11th Cir.: Commerce Clause permits standalone tort preemption

The Eleventh Circuit held that Congress may use its Commerce Clause power to pass a law whose sole purpose and effect is to displace state tort law as it applies to rental car companies.

 Congress, it said, could reasonably conclude that state tort law was a substantial burden on interstate commerce. The court also held that the law at issue, known as the Graves Amendment, preempted a suit asserting strict liability against a rental car company for an accident caused by a lessee. Garcia v. Vanguard Car Rental USA, --- F.3d ---, 2008 WL 3842963 (11th Cir. Aug. 19, 2008) (No. 06-00220).

, a Carter appointee.

    This is the second circuit court this year to reject the novel theory that Congress lacks the power to preempt state tort law in the absence of any federal regulatory scheme. The Second Circuit upheld a law preempting suits against gun manufacturers in City of New York v. Beretta USA Corp., 524 F.3d 384 (2d Cir. 2008) (summary here ).

    Garcia's spouse was killed in a collision with a Vanguard vehicle driven by a lessee. Like many states, Florida common law imposes strict liability on a car owner when a driver to whom the car was entrusted negligently causes an accident. Garcia's wrongful death action was consolidated with a declaratory judgment action by Vanguard, and the district court held that the Graves Amendment, 49 U.S.C. § 30106, validly preempted Garcia's suit. Appended to the 2005 transportation appropriations bill, the Amendment expressly preempts all vicarious liability in state courts for rental car companies. Another district court held the Amendment unconstitutional. Vanguard Care Rental USA v. Huchon, 532 F.Supp.2d 1371 (S.D. Fla. Sep. 14, 2007) (summary here ).

    The appeals court rejected Garcia's argument that her claim fell within the Graves Amendment's saving clause for "financial responsibility or insurance standards." The court reasoned that a "financial responsibility" law in this context meant one that was similar to an insurance standard, not a theory of tort liability. Otherwise, "the exception would swallow the rule."

    Regarding the constitutional question, the court noted that the commerce power extends to three categories of activities: channels of interstate commerce; instrumentalities of interstate commerce; and intrastate activities that substantially affect interstate commerce. United States v. Lopez, 514 U.S. 549 (1995). The court said that the Graves Amendment does not fall in the first category, because it does not regulate roads as such. The court noted some authority indicating that "methods of interstate transportation and communication are per se instrumentalities of commerce," but said, "the implications of this argument give us reason to doubt its premise." Congress would have plenary power over "many aspects of automobile use," including traffic rules and licensing drivers. Accordingly, other authority indicates that Congress's power to regulate modes of transportation and communication derives from the third Lopez category.

    As to this "substantial effect" category, the court distinguished between economic and noneconomic activities. Whereas Congress cannot regulate noneconomic activity based solely on its aggregate economic impact, e.g. Lopez, it needs only a "rational basis" for regulating economic activities, e.g., Gonzales v. Raich, 545 U.S. 1 (2005). Garcia argued that the Graves Amendment regulated only state tort law (noneconomic) rather than the rental car market (economic). But the court called this "a distinction without a difference, as the state tort law preempted by the statute regulates the rental car markets; in other words, the effect of the statute is to deregulate the rental car market." There is "no question" that car rentals substantially affect interstate commerce, due to "the size and national scope of the industry," and because rental cars are so frequently driven between states.

    The court acknowledged that it is "relatively novel" for Congress to pass a law "with the sole purpose and effect of preempting state-law claims," noting that the only other example it was aware of was the law upheld in Beretta USA. Nevertheless, the court said that "so long as the underlying economic activity the federal statute aims to protect is within the commerce power, we will not second guess Congress's decision that preemption is an appropriate means to achieve proper ends."

    Whatever the merits of imposing vicarious liability on rental car companies, both the Graves Amendment and the gun law in Beretta USA represent a disturbing strategy by a Republican Congress, which is now deemed constitutional: to eliminate individual claims under state law, not because they conflict with any federal scheme, but simply to protect business.