Sutherland v. Kennington Truck Service, Ltd

562 N.W.2d 466, 454 Mich. 274

• Court: Michigan Supreme Court
• Decided: May 13, 1997
• Docket: 102290, Calendar No. 15
• Status: Published

Opinions

Mallett, C.J.

In this choice of law case, an Ontario driver and an Ohio driver collided while on a Michigan highway. Plaintiffs filed suit in Michigan two years and twenty-two days after the accident. Both Ohio and Ontario have two-year statutes of limitations, while Michigan has a three-year statute of limitations. The trial court applied Ontario’s statute of limitations, holding that Michigan had no interest in the litigation. We reverse and hold that because neither Ohio nor Ontario have an interest in having its law applied, Michigan law will apply.

I

FACTS AND PROCEEDINGS

The facts in this case are fit for a law school choice of law examination. On August 14, 1989, two trucks collided on Interstate 75 in Monroe County, Michigan. The driver of one truck, Larry G. Sutherland, is a resident of Ohio and was operating a truck licensed in Ohio. The driver of the other truck, Gregory Zavitz, is a citizen of Ontario, Canada. He was employed by Kennington Truck Service, an Ontario corporation. Zavitz’ truck was owned by Elgin Leasing, which had leased the truck to Canadian Timkin. Both Elgin Leasing and Canadian Timkin are Ontario corporations.

On September 5, 1991, two years and twenty-two days after the accident, Mr. Sutherland and his wife sued defendants in Monroe Circuit Court, alleging negligence. Defendants moved for summary disposition pursuant to MCR 2.116(C)(7), arguing that the court should apply either Ohio’s or Ontario’s statute of limitations. Both of these jurisdictions bar negligence actions filed more than two years after the cause of action arose.¹ In response, plaintiffs argued that the case should be governed by Michigan’s three-year statute of limitations.²

The trial court granted the motion for summary disposition. Applying “interest analysis,” the court found that Michigan had no interest in the outcome of this litigation because none of the parties are Michigan citizens. The court further found that Ontario had an interest in protecting its citizens from stale claims. On this basis, the court held that Ontario’s two-year statute of limitations would apply.

In an unpublished opinion per curiam, the Court of Appeals affirmed.³ The Court stated:

The trial court did not err in applying the Ontario statute. The trial court properly conducted an interest analysis to decide which state had the greatest interest in applying its statute of limitation. Although Michigan law once favored application of the law of the forum to procedural matters, such is no longer the case. Recent decisions have criticized the distinction between procedure and substance for conflict of law analysis, recognizing that it has often been used in a manipulative manner. See Olmstead v Anderson, 428 Mich 1, 28; 400 NW2d 292 (1987); Sexton v Ryder Truck Rental, Inc, 413 Mich 406, 419-423; 320 NW2d 843 (1982); Mahne v Ford Motor Co, 900 F2d 83, 87 (CA 6, 1990); Penwest Development Corp v Dow Chemical Co, 667 F Supp 436, 442 (ED Mich, 1987); Farrell v Ford Motor Co, 199 Mich App 81; 501 NW2d 567 (1993). Neither party in this action is a citizen of this state, both parties are residents of states that have a two-year statute of limitations, and the statute of limitation issue is not an issue involving conduct. We find no error in the trial court’s analysis.

We granted leave to appeal on plaintiffs’ motion for reconsideration.

II

THE CHOICE OF LAW “REVOLUTION”

Before 1963, American choice of law jurisprudence for tort cases was uniform. All fifty states adhered to the doctrine of lex loci delicti, or the law of the place of the wrong, as espoused by Professor Beale in the First Restatement on Conflicts of Law. Under this doctrine, tort cases were governed by the law of the jurisdiction in which the wrong occurred. Thus, a suit by Michigan citizens who were involved in an accident in another jurisdiction would be governed by the law of the other jurisdiction, even if the suit were brought in this state.⁴ The primary advantage of this rule was that conflicts of law questions were easy to resolve, at least in theory. Parties in litigation could usually predict what law would govern the case by determining the state where the last act necessary to create liability occurred.⁵

