          07-4597-cv
          Merchants Insurance Group, et al. v. Mitsubishi et al.



 1                                    UNITED STATES COURT OF APPEALS
 2                                        FOR THE SECOND CIRCUIT
 3
 4                                                   SUMMARY ORDER
 5
 6   RULINGS BY SUM M ARY ORDER DO NOT HAVE PRECEDENTIAL EFFECT. CITATION TO SUM M ARY ORDERS
 7   FILED AFTER JANUARY 1, 2007, IS PERM ITTED AND IS GOVERNED BY THIS COURT’S LOCAL RULE 32.1 AND
 8   FEDERAL RULE OF APPELLATE PROCEDURE 32.1. IN A BRIEF OR OTHER PAPER IN W HICH A LITIGANT CITES
 9   A SUM M ARY ORDER, IN EACH PARAGRAPH IN W HICH A CITATION APPEARS, AT LEAST ONE CITATION M UST
10   EITHER BE TO THE FEDERAL APPENDIX OR BE ACCOM PANIED BY THE NOTATION: “(SUM M ARY ORDER).”
11   A PARTY CITING A SUM M ARY ORDER M UST SERVE A COPY OF THAT SUM M ARY ORDER TOGETHER W ITH
12   TH E PAPER IN W HICH THE SUM M ARY ORDER IS CITED ON ANY PARTY NOT REPRESENTED BY COUNSEL
13   UNLESS THE SUM M ARY ORDER IS AVAILABLE IN AN ELECTRONIC DATABASE W HICH IS PUBLICLY
14   A C C E S S IB L E W IT H O U T P A Y M E N T O F F E E ( S U C H A S T H E D A T A B A S E A V A IL A B L E A T
15   HTTP://W W W .CA2.USCOURTS.GOV/). IF NO COPY IS SERVED BY REASON OF THE AVAILABILITY OF THE
16   ORDER ON SUCH A DATABASE, THE CITATION M UST INCLUDE REFERENCE TO THAT DATABASE AND THE
17   DOCKET NUM BER OF THE CASE IN W HICH THE ORDER W AS ENTERED.
18
19               At a stated term of the United States Court of Appeals for the Second Circuit, held at
20        the Daniel Patrick Moynihan United States Courthouse, 500 Pearl Street, in the City of New
21        York, on the 16th day of December, two thousand nine.
22
23        PRESENT:
24                    GUIDO CALABRESI,
25                    DEBRA ANN LIVINGSTON,
26                                Circuit Judges,
27                    JANE A. RESTANI
28                                Judge.*
29        __________________________________________
30
31        Merchants Insurance Group, Deejay Carpet Co., Inc.,
32
33                            Plaintiffs-Appellants,
34
35                            v.                                                07-4597-cv
36
37        Mitsubishi Motor Credit Association, Mitsubishi Motor Credit of America, Inc.,
38
39                            Defendants-Appellees,
40

                    *
                  The Honorable Jane A. Restani, Chief Judge of the United States Court of International
          Trade, sitting by designation.
 1   Tri-Arc Insurance Company d/b/a Tri-Arc Financial Services,
 2
 3               Defendant.
 4   __________________________________________
 5
 6   FOR APPELLANT:                 WILLIAM MATLIN, Hoffman & Roth, LLP, New York, NY
 7                                  (JAYNE F. MONAHAN, on the brief).
 8
 9   FOR APPELLEES:                 HOWARD STRONGIM, Strongin Rothman & Abrams, LLP, New
10                                  York, NY (ANNETTE G. HASAPIDIS, on the brief)
11

12          Appeal from a judgment of the United States District Court for the Eastern District of New

13   York (David G. Trager, J.)

14          UPON DUE CONSIDERATION IT IS HEREBY ORDERED, ADJUDGED, AND

15   DECREED that the judgment of the district court be VACATED and the case REMANDED to the

16   district court for further proceedings consistent with this opinion.

17          Plaintiff-Appellants Merchants Insurance Group (“Merchants”) and Deejay Carpet Co., Inc.

18   (“Deejay Carpet”) appeal from a judgment of the United States District Court for the Eastern District

19   of New York granting summary judgment to Defendants-Appellees Mitsubishi Motor Credit

20   Association and Mitsubishi Motor Credit of America (“MMCA”). Because we disagree with the

21   district court that the Graves Amendment, 49 U.S.C. § 30106, bars Merchants’ claims, we vacate

22   and remand for further proceedings consistent with this summary order. We assume the parties’

23   familiarity with the facts, procedural history, and issues on appeal.

