«Choice of Law and Predictability of Decisions in Products Liability Cases Michael Ena∗ ∗ Copyright c 2006 by the authors. Fordham Urban Law ...»
Fordham Urban Law Journal
Volume 34, Issue 5 2006 Article 1
Choice of Law and Predictability of Decisions
in Products Liability Cases
Copyright c 2006 by the authors. Fordham Urban Law Journal is produced by The Berkeley
Electronic Press (bepress). http://ir.lawnet.fordham.edu/ulj
Choice of Law and Predictability of Decisions
in Products Liability Cases∗
This Comment explores the complicated choice of law questions arising in products liability cases where the product in question is often produced in one state, sold in another, and caused an injury in a third. Which state’s law will be used is often a highly contested issue among the interested parties to such a suit. Because of the lack of uniformity in the choice of law methodologies and the differences in rules of law among the states, decisions are often inconsistent and highly unpredictable. Predictability of law is especially important in the products liability context for identiﬁcation of business risks in the marketing of particular products. This Comment analyzes two of the most prevailing choice of law methodologies: lex loci delicti and the “most signiﬁcant relationship” rule of the Second Restatement of Conﬂict of Laws. It focuses on recent decisions coming out of New Jersey and Indiana and reveals how these decisions add to the inconsistency and unpredictability of products liability choice of law court decisions. The Comment argues that neither the First nor the Second Restatement approaches are entirely adequate to provide guidance to courts or to manufacturers of mass-marketed goods. It concludes that an approach that combines enhancements to the Second Restatement with federal preemption for certain types of products that are already heavily regulated by the federal government may be a more realistic answer to the question of consistency and predictability of court decisions in products liability cases.
KEYWORDS: products liability, choice of law, mass tort, lex loci delictus, lex loci delicti, most signiﬁcant relationship, mass market, products, manufacture, injury, predictability, consistency ∗ J.D. Candidate. Fordham University School of Law 2009. I would like to thank Professor George W. Conk for his valuable advice and guidance.
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CHOICE OF LAW AND PREDICTABILITY OF
DECISIONS IN PRODUCTS LIABILITY CASESMichael Ena * The tale of American choice of law principles has become the story of a thousand and one inconsistent tort cases.1 —Alan Reed
INTRODUCTIONThe unique political landscape of the United States, where each state is a sovereign over its territory and can enact its laws within broad limits of the federal Constitution, leads to the lack of “uniformity in rules of law from state to state.”2 In cases that implicate the legal systems of two or more states, courts have to decide which law will govern the case, but the choice of law rules, as well as their application by different courts, are all but uniform.3 Choice of law questions often arise in products liability cases because the product in question was produced in one state, purchased in another state, and caused an injury in yet another state.4 This presents a significant challenge to courts, especially in mass tort actions arising from a long-term exposure to harmful substances in many different states.5 Before a court can proceed on adjudicating the merits, it needs to decide which law to apply, and in many cases the court’s choice of law decision may mean the difference between dismissing the * J.D. Candidate, Fordham University School of Law, 2009. I would like to thank Professor George W. Conk for his valuable advice and guidance.
1. Alan Reed, The Anglo-American Revolution in Tort Choice of Law Principles:
Paradigm Shift or Pandora’s Box?, 18 ARIZ. J. INT’L & COMP. L. 867, 898 (2001).
2. Harold P. Southerland, Sovereignty, Value Judgments, and Choice of Law, 38 BRANDEIS L.J. 451, 452 (2000) [hereinafter Southerland, Value Judgments].
4. See, e.g., World-Wide Volkswagen Corp. v. Woodson, 444 U.S. 286 (1980) (German-manufactured car purchased in New York caused plaintiff’s injury in Oklahoma); Trahan v. E.R. Squibb & Sons, Inc., 567 F. Supp. 505 (M.D. Tenn. 1983) (plaintiff sued a New York manufacturer of diethylstilbestrol (DES) after she was diagnosed with cervical cancer in Tennessee caused by her mother’s ingestion of DES during her pregnancy in North Carolina).
5. See, e.g., Philip Morris, Inc. v. Angeletti, 752 A.2d 200, 232 (Md. 2000) (vacating certification of two classes of plaintiffs and holding that Maryland choice of law principles required application of individualized choice of law analysis for each class member since the class member may have been exposed to tobacco in one state but experienced illness or was diagnosed with a disease in other states).
