. Mich. Comp. Laws. § 257.401. On September 1, 2000, Decedent Shah, Defendant Trivedi, and five other passengers were traveling north on Interstate 69 ("I-69"). Defendant Trivedi was driving the van. Defendant Trivedi exited at Copeland Road, and after failing to locate a gas station, entered southbound I-69 from Copeland Road. Construction on I-69 limited traffic on the northbound and southbound lanes to one lane in each direction, with barriers separating the opposite lanes of traffic. After traveling south on I-69 for a short distance Defendant Trivedi believed the road was closed and attempted to make a U-turn so he could travel back up the entrance ramp to Copeland Road. Due to construction, turning space was restricted and Defendant Trivedi requested Decedent Shah exit the van and assist him. While making the turn the van blocked the entire southbound lane of I-69. At the same time, Defendant Douramacos was traveling south on I-69 behind the van and began to slow as he noticed the van blocking traffic. At the same time, Defendant Sosa was traveling south on I-69 behind Defendant Douramacos and he failed to observe Defendant Douramacos' reduced speed and Defendant Trivedi's van blocking the southbound lane. Defendant Sosa's vehicle struck Defendant Douramacos' vehicle, which collided with Defendant Trivedi's van, resulting in Decedent Shah being hit and killed.
Plaintiff Ajay Shah, as the duly appointed representative of the decedent, initiated this action against Defendants Mahendra Trivedi, Hertz Corp., Greenfield Leasing Co., Julio Sosa, Capache Transportation, Inc., and John Douramacos under Michigan Compiled Laws § 600.292, Michigan's Wrongful Death Act, seeking damages in excess of $75,000. At all relevant times each party has resided in a different state or country, and therefore, jurisdiction is properly founded on diversity of citizenship. 28 U.S.C. § 1332.
II. Standard of Review
Review of a motion for summary judgement requires the court to determine if there is no genuine issue as to any material fact such that the moving party is entitled to judgement as a matter of law. Fed.R.Civ.P. 56(c). The court must consider the record as a whole by reviewing all pleadings, depositions, affidavits, and admissions on file. Matsuhita Elec. Indus. Co. v. Zenith Radio Corp., 475 U.S. 574, 587 (1986). The facts are to be considered in a light most favorable to the non-moving party, and ". . . all justifiable inferences are to be drawn in his favor." Schaffer v. A.O. Smith Harvestore Prod., 74 F.3d 722, 727 (6th Cir. 1996) (quoting Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 255 (1986) (other citations omitted). Once the movant satisfies his/her burden of demonstrating an absence of genuine issue of material fact, the non-moving party must come forward with specific facts showing that there is a genuine issue for trial. Kramer v. Bachan Aerospace Corp., 912 F.2d 151, 153-154 (6th Cir. 1990). The non-moving party may not rest on its pleading but must present "specific facts showing that there is a genuine issue for trial." Celotex Corp. v. Catrett, 477 U.S. 317, 324 (1986) (quoting Fed.R.Civ.P. 56(e)). It is the function of the Court to decide "whether the evidence presents a sufficient disagreement to require submission to a jury or whether it is so one-sided that one party must prevail as a matter of law." Anderson, 477 U.S. at 251-252. The question is "whether a fair-minded jury could return a verdict for the [non-moving party] on the evidence presented." Id. at 252.
In diversity cases, the choice of law is governed by the forum court. Klaxon v. Stentor Electric Manufacturing Co., 313 U.S. 487, 496 (1941). Michigan's choice of law is determined by an interest analysis approach. Sutherland v. Kennington Truck Service, Ltd., 562 N.W.2d 466, 471 (1997). The forum court's law will be applied unless a "rational reason" to do otherwise exists. Id. To determine whether a rational reason to displace Michigan law exists, the court employs a two-step analysis. Id. First, the court must determine if any foreign state has an interest in having its law applied. Id. When no state has such an interest, Michigan law will apply. Id. "If a foreign state does have an interest in having its law applied, the court must then determine if Michigan's interests mandate that Michigan law apply, despite the foreign state's interests." Id. A litigant's residence, with nothing more, is insufficient to support an interest in applying his home state's law. Id. at 472 (quoting Home Ins. Co. v. Dick, 281 U.S. 397, 408 (1930)). The accident at issue occurred in Michigan and no defendant has advanced any foreign state interest in applying its law; thus, the presumption that Michigan law applies is unchallenged and must prevail.
III. Analysis
Plaintiff filed a wrongful death action against multiple defendants seeking damages for pain and suffering, loss of consortium, loss of economic support, and any damages permitted under Michigan Compiled Laws § 500.3135 and Michigan Compiled Laws § 600.2922. With respect to Defendant Greenfield Leasing's liability, Plaintiff claims Defendant Trivedi was not adequately informed of the availability of supplemental insurance and the possible limit on liability imposed by operation of Michigan law. Plaintiff maintains Michigan law requires that notice of the liability limit must be conferred to lessees. In the alternative, Plaintiff claims that Michigan law should not apply to the case at bar.
