EENY, MEENY, MYNIE, MOE – Choice of Law Issues in California Tort Cases Occurring Outside of California
If the driver of an interstate trucking company causes an accident in Arizona that injures a resident of California, in a resulting lawsuit should California or Arizona law apply? This sort of scenario is fairly common for our firm’s corporate clients who do business in different states. The determination of the proper tort law that should be applied by a jury – as determined by the trial court – can often be quite significant in the outcome of the case, especially if the law of the state being applied outside of California differs substantially from California law. There is also the further issue of whether the suit should have been filed in federal court because of the potential diversity jurisdiction that might be triggered based on the differing residences of the parties involved in the suit. This article addresses these issues and provides a guideline for the companies and their counsel with regard to different choice of law strategies in personal injury and tort lawsuit.
Which Law Should Apply?
California courts have held that there is a “governmental interests analysis” to determine the choice of law used in a personal injury matter. Offshore Rental Co. v. Continental Oil Co. (1978) 22 Cal.3d 157, 161 holding modified by I. J. Weinrot & Son, Inc. v. Jackson (1985) 40 Cal.3d 327 (“the forum in a conflicts situation ‘must search to find the proper law to apply based upon the interests of the litigants and the involved states.’”) This “governmental interests analysis” is three-fold:
First, the court must determine whether the substantive laws of California and the foreign jurisdiction differ on the issue before it … Second, if the laws do differ, then the court must determine what interest, if any, the competing jurisdictions have in the application of their respective laws ... “If only one jurisdiction has a legitimate interest in the application of its rule of decision, there is a false conflict and the law of the interested jurisdiction is applied.” … On the other hand, if more than one jurisdiction has a legitimate interest, “the court must move to the third stage of the analysis, which focuses on the comparative impairment of the interested jurisdictions. At this stage, the court seeks to identify and apply the law of the state whose interest would be the more impaired if its law were not applied.”
Munguia v. Bekins Van Lines, LLC (E.D. Cal., Oct. 19, 2012, 1:11-CV-01134-LJO) 2012 WL 5198480 report and recommendation adopted, (E.D. Cal., Nov. 14, 2012, 1:11-CV-01134-LJO) 2012 WL 5511749 (internal citations omitted).
What about liability for the acts or conduct of non-patrons? Does a business owner have a legal duty to protect its patrons (or tenants) from criminal acts by third persons while they are patronizing the establishment, or are simply on the establishment’s property? The answer is a clear “yes.” Under California law, business proprietors owe a “general duty of maintenance, which is owed to tenants and patrons, and ... include[s] the duty to take reasonable steps to secure common areas against foreseeable criminal acts of third parties that are likely to occur in the absence of such precautionary measures.” Delgado v. Trax Bar & Grill (2005) 36 Cal.4th 224, 235
California courts have held that a tort completed in a foreign jurisdiction provides a presumptive interest in applying the foreign state’s law, absent some compelling interest to be served by applying California law. Castro v. Budget Rent-A-Car System, Inc. (2007) 154 Cal.App.4th 1162, 1180. In Castro, a California resident was visiting the state of Alabama and was injured when his rental car ran into an overturned truck which was driven by another defendant and owned by Budget Rent-A-Car. The plaintiff filed suit against Budget in a California state court. The Castrocourt determined that there was a conflict between the two states’ laws, i.e California law would allow a limited recovery and Alabama law would preclude recovery, based on the state’s ban on liability against an owner for damages caused by the non-owner driver’s torts.
In determining that Alabama law applied, the Castro court noted that Alabama had a presumptive interest in controlling its roadways and that the liability issues which would preclude recovery for the plaintiff serve a compelling state interest in preventing negligent driving by holding negligent drivers, and not car owners, liable for tortious conduct. Furthermore, Alabama had an “interest in not having vehicle owners and drivers in its jurisdiction subjected to different liabilities based on the fortuity of which state a plaintiff happens to be a resident.” Castro, supra, 154 Cal.App.4th at 1181. The Castro court then turned to California law to determine if the application of the California Vehicle Code section in question creates a legitimate government interest in controlling the permissive use of vehicles in another state, it found none. However, California law, as expressed by the California Vehicle Code, did have a competing interest in protecting the plaintiff, a California resident.
