TRANSAMERICAN FREIGHT v. BRADA MILLER
Argument of Alphonso H. Voorhees
Chief Justice Warren E. Burger: We will hear arguments first this morning in number 74-54, Transamerican Freight Lines against Brada Miller Freight Systems.
Mr. Voorhees, you may proceed whenever you are ready.
Mr. Alphonso H. Voorhees: Mr. Chief Justice and may it please the Court.
My name is Voorhees, I am from Saint Luis Missouri, and I represent Transamerican Freight Lines, the petitioner in this case.
The case is hereby a writ of certiorari to the Seventh Circuit.
The facts of this case involved a lease of equipment between two trucking companies, two certificated carriers.
They start on January 19, 1968 at which time the lesser the owner of the equipment, a tractor and trailer leased the equipment to Transamerican Freight Lines.
The lesser was Brada Miller Freight Systems, the respondent here leased the equipment to Transamerican Freight Lines to carry a load of steel from Detroit, Michigan, at which point the lease was entered into to Kansas City, Missouri.
During the progress of the lease and the carriage of the steel, the truck was involved in an accident in Illinois and injuring one Sandra Wear seriously, and she later filed suit against both Brada Miller and Transamerican.
Prior to trial Sandra Wear, dismissed her case against Brada Miller and proceeded to trial against Transamerican Freight Lines.
During the course of which trial, Transamerican entered into a settlement with Sandra Wear.
The lease agreement between the parties leasing the equipment, provided for the lease of the equipment and provided that the lesser, Brada Miller, would furnish a driver, one Hardrick, who would operate the equipment during the term do the lease.
The lease also contained an indemnity agreement providing that in the event of a loss, the lesser Brada Miller, would hold the lessee Transamerican, harmless from any loss, which resulted from the negligence of the lesser, or its agents, or servants.
The lease provided that the driver was to be considered an employee and agent of the lesser during the terms of the lease.
The Interstate Commerce Commission has handed down regulations, some twenty years ago, governing the relationship of parties involving in the leasing or the transfer of equipment from one person or company to another for a trip, which is what we call this, in other words the equipment was leased for one trip.
And the regulations of the Commission set forth certain requirements which must be met by the parties to the lease in this kind of a situation.
Applying to our case, one of the regulations states, and I am quoting out of the middle of Section 1057 3(a) of the regulations, that the two carriers involved in the lease must have first agreed in writing that control and responsibility for the operation of the equipment shall be that of the lessee.
This case was argued and decided by the Seventh Circuit and that Court held that the indemnity agreement involved here violated the control and responsibility provisions of the Commerce Commissions Regulations.
The purpose of this lawsuit is a suit by Transamerican the lessee, against Brada the lesser, to recover the amount which Transamerican had paid Sandra Wear to settle the lawsuit plus the expenses involved.
As I say the narrow issue is now whether or not the indemnity provision in the lease agreement violates the control and responsibility provisions of the Regulations of the Commission.
The Seventh Circuit among the Circuits, among the Circuit Court of Appeals, stands alone in holding that the indemnity provisions are in violation of these Regulations.
And on the other side, and holding directly opposite, are decisions of the Fourth, Fifth and Sixth Circuits and by implication a decision of the Tenth Circuit, all of which cases are cited in the briefs.
The question the Commission has in the past resided that when they talk about control and responsibility, and I will quote, possibly subject to some qualifications it may be stated that when a certificate are permit holder; Furnishes service in vehicles owned and operated by others, he must control the service to the same extent as if he owned the vehicles, but need to control the vehicles only to the extent necessary to be responsible to the shipper, the public and the Commission for the Transportation.
This lease provided and was complied within this respect that the equipment during the term of the lease was identified as that of the lessee, the signs, decals, whatever you want to call them of the Transamerican Freight Lines were placed on the truck and were on the truck at the time of the accident.
The truck was required to and was following the certificate of the routes of the Transamerican Freight Lines, and Transamerican in carrying out its responsibility, which is provided for by the lease and the regulations has ultimately paid the injured party in this case.
