By: John C. Lane
The result is predictable in this choice-of-law decision, but the
judicial guidance is unusually detailed in the recently released
opinion by the Court of Appeals for the Third Circuit in Lebegern v.
Forman, et al. (December 18, 2006). The case arises out of a fatal
accident occurring in New Jersey involving Pennsylvania and New
Jersey motorists. The Third Circuit gives instruction on the
“how-to” of conducting a choice-of-law analysis under the
governmental-interest test as followed in New Jersey. In the end,
New Jersey’s law, less generous than Pennsylvania’s death statute,
was held to apply. In a state sandwiched between New York and
Pennsylvania, New Jersey’s state and federal courts frequently
address choice-of-law issues. Many cases involve interstate
truckers, intermodal providers, and other transportation modes, and
the Lebegern decision will have its impact for us.
Background Facts and the Litigation
The case arises out of an accident which resulted in the death of
Daniel Carson and serious injuries to his fiancée, Janet Golonka, on
September 16, 2001. Both lived in Bucks County, Pennsylvania, and
drove to New Jersey for a shopping spree. While there, their car was
struck head-on by a vehicle driven by Stephen Cracker. The car was
purportedly owned by Glenn Forman, a licensed New Jersey car dealer,
which Forman purchased from Michael Weiss. Weiss allegedly acted on
behalf of Kenneth Albert or Good Times Cycles. This troop of
parties, whatever their legal responsibility, were all residents of
New Jersey.
Suit was brought in New Jersey federal court against Stephen
Cracker and all of those described above by Daniel Carson’s mother,
Jean L. Lebegern, as administratrix of his estate. Count II of
Lebegern’s amended complaint asserted a claim under the Pennsylvania
Survival Act, whose damages provisions are substantially more
generous than New Jersey’s counterpart. That Count was the exclusive
focal point of this case.
Cracker filed a motion to dismiss Count II, arguing that
Pennsylvania law does not apply and that New Jersey’s more limited
Survival Act should govern the damage issue. Jean Lebegern opposed
that motion and cross-moved for summary judgment, asking the
district court to declare that Pennsylvania law governed the
survival claim. The district court granted Cracker’s motion holding
that the New Jersey Survival Act would apply. 339 F. Supp. 2d 613 (D.N.J.
2004). The Third Circuit granted Lebegern’s petition for an
interlocutory appeal, and affirmed the district court’s ruling. Both
courts followed New Jersey’s choice-of-law rules.
To begin with, the Court of Appeals reaffirmed that New Jersey
follows a flexible governmental-interest approach requiring
application of the law of the state with the greatest interest in
resolving the particular issue. Furthermore, the New Jersey Supreme
Court has cited the Restatement (Second) of Conflict of Laws as a
guiding principle. The Restatement § 145(1) (1971) uses an
issue-by-issue conflicts analysis. Erny v. Estate of Merola, 782
A.2d 1208 (N.J. 2002). (Thus, it is possible to apply New Jersey law
on liability issues and yet to have Pennsylvania law govern the
damage issues.) The law that applies on the issue under analysis is
the law of the state with the dominant policy interest. To apply the
governmental-interest analysis, it is necessary to analyze the
purpose underlying the competing state laws.
The Court then signaled its ultimate conclusion with this bold
statement: “There is a presumption that the law of the situs state
applies. When another state has more significant interest and the
policies of the situs state will not be frustrated by the
application of the foreign law, however, the presumption can be
overcome.” From that point, we follow the Court’s dissertation on
how to determine which is “the more interested state.”
Two Prongs, Five Factors, Four Contacts: What a formula!
The governmental-interest test is a far cry from the simplicity
of the lex loci delicti rule. The Court of Appeals explains that it
has two prongs, five broad factors, and four important contacts,
under the New Jersey cases. (Fight the tendency of the eyes to glaze
over at this point, or to revert to the football game on television.
Together we will master this analysis.)
The test consists of two prongs. First, the court must determine
whether there is an actual conflict between the laws of the two
states. If not, the inquiry is over, and, here, New Jersey law would
apply. If a real conflict does exist, then the second prong requires
the Court to “assess the interests each state has in applying its
own law and determine which state has the most significant
relationship to the parties and the event.” Fu v. Fu, 733 A.2d 1133,
1138 (N.J. 1999).
We then read of the need to identify the “governmental policies”
of each state, and how they are affected by each state’s contacts to
the litigation and the parties; and if a state’s concerns are not
directed at the policies before the court, that state has no
interest in applying its law.
And so we look to the five broad factors articulated by the New
Jersey Supreme Court to aid in applying the governmental-interest
test: (1) interstate comity; (2) the interests of the parties; (3)
the interests underlying the substantive body of law; (4) the
interests of judicial administration; and (5) the competing
interests of the states. Fu, 733 A.2d at 1140-41 (citing Restatement
(Second) of Conflict of Laws § 145 cmt. b). The Court of Appeals
notes that the fifth factor – the competing interests of the states
– is the most important.
In a tort case, there are also four “contacts” relevant to the
governmental-interest test: (1) the place where the injury occurred;
(2) the place where the conduct causing the injury occurred; (3) the
domicile, residence, nationality, place of incorporation, and place
of business of the parties; and (4) the place where the
relationship, if any, between the parties is centered. Fu, 733 A.2d
at 1142 (citing the Restatement).
Before proceeding with the actual analysis, the Court of Appeals
chastised those district courts that have failed to address the
first prong – to determine whether an actual conflict exists –
first:
***The better approach is to
determine whether there is a conflict by
examining the substance of the laws before
assessing whether the states’ interests are
actually furthered by application of the
potentially applicable doctrines. “[T]he initial
step in choice-of-law questions is a
determination of whether there is a distinction
in the laws of particular jurisdictions.”