The Castro court relied in part on a prior holding in the case of Offshore Rental Co. v. Continental Oil Co. (1978) 22 Cal.3d 157. The Offshore decision ruled that a California plaintiff suing in Louisiana state court would go uncompensated for a substantial loss under Louisiana law. Nevertheless, the Offshore court concluded that by entering a foreign jurisdiction, the plaintiff exposed himself to the risks of that territory and should not expect to subject the foreign defendant to a financial hazard that the foreign jurisdiction’s law had not created. Castro, supra, 154 Cal.App.4th at 1182. Just like the court in Offshore, the Castro court similarly concluded that “by entering and driving in Alabama, Castro voluntarily exposed himself to the risks of that “territory,” and therefore plaintiffs should not expect to subject Budget to a “financial hazard” that Alabama law had not created. Based on the respective governmental interests of Alabama and California, Alabama's interest in allocating liability and deterring negligent driving within its borders would be more impaired by the application of California's permissive user statute than would California's interests if Alabama law is applied.” Id.
One caveat to the choice of law question that appears in large-scale cases—such as asbestos actions—is the applicability of the choice of law test to multiple defendants across multiple issues, i.e. does the same law of one state apply to all defendants, or does the location of each defendant, (or the potential exposure location of the plaintiff), dictate which law should be used. To resolve this question, a defendant should move the court early in a proceeding to determine what law applies in what situation or to what issue. For example, court’s may apply California law for one issue in a case depending on the totality of the factors involved, and then may apply Arizona law to other issues present in the case. See McCann v. Foster Wheeler LLC (2010) 48 Cal.4th 68.
Choice of law often also arises for trucking companies who have offices or a presence in multiple states. Employee drivers of these interstate trucking companies can potentially be liable for accidents and injuries they cause to residents of states in the injured party’s state, even when the company or driver has no real attachment to the location of the accident. The determination of which law should apply can be significant to the ultimate determination of the case, whether it be by settlement or trial.
For example, California law has long imposed joint and several liability among joint tortfeasors for the economic damages sustained by a personal injury plaintiff. Types of recoverable economic damages under California law include a plaintiff’s incurred medical expenses, wage loss, and property damage. Under California’s joint liability schema if any of the co-defendants are found even 1% liable by the jury, the plaintiff has the option of pursuing any one of the defendants for the full amount of economic damages that a jury awards to the plaintiff in a verdict.(1) American Motorcycle Assn. v. Superior Court (1978) 20 Cal.3d 578.In contrast, Arizona does not impose any joint and several liability among joint tortfeasor defendants, but generally only applies several liability for a personal injury plaintiff’s damages. Ariz. Rev. Stat. Ann. § 12-2506. This means that a tortfeasor defendant would only be responsible for paying a percentage of the plaintiff’s awarded damages based on his or her proportionate share of liability as determined by the jury. However, recoverable damages are different between Arizona and California.
The following hypothetical illustrates the point. Plaintiff, a resident of California, files suit against corporation A and individual B in California for injuries he sustained in Arizona. The matter proceeds to trial, plaintiff prevails, and is awarded a $1 million verdict by the jury, of which $500,000 is awarded as economic damages and $500,000 is awarded as non-economic damages. The jury finds corporation A to be 10% liable and individual B 90% liable. Applying California’s joint and several liability law, the plaintiff could choose to recover its $500,000 economic damages award from corporation A and $50,000 of his $500,000 non-economic damages (based on corporation A’s 10% share of liability). Thus, corporation A could potentially be responsible for paying 55% of the total judgment despite only bearing 10% of the liability for the plaintiff’s injuries.
If Arizona’s several liability law is applied to the same scenario, corporation A would only be responsible for 10% of the entire verdict of $1 million, both economic and non-economic damages. The obvious difference in jurisdictional law is the result of differing public policies as determined by the state legislatures, which were in no doubt influenced by the political leanings of each state’s law-making bodies. For a corporation’s general counsel, or retained outside counsel, the choice of law that is applied to a given case is strategically significant and bears careful analysis from the outset when evaluating the potential exposure of the case.
The potential conflict and choice of law issues in tort cases should be determined early in the litigation, generally at the pleading stage, when a corporate defendant is determining how it should respond to a personal injury complaint. There are other issues that arise in inter-jurisdictional lawsuits, such as whether the matter should be (or can be) removed to federal court where adjudication of a multi-party suit may be easier and more efficient. Those topics merit their own discussion. Regardless, the jurisdiction—federal court versus state court, or the state court venue—is a primary consideration that must be undertaken at once. Once the corporation’s retained counsel performs this strategic analysis, the proper motion (motion to remove to federal court), or responsive pleading, needs to be filed to preserve the corporation’s choice of law strategy. In state court, typically the time for a defendant to file a responsive pleading – absent a stipulation – is thirty days from the day that the summons and complaint were properly served; the time in which to file a responsive pleading in federal court is even shorter—21 days from proper service of the summons and complaint.
Joseph J. (J.J.) Minioza is a partner and shareholder in Oakland office of Ericksen Arbuthnot, a California law firm. He is a trial attorney specializing in representing corporate defendants in all manner of suits, from personal injury, to employment, to construction and real estate matters.