As I have quoted from comments of the Commission in the prior hearings, the—it is not necessary, it is not the dealing of the Commission that the lessee has to control the direct minute-to-minute, day-to-day operation of the vehicle.
The lessee must control the service, that is the routes, the identity of the equipment, other things which are provided for in the regulations, but as far as the actual operation of the vehicle itself, the lessee is permitted to allow this equipment or direct that it be in effect operated by others as long as it, the lessee, is responsible for the operations.
Justice Harry A. Blackmun: Mr. Voorhees, let me clarify a couple of facts--
Mr. Alphonso H. Voorhees: Mr. Justice Blackmun, yes.
Justice Harry A. Blackmun: Does the agreement provide that the lessee has the right to reject the driver furnished by the lesser?
Will it go that far?
Mr. Alphonso H. Voorhees: The agreement does not specifically provide that, in fact the agreement in this case, which is contained in the appendix to the petitioner’s brief, provides that the person operating the truck shall be Howard Hardrick, the employee of Brada Miller.
It does not—now by implication, or I guess by actual words, by making that provision the lessee has at least accepted Howard Hardrick as a driver of the equipment.
Hardrick was an employee of the lesser Brada, prior to the time of the lease, he was an employee of Brada after the lease and, by the terms of the lease was an employee of Brada the lesser at the time of the lease.
Justice Harry A. Blackmun: As I understand it, the indemnification clause here does not apply to the lessee’s own negligence.
Mr. Alphonso H. Voorhees: That is true.
Justice Harry A. Blackmun: Do you think the case would be different if it did?
Mr. Alphonso H. Voorhees: No.
I think if we read the amici curiae brief filed by the Interstate Commerce Commission and the United States, they are discussing the fact that ultimately they may enact regulations regulating the area of indemnity agreements.
Their briefs states quite clearly that they do not feel that their present regulations do control these agreements, and they state that when they do enact such regulations they would consider allowing indemnity agreements in certain instances and not allowing them in other instances.
But at this point the position is that no regulations have been made controlling the indemnity agreement, prohibiting them or allowing them, they did not just mention therefore the indemnity agreement we contend is proper.
Now, your question is directed to if it was the negligence of the lessee, and I think if we read the amici curiae brief, their feeling is that when they enact regulations they would probably provide that negligence of the lessee would preclude its recovery under an indemnity agreement, but this has not been regulated at this time?
Justice William H. Rehnquist: What was the basis for Federal Jurisdiction in this case, Mr. Voorhees, a diversity?
Mr. Alphonso H. Voorhees: It was diversity, Mr. Justice Rehnquist.
Justice William H. Rehnquist: I suppose that if the indemnity agreement had been invalid under the law of the state in which the accident occurred or the state which the case was tried, would that make it a different case?
Mr. Alphonso H. Voorhees: I think that that would.
Now, this question has not been gone into, the agreement was entered into in Michigan, the accident occurred in Illinois, the three case was tried and is presently pending in the Federal Courts in Illinois.
Justice William H. Rehnquist: Most states will allow indemnity agreements whether the person possibly negligence is seeking to recover from the person actively negligence.
Mr. Alphonso H. Voorhees: Yes, they do, and Michigan and Illinois, and I do not attempt to state which law I think would govern here but those are the two obvious States to look to.
Michigan and Illinois both provide that a person may indemnify himself against his own negligence if the indemnity agreement specifically so provides.
Justice Byron R. White: You say the driver here would remain the employee of Brada, I take that he did.
If the driver is negligent and injured someone and they say under that victim sues the lessee, Transamerican, on what basis is the claim made?
Mr. Alphonso H. Voorhees: That, Mr. Justice White, that question, I will answer it but it is not involved, I contend in the issues before this Court.
Justice Byron R. White: It is not, but except for one thing, you say—I think it bears on the control of whether this is really a lessee’s operation or not, or whether the lesser is really just piggy-backing on the lessee’s authority?
Mr. Alphonso H. Voorhees: If I may go in to a little history and going back years, this type of agreements I think generally fell into the category of what was known as the “independent contractor relationship.”