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1418 FORDHAM URB. L.J. [Vol. XXXIV
case on a certain motion and allowing the plaintiff to proceed with discovery and trial.6 It is not surprising that in such cases parties vigorously litigate choice of law questions, and the appeals process often reaches the state high courts or even the Supreme Court of the United States.7 Lack of uniformity in the choice of law methodologies that American courts use, combined with differences in the rules of law among states, lead to highly inconsistent and often unpredictable decisions.8 Even within a single state, courts often lack a coherent approach to choice of law issues because the state’s choice of law methodology provides inadequate guidance to the courts.9 While the certainty, predictability, and uniformity of results are generally less important in tort cases, in the products liability context, predictability of judicial decisions is an important factor in evaluating business risks associated with the marketing of a particular product.10 A profusion of laws applicable to mass-produced and massSee, e.g., Morgan v. Brio Mfg. Co., 474 N.E.2d 286, 289-90 (Ohio 1984) (affirming application of Kentucky law precluding recovery by a Kentucky plaintiff injured in Kentucky by a meat grinder produced by an Ohio manufacturer and the dismissal of the case on summary judgment). Ohio law was more favorable to the plaintiff and would have allowed him to attempt to prove that the product that caused the injury was defective. See Temple v. Wean United, Inc., 364 N.E.2d 267 (Ohio
1977) for a discussion of Ohio choice of law rules.
7. See, e.g., Allstate Ins. Co. v. Hague, 450 U.S. 971 (1981) (upholding application of Minnesota law where the plaintiff, a Minnesota resident whose husband died from injuries suffered when a motorcycle on which he was a passenger was struck by an automobile in Wisconsin, argued for the application of a more favorable Minnesota law, while the defendant insurance company argued that Wisconsin law more favorable to the defendant should apply); Young v. Masci, 289 U.S. 253 (1933) (upholding constitutionality of the application of a New York statute over objections of a New Jersey defendant who gave permission to a third party to drive his car to New York where the third party injured the plaintiff).
8. Compare Rowe v. Hoffmann-La Roche Inc., 892 A.2d 694 (N.J. Super. Ct.
App. Div. 2006), with Alli v. Eli Lilly & Co., 854 N.E.2d 372 (Ind. Ct. App. 2006) where the two courts reached opposite results on almost identical sets of facts. See infra Part II for a detailed discussion of these two decisions.
9. See, e.g., Rowe v. Hoffmann-La Roche Inc., 892 A.2d 694 (N.J. Super. Ct.
App. Div. 2006), rev’d, 917 A.2d 767 (N.J. 2007). The trial court held that Michigan law favorable to the defendant applied where a Michigan resident sued a New Jersey drug manufacturer for the injuries that allegedly resulted from inadequate labeling of the drug. Rowe, 892 A.2d at 669-70. The appellate division reversed. Id. at 709. The Supreme Court of New Jersey reversed again and remanded the case for the reinstatement of the trial court’s order. Rowe, 917 A.2d at 776. See supra Part II for a detailed discussion of these cases.
10. RESTATEMENT (SECOND) OF CONFLICT OF LAWS § 145 cmt. b (1971) [hereinafter SECOND RESTATEMENT] (“[T]he values of certainty, predictability and uniformity of result are of lesser importance in torts than in areas where the parties and their lawyers are likely to give thought to the problem of the applicable law in planning their transactions.”).
\\server05\productn\F\FUJ\34-5\FUJ501.txt unknown Seq: 3 28-NOV-07 11:13 2007] CHOICE OF LAW AND PREDICTABILITY 1419 marketed undifferentiated products generates substantial costs of compliance and may lead to uncertainty and economic inefficiency.11 The uncertainty may force manufacturers to forgo development, production, and marketing of otherwise valuable products that might expose them to unpredictable risk.12 This risk, in turn, may negatively affect the variety of products available to consumers.13 The utility of products, however, has to be balanced with the need to make products reasonably safe, which prevents manufacturers from externalizing their costs at the expense of consumers.14 This Comment proposes that it is unrealistic to expect a comprehensive solution to the consistency and predictability of court decisions in the products liability area. Value judgments and policy considerations that underlie court decisions, combined with the wide discretion that modern choice of law methodologies provide, make the uniformity of decisions practically impossible.15 Part I analyzes the relevant historical background and development of the two prevailing choice of law methodologies for tort cases—the traditional rule of lex loci delicti of the First Restatement of Conflict of Laws16 and the “most significant relationship” rule of the Second Restatement of Conflict of Laws.17 It shows how the evolution of American society led to changes in choice of law methodologies that sacrificed the need for consistent and predictable choice of law decisions in favor of flexibility and fairness.