While all states purported to adhere to the rule of lex loci delicti in the first half of this century, many state courts expressed discomfort with the rigidity of the rule. In order to mitigate what were seen as harsh results, courts developed several “escape devices” to the lex loci delicti rule. For example, a forum court would decline to apply the law of another jurisdiction if that law conflicted with an important public policy of the forum state. Courts would also characterize issues as “procedural,” instead of substantive, in order to apply the law of the forum. While the application of these escape devices avoided what were seen as unjust results, they also undermined the predictability of the lex loci delicti rule.⁶

In 1963, New York became the first state to explicitly abandon the traditional approach to conflicts of law. In the seminal case of Babcock v Jackson, 12 NY2d 473, 484; 240 NYS2d 743; 191 NE2d 279 (1963), the New York Court of Appeals stated that the traditional rule “fail[ed] to take into account essential policy considerations and objectives . . . .” Instead of adhering to the lex loci delicti rule, the New York Court of Appeals asserted that it would consider the contacts of the tort with each jurisdiction and the interests that each government had in having its law applied.⁷

Babcock sparked a “revolution” in conflicts of law jurisprudence. Freed from the monolithic adherence to the traditional rule, state after state revisited its conflicts rules and expressed its frustration with the lex loci delicti doctrine. By 1980, thirty-one states had abandoned the traditional rule. Currently, only ten states still purport to apply the lex loci delicti rule.⁸

While Babcock slew the lex loci delicti dragon, it has not produced a consensus on how to deal with conflicts of law questions in the absence of the traditional rule. On lex loci’s grave, several competing theories have sprouted. The most prominent of these “modem” theories is “interest analysis,” an approach that the late Brainerd Currie has advocated.⁹ Under this approach, courts examine the governmental interests of the involved jurisdictions. If the forum state has no interest in having its law applied but the other jurisdiction does, the law of the other jurisdiction should be chosen. If the forum state has an interest and the other does not, the court should choose forum law. If both the forum state and the alternate have an interest in having its law applied and the laws conflict, then the court should apply the forum’s law. If neither jurisdiction is interested, the court should again apply forum law.

While several states have adopted interest analysis, it competes for attention with other theories. Under Professor Leflar’s “choice influencing considerations,” for example, courts ask which jurisdiction has the “better rule of law.”¹⁰ The approach that the Second Restatement on the Conflicts of Law proposes, on the other hand, would require courts to determine which jurisdiction has the “most significant relationship” to the tort.¹¹ At least one state, Kentucky, has adopted a blanket lex fori approach, in which forum law will always be applied.¹²

Proponents of these various approaches have engaged in a vigorous debate over the advantages and disadvantages of each approach. As Justice Riley has noted, conflicts of law has become a fecund milieu for academic scholarship.¹³ While this debate is illuminating, much of it ignores the fact that, in practice, all the modem approaches to conflicts of law are relatively uniform in the results they produce. Professor Borchers has surveyed cases that purport to apply the various modem approaches and concluded that none of the modem approaches differ significantly from the others in three important respects: the percentage of times that courts apply forum law, the percentage of times that plaintiffs recover, or the percentage of times that local parties prevail.¹⁴

In fact, Professor Borchers’ research shows that each of the modem approaches tend to favor significantly the application of forum law. Applying the modem approaches, courts select forum law between approximately fifty-five and seventy-seven percent of the time.¹⁵ This has led one commentator to note:

On reading a substantial number of these cases over the years, one has a feeling that the courts may not be doing what they purport to do, that is, employing the modem choice-of-law theories in a neutral way to determine what law applies. Rather, one suspects that courts employing the new theories have a very strong preference for forum law that frequently causes them to manipulate the theories so that they end up applying forum law.[¹⁶]

Likewise, Professor Sedler has noted:

[T]he results in actual cases that arise are not likely to differ depending on which particular “modem” approach a court is purportedly applying or on whether a court even commits itself to a particular approach. Moreover, there seems to be little dispute among the commentators that the courts are generally reaching functionally sound and fair results in the cases coming before them for decision.[¹⁷]

This preference for forum law is hardly surprising. The tendency toward forum law promotes judicial economy: judges and attorneys are experts in their state’s law, but have to expend considerable time and resources to learn another state’s law.

