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A Trucking Law Firm's Study: A History of the Lease Provisions Under Federal Law

Historically, trying to determine who was responsible for the negligence of the truck driver in a truck crash case was like trying to put together a jigsaw puzzle with missing pieces.

As a result, responsible parties often avoided liability for the horrific damages they cause. Fortunately, The Interstate Commerce Commission, the predecessor to the Federal Motor Carrier Safety Administration, took aggressive action to stop the hide the ball actions of motor carries subject to the FMCSR’S by revising the Lease Provisions of the FMCSR’S to hold the motor carrier responsible for the conduct of anyone operation under their authority and displaying their DOT number which is required under federal law. Today, motor carriers are required to assume possession and control of leased equipment in a written lease under the Section 376.12 of the Federal Motor Carrier Safety Regulations (FMCSRs). However, the path leading up to this modern rule was long, complicated, and fraught with litigation. Which resulted in needless time, expense and litigation just to determine who the responsible were. Under a lease, a motor carrier rents equipment it does not own to use for its purposes. Motor carriers have long utilized leases to circumvent regulation.

While the requirements that the motor carrier assumes control and has a written lease are common sense. The path to implementing them was long and drawn out since the Interstate Commerce Commission faced extraordinary pushback from trucking companies that wanted to avoid even the most basic regulations.

How the Law Changed for Truck Companies

In 1936, Interstate Commerce Commission’s Bureau of Motor Carriers first sought to require that motor carriers assume possession and control of leased equipment. [1] However, motor carriers used litigation to undercut and eliminate the ICC’s regulations.

In 1940, the ICC commended a study of the use of leased equipment by motor carriers. The research was interrupted by WWII and the ICC had to wait until years later to take action.

In 1950, the ICC issued its Ex- Parte Decision MC-43 which set forth new rules governing the leasing of motor vehicles by carriers based on its current research findings. The ICC observed, “it is clear that protection of the public is greater by carriers which own their vehicles than by those which rent all their equipment.” Further, the ICC described leasing as the “greatest threat to the observance of the safety regulations….” Part of the ICC’s concern stemmed from the lax inspection of the equipment a failure by lessees to properly log driver’s hours of service which all posed a significant safety risk to the traveling public. In order to address the rampant violation of safety regulations in the industry, the ICC concluded that it needed regulations that required carriers to assume legal responsibility and have proper control of leased equipment. The rules issued in the order required that leases were in writing, for a period of at least 30 days, and must provide for “the exclusive possession, control, and use of the equipment during the full period of the lease.”

Within one year of issuing the rules, numerous companies and industry organizations filed lawsuits to stop the enforcement of the regulations. According to the annual report from the ICC, in 1951 the American Trucking Association and other carriers filed lawsuits to stop the ICC from enforcing the rules.

However, the ATA was largely unsuccessful in its litigation that argued that the ICC did not have the authority to promulgate the regulations. The Supreme Court in its landmark 1953 decision in American Trucking Associations, Inc. v. United States observed that the uses of leases at the time allowed carriers to circumvent most regulations designed to protect public safety such as required inspections. Indeed, since most leases were informal and oral it often made sanctioning carriers for rules violations nearly impossible. Given the extensive evidence of motor carriers attempting to circumvent the law, the Supreme Court upheld the Interstate Commerce Commission’s rules that required leases last for at least 30 days. The ICC believed that such rules would allow it to ensure that its regulations were followed.

Even after the Supreme Court’s decision upholding the ICC’s rule, the rule, established by Ex Parte No. 43, languished and its implementation was delayed. As of 1955 parts of the lease the rule had not gone into effect and were delayed further into 1956. Data from the ICC in 1953 showed that leased vehicles with drivers accounted for almost 20% of the vehicles providing intercity service.

While the Supreme Court upheld the ICC’s 30-day lease regulations, Congress disagreed with some of the regulations. In 1956, Representative King of Pennsylvania testified that the 30-day lease-length requirement would disrupt the US system of agriculture since farmers depended on trip leasing to receive rates that allowed their farms to function. As an attempt to compromise, Senators proposed a bill to amend the Interstate Commerce Act. The bill granted the ICC the power to issue regulations that required that all leases of equipment by motor carriers be in writing and that the carrier assume full responsibility for the operation of the vehicle under the law while prohibiting ICC from issuing regulations requiring a specific duration for leases in certain industries. This bill served as a compromise that provided regulation of leasing without the controversial 30-day lease requirement.

On August 3, 1956, the bill was passed.

The lease provisions requiring the carriers to assume complete responsibility for the equipment had an impact on the liability of carriers for accidents remained the same as those issued in the 1951 Ex Parte Order until their first major revision in 1979.

In 1976, the ICC conducted a survey of motor carriers that found that many carriers utilizing owner-operators shifted the costs from the carrier to the owner-operator. In 1977, the ICC began rule-making proceedings to revise the Lease and Interchange provisions. In 1979, the ICC issued its final rules which did not alter the control requirements but required carriers to bear additional costs.

The result of the congressional action has been a huge victory for the safety of the motoring public by holding the licensed motor carrier responsible for the safe operation of the driver and trucking company and simplified the search for responsible parties through the DOT lease requirements. At the same time, the history of the regulations shows the extent to which trucking companies seek to avoid liability.


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