11. Michael I. Krauss, Product Liability and Game Theory: One More Trip to the Choice-of-Law Well, 2002 BYU L. REV. 759, 775-76 (2002).
12. Id. at 767-69.
14. Cf., e.g., Nina A. Mendelson, A Control-Based Approach to Shareholder Liability for Corporate Torts, 102 COLUM. L. REV. 1203, 1212 (2002) (noting that the limited liability of corporations serves as an investment subsidy “permitting companies to externalize costs for which they would otherwise be compelled to pay tort damages”); Robert Wai, Transnational Liftoff and Juridical Touchdown: The Regulatory Function of Private International Law in an Era of Globalization, 40 COLUM. J.
TRANSNAT’L L. 209, 253 (2002) (“Tort law is the major form of private law that attempts to address regulatory gaps by permitting affected individuals to sue actors that seek to externalize costs onto others.”).
15. Andrew J. Walker, Conflict of Laws Analyses for the Era of Free Trade, 20 AM.
U. INT’L L. REV. 1147, 1206 (2005) (“[A]bsent an unusually clear fact scenario... the value judgments implicit in the analyses required by law make it virtually impossible for courts to apply the necessary analyses with uniformity of results.”).
16. RESTATEMENT (FIRST) OF CONFLICT OF LAWS § 378 (1934) [hereinafter FIRST RESTATEMENT] (“The law of the place of wrong determines whether a person has sustained a legal injury.”).
17. SECOND RESTATEMENT, supra note 10, § 145 (“The rights and liabilities of the R parties with respect to an issue in tort are determined by the local law of the state which, with respect to that issue, has the most significant relationship to the occurrence and the parties....”).
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1420 FORDHAM URB. L.J. [Vol. XXXIV
Part II closely examines the two leading choice of law methodologies and shows how courts in New Jersey and Indiana apply them in tort cases. While New Jersey adopted the Second Restatement approach, Indiana courts still adhere to the lex loci delicti rule.18 The discussion compares and contrasts the analytic frameworks used in the two states and their application to products liability cases. The comparison is illustrated by a detailed discussion of two recent New Jersey and Indiana cases where out-of-state plaintiffs sued in-state manufacturers of pharmaceutical products and where the courts reached opposite results on almost identical fact patterns.19 The discussion reveals problems that arise from the choice of law methodologies applied by the two states, including inconsistency and unpredictability of court decisions concerning nationally marketed products.
Part III uses historical analysis from Part II to argue for changes in the choice of law approaches, especially in products liability cases. Part III also contains a critical discussion of lex loci delicti, the Second Restatement, and several proposals aimed at improving the current state of affairs in the choice of law area.
The Comment concludes that an approach that combines enhancements to the Second Restatement with federal preemption for certain types of products may be a more realistic answer to the question of consistency and predictability of court decisions in products liability cases.
Traditionally, in tort cases, American courts applied the law of the place where the tort was committed, or lex loci delicti.20 The doctrine, to a significant extent, originated from the works of a Harvard Law School Professor and United States Supreme Court Justice Joseph Story, whose treatise Commentaries on the Conflict
18. See infra Parts II.A, II.B.
19. See Rowe v. Hoffmann-La Roche, Inc., 892 A.2d 694 (N.J. Super. Ct. App.
Div. 2006), rev’d, 917 A.2d 767 (N.J. 2007); Alli v. Eli Lilly & Co., 854 N.E.2d 372 (Ind. Ct. App. 2006). See infra Part II for a detailed discussion and analysis.
20. See, e.g., LEA BRILMAYER, CONFLICTS OF LAWS: FOUNDATIONS AND FUTURE DIRECTIONS 11-12 (Little Brown & Co. ed., 1991).