Thus, on surveying current conflicts of law jurisprudence, one can reasonably conclude that only two distinct conflicts of law theories actually exist. One, followed by a distinct minority of states, mandates adherence to the lex loci delicti rule. The other, which bears different labels in different states, calls for courts to apply the law of the forum unless important policy considerations dictate otherwise.

m

THE DEVELOPMENT OF MICHIGAN’S CHOICE OF LAW JURISPRUDENCE

The evolution of Michigan’s choice of law jurisprudence has paralleled national trends. In Abendschein v Farrell, 382 Mich 510; 170 NW2d 137 (1969), this Court declined to join the emerging conflicts of law movement. In adhering to the doctrine of lex loci delicti, the Court asserted that

the quagmire of unanswered and perceivably unanswerable questions arising out of the proposed new doctrine appears less attractive than our admittedly hard and fast — and occasionally unjust, it is true — -rule that the law of the place of the wrong is applied when the forum is a Michigan court. [Id. at 516.]

Despite adherence to the traditional rule, Michigan courts continued to employ various “escape devices” in order to mitigate harsh consequences. See, e.g., Sweeney v Sweeney, 402 Mich 234; 262 NW2d 625 (1978); Shaheen v Schoenberger, 92 Mich App 491; 285 NW2d 343 (1979); Branyan v Alpena Flying Service, Inc, 65 Mich App 1; 236 NW2d 739 (1975). In these cases, courts readily found public policy reasons to displace the lex loci delicti with forum law.

A majority of this Court finally abandoned the lex loci delicti rule in the companion cases of Sexton v Ryder Truck Rental and Storie v Southfield Leasing, supra. After exhaustively reviewing the history of choice of law jurisprudence in Michigan, the Court noted that the purported advantages of the traditional rule were, in practice, nonexistent. The Court stated:

Review of the arguments for lex loci and the alternate choice-of-law methodologies convinces us that slavish devotion to the rigidities of lex loci no longer is either the reasonable policy to follow or the generally accepted law in the United States. As a matter of fact, the courts of Michigan have frequently departed from lex loci in individual instances. [Sexton, supra at 425.]

While Sexton marked the end of the lex loci delicti rule in Michigan, it did not produce a consensus on the appropriate choice of law methodology to be applied. Justice Williams’ opinion¹⁸ expressly declined to embrace any of the “modem” approaches to conflicts of law. Id. at 433. Instead, his opinion held that forum law would be applied when Michigan residents or corporations doing business in Michigan are involved in accidents in another state and appear as plaintiffs and defendants in Michigan courts. Id.

Justice Levin, on the other hand, wished to create a presumption in favor of forum law for all tort cases involving personal injury or property damage. He stated:

[W]e should go the distance and declare that Michigan law will apply in all personal injury and property damage actions without regard to whether the plaintiffs and defendants are all Michigan persons unless there is some compelling reason for applying the law of some other jurisdiction, and that merely because the injury arose out of an occurrence in another state is not such a reason. [Id. at 442 (Levin, J., concurring).]

Because Sexton did not produce a clear majority, lower courts struggled with its application. Some courts read Sexton to apply only to cases in which all the parties are Michigan residents and adhered to the lex loci delicti rule for all other cases.¹⁹ Other courts have read Sexton to require a balancing of interests of the various states in the event that one of the parties is not from Michigan.²⁰

This Court clarified much of the confusion surrounding Sexton in Olmstead v Anderson, supra. Olmstead involved an automobile accident in Wisconsin between a Michigan driver and two Minnesota residents. The plaintiff, the administratrix of the estates of the deceased Minnesota residents, originally filed suit in Minnesota, but this suit was dismissed for improper venue and lack of jurisdiction. The plaintiff then filed suit in Michigan.