The lessee of the equipment, if sued would generally defend and say that the person from whom he lease the equipment was an independent contractor and lessees’ generally I think successfully defended on that ground.
Now, this is one of the things that the Commission was attempting to regulate, I think that individual owners of equipment, probably not well-maintained--
Justice Potter Stewart: Let me, let us assume there was no indemnity agreement, and the third person sued the lessee whose authority was being used and whose bill of lading had been issued I guess?
Now let us assume no indemnity agreement or anything, the third party may recover against the lessee may he not?
Mr. Alphonso H. Voorhees: The third party, under the regulations, could recover against the lessee.
I think this is one of the two purpose--
Justice Potter Stewart: No, none of the regulations, so that is a federal question?
Mr. Alphonso H. Voorhees: Yes.
Justice Potter Stewart: So that is a question of federal?
Mr. Alphonso H. Voorhees: Yes.
Justice Potter Stewart: So that it is not respondeat superior, it is not the fact that he is an employee, it is just the fact that the Federal, the Federal Regulations says the lessee is responsible?
Mr. Alphonso H. Voorhees: That is correct, that is correct.
And you say if there were no indemnity agreement to follow that on--
Justice Potter Stewart: Well, I guess the indemnity agreement be irrelevant in terms—as far as the liability of the lessee under the Regulations Commission.
Mr. Alphonso H. Voorhees: As far as the liability of the lessee and it was in this case there was no question that the lessee was liable, and the lessee has accepted the responsibility and paid.
Now, to track back a little bit on this history the Commission may enacted these Regulations and one of the principle things that they were concerned about was lessee’s dodging liability I think, so they said that the lessee should be responsible.
And then I say this, all of the requirements of the Regulations of the Commission have been carried out in this case, they have been followed by the parties.
Well now, this regulation has been held by a couple of the cases in the briefs, makes the employee a statutory or special employee for whose acts the lessee is liable.
But for the regulations, the driver and his employer would be independent contractors, I mean whatever that means, [laughter] it means different things I suppose from case to case.
Unknown Speaker: [Inaudible]
Mr. Alphonso H. Voorhees: I am not prepared to answer that, I am not really quite sure if a violation of the, or a question involving the--
Justice Potter Stewart: A third party’s claim against the—on your theory, a third party’s claim against the lessee was strictly a federal law question of the regulation.
Mr. Alphonso H. Voorhees: Yes.
Now, again it probably is, in other words the liability of the lessee is set by the Regulations.
Whether that is a sufficient--
Justice Potter Stewart: --is anyway that this not be -- the driver is not an employee of the Brada.
Mr. Alphonso H. Voorhees: On the statute or the regulations, make him such --
Justice Potter Stewart: --the lessee liable of (Inaudible)
Mr. Alphonso H. Voorhees: I think that that is true using common definitions of word employee.
Justice Potter Stewart: But on the common law of Illinois might hold the driver to have been a barrowed servant and therefore an agent of the lessee conceivably, but that is, we really do not need to get in to that here [voice overlap] because the Commission’s regulation is clear, is it not?
Mr. Alphonso H. Voorhees: That is right, Mr. Justice Stewart.
Justice Potter Stewart: The attorney takes turns around the to what extent must the lessee (Inaudible).
This liable is a matter of Commission Regulation, the lessee.
Mr. Alphonso H. Voorhees: That is correct.
Justice Potter Stewart: No need to go any further that is conceded in this case, I gather that is not an issue.
Mr. Alphonso H. Voorhees: I find in defining the word control of an employee to involve some rather nebulous phrases and sometimes beyond those fictitious.
An employer is not going to control the minute-to-minute operations of a driver driving a truck.
He is not going to be able to prevent him from going too fast or from failing to stop at an appropriate time, he is going to—the control involved here is twofold.
The lessee controls in that he tells the driver where to go and what routes to follow and what reports to file and prepare, the lesser controls because the lesser is the continuing employer, the lesser is the one that the man is going to be working for next week.