24   I.     Background

25          On November 27, 1997, non-party Joceline DeJean was a passenger in a leased Mitsubishi

26   Galant driven by her son, Jerry DeJean. The DeJeans were involved in an accident in Queens, New

27   York with a vehicle owned by Deejay Carpet and driven by non-party Daniel Hess. Ms. DeJean


                                                       2
 1   leased her vehicle from Mitsubishi Motor Credit Association, which maintained a $1 million

 2   insurance policy through now-defunct Reliance Insurance Company (“Reliance”). Ms. DeJean

 3   additionally carried a personal Allstate insurance policy of $100,000 on the vehicle. The Deejay

 4   Carpet vehicle was insured by Merchants with a liability limit of $1 million. Reliance is a

 5   Pennsylvania corporation that was placed into liquidation on October 3, 2001.

 6           In 1998, Ms. DeJean filed a lawsuit in New York State Supreme Court, Queens County,

 7   against Hess, Deejay Carpet, and her sons Jerry and Patrick DeJean, seeking to recover damages for

 8   personal injuries sustained in the accident. On March 26, 2003, a jury returned a verdict for

 9   $700,000 in Ms. DeJean’s favor. The jury apportioned thirty percent of the liability to Jerry DeJean

10   and seventy percent to Deejay Carpet and Hess. Despite their apportioned liability of only thirty

11   percent, Deejay Carpet and its insurer, Merchants, became responsible for the entire verdict through

12   joint and several liability.

13           On October 20, 2003, Merchants filed an Amended Complaint in state court in New York,

14   seeking contribution from MMCA, the DeJean lessor, for any amounts that Merchants had to pay

15   to Ms. DeJean in excess of its proportionate liability. On November 26, 2003, the case was removed

16   to district court based on diversity of the parties. However, for reasons unclear from the record,

17   judgment had not yet been entered in the DeJean personal injury action by the time Merchants filed

18   its suit for contribution or before the suit was removed to district court. Thus, on July 11, 2005, the

19   district court declared Merchants’ suit unripe and dismissed it without prejudice to reopen “if and

20   when a judgment is entered in the state court case and plaintiff makes a payment on that judgment.”

21   Merchants Ins. Group v. Mitsubishi Motor Credit Ass’n, No. 03-CV-6017, 2005 WL 1631145, at

22   *2 (E.D.N.Y July 11, 2005). The clerk of the court was directed to close the case, and the next day


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 1   a judgment sheet was filed stating, inter alia, “ORDERED and ADJUDGED that the plaintiffs take

 2   nothing of the defendants.”

 3          On August 26, 2005, a judgment of $855,376.64 was entered in state court. On December

 4   12, 2005, Merchants satisfied the judgment at a reduced amount of $600,000. By letter dated

 5   January 27, 2006, Merchants requested that the district court reopen the previously unripe case, and

 6   the case was reopened in June 2006. When the case was reopened, no new summons was issued and

 7   no new complaint was filed.

 8          Although neither party argued for its applicability, on September 25, 2007, the district court

 9   granted MMCA’s then-pending motion for summary judgment on the ground that the federal Graves

10   Amendment, which is part of the 2005 Safe, Accountable, Flexible, Efficient Transportation Equity

11   Act, precluded Merchants’ claims. Merchants Ins. Group v. Mitsubishi Motor Credit Ass’n, 525 F.

12   Supp. 2d 309 (E.D.N.Y. 2007). The district court reasoned, under state law, that although the instant

13   action was first filed in October 2003, which was before the Graves Amendment’s effective date,

14   the suit was prematurely filed and was therefore not justiciable at that time. Id. at 314. After

15   acknowledging that there is “no indication on the docket sheet that a new summons and complaint

16   was ever filed when the case was re-opened[,] . . . . the parties to the lawsuit have remained the same,

17   and plaintiff’s claim is unchanged,” the district court held that the suit “commenced” for purposes

18   of the Graves Amendment only after it became justiciable and was reopened in June 2006. Id. Since

19   June 2006 is after the effective date of the Graves Amendment, the district court found that the case

20   was preempted by federal law and granted summary judgment in favor of MMCA. Id.