The choice of law issue was vitally important in Olmstead, because Wisconsin law at the time limited recovery in wrongful death cases to $25,000. Neither Michigan nor Minnesota limited recoverable damages at that time. In addressing the choice of law question, this Court began with the presumption that Michigan law would apply. Id. at 24, 30-31. The Court then asked whether “reason requires that foreign law supersede the law of this state.” Id. at 24.

In analyzing whether a rational justification for displacing Michigan law existed, the Court in Olmstead reviewed Wisconsin’s interests in having its law applied. The Court noted that neither party was a resident of Wisconsin, and that Wisconsin therefore did not have any interest in seeing its limitation of damages provision applied to this case. The Court also noted that because the insurance companies of both parties knew of the possibility of unlimited liability, no unfairness would result from the application of Michigan law. Id. at 25. Because Wisconsin did not have an interest in having its law applied, the lex fori presumption was not overcome, and the Court did not undertake an analysis of Michigan’s interests.

iv

ANALYSIS

Olmstead provides the analytical framework for deciding this case. That is, we will apply Michigan law unless a “rational reason” to do otherwise exists. In determining whether a rational reason to displace Michigan law exists, we undertake a two-step analysis. First, we must determine if any foreign state has an interest in having its law applied. If no state has such' an interest, the presumption that Michigan law will apply cannot be overcome. If a foreign state does have an interest in having its law applied, we must then determine if Michigan’s interests mandate that Michigan law be applied, despite the foreign interests. Id. at 24, 29-30.

Ohio and Ontario are the only two foreign jurisdictions that potentially have an interest in having their law applied in this case. Ohio, where the plaintiffs reside, has a two-year statute of limitations for these types of actions.²¹

However, a court could not apply Ohio law to this case without violating the defendants’ due process rights. As Justice Brennan stated in Allstate Ins v Hague, 449 US 302, 313; 101 S Ct 633; 66 L Ed 2d 521 (1981), in order for a court to choose a state’s law, “[the] State must have a significant contact or significant aggregation of contacts, creating state interests, such that choice of its law is neither arbitrary nor fundamentally unfair.”²² In this case, the only contact that Ohio has with this litigation is that plaintiffs are Ohio residents. The United States Supreme Court has stated that the plaintiff’s residence, with nothing more, is insufficient to support the choice of a state’s law. Home Ins Co v Dick, 281 US 397, 408; 50 S Ct 338; 74 L Ed 926 (1930); see also John Hancock Mut Life Ins Co v Yates, 299 US 178; 57 S Ct 129; 81 L Ed 106 (1936).

Because Ohio does not have an interest in seeing the court apply its law, Ontario is the only remaining candidate. Ontario, like Ohio, has a two-year statute of limitations.²³ Defendants claim that because Ontario law would benefit the Ontario defendants by barring the claim, Ontario has an interest in having its statute of limitations applied. Certainly, one purpose of a statute of limitations is to protect defendants from stale claims. We do not agree, however, that Ontario has an interest in protecting the defendants from stale claims in this situation. In fact, according to Canadian and Ontario law, Ontario has an interest in having Michigan’s statute of limitations applied in this case.

In the companion cases of Tolofson v Jensen and Lucas v Gagnon, 120 DLR4th 289 (1994), the Supreme Court of Canada adopted the lex loci delicti rule and held that Canadian courts must apply the substantive law of the jurisdiction where the tort occurred.²⁴ The court also stated that statutes of limitation are substantive, not procedural, for choice of law purposes. Tolofson, supra. Thus, under Tolofson, Canadian courts must apply the statute of limitations of the jurisdiction in which the tort occurred.

Tolofson involves residents of British Columbia who were injured in an automobile accident in Saskatchewan, and thus does not present an international choice of law problem. Justice La Forest, speaking for the court, noted that an exception to the lex loci delicti rule may exist in international tort litigation if application of the law of a foreign country “could give rise to [an] injustice.” Id. at 308. Justice La Forest continued, however, to state that he could only “imagine few cases where this would be necessary.” Id.