Grossman v. Club Med Sales, Inc., 640 A.2d 1194,
1197-1198 (N.J. Super. 1994) [emphasis added in
original]. The competing states’ interests in
the application of their laws are not addressed
until after the basic conflict question is
answered. Id. at 1198 (citing Veazey [v. Doremus],
510 A.2d at 1189-90).
The Court of Appeals cited examples of choice-of-law decisions by
federal district courts, in which the analysis moved prematurely to
the competing states’ interests before determining whether an actual
conflict existed in the substance of the states’ laws. The Court
suggests that this faulty approach has led to flawed analyses and
incorrect results. The passion of the Court on this point suggests
an explanation for the grant of the petition for the interlocutory
appeal, an unusual occurrence in the federal courts.
With that admonition expressed, the Court quickly handled the
first prong of the analysis. There is a clear difference in the laws
of New Jersey and Pennsylvania governing damages under the states’
respective Survival Acts, Pennsylvania’s providing a significantly
higher economic recovery. Only after reaching that conclusion did
the Court proceed to the second prong – to determine which state has
the most significant relationship to the parties and the event. The
excitement is mounting!
Finding the More Interested State
These contact points were incontestable and were important to
the Court:
(1) Place where the injury occurred: New Jersey
(2) Place where the conduct causing the injury occurred:
New Jersey
(3) Domicile and residence of the parties:
(a) Plaintiff: Pennsylvania
(b) Defendants: New Jersey.
On these facts, the Restatement, generally, would apply the law
of New Jersey, where the injury occurred, unless Pennsylvania’s
competing interest – its relationship to the occurrence and parties
– is more significant than New Jersey’s and application of
Pennsylvania law will not frustrate the purposes of New Jersey’s
law: “When each state is interested in the application of its laws
and the application of the foreign state’s law would frustrate the
purposes of the forum state, the presumption is to apply the law of
the forum.”
The Court of Appeals analyzed the two states’ survival and death
acts at issue. Reviewing the statutes themselves, limited
legislative history, and case law, the Court came to a
characterization of the purposes of the Pennsylvania and New Jersey
schemes. The Court concluded that while the Pennsylvania exhibited
an “important interest in securing an adequate recovery,” New
Jersey’s interest is more balanced: “[O]ne of the purposes of the
Survival Act was to protect defendants.” [Emphasis added].
The extent of the inquiry is illustrated by this
passage in the opinion:
To the extent that the purposes
behind the New Jersey Survival Act have been
discussed, it appears that the Act was part of a
comprehensive scheme to work in concert with the
Wrongful Death Act to ensure proper redress by next
of kin and the estate of the deceased following a
tort leading to death. (Citation omitted). However,
the interests of defendants appear also to be a
concern of the New Jersey Legislature because the
Survival Act was structured to avoid allowing
multiple recoveries for the same loss. When a
legislature creates such a damages scheme, it is
considering the interests of both those who receive
and those pay. Thus, we conclude that one of the
purposes of the Survival Act was to protect
defendants.
The inescapable conclusion is that “both states’ policies would
be furthered by the application of their law and each state’s
interests frustrated by the application of the other state’s law.”
That leads to the presumption that the law of the forum – here, New
Jersey – would be applied. (Note again, the Third Circuit’s
admonition that this analysis should not drive the issue as to
whether a true conflict exists. That issue is resolved first, and if
no true conflict exists, the analysis of the competing interests is
never reached.)
In this case, application of Pennsylvania’s law would frustrate
the purpose of the New Jersey statutory scheme, and thus New Jersey
law is held to apply to the issue of damages. The Court of Appeals
concludes with these placating words:
While Pennsylvania is
understandably interested in applying its liberal
recovery rules to a Pennsylvania plaintiff, it
cannot expect to impose a liability scheme onto an
unwitting state that has confronted the issue and
reached a different conclusion in its legislative
response. While the facts are undeniably tragic, the
District Court properly concluded that New Jersey
law applies even though it will affect the amount of
available damages.
Conclusion
The Third Circuit sits in Philadelphia and hears appeals from the
district courts in both New Jersey and Philadelphia. The Court
obviously has no bias against Pennsylvania plaintiffs or in favor of
New Jersey defendants. It does have a bias in favor of proper and
careful choice-of-law analysis. In the Lebegern decision, the Court
admonishes lower courts to follow the two-prong approach, and
provides succinct guidance for a governmental-interest analysis if,
and only if, the district court first determines (in the correct
manner) that an actual conflict in the laws of the states does
exist.
The analysis that follows that determination can and often does
involve significantly differing outcomes. It is for that reason that
a proper approach to the decision is of such importance. The Court
of Appeals obviously was concerned that the district courts within
the Third Circuit have strayed from the correct analysis and have
reached incorrect results, and wished to provide clear guidance on
“how to” perform the analysis and reach the right conclusion.
The decision also will assist trial attorneys and their clients
in preparing legal arguments in cases involving choice-of-laws
issues in this and any jurisdiction that has adopted the
governmental-interest approach. For those of us in the
transportation arena, these issues arise regularly in our cases. The
Lebegern opinion should be a helpful guide in the presentation of
our choice-of-laws arguments. And in any event, together we have
mastered the subject.
* Law Offices of John C. Lane, Wyckoff, NJ and New York, NY. Mr.
Lane practices transportation law in New York and New Jersey.
© The Transportation Lawyer, February 2007. Reprinted by
permission of the Transportation Lawyers Association.