Chances are the lessee would not see this driver again after the end of this particular trip.
So that the lesser is then the one that has the right to discipline the employee if he has violated traffic regulations, or has done something wrong and the lesser is the one that could discharge him, or provide some other type of discipline.
Now, there are two, aside from the fact that we have the authority of several Circuits maintaining that these indemnity agreements are not in violation of the regulations.
Two basic reasons here, which I urge are first the basic concept of freedom of contract;
I have quoted in the brief from a case that is quite old from this Court, a 1900 case, and it is Baltimore and Ohio, Southwestern Railway Company versus White, provides that the contract between parties should not be invalidated unless it is clearly against public policy, public right or public welfare.
Additionally, the courts have held and this Court in the case of Bowles against Seminole Rock and Sand Company, that the interpretations by an administrative agency of the government of its own regulations are entitled to great weight(ph) and they become controlling, and this is a quote from the Bowles case, “become of controlling weight unless it is plainly erroneous or inconsistent with the regulations.”
The amici brief, filed in this case by the Commission and by the United States, takes the strong position that they have not attempted to regulate indemnity agreements that they feel that the indemnity agreement in this case is appropriate and is valid.
And that they do discuss the fact that in the future they may attempt to regulate these agreements, I think you can assume from reading their brief that they probably will but they have not at this point.
I think that basically that concludes my argument unless the Court has any further questions?
Chief Justice Warren E. Burger: I think not--
Mr. Alphonso H. Voorhees: I have some time, reserved.
Chief Justice Warren E. Burger: Mr. Leritz.
Argument of Joseph L. Leritz
Mr. Joseph L. Leritz: Mr. Chief Justice and may it please the Court.
The respondent in this case takes a somewhat different view of the various liabilities and the right of control and the fact of control.
The questions presented by the petitioner, the respondent and the ICC and the United States, and I will refer to it as the ICC for simplicity, are a little bit different.
The petitioner states that the question before the Court is where the lessee assumes control and responsibility for the tractor and trailer is an indemnity caused in an otherwise vital least agreement against the regulations.
The respondent sees the question as whether an agreement to indemnify for losses, due to the operation of the equipment, is in violation of the regulations and the ICC sees the question as whether the agreement to indemnify for loses—whether the regulation for prohibits the lesser from agreeing to indemnify the lessee for losses caused by the negligence of the lesser.
Now in the amici curiae brief, the Interstate Commerce Commission claims that indemnity agreements, such as we have here, are beneficial because they tend to place the responsibility for the loss, for the casualty, where it belongs.
The ICC assumes that the negligence of the driver is the negligence of the lesser, and it is respondent’s position in this case that the ICC is incorrect in that for reasons I hope to develop in my argument.
The regulations require that the exclusive possession control and use of the equipment remain in the lessee, and of course not in the lesser.
Now, in the ICC brief, the Interstate Commerce Commission takes the position that the regulations do not require the lessee to operate the equipment itself.
The lesser can perform that task by furnishing the driver as well as the equipment, and that subject to authority and responsibili—responsibility of the regulations, it can allow the lesser to perform the ministerial tasks of moving the freight.
In other words, it is the Interstate Commerce Commission’s position and the petitioner’s commission that the actual movement of the freight, the actual work is done by the lesser.
On page eight of the brief states that the mere performance by the lesser of physical operation of leased equipment does not negate the lessee’s control and responsibility.
And further on page nine, under certain circumstances, an indemnity cause might help to induce the lesser properly to perform the ministerial tasks that under the regulations can be assigned to it.
The indemnity cause might help the lessee influence performance of the lesser and thereby exercise control and responsibility over the lesser.
And finally on page sixteen, the amici curiae brief states that providing the driver at least physical moment-to-moment control of the vehicle and the lesser, this is the control over ministerial tasks and the ICC states is it not the control and responsibility required by the regulations.
Now, I think that the ICC’s position that the party who is responsible in fact and the negligent party shall ultimately bear the loss, it is the correct position.
However, I think it is based on a false premise and therefore the—although the logic is good the conclusion is wrong.