We seriously doubt that an Ontario court would find that the application of Michigan’s three-year statute of limitations in this case would “give rise to injustice.” Certainly, no Ontario court has expressed qualms about applying American law. In Ostronski v Global Upholstery Co, 1995 Ont C J LEXIS 4668, for example, the Ontario Court of Justice applied Pennsylvania’s statute of limitations to a tort suit commenced in Ontario.²⁵ Ontario’s courts have even applied American law when that law is detrimental to Canadian litigants. See In re Hanlan, 1996 Ont C A LEXIS 754, rev’g Hanlan v Sernesky, 1996 Ont C J LEXIS 2538.

Thus, had plaintiffs filed this suit in Ontario, Ontario’s courts would have applied Michigan’s three-year statute of limitations.²⁶ Because even Ontario courts would not allow the defendants to escape this claim through application of Ontario law, we do not see how Ontario can have an interest in having Michigan courts apply Ontario law.

Therefore, no foreign state has an interest in having its law applied to this case. The lex fori presumption is not overcome, and we need not evaluate Michigan’s interests. Olmstead at 30. Michigan’s three-year statute of limitations will apply to this case.

v

For these reasons, we reverse the judgment of the Court of Appeals and remand the case to the trial court for further proceedings.

Cavanagh, Boyle, and Weaver, JJ., concurred with Mallett, C.J.

1 Ohio’s statute of limitations is Ohio Rev Code Ann 2305.10. Ontario’s is Ch H.8, Ont Rev Stat 206.

2 MCL 600.5805(8); MSA 27A.5805(8). Because the action accrued within the State of Michigan, Michigan’s borrowing statute, MCL 600.5861; MSA 27A.5861, does not apply. MCL 600.5861; MSA 27A.5861 states:

An action based upon a cause of action accruing without this state shall not be commenced after the expiration of the statute of limitations of either this state or the place without this state where the cause of action accrued, except that where the cause of action accrued in favor of a resident of this state the statute of limitations of this state shall apply. This amendatory act shall be effective as to all actions hereinafter commenced and all actions heretofor commenced now pending in the trial or appellate courts.

3 Issued November 3, 1994 (Docket No. 152177).

4 See, e.g., Kaiser v North, 292 Mich 49; 289 NW 325 (1939) (applying Ontario’s guest statute to a suit by Michigan plaintiffs who were involved in an automobile accident in Ontario).

5 Scoles & Hay, Conflict of Laws (2d ed), § 17.2, pp 570-572.

6 Id., § 17.7, pp 577-580.

7 Babcock, supra at 482. In Babcock, the plaintiff and the defendant were taking a weekend trip together from New York to Ontario. Both parties were residents of New York, and the automobile was garaged and licensed in New York. While in Ontario, the defendant lost control of the car and crashed into a wall.

The plaintiff sued in New York. Under Ontario’s guest statute, the suit would have been barred. The New York Court of Appeals, however, stated that Ontario had no interest in seeing its law applied to this case, because all the parties were from New York.

8 These states are Alabama, Georgia, Kansas, Maryland, New Mexico, North Carolina, South Carolina, Virginia, West Virginia, and Wyoming. Solimine, The impact of Babcock v Jackson: An empirical note, 56 Alb L R 773 (1993).

9 Currie, Selected Essays on the Conflict of Laws, pp 177-187.

10 Leflar, Choice-influencing considerations in conflicts law, 41 NYU L R 267, 282 (1966). Three states, Minnesota, New Hampshire, and Wisconsin have adopted this approach. See Milkovich v Saari, 295 Minn 155; 203 NW2d 408 (1973); Clark v Clark, 107 NH 351; 222 A2d 205 (1966); Zelinger v State Sand & Gravel Co, 38 Wis 2d 98; 156 NW2d 466 (1968).