A. Michigan law requires lessors provide lessees with knowledge of the liability cap but creates no penalties for failing to give such notice.
Defendant Greenfield Leasing's contract with Defendant Trivedi implicated the statutory liability provisions of whatever state exercised jurisdiction — in this case Michigan. Michigan law requires that persons engaged in the business of leasing motor vehicles provide liability insurance to lessees. State Farm Mut. Auto. Ins. Co. v. Ent. Leasing Co., 549 N.W.2d 345, 347 (1996). However, Michigan Compiled Laws § 257.401(3) limits lessor liability, unless the lessor or his agent was negligent in the leasing of the motor vehicle, to $20,000 as a result of bodily injury to or death of one person in any one accident and $40,000 as a result of bodily injury to or death of two or more persons in any one accident. The statute further provides that a lessor of motor vehicles "shall notify a lessee that the lessor is liable only up to the maximum amounts provided for in subsection (3) . . ." Mich. Comp. Laws § 257.401(4).
The only federal or state opinion interpreting the notice requirement in Michigan Compiled Laws § 257.401(4) is Church v. Save-a-Buck. 151 F. Supp.2d 905 (W.D. Mich. 2000) [Miles, J.]. In Church, plaintiff claimed that because defendant did not provide the lessee with notice of the lessor's limited liability, [Michigan Compiled Laws] § 257.401(4) limiting lessor liability did not apply in this instance. Church, 151 F. Supp.2d at 910. The court rejected Plaintiff's argument and held that, "[w]hile § 257.401(4) clearly imposes a notice requirement, it does not impose a penalty for failure to give the required notice." Id. Therefore, according to Church, if a lessor fails to give a lessee notice of the liability cap the lessor is still protected by the limiting liability provisions of subsection (4).
The maxims of statutory construction support Church as Michigan lawmakers demonstrated their ability to impose penalties under subsection (3) and their failure to do so under subsection (4) further suggests that notice, while desired, is not a requirement under Michigan law. Bailey v. U.S., 516 U.S. 137 (1995) (holding an existence of liability under one provision of the statute and the omission of liability elsewhere in the statute is a clear indication of Congressional intent). Also, Michigan Compiled Laws § 257.401(5) indicates that Michigan's legislature intended to impose no consequences for failure to give notice under subsection (4). Subsection (5) expressly provides that subsection (4) shall not be construed to expand or reduce, except as otherwise provided by this act, the liability of a person engaged in the business of leasing automobiles and designates that the lessor's liability is determined under a common law standard. Id. Thus, an expanded interpretation of subsection (4) creating penalties cannot be justified. Therefore, the only way for Plaintiff to circumvent the limit on liability is to prove that Defendant Greenfield was negligent in the leasing of the automobile. Id. Plaintiff, however, has not alleged, and no facts suggest, that Defendant Greenfield Leasing was negligent in leasing the van to Defendant Trivedi. Negligence in this context means "actions which would have made the lessor liable under common law, such as negligent entrustment (i.e., leasing the vehicle to a plainly incompetent or unqualified driver) or negligence in failing to provide the lessee with a reasonably safe vehicle." Church, 151 F. Supp.2d at 910.
B. This Court will follow Church's interpretation of the notice requirement in Michigan Compiled Laws § 257.401.
Defendant Greenfield Leasing has Moved for Summary Judgement and requests this Court follow the Church court's interpretation of Michigan Compiled Laws § 257.401(4) and limit its liability to the statutory minimum regardless of notice. In support of its Motion, Defendant Greenfield Leasing relies on Allstate Ins. Co. v. Thrifty Rent-a-Car Systems, 249 F.3d 450 (6th Cir. 2001). In Allstate, the Sixth Circuit affirmed Church's interpretation of what constitutes negligent leasing and that lessors are only obligated to insure a lessee up to, but not exceeding, the statutory minimum. Allstate, 249 F.3d at 456, 458. Allstate, however, did not discuss the district court's decision on the issue of notice.
