Polk Corporation is incorporated in Arizona with one shareholder, James Polk, who is a resident of Tennessee. Polk Corporation’s principal place of business is also Arizona. It owns a business jet. Mr. Polk flew on the company jet from Nashville, Tenn., where it is hangared, to San Diego, Calif. While on the tarmac at the airport in San Diego, another airplane owned by Crockett Corporation, incorporated in the state of Michigan and with its principal place of business in Michigan, accidentally hit Polk Corporation’s jet. The impact severely damaged Polk Corporation’s jet. Unfortunately, Mr. Polk was onboard the aircraft during the impact and his right hand was gravely injured. At the time of the accident, a Johnson Corporation employee was marshalling Crockett Corporation’s airplane.

Polk Corporation and Mr. Polk sued Crockett Corporation in the United States District Court for the Middle District of Tennessee for the cost to repair the aircraft and for post-repair diminution in value. Mr. Polk sued Crockett Corporation for personal injuries, and both plaintiffs sued Crockett Corporation for punitive damages. In the same lawsuit, Polk Corporation sued Johnson Corporation for negligence and punitive damages. The Court is faced with an issue that is often an afterthought: what law to apply to each issue in the case. This article will discuss the history of choice-of-law issues in tort lawsuits in the United States and the current state of the law on this issue in Tennessee.

Evolution of Choice-of-Law Analysis in the United States for Negligence Claims

Traditionally, courts in the United States applied the lex loci delicti rule to determine what state’s law to apply to a negligence lawsuit.¹ Under this approach, “a court looks solely at the place where the tort was committed.”² For example, a case filed in Tennessee based upon a death that occurred in Arkansas would require the Tennessee court to apply Arkansas law. This approach “was enshrined in the 1934 Restatement (First) of Conflict of Laws, which advocated hard and fast choice-of-law rules ‘premised on the principle that the last event necessary to create or change a legal relationship determines where a right vests.’”³ Some scholars, however, “discredited lex loci delicti because it failed to take into account underlying policy considerations in evaluating the significance to be ascribed to the circumstance that an act had concerning the rights and liabilities which arise out of that act.”⁴

In 1963, New York became one of the first states to move away from lex loci delicti.⁵ In Babcock v. Jackson, three residents of New York were in an automobile accident in the Province of Ontario, Canada.⁶ One of the passengers sued the driver for negligence in New York state court.⁷ Ontario had a statute that exempted a driver from liability to a passenger unless he or she was carrying passengers for compensation.⁸ The defendant moved to dismiss the lawsuit because he argued that the court should apply the statute to bar plaintiff’s recovery because the accident occurred in Ontario.⁹

On appeal, the court determined that “reconsideration of the inflexible traditional rule [lex loci delicti] persuades us…that, in failing to take into account essential policy considerations and objectives, its application may lead to unjust and anomalous results. This being so, the rule, formulated as it was by the courts, should be discarded.”¹⁰ The court noted that, going forward, it should consider the law of the state that has the most significant relationship with the subject incident.¹¹ A court should also consider “the relative importance of the relationships or contacts of the respective jurisdictions is to be evaluated in the light of ‘the issues, the character of the tort and the relevant purposes of the tort rules involved.’”¹² The court determined that New York law should apply because it had the most significant relationship to the accident even though the accident occurred in Ontario.¹³

The authors of the Restatement (Second) of Conflicts of Laws (“Restatement Second”) finalized it in 1971. The authors “attempted to summarize the nature of choice of law in American courts under the new ‘significant relationship test.’”¹⁴ Under Section 6, this treatise listed the following factors for a court to consider under the most significant relationship test:

(a) the needs of the interstate and international systems, (b) the relevant policies of the forum, (c) the relevant policies of other interested states and the relative interests of those states in the determination of the particular issue, (d) the protection of justified expectations, (e) the basic policies underlying the particular field of law, (f) certainty, predictability and uniformity of result, and (g) ease in the determination and application of the law to be applied.¹⁵

The Most Significant.Relationship Test Under Tennessee Law

In 1992, the Tennessee Supreme Court adopted the most significant relationship approach of the Restatement Second to determine choice-of-law issues related to tort lawsuits.¹⁶ In Hataway v. McKinley, Grady Hataway died after he sustained injuries during a scuba diving accident in a rock quarry in Arkansas.¹⁷ Hataway’s wrongful death beneficiaries filed suit in Tennessee because of the accident, and the trial court applied Arkansas law using lex loci delicti because this is where the incident occurred.¹⁸

