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WHITE v. SMITH

July 21, 1975

Andrew WHITE and Elizabeth White, Plaintiffs,
v.
Samuel SMITH et al., Defendants



The opinion of the court was delivered by: GERRY

 GERRY, District Judge.

 Samuel Smith, the defendant is a resident of Michigan. Smith traveled from Detroit to New York City, where he rented a 1972 two-door sedan from defendant, Avis Rent-A-Car, a Delaware Corporation which does business in New York. Smith agreed to return the vehicle to New York City by July 5, 1972. The automobile was licensed and registered in New York by its title owner, defendant Chrysler Leasing Corporation, also a Delaware Corporation doing business in New York. The vehicle had previously been leased for a long term by Chrysler to Avis for use in the latter's business of renting cars to the general public.

 On July 4, 1972, Smith drove his rented automobile to Philadelphia to visit some relatives. From there, Smith and some companions set out for the Jersey shore via the Atlantic City Expressway. While traveling eastbound, one of Smith's companions apparently realized he had left his hat in an Expressway restaurant. Smith, intending to retrieve the hat, executed a "U" turn, and proceeded west, still driving in the eastbound lane.

 At this point, plaintiffs, Andrew and Elizabeth White, residents of Pennsylvania, were driving their Pennsylvania registered automobile eastward toward Atlantic City and the approaching Smith sedan. The White vehicle collided head-on with the Smith/Avis vehicle on the Expressway in Hamilton Township, New Jersey. This lawsuit for damages is the result of that untimely incident.

 The Whites sued Smith, Chrysler and Avis in the District of New Jersey, site of the accident. Jurisdiction is based upon diversity of citizenship and the amount in controversy exceeds $10,000.

 Presently before the Court are the motions of Chrysler and Avis for summary judgment. The Court's disposition of these motions will depend upon which state's law is applicable on the issue of an automobile owner's liability for the driver's negligence. Defendants contend that either New Jersey or Pennsylvania law must be applied, in which case they urge that neither Avis nor Chrysler could be liable as a matter of law based on the record presently before this Court. The Whites, however, have tendered the law of New York, under which they argue that the negligence of an operator must be imputed to the vehicle's owner. *fn1"

 I

 At the outset, it is undisputed that in a diversity case, a federal court must apply the forum state's choice of law rules. Klaxon Company v. Stentor Electric Manufacturing Company, Inc., 313 U.S. 487, 61 S. Ct. 1020, 85 L. Ed. 1477 (1941). In determining whether the law of New York, New Jersey or Pennsylvania should thus be applied on the issue of an automobile owner's liability, the New Jersey choice of law rules are binding upon this Court.

 It is equally clear that New Jersey has long since abandoned the mechanical lex loci delicti or "vested right" approach to conflicts of laws, e.g., Harber v. Graham, 105 N.J.L.213, 143 A. 340 (E. & A. 1928), substituting in its stead the modern "governmental interest" analysis. Heavner v. Uniroyal, Inc., 63 N.J. 130, 305 A.2d 412 (1973); Rose v. Port of New York Authority, 61 N.J. 129, 293 A.2d 371 (1972); Pfau v. Trent Aluminum Co., 55 N.J. 511, 263 A.2d 129 (1970); Mellk v. Sarahson, 49 N.J. 226, 229 A.2d 625 (1967). *fn2"

 Under the lex loci delicti approach, the law of the place of the tort automatically controlled the case. In determining which jurisdiction