21          Merchants now appeals the district court’s award of summary judgment.

22   II.    Discussion


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 1          A.      Standard of Review

 2          We review a district court’s grant of summary judgment de novo, construing all facts in favor

 3   of the non-moving party. Pilgrim v. Luther, 571 F.3d 201, 204 (2d Cir. 2009). Summary judgment

 4   is warranted only where, construing all the evidence in the light most favorable to the non-movant

 5   and drawing all reasonable inferences in that party’s favor, “there is no genuine issue as to any

 6   material fact and . . . the movant is entitled to judgment as a matter of law.” Fed.R.Civ.P. 56(c); see

 7   also Mathirampuzha v. Potter, 548 F.3d 70, 74 (2d Cir. 2008).

 8          We also review a district court’s interpretation of a federal statute de novo. United States v.

 9   Martinez, 572 F.3d 82, 84 (2d Cir. 2009); United States v. Delis, 558 F.3d 177, 180 (2d Cir. 2009).

10          B.      The Graves Amendment

11          As the district court explained, under New York law, MMCA qualifies as an “owner” of the

12   DeJean vehicle. New York law provides that an “owner” of a vehicle is

13                  [a] person, other than a lien holder, having the property in or title to
14                  a vehicle or vessel. The term includes a person entitled to the use and
15                  possession of a vehicle or vessel subject to a security interest in
16                  another person and also includes any lessee or bailee of a motor
17                  vehicle or vessel having the exclusive use thereof, under a lease or
18                  otherwise, for a period greater than thirty days.
19
20   N.Y. Veh. & Traf. Law § 128 (McKinney 2005).

21          New York law imposes joint and several liability on an owner of a vehicle for damages

22   arising from negligent operation of that vehicle. The relevant statute states, in pertinent part:

23                  Every owner of a vehicle used or operated in this state shall be liable
24                  and responsible for death or injuries to person or property resulting
25                  from negligence in the use or operation of such vehicle, in the
26                  business of such owner or otherwise, by any person using or operating
27                  the same with the permission, express or implied, of such owner.
28


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 1   Id. § 388. New York courts have explicitly held that the lessor of a vehicle is an “owner” under

 2   Section 128 and is subject to vicarious liability under Section 388. See, e.g., Taughrin v. Rodriguez,

 3   677 N.Y.S.2d 861, 862 (N.Y. App. Div. 4th Dep’t 1998) (holding that Ford Credit, which

 4   administered a lease on behalf of Ford Credit Titling Trust, was an “owner” under Section 128 and

 5   could be liable under Section 288); Sullivan by Sullivan v. Spandau, 589 N.Y.S.2d 49, 50-51 (N.Y.

 6   App. Div. 2d Dep’t 1992).

 7          The parties do not dispute that MMCA is an owner under Section 128 and is therefore subject

 8   to vicarious liability under New York law.1 However, New York’s vicarious liability scheme as it

 9   applies to lessor-owners of a leased vehicle was preempted by the August 10, 2005 enactment of the

10   Graves Amendment. The Amendment provides, in pertinent part:

11                  (a) In general.--An owner of a motor vehicle that rents or leases the
12                  vehicle to a person (or an affiliate of the owner) shall not be liable
13                  under the law of any State or political subdivision thereof, by reason
14                  of being the owner of the vehicle (or an affiliate of the owner), for
15                  harm to persons or property that results or arises out of the use,
16                  operation, or possession of the vehicle during the period of the rental
17                  or lease, if--
18
19                          (1) the owner (or an affiliate of the owner) is engaged in the
20                  trade or business of renting or leasing motor vehicles; and
21
22                          (2) there is no negligence or criminal wrongdoing on the part
23                  of the owner (or an affiliate of the owner).
24
25   49 U.S.C. § 30106(a). The statute contains an express effective date:

26                  (c) Applicability and effective date.--Notwithstanding any other
27                  provision of law, this section shall apply with respect to any action
28                  commenced on or after the date of enactment of this section without
29                  regard to whether the harm that is the subject of the action, or the


            1
              MMCA argued before the district court that it was not an “owner” under New York law,
     but has explicitly abandoned this argument on appeal.

                                                       6
 1                   conduct that caused the harm, occurred before such date of
 2                   enactment.
 3
 4   Id. § 30106(c). The “date of enactment” was August 10, 2005.

