What happens in Vegas might be resolved by a California court

A tour bus is manufactured in Indiana, and delivered to a buyer in Las Vegas. While driving from Las Vegas to the Grand Canyon, the bus rolls over, killing or injuring passengers who did not have seatbelts (the driver and a guide has seatbelts and survived). The injured and dead are all Chinese nationals. Whose law applies?

California's, of course.

That's the ruling in Chen v. L.A. Truck Centers, 2017 DJDAR 492 (Jan. 18, 2017). The ruling should sound surprising based on the above facts. There are a few other facts that make it less so. Perhaps the biggest takeaway of the decision is that choice of law depends on the parties involved, and if that changes over the course of the case, so can the applicable law.

Plaintiffs sued the Indiana manufacturer of the bus (Starwest), the driver, the tour company and the dealer (Buswest) that sold the bus to the tour company. All but the manufacturer were California residents. Consistent with its usual practice, the dealer did not order passenger seat belts for the tour bus, although they were available for nominal charge. The bus sat on Buswest's California lot for two years until it the tour company purchased it and had it delivered to Las Vegas. The bus was licensed to travel in California, Nevada and Arizona.

Plaintiffs brought two motions to determine whether Indiana or California law applied. Chen held that "Indiana law does not permit a plaintiff to recover for a defectively designed product unless the seller failed to exercise reasonable care in designing the product. (Ind. Code, § 34-20-2-2.) This is in marked contrast to California, as California law allows recovery for a defectively designed product even if the defendant used reasonable care." In other words, Indiana is a "negligence-only" jurisdiction, whereas California also has strict products liability.

The trial court ruled that Indiana law applied. "[T]he court identified three interests which could potentially be at stake: (1) a state's interest in compensating its injured residents; (2) a state's interest in deterring wrongful conduct within its borders; and (3) a state's interest in protecting its resident defendants from excessive damages." The first two interests did not apply, because plaintiffs were Chinese nationals and the accident occurred in Arizona. The third interest favored Indiana. "Indiana has an interest in applying its law to protect its resident defendant (Starcraft) and California's interest is aligned, in that the application of Indiana law would also protect the California defendant (Buswest)."

Plaintiffs thereafter reached a pretrial settlement with Indiana defendant Starcraft, and sought reconsideration of the choice of law issue. Plaintiffs argued that, "in the absence of Starcraft, Indiana had no interest in the application of its law. They argued that, to the extent Indiana had a residual interest in encouraging the purchase of products from its residents, that interest was overwhelmed by California's interest in regulating the sale of defective products within its borders." The trial court rejected this second motion as well, in part on the rationale that it was an improper motion for reconsideration, in part on the ground that the parties had relied on the choice of law determination and it was unfair to change on the eve of trial and in part because the court found the initial ruling to be correct.

The jury found for the defense. Plaintiffs appealed, and the Court of Appeal reversed, largely on the grounds plaintiffs had argued in their second motion.

As a preliminary matter, the court found that rules related to motions for reconsideration did not apply to choice of law determinations.

"A motion to determine the law to be applied in a case is 'the equivalent of an in limine motion that seeks to resolve a conflict of laws or choice of law issue.' In limine rulings are not binding; they are subject to reconsideration upon full information at trial. Because by their very nature, motions in limine are subject to reconsideration at any time prior to the submission of the cause, they are not subject to the formal constraints of a motion for reconsideration under Code of Civil Procedure section 1008." (Internal citations omitted.)

The court found this general in limine principle particularly appropriate for choice of law rulings. "Conflicts of law questions cannot properly be resolved until the actual issues are known. More importantly, identification of the governmental interests implicated by the conflicting laws on any issue depend on the circumstances of the case - both the facts as they are developed at trial and the parties involved. In this case, it is the parties involved that are key .... once Starcraft had been dismissed from the case, any interest Indiana had in applying its law to Starcraft was no longer at issue. The court was required to reconsider its choice of law analysis in the absence of the Indiana defendant."

The court's analysis of the relevant California governmental interests suggests that, while there is an interest in offering the protections and benefits of California law to California resident plaintiffs, there is no corresponding interest in "protecting" a California resident defendant by applying the more favorable law of another jurisdiction.

According to the Chen court: "The primary purpose of California's strict products liability law is to insure that the cost of injuries of defective products is borne by the manufacturers that put such products on the market rather than by the injured persons who are powerless to protect themselves." That the plaintiffs "are neither injured in California nor California residents" is not determinative. "[T]he policy behind strict products liability is greater than simple plaintiff compensation. For one, it implicates the public policy that the cost of defective products be borne by the manufacturers who put such products on the market. Buswest placed the bus on the market in California; California's policy interest is therefore implicated." Another interest is "to provide an economic incentive for improved product safety; this clearly applies to a California dealership which orders products and has the option to include safety devices." Other interests implicated are "to induce the reallocation of resources toward safer products" and "to spread the risk of loss among all who use the product."

If at first you do not succeed, try, try again. If the parties change, then even if it is the same plaintiffs and the same injuries and the same accident, the choice of law can change too.