Plaintiff argues that Defendant Trivedi did not have notice of limiting liability provisions in his lease and requests this Court decline to follow Church and not apply the statutory limit on lessor liability. Plaintiff claims the Church court's interpretation of Michigan Compiled Laws § 257.401(4) was incorrect. Plaintiff relies on several cases that generally describe statutory rules of construction, lending some credence to its argument, but ultimately cannot overcome Church as valid authority. See Omelenchuk v. City of Warren, 647 N.W.2d 493 (Mich. 2002); Manville v. Bd. of Governors of Wayne State University, 272 N.W.2d 400 (Mich. 1978). In Church, the court had a full and complete opportunity to examine the purpose of Michigan Compiled Laws § 257.401 and interpret subsection (4)'s notice requirement with the benefit of the same precedent and rules of construction. The Church court understood that the "legislature did not intend to pass a law that has no effect" and that the "word shall connotes a mandatory duty." In light of these principles, the court interpreted subsection (4) as not requiring notice to lessees. The legislature indicated a willingness to apply penalties for negligent leasing under Michigan Compiled Laws § 257.401 in subsection (3) but did not do so in subsection (4) and, therefore, a penalty for failing to notify lessors of a liability limit was not the intent of the legislature. This Court's principal duty in interpreting a statute, is to determine and effectuate the intent of the Legislature. Sun Valley Foods Co. v. Ward, 596 N.W.2d 119, 123 (1999) (citing Murphy v. Michigan Bell Telephone Co., 523 N.W.2d 310 (1994)). Furthermore, no negative authority exists to suggest that Church was decided wrongly. Thus, this Court finds no reason to disagree with Church and will limit lessor liability to statutory maximum, regardless of notice.
This Court is also persuaded by public policy concerns. If this Court chose not to follow Church and imposed penalties on lessors who did not provide lessees with notice of limited liability the result would be an unnecessary complication of commercial automobile leasing and the added costs would likely overwhelm the industry. Out of state lessors would be required to inform lessees of Michigan's limiting liability provisions or face the possibility of staggering liability. Presumably, to protect their own interests, other states would create similar, or impose existing, notice requirements and leasing agreements would reflect lessor liability laws of all 50 states and become lengthy unmanageable documents. Future Michigan decisions may determine notice is required, however, this Court is not prepared to place the considerable burden of advising lessees as to the possible limiting liability provisions of every jurisdiction on commercial automobile lessors.
C. Church applies to out of state lessors.
Plaintiff argues, even if this Court follows Church, Michigan Compiled Laws § 257.401(3) is not intended to apply to out of state lessors. Plaintiff claims that because the legislature did not design Michigan Compiled Laws § 257.401(3) to have an extraterritorial effect the liability cap does not apply to out of state lessors. Plaintiff cites Sexton v. Ryder Truck Rental, which recognized that "Michigan statutes are not intended to have extraterritorial effect, absent a clear indication of such to the contrary." Sexton v. Ryder Truck Rental, 320 N.W.2d 843, 855 (1982). While Plaintiff correctly presumes that statutes generally only have intraterritorial effect, Sexton is distinguishable from the instant case. In Sexton, the issue of which state's law applied was very much in conflict. The Sexton court held that choice of law principles required the law of the state where the leasing agreement was executed must apply. However, in the case at bar, Plaintiff has argued persuasively that Michigan law applies and Defendant offered nothing to the contrary. Thus, even though the leasing contract was executed in New Jersey, both Plaintiff and Defendant Greenfield Leasing have expressed a desire for the Court to apply Michigan law. Had Plaintiff argued that the execution of the leasing agreement controlled this Court's choice of law, Sexton would require application of New Jersey law. Despite the obvious paradox, Plaintiff takes the curious position of asking this Court to disregard Michigan Compiled Laws § 257.401(3)'s cap on liability and apply subsection (1) of the same provision relating to the liability of non-lessors even though Defendant is clearly identified as a lessor under subsection (3). Plaintiff cannot have it both ways. Either Michigan law applies and limits Defendant's liability as a lessor to $20,000 or New Jersey law applies because the rental agreement originated there.
"New Jersey adheres to the common-law rule that the owner of a motor vehicle is not liable for the negligence of a permissive user unless the driver is acting as the owner's agent or employee." Fu v. Fu, 733 A.2d 1133, 1138 (1999). However, New Jersey law would not leave Plaintiff without remedy. Under New Jersey Statute 45:21-1 to -3, commercial lessors are required to provide liability insurance of $10,000 to $20,000 for bodily injury or death, and $5000 for property damage. N.J.S. 45:21-2 and -3. Had the application of New Jersey law been advanced Plaintiff's recovery would have been the same or possibly less.
This Court will follow Church and apply Michigan Compiled Laws § 257.401(3), limiting liability of lessors to $20,000 despite an absence of notice, as no sound basis exists to rule otherwise. Michigan Compiled Laws § 257.401(3) will control the determination of Defendant's liability.
IV. Conclusion
Therefore, the Court will grant Defendant Greenfield Leasing's Motion and its liability shall be fixed at the statutory maximum of $20,000 pursuant to Michigan Compiled Laws § 257.401(3). An Order consistent with this Opinion will be entered.