The Tennessee Supreme Court overturned the trial court and held that “the local law of the state where the injury occurred determines the rights and liabilities of the parties, unless, with respect to the particular issue, some other state has a more significant relationship.”¹⁹ In order to determine if another state has a more significant relationship, a court applying Tennessee’s choice-of-law analysis will consider the following contacts: “(a) the place where the injury occurred, (b) the place where the conduct causing the injury occurred, (c) the domicile, residence, nationality, place of incorporation and place of business of the parties, (d) the place where the relationship, if any, between the parties is centered.”²⁰ A court is to evaluate these contacts “according to their relative importance with respect to the particular issue.”²¹ After adopting the most significant relationship test, the Court determined that Tennessee law applied because the parties had no contacts with Arkansas, other than the fact the accident occurred in Arkansas, and were life-long residents of Tennessee.

Dépeçage in Tennessee

After determining the choice-of-law rule that generally applies to a cause of action, most attorneys will end their analysis at that point. Section 145 of the Restatement Second, however, requires a court to conduct a choice-of-law analysis for each tort issue.²² By stating that a choice-of-law analysis should be conducted for each issue and what contacts to consider, the authors of the Restatement Second laid the foundation for dépeçage. This French word means, “cutting up, dismembering, carving up.”²³

Tennessee applies the doctrine of dépeçage in its choice-of-law procedures.²⁴ Under that doctrine, “there is no inconsistency in applying the law of one state to a particular issue (such as compensatory claims) and the law of a different state to another issue (such as punitive damages claims).”²⁵

The United States District Court for the Western District of Tennessee used this doctrine in a case where a single-vehicle automobile accident occurred in Mexico involving several Memphis residents.²⁶ Ford Motor Company designed and manufactured the vehicle involved in the accident.²⁷ The plaintiffs sued Ford Motor Company, a Delaware corporation with its principal place of business in Michigan.²⁸ The plaintiffs sued Ford Motor Company “under theories of strict liability, negligence, violation of the Tennessee Consumer Protection Act and breach of implied warranty of merchantability and fitness for a particular purpose” and sought punitive damages.²⁹

Ford Motor Company filed a motion for partial summary judgment arguing that the Court should apply Michigan law to the issue of punitive damages and dismiss that claim because Michigan law did not recognize punitive damages.³⁰ During its analysis, the court noted that it would apply Tennessee choice-of-law rules by considering the contacts listed in the Restatement Second.³¹ It also noted that it would “evaluate the[se] contacts ‘according to their relative importance with respect to the particular issue,’ and [ ] this is to be accomplished by carefully examining the policies behind the laws of the interested states and the interests of those states in the claim.”³² Stated another way, it would apply the concept of dépeçage.

After analyzing the various contacts and weighing the interest of applying Tennessee’s punitive damages law versus Michigan’s punitive damages law, the Court held:

Michigan, as Defendant’s principal place of business and the place where the alleged misconduct occurred, has the most significant relationship to the issue of punitive damages. “When the primary purpose of a rule of law is to deter or punish conduct, the States with the most significant interests are those in which the conduct occurred and in which the principal place of business and place of incorporation of defendant are located.”³³

Going Beyond the Issue of Punitive Damages

Dépeçage is not limited to the issue of punitive damages. It can typically apply to each issue in a tort lawsuit. In fact, a court can even apply a different state’s law for different types of damages. For example, if there is a conflict of law regarding how compensatory damages are awarded, a court will generally apply the law of the state where the plaintiff felt the injury.³⁴    

In Carolina Indus. Prod. Inc. v. Learjet Inc., plaintiffs J.W. Equities LLC, Joseph Willen and Carolina Industrial Products Inc. alleged that Learjet Inc. made false statements regarding a Learjet airplane owned by Carolina Industrial Products Inc. that diminished its value.³⁵ The court had to determine, according to Kansas’ choice-of-law rules, if the corporate plaintiffs felt the injury to the aircraft’s value in Kansas or in Georgia in order to determine which state’s law applied.³⁶ The court determined that Georgia law applied since the harm was felt in Georgia because “the alleged harm to the plaintiffs was the diminution in value of [an aircraft], located in Georgia, and the resulting financial loss to the plaintiffs, also located in Georgia.”³⁷