11 Restatement Conflicts of Law, 2d, § 145, p 414.

12 Foster v Leggett, 484 SW2d 827 (Ky App, 1972).

13 Olmstead v Anderson, supra at 9, n 6.

14 Borchers, The choice-of-law revolution: An empirical study, 49 Wash & Lee L R 357 (1992).

15 According to Professor Borchers’ research, the Second Restatement’s approach results in the application of forum law fifty-five percent of the time, with a margin of error of five percent. Interest analysis results in forum law sixty-three percent of the time, with a margin of error of ten percent. Leflar’s approach yields forum law in sixty-five percent of cases, with a margin of error of eleven percent The lex fori rule yields lex fori in seventy-seven percent of cases, with a twenty-three percent margin of error. When one considers the margins of error, one can conclude that there is no statistically significant difference between the modern approaches in terms of the application of forum law. Id., n 14 supra at 374-375.

16 McDougal, The real legacy of Babcock v Jackson: Lex fori instead of lex loci delicti and now it’s time for a real choice-of-law revolution, 56 Alb L R 795, 797 (1993).

17 Sedler, Choice of law in Michigan: Judicial method and the policy-centered conflict of laws, 29 Wayne L R 1193, 1198-1199 (1983).

18 This opinion was also signed by Justices Levin and Moody.

19 See, e.g., Severine v Ford Aerospace & Communications Corp, 118 Mich App 769; 325 NW2d 572 (1982); Hamann v American Motors Corp, 131 Mich App 605; 345 NW2d 699 (1983).

20 See, e.g., Bennett v Enstrom Helicopter Corp (On Reconsideration), 686 F2d 406 (CA 6, 1982); Vogh v American Int'l Rent-A-Car, Inc, 134 Mich App 362, 368; 350 NW2d 882 (1984); Hampshire v Ford Motor Co, 155 Mich App 143; 399 NW2d 36 (1986).

21 Ohio Rev Code Ann 2305.10.

22 The “significant contacts” required for choice of law purposes is similar to the “minimum contacts” required for jurisdictional purposes. That is, International Shoe Co v Washington, 326 US 310, 316; 66 S Ct 154; 90 L Ed 95 (1945), holds that a state may not exercise jurisdiction over a defendant unless the defendant and state have “minimum contacts” so that “traditional notions of fair play and substantial justice” are not offended.

The United States Supreme Court has never determined the relationship between the “significant” contacts required for choice of law and “minimum” contacts required for jurisdiction. Scoles & Hay, n 5 supra, §§ 3.28-3.29, pp 96-101; Martin, Personal jurisdiction and choice of law, 78 Mich L R 872 (1980). However, at least one commentator has argued that the standards should be the same. Id. Intuitively, at least as many contacts should be required for choice of law purposes as for jurisdictional purposes. It would make little sense to say that state X does not have enough contacts to exercise jurisdiction, but yet allow state Y to apply state X’s law.

23 Ch H.8, Ont Rev Stat 206.

24 The Supreme Court of Canada has superintending control over the interpretation of all federal and provincial laws. Tolofson, supra. Thus, choice of law jurisprudence is uniform throughout the provinces. This stands in sharp contrast to the American experience, where the United States Supreme Court has shown a deep reluctance to federalize choice of law. See Sun Oil Co v Wortman, 486 US 717; 108 S Ct 2117; 100 L Ed 2d 743 (1988).

Interestingly, Canadian choice of law jurisprudence is moving in exactly the opposite direction from American choice of law jurisprudence. While American courts are moving from a lex loci delicti standard to lex fori, Canadian courts have moved from lex fori to lex loci delicti. See Tolofson, supra.

25 See also Abb Power Generation v CSX Transportation, 1996 Ont C J LEXIS 1029 (stating that Ohio tort law will apply to a suit commenced in Ontario).

26 In looking at Ontario’s statute of limitations, we in no way intend to breathe life into the doctrine of renvoi. Under renvoi, once a court determines that it will apply the law of another jurisdiction, it applies the entire law of that jurisdiction, including its choice of law rules. Thus, the choice of law rules of the chosen state could point the court to a third state or back to the forum state. Renvoi creates the potential for circular analysis and has been criticized by American courts. See, e.g., Haumschild v Continental Casualty Co, 7 Wis 2d 130, 142; 95 NW2d 814 (1959).

In this case, we do not engage in renvoi because we decline to apply any of Ontario’s law. We look at Ontario’s choice of law rules merely to determine Ontario’s interests.