And I say this by going back to the history of master of the master-servant relationship.
Let us assume that there was no regulation in this case, I think these matters would be governed by traditional questions of respondeat superior, master and servant, agent and principal.
I think, well I know that all of the cases that have considered this particular problem, the State cases and the Federal cases, have held the opposite that the lessee operates and trans-operates the vehicle and transports the freight under the common law and under the regulations.
Now, getting back to our assumption that this is a common law rather than a regulation matter, there is no regulation.
When the lessee takes over control of the truck and of the driver, the driver becomes the special employee of the lessee, he still may remain in the general employee of the lesser but traditionally under our law and I think cases almost all hold this, that in the event of the negligence of the driver in that situation that the responsibility would be the responsibility of the lesser.
We must remember, of the lessee I am sorry, of the lessee, yes Sir I am sorry.
Justice William H. Rehnquist: You are talking now about the responsibility of the lessee and lesser inter say-say and not about responsibility to the ultimate plaintiff.
Mr. Joseph L. Leritz: Well I think both, Mr. Justice Rehnquist, as I hope to explain.
A party a lesser to a lessee is not negligent itself it only can be negligent through the act of the driver.
Now, in this particular situation and the situations, which are generally considered, the driver is driving down the road and it commits a negligent act.
The act is an act of an individual, some employee or co-employer, or corporation, or other party through a legal fiction is responsible for that person’s act.
Now assuming there was no regulation, who would be the party responsible for the driver’s act?
Under the common law, and I think I can say this having investigated it having practiced in this field for a long time, under the common law this—the special employer, the lessee in this case, would be responsible--
Justice William H. Rehnquist: Responsible to an injured third party?
Mr. Joseph L. Leritz: Yes Sir, responsible to an injured third party.
Justice William H. Rehnquist: Well so, supposing you had a single truck owned by an individual who drove it himself, and he leased it say the Transamerican in this case.
Now, if there were no regulation, would not Transamerican in many states be able to obtain indemnity against him, just under common law if he were negligent?
Mr. Joseph L. Leritz: Yes Sir, they could, against him in the same way in that in this case, Transamerican could obtain indemnity against the driver Hardrick, but you see they are not attempting to obtain indemnity from the driver Hardrick but from Brada Miller who is Hardrick’s general employer.
There is a difference there; the driver is always subject to indemnify his principle, whether he be Brada Miller or Transamerican, the driver being the ultimately responsible person is always the person who theoretically at least must pay.
And in a situation you gave, the driver being the owner of the truck must pay, the question in this case is must Brada Miller being the general employer of the driver of the truck pay, and I think that is a different issue, Your Honor.
Now, under common law principles of respondeat superior, I am going to refer the Courts that I have to two Missouri cases one of which Mr. Voorhees was involved in, it is in my brief, Branica versus Transamerican 428 Southwest 2d 524, and Barshed Truck Lines versus Gerry Lips 424 Southwest 2d 81.
And I think it is the general law throughout the country and always has been.
The Courts generally hold that under the common law principles of respondeat superior for a person to become a special employer, three things are necessary.
First, the employee must consent to enter into the special employment.
Second, he must as a matter of fact enter into the special employment and go forward with the employment.
And third, the special employer must have the right to control his actions.
If those three conditions are met, then the driver comes in to the special employ, of in this case Transamerica, and Transamerica would then be liable to the general public for any negligence of the driver.
Now, were those three conditions met, I think they obviously were.
Hardrick here did enter, did agree to enter into the special employ, he did as a matter of fact enter on to this special employ by driving the truck and Transamerican did have the control, in fact as well as under the regulations.
Now, if that is the common law, if the common--
Unknown Speaker: Did had the control insofar as it said you are to drive this truck from Detroit to Kansas City along on the following route.
Mr. Joseph L. Leritz: Yes Sir, it had that much control.
Unknown Speaker: There is that much and no more?
Mr. Joseph L. Leritz: I think it had more control as I hoped to develop, maybe I am wrong, but I think I can develop some more control.