 5           In the instant case, there is no dispute that, if Merchants’ suit against MMCA was

 6   commenced after the Graves Amendment’s effective date, the Graves Amendment preempts New

 7   York law and precludes Merchants’ claim. Rather, the dispute here is whether the “action” was

 8   “commenced on or after” August 10, 2005 such that it is precluded by the Graves Amendment. The

 9   district court applied New York law and held that although the action was originally filed before the

10   effective date, since the action was not justiciable at that time, for purposes of the Amendment, it

11   “commenced” when it was reopened in June 2006. Merchants argues on appeal that, under New

12   York law, their filing of a summons and complaint in October 2003 “commenced” the action before

13   the Graves Amendment effective date.

14           C.      Commencement of the Action

15           The effective date provision of the Graves Amendment does not specify when an “action”

16   is considered to have “commenced.” Nor does it suggest whether we should look to principles of

17   federal law to determine when the action commenced, or whether we should—as we do in some

18   other circumstances, see, e.g., STX Panocean (UK) Co., Ltd. v. Glory Wealth Shipping Pte Ltd., 560

19   F.3d 127, 130 (2d Cir. 2009); Burke v. PriceWaterHouseCoopers LLP Long Term Disability Plan,

20   572 F.3d 76, 78 (2d Cir. 2009)—look to state law to provide the applicable rule of decision. We

21   need not answer this question here, however, since the answer is the same whether we apply federal

22   or state law.

23           In New York, “[a]n action is commenced by filing a summons and complaint or summons



                                                      7
 1   with notice.” McKinney’s CPLR § 304(a). Here, there is no dispute that the summons and

 2   complaint were originally filed before August 10, 2005.

 3           In Jones v. Bill, 890 N.E.2d 884 (N.Y. 2008), a case that had not yet been decided when the

 4   district court decided the case below, the New York Court of Appeals applied CPLR § 304(a) and

 5   held that, for purposes of the Graves Amendment, an action commenced when the complaint was

 6   originally filed, not when the lessor was later joined as a defendant with an amended summons and

 7   complaint. Id. at 886. The court noted that it need not “look further than the unambiguous language

 8   of the [Graves Amendment] to discern its meaning” because “under the statute’s plain language, any

 9   action filed prior to August 10, 2005 has been ‘commenced’ and therefore removed from the federal

10   statute’s preemptive reach.” Id. The court also acknowledged—and we agree—that its result would

11   be the same under the Federal Rules of Civil Procedure because “Congress’s understanding of

12   ‘commencement’ as it pertains to initiation of a federal claim is incontrovertible; New York’s

13   commencement-by-filing system is modeled on its federal counterpart.” Id. at 887 (citing Fed. R.

14   Civ. P. 3).

15           Here, it was not necessary for the district court to go beyond the face of the statute to discuss

16   the justiciability or prematurity of the suit as originally filed. If state law applies here by virtue of

17   our construction of the Graves Amendment, CPLR § 304(a) is unambiguous. Although the district

18   court’s concerns about “reward[ing] plaintiff’s improper filing and subvert[ing] Congress’ decision

19   to bar suits, such as the instant one,” Merchants Ins. Group, 525 F. Supp. 2d at 314, are well-taken,

20   the suit at issue commenced when it was originally filed in state court, even though it was later

21   dismissed and then reopened. We see no reason, moreover, that the result would not be the same

22   with reference to federal procedural principles. Under the Federal Rules of Civil Procedure, “[a]


                                                        8
 1   civil action is commenced by filing a complaint.” Fed. R. Civ. P. 3. Thus, this action “commenced”

 2   when it was originally filed in state court on October 20, 2003, and is not barred by application of

 3   the Graves Amendment.

 4          MMCA urges us to affirm the district court on the alternative ground that application of the

 5   California Insurance Code bars Merchants’ claims. MMCA correctly notes that we may affirm the

 6   district court’s judgment on any ground appearing in the record. Blackman v. N.Y. City Transit

 7   Auth., 491 F.3d 95, 100 (2d Cir. 2007). However, “[i]t is our settled practice to allow the district

 8   court to address arguments in the first instance.” Farricielli v. Holbrook, 215 F.3d 241, 246 (2d Cir.

 9   2000). Because the district court did not have the opportunity to evaluate MMCA’s contention that

10   state insurance law bars Merchants’ claims, we leave the question for the district court to address on

11   remand.

12          For the foregoing reasons, the judgment of the district court is hereby VACATED and

13   REMANDED for proceedings consistent with this opinion.

14

15

16

17                                                  FOR THE COURT:

18                                                  Catherine O’Hagan Wolfe, Clerk

19

20                                                  By:__________________________




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