Here is part 2 of a brief I submitted to a North Carolina court several years ago in opposition to a motor carrier’s motion for summary judgment. The basis for the motion was that the lease agreement stated that the driver was an independent contractor, and the motor carrier was not liable for the driver’s negligent acts or omissions. We won the motion and the case settled soon thereafter. A summary of the case is described here: https://kevinjwilliamslaw.com/case-result/5-5-million-settlement-2/.
Part 1 of this short blog series provided a historical explanation of federal regulations including the Federal Motor Carrier Safety Regulations (FMCSR) and their treatment of independent contractors. Part 2 focuses on the specific requirements under federal regulations pertaining to lease agreements. Disclaimer – I have not Shepardized the case law discussed below, so you’ll want to update the research for your own purposes.
II. THE MOTOR CARRIER MAY NOT RELY ON THE MOTOR CARRIER TRANSPORTATION CONTRACT’S LANGUAGE TO INSULATE ITSELF FROM LIABILITY WHERE IT FAILED TO COMPLY WITH FEDERAL REGULATIONS REGARDING LEASING ARRANGEMENTS
In our case, Motor Carrier relied upon the independent contractor language of the Motor Carrier Transportation Contract with the truck owner to disclaim liability. In addition, Motor Carrier pointed to the fact that the truck owner bore his own D.O.T. number on his tractor truck to support its position. However, Motor Carrier’s reliance is misplaced under applicable federal regulations. For the reasons discussed in Section I. in the preceding blog post, Motor Carrier is liable for the acts of its independent contractors when the negligence occurs in the course and scope of the employment. Even if this were not the case, the Motor Carrier Transportation Contract (which is really a lease) between Motor Carrier and truck owner violates federal regulations. Consequently, Motor Carrier may not be permitted to claim the benefits of the lease’s language which illegally attempts to insulate Motor Carrier from liability. Similarly, the manner in which the owner’s truck was marked also violates federal regulations and is not at all determinative of liability.
A. The Language of the Lease Violates Federal Regulations
The federal regulations are specific about leasing requirements between an authorized motor carrier and an owner/operator. Specifically, 49 C.F.R. § 376.11, entitled “General Leasing Requirements,” provides:
Other than through the interchange of equipment as set forth in § 376.31, and under the exemptions set forth in Subpart C of these regulations, the authorized carrier may perform authorized transportation in equipment it does not own only under the following conditions:
(a) Lease – There shall be a written lease granting the use of the equipment and meeting the requirements contained in § 376.12.
….
(c) Identification of Equipment – The authorized carrier acquiring the use of equipment under this section shall identify the equipment as being in its service as follows:
(c)(1) During the period of the lease, the carrier shall identify the equipment in accordance with the FMCSA’s requirements in 49 CFR part 390 of this chapter (Identification of Vehicles).
(c)(2) Unless a copy of the lease is carried on the equipment, the authorized carrier shall keep a statement with the equipment during the period of the lease certifying that the equipment is being operated by it. . . .
49 C.F.R. § 376.11 (2001)(emphasis added). Since Motor Carrier was an authorized motor carrier which sought to perform authorized transportation of wood chips using equipment owned by Owner/Operator, the agreement between them is really a lease; further, it must meet the requirements of 49 C.F.R. § 376.12. With respect to the language of the Motor Carrier Transportation Contract, Motor Carrier failed to comply with federal regulations when it wrongfully attempted to disclaim liability under the lease’s language. In particular, 49 C.F.R. § 376.12 states:
Except as provided in the exemptions set forth in subpart C of this part, the written lease required under 49 C.F.R. § 376.11(a) shall contain the following provisions. The required lease provisions shall be adhered to and performed by the authorized carrier.
. . . .
(c)(1) Exclusive possession and responsibilities – (1) The lease [between independent contractor and carrier] shall provide that the authorized carrier lessee shall have exclusive possession, control, and use of the equipment for the duration of the lease. The lease shall further provide that the authorized carrier lessee shall assume complete responsibility for the operation of the equipment for the duration of the lease.
49 C.F.R. § 376.12 (2001). However, Section 3(c) of the lease Motor Carrier drafted provides:
All equipment owned and leased, subleased and used by CARRIER and all personnel employed by CARRIER shall be solely under the control of CARRIER during the entire performance of this contract. Under no circumstances will CARRIER be construed as and [sic] employee of SHIPPER.
Under the lease, “CARRIER” is defined as Owner/Operator, and “SHIPPER” is defined as Motor Carrier. However, the federal regulations, under § 376.12, require that the lease contain a provision stating that Motor Carrier shall have exclusive possession, control, and use of Owner/Operator’s equipment, and that Motor Carrier will assume complete responsibility for the equipment’s operation. Here, the actual lease says that all equipment, personnel, etc., shall be solely under the control of Owner/Operator. Thus, it is evident that Motor Carrier, through its lease, violates the plain language of federal regulations and attempts to disclaim any liability it may have under the law by virtue of the agreement. Because the lease provision is in direct contravention of federal regulations, it must be declared invalid.