Justice Lewis F. Powell: Mr. Leritz--
Mr. Joseph L. Leritz: Yes Sir, Mr. Justice Powell.
Justice Lewis F. Powell: I am not following entirely your argument about the common law.
If the common law applied, you are not suggesting that your indemnity agreement would be invalid, are you?
Mr. Joseph L. Leritz: If the common law applied there would be, may I say if the common law applied absent in indemnity agreement, there would be no right of indemnity from Transamerican against Brada Miller.
Justice Lewis F. Powell: That has absent such an agreement but here you have an agreement, you are not attacking the validity of the agreement absent the ICC regulation, are you?
Mr. Joseph L. Leritz: Under the law of many states, Sir, an indemnity agreement will not be given any credence if unless it agrees to indemnify the indemnitor—the indemnity against his own negligence.
Now, in the State of Missouri that is the law, in some other states I think in the State of Illinois that is the law.
In other words, I cannot agree to indemnify you against your own negligence unless I specifically in the indemnity agreement state I will do so.
So I would say that the indemnity agreement in this case, under the common law, is certainly in question, and I think all indemnity agreements of this kind under the common law are in question.
Whether this particular one--
Justice Thurgood Marshall: In which state?
Mr. Joseph L. Leritz: Well, in any state, Mr. Justice Marshall, or in some states.
In Missouri for example, I think it would be questionable.
Justice Thurgood Marshall: You keep saying in any state then you cite Missouri, and I think there are few others.
Mr. Joseph L. Leritz: Well the reason I say that, if I may, is that we are looking to the question as to whether or not this agreement is against public policy in general.
Justice Thurgood Marshall: [Voice overlap] a regulation to the ICC is in qualitative to those regulations, is it not?
Mr. Joseph L. Leritz: No Sir, I do not think it is?
Justice Thurgood Marshall: Oh, I see.
Mr. Joseph L. Leritz: And may I explain why I think that?
Justice William H. Rehnquist: Well, let me ask you one question about the remark you have made just a moment ago.
You say we are looking to the question of whether this agreement is against public policy in general.
Now all the Seventh Circuit held that was there was contrary to the ICC regulations?
Mr. Joseph L. Leritz: Yes Sir, that is correct, I would say that is correct.
Justice William H. Rehnquist: And if you are going to sustain the Seventh Circuit’s holding it would not be enough to show that the Seventh Circuit might if it had taken a different tack, decided that it was against public policy in Illinois or Michigan?
Mr. Joseph L. Leritz: That is correct.
I think though that the Regulations add additional reasons, in other words we had a situation where the common law absent the regulations states where the negligence lies and where responsibility lies.
Now the regulations come along and reinforce that, they do not take anything away from the common law they reinforce the common law.
They make it clear that under a situation such as this, the control—the possession, control, and use of the equipment is in the lessee.
That is what the regulations says, control of the equipment.
Chief Justice Warren E. Burger: Does the ICC share your view of this matter?
Mr. Joseph L. Leritz: The ICC does not, Sir.
Chief Justice Warren E. Burger: Well if that is not quite important, you have consumed half of your time now council and perhaps you would address that correctly.
Mr. Joseph L. Leritz: Alright, I believe that—I believe that the ICC’s position is based on a false premise, MR. Chief Justice.
And the false premise is that the control of the equipment and of the driver remains in the lesser.
I think that is the false premise.
Now the ICC has stated, and I quote—paraphrase, “the objective of safe operation might be frustrated if the indemnity clause also requires the lesser to indemnify the lessee for the lessee’s negligence.
In other words the ICC, and if I understand that statement correctly, takes the position that if it’s the indem—if the indem, I am sorry.
If the lesser is called upon to indemnify the lessee for the lessee’s own negligence, then the purpose—then the indemnity agreement does then to frustrate the purpose of the regulations.
So I think it is very important for us to determine whose negligence is involved here.
Is it the negligence of Hardrick, the negligence of the lesser, or the negligence of the lessee?