There appears, however, to be a limit to how far a court is willing to parse issues under a choice-of-law analysis. In Johnson v. Cont’l Airlines Corp., the parties agreed that Colorado law applied to the issue of liability, but Idaho law governed the issue of compensatory damages.³⁸ The plaintiffs, however, argued that the court should apply Colorado’s prejudgment interest law because prejudgment interest has different underlying policy considerations that are separate from the consideration for compensatory damages.³⁹ While acknowledging the Restatement’s issue-by-issue approach, the court held that issues that have a common purpose, such as pre-judgment interest and compensatory damages, should not be fragmented.⁴⁰ Stated another way, “a party who seeks the benefit of one aspect of a state’s compensatory damages law must accept the entire package.”⁴¹

Conclusion

A choice-of-law analysis can be simple if all of the contacts favor one state, except for the fact that the accident occurred in a different state (or in the absence of a conflict of laws among the states involved). Things become complicated when you have different parties from several different states or countries. Then, things are complicated further because a different state’s or country’s law can apply to each issue. Therefore, when faced with one of these fact patterns, attorneys must systematically analyze all the contacts for each claim and each party. |||

JAMES L. CRESSWELL, JR. is a shareholder in the Memphis office of Evans Petree PC, a law firm with offices throughout the Mid-South. Cresswell primarily practices civil litigation including aviation, trucking liability, logistics liability, products liability, premises liability, governmental tort liability, sports and recreation liability, employment law and coverage disputes. He is a graduate of the University of Mississippi Law School.

NOTES

1. Christopher G. Stevenson, Dépaçage: Embracing Complexity to Solve Choice-of-Law Issues, 37 IND. L. REV. 303, 305 (2003).
2. Stevenson, supra note 1, at 305.
3. Stevenson, supra note 1, at 306.
4. Stevenson, supra note 1, at 306.
5. Harold L. Korn, The Choice-of-Law Revolution: A Critique, 83 COLUM. L. REV. 772, 827 (1983).
6. Babcock v. Jackson, 12 N.Y.2d 473, 476–77, 191 N.E.2d 279, 280 (1963).
7. Id.
8. Id.
9. Id.
10. Id. at 285.
11. Id. at 283–84.
12. Id. at 283–84.
13. Id. at 285.
14. Stevenson, supra note 1, at 308.
15. Stevenson, supra note 1, at 308 (quoting Restatement (Second) of Conflict of Laws § 6 (1971)).
16. Hataway v. McKinley, 830 S.W.2d 53, 59 (Tenn. 1992) (abandoning lex loci delicti test and finding that Tennessee law applies despite alleged wrongful death occurring in Arkansas).
17. Id. at 54.
18. Id.
19. Id. at 60 (quoting the Restatement (Second) of Conflict of Laws §146 (Am. Law Inst. 1971)).
20. Id. at 59.
21. Id.
22. Stevenson, supra note 1, at 308 (quoting Restatement (Second) of Conflict of Laws § 145 (Am. Law Inst. 1971)).
23. Stevenson, supra note 1, at 304.
24. Kines v. Ford Motor Co., No. 119CV01054JDBJAY, 2020 WL 5550396, at *2 (W.D. Tenn. Sept. 16, 2020).
25. Id. at *2.
26. Aguirre Cruz v. Ford Motor Co., 435 F. Supp. 2d 701, 702 (W.D. Tenn. 2006).
27. Id. at 703.
28. Id.
29. Id.
30. Id.
31. Id.
32. Id. at 704.
33. Id. at 706.
34. Restatement (Second) of Conflict of Laws § 145 cmt. f. (Am. Law Inst. 1971) (financial losses “will normally be felt most severely at the plaintiff’s headquarters or principal place of business.”); see also Danziger v. Ford Motor Co., 402 F. Supp. 2d 236, 239 (D.D.C. 2005) (“The District of Columbia, home of the plaintiffs both when the Explorer was purchased and when the accident occurred, is interested in their compensatory recoveries but not punitive damages.”)
35. Carolina Indus. Prod. Inc. v. Learjet Inc., 189 F. Supp. 2d 1147, 1165 (D. Kan. 2001).
36. Id.
37. Id. at 1165–66 (determining that harm felt where corporate plaintiff had its principal place of business and other plaintiffs resided, Georgia); see also Radair LLC v. Alaska Airlines Inc., No. 220CV02286MSNCGC, 2022 WL 2222472, at *1 (W.D. Tenn. June 21, 2022) (Nevada law applied claim for diminution in value of aircraft damaged in California because aircraft owned by Nevada limited liability company).
38. Johnson v. Cont’l Airlines Corp., 964 F.2d 1059, 1060 (10th Cir. 1992).
39. Id. at 1062.
40. Id. at 1063.
41. Id. at 1064.