Defendant Motor Carrier may rely on 49 C.F.R. § 376.12(c)(4) to argue that the federal regulations specifically contemplate an independent contractor relationship that would insulate it from liability. That provision states:
Nothing in the provisions required by paragraph (c)(1) of this section is intended to affect whether the lessor or driver provided by the lessor is an independent contractor or an employee of the authorized carrier lessee. An independent contractor relationship may exist when a carrier lessee complies with 49 U.S.C. 14102 [formerly 11107] and attendant administrative requirements.
49 C.F.R. § 376.12 (2001)(emphasis added). A plain language reading of subparagraph (c)(4) indicates that an independent contractor relationship between a lessor and lessee may be maintained, but with the condition that the carrier lessee must comply with 49 U.S.C. § 14102. That statute states, in part:
(a) General authority of Secretary.—The Secretary may require a motor carrier providing transportation subject to jurisdiction under subchapter I of chapter 135 that uses motor vehicles not owned by it to transport property under an arrangement with another party to—
. . .
(1) make the arrangement in writing signed by the parties specifying its duration and the compensation to be paid by the motor carrier;
(2) carry a copy of the arrangement in each motor vehicle to which it applies during the period the arrangement is in effect;
(3) inspect the motor vehicles and obtain liability and cargo insurance on them; and
(4) have control of and be responsible for operating those motor vehicles in compliance with requirements prescribed by the Secretary on safety of operations and equipment, and with other applicable law as if the motor vehicles were owned by the motor carrier.
49 U.S.C.A. § 14102 (1995)(emphasis added).
The lease in the present case fails to comply with the statutory requirements set forth above. In fact, the lease employs language which is designed to try and avoid liability on the part of Motor Carrier, in direct contravention of the spirit of the federal regulations “promulgated by the Commission to correct widespread abuses incident to the use of leased equipment by the carriers.” Proctor v. Colonial Refrigerated Transportation, Inc., 494 F.2d 89, 91-92 (4th Cir. 1974). Because the lease violates the condition set forth in 49 C.F.R. § 376.12(c)(1), as well as 49 U.S.C. § 14102(a)(4), which provide that Motor Carrier must be in control of and be responsible for Owner/Operator’s tractor as if Motor Carrier were its owner, Motor Carrier cannot be permitted to claim the benefit of 49 C.F.R. § 376.12(c)(4) which permits an independent contractor relationship only when certain requirements are met.
B. The D.O.T. Mark on the Truck Violated Federal Regulations
Motor Carrier also relies on the fact that Owner/Operator’s truck was marked with its own D.O.T. number. With respect to marking requirements, Motor Carrier violated federal regulations yet again in its transparent attempt to avoid liability. Given Owner/Operator’s lease agreement with Motor Carrier, the tractor truck should have been marked pursuant to Motor Carrier’s D.O.T. authority. A review of 49 CFR part 390, in accordance with subsection (c)(1) above, discloses the following requirements set forth in 49 C.F.R. § 390.21:
(a) General. Every self-propelled CMV, as defined in § 390.5, subject to subchapter B of this chapter must be marked as specified in paragraphs (b), (c), and (d) of this section.
(b) Nature of marking. The marking must display the following information:
(b)(1) The legal name or a single trade name of the motor carrier operating the self-propelled CMV….
(b)(2) The motor carrier identification number issued by the FMCSA, preceded by the letters “USDOT”.
(b)(3) If the name of any person other than the operating carrier appears on the CMV, the name of the operating carrier must be followed by the information required by paragraphs (b)(1), and (2) of this section, and be preceded by the words “operated by.”
(b)(4) Other identifying information may be displayed on the vehicle if it is not inconsistent with the information required by this paragraph.
49 C.F.R. § 390.21 (2000). Under the plain language of the statutes, Motor Carrier was required to “identify [Owner/Operator’s tractor truck] as being in its service” by placing its own U.S.D.O.T. numbers on Owner/Operator’s truck. Thus, it was improper for Motor Carrier to enter into a lease with Owner/Operator to haul Motor Carrier’s trailer without placing its own D.O.T. numbers on the tractor truck. Consequently, Motor Carrier may not rely on the markings on Owner/Operator’s tractor truck to avoid liability.
Part 3 of my argument against the independent contractor defense concerns the liability of trucking companies for the negligence of their independent contractors under North Carolina law and shall be published soon in a subsequent blog post.
If you have been seriously injured or lost a loved one due to a large truck crash, contact the Law Office of Kevin J. Williams for a free consultation. If you are a lawyer looking to associate counsel, the Law Office of Kevin J. Williams can help you find all sources of coverage available and bring all responsible parties to justice.