If the negligence if Hardrick is the negligence of the lessee, then if read the ICC’s brief correctly, then the ICC would take the possession well there it should remain; and it would not be proper under the regulations and it would not follow that the liability should be shifted from a non-negligent—from a negligent to a non-negligent part.
There are also some practical reasons, if might cite someway, these regulations might be con—I am sorry, why these indemnity agreements might be contrary to the regulations and might be against public policy.
As the Court knows from reading the respondent’s brief, there is a serious question as to whether or not the driver in this case have the right and authority to enter into this contract.
I know that is not a question for this Court and I know this Court will not decide that.
But it brings up an important part—point, here you have a situation where a driver comes up to the doorway of a trucking company with a truck and solicits a load, and it takes a load.
The lessee describes the cargo, tells him, decides what kind of cargo is to be carried, whether a dangerous cargo or other cargo, how it is to be loaded, where it is to be taken, the route by which it is to be taken, the lessee describes and gives instructions, any especial instructions with regard to the trip itself.
The lessee gives the driver expense money, the lessee checks the driver’s medical records, the lessee makes an inspection of the truck itself, in the event of an accident the lessee—the driver reports to the lessee and the lessee in turn reports to the Interstate Commerce Commission.
I think all of this taken together show a great deal of practical control of the lesser over the trip and the driver and the equipment itself.
Justice Potter Stewart: Or the lessee, you mean.
Mr. Joseph L. Leritz: The lessee, I am sorry, the lessee, yes Sir.
A great deal of practical control, and the law puts that control there, the common law puts that control there and the regulations put that control there.
Justice Thurgood Marshall: The only thing the lessee does not control is the negligence of the driver.
Mr. Joseph L. Leritz: That is correct, Sir.
Justice Thurgood Marshall: And that is the only thing that is involved in this damage suit?
Mr. Joseph L. Leritz: That is correct.
Of course, no one can control that I suppose.
If a driver is going to be negligent, he is going to be negligent.
So we have to look elsewhere, where is the law place the responsibility, where do the practicalities placed the responsibility, where do the regulations place the responsibility.
I might just point out again some practical reasons.
In this particular case Brada Miller did not know of this accident for four months, its investigation of the accident was impeded, the accident was not reported by the lesser for about four months, he report it to the ICC for about four months.
It is respondent’s position that if a lessee knows or thinks that it is going to be reimbursed or indemnified for an accident, it does not have the incentive to do what it must do and to make a prompt investigation and attempt to make a prompt settlement.
I think a rule such as this, I am sorry, I think an indemnity agreement which shifts liability will tend to have an inhibiting effect an investigations and on settlements of claims.
Justice William H. Rehnquist: If you are talking about practicalities, MR. Leritz, as you are, is Transamerican generally insured against this sort of thing as Brada Miller insured against this sort of thing?
Mr. Joseph L. Leritz: Brada Miller is insured above a point, Mr. Justice Rehnquist, that does not involve this—the amount of money here, there is a financial responsibility arrangement.
Justice William H. Rehnquist: So it is a self-insured for purposes of this.
Mr. Joseph L. Leritz: That is my understanding, Sir, yes.
I should—I would like to close with the following comments.
These indemnity agreements at best are questioned, they at best—at worst they actually take the responsibility from where the law places it, and the regulations place it, and the practicality has placed it, and shift it to where it does not belong.
They take it and the respondent’s position to—position the respondent’s takes, the indemnity agreement takes the ultimate financial responsibility from the lessee, who has control under the common law under the regulations and under the practicalities, and puts it in the lesser who does not have those responsibilities and control.
Now it seems to me that that is contrary to the intent of the regulations, despite the position of the Interstate Commerce Commission, and contrary to good practice, to good—to good practice in the trucking industry.
Why not leave the ultimate responsibility where the law places it.
If for example the negligence is the negligence of the lessee through the driver, leave the ultimate responsibility with the lessee, if the negligence is the negligence of the lessee through some other act of the lessee, then leave the responsibility—the ultimate responsibility with the lesser.
