With the rise in “nuclear” verdicts, transportation companies are more sensitive than ever to protecting one of the more valuable assets – trucks, tractors, and trailers and for good reason: what’s a motor carrier without its fleet? Scopelitis can advise on the best structure to protect assets.

Forming an equipment leasing company to own trucks, tractors, and trailers and then lease to the motor carriers (affiliate and third party alike) offers several forms of protection.

• The motor carrier benefits from the separate legal existence of the equipment leasing company.
  • While the motor carrier bears practically all risk associated with, for instance, accidents, driver misclassification, and cargo claims, the equipment leasing company engages in limited (if any) risk-generating activities. The bedrock principle of limited liability afforded to corporations and LLCs means that, except in rare circumstances, the liability of the motor carrier cannot be transferred to the equipment leasing company. Therefore, a plaintiff cannot ordinarily reach through the motor carrier to reach the assets of a separately existing entity.
  • Of course, some courts are apt to permit “veil-piercing” (link veil piercing article here), and certain precautions must be followed for this protection to stand in those jurisdictions.

• The separate equipment leasing company can utilize the federal Graves Amendment.
  • Several states have enacted statutes making the owner of a vehicle liable for the negligence of its driver—even if the owner did nothing wrong. Fortunately, the Graves Amendment neutralizes these statutes. The Amendment has been used as a powerful protective device for motor carrier operations. The Graves Amendment preempts those state statutes that make owners liable for the negligence of the driver, barring any independent negligence of the equipment leasing company subject to satisfying statutory criteria.

• Certain tax benefits are available to equipment leasing companies 

• • The equipment leasing company can avoid sales tax (or other types of similar tax) on the purchase of vehicles exclusively for its lease inventory when a purchase of the same vehicle by a motor carrier is taxable. Scopelitis attorneys have invested significant effort in researching each state’s statutes on vehicle owners’ liability and the courts’ treatment of the Graves Amendment, and they are equipped to counsel clients on how best to protect their assets.

Contact Katie Feary-Gardner, Rachael Robinson, or Andrew Caito to ensure your assets are protected.