If on the other hand the lesser is negligent, the lesser is responsible and the lessee would have a cause of action over without an indemnity agreement, allow the law, not the artificial indemnity agreement, to place the ultimate responsibility where it belongs.
I think under those circumstances the law would best be served, it would cut down litigation of which there is considerable amount in this area, and unless the Court does take such a position these cases are going to continue to be litigated because the only thing, as I understand, the only question before this Court is whether or not these kinds of agreements are contrary to public policy because of the regulations.
If the Court says, no they are not and we will allow them, then we will continue to have litigation under the law of the various states under the provisions of the various contracts.
I respectfully submit on behalf of respondent that the Court hold that indemnity agreements, which tend to shift liability, from that party who is ultimately responsible under the law to some party who is not responsible under the law should be condemned.
Then I think, Your Honors, that the regulations will be complied with, the common law would be followed, and the litigation will be terminated.
Thank you very much.
Justice Lewis F. Powell: Mr. Leritz, does this indemnity agreement on this phase, report to shift liability in the manner you have described?
Mr. Joseph L. Leritz: Not on this phase, Your Honor.
Justice Lewis F. Powell: Well, how else can we view it unless we get into the facts of the case and undertake to assess whether or not the driver himself was a cause of this accident.
Mr. Joseph L. Leritz: Well Mr. Justice Powell, it does on its phase for this reason.
It says that the lesser will indemnify the lessee for the lesser’s negligence and the--
Justice Lewis F. Powell: Only for the lesser’s negligence or the negligence of lesser’s agents or employee?
Mr. Joseph L. Leritz: Right, but it also in another part of the agreement states that the lesser, that the driver is not an agent of the lessee but rather remains an agent of the lesser, which is contrary to fact, to common law and to the regulations.
The provisions of the lease in this case, which attempt to both through the indemnity agreement by stating that the driver remains the agent of the lesser and is not the agent of the lessee is contrary to fact in law.
There are many provisions of this agreement which attempt to bolster the indemnity—the indemnity agreement.
And in doing so they cite statements that are—cite facts I should say, or tempt to cite facts which are contrary to the true facts.
Chief Justice Warren E. Burger: Mr. Voorhees, you have anything further--
Rebuttal of Alphonso H. Voorhees
Mr. Alphonso H. Voorhees: Mr. Chief Justice and may it please the Court.
I have one or two quick comments.
First, as I have mentioned earlier the question here is the issue, the narrow issue is what has the Commission done, and I believe that most of Mr. Leritz argument was directed to what should they do.
Since I do not believe that is the question I hesitate to get into it, however I note in one of the footnotes in the briefs of the Interstate Commerce Commission and the Unites States, they—well as a matter of a fact in a part of their brief including a footnote, they refer to probably what they would do and the beneficial aspects of indemnity agreements in general if they should ever reach the point of regulating this indemnity agreements.
In this footnote, they refer to a 1973 University of Chicago Law Review Article, which tries to assess or appraise the economic approach to accidents and to the master-servant relationship and to the independent contractor relationship.
And the gist of the article is that the person writing that article reaches the conclusion that liability should ultimately be with the person who has the most control over the ultimate prevention of the accidents.
He advocates in this article the use of indemnity agreements to allocate that liability.
He says in his view there should not be any distinction between independent contractor and master-servant relationships that it would be ideal for both parties, were at common law liable, and then they could adjust their differences between themselves by means of indemnity agreement, and thereby put the blame on the person who theoretically would be in a best position to prevent accidents.
And as we have shown here, Brada Miller is the company that would have the control over determining or analyzing latent defects to their equipment that Transamerican may not be able to find by inspection.
Also, Brada the lesser, is the company that has the ultimate employer-employee control over their driver.
They have the means of weeding out drivers with bad driving history, they have the means of disciplinary or discharging, and the best means of providing safe drivers.
So as I say, even though that is not the question in this case, when we consider various authorities on what should be done, this particular authority cited in the amici curiae brief does endorse and advocate the approach of use of indemnity agreements.
I think that concludes the petitioner’s argument.
Chief Justice Warren E. Burger: Thank you gentleman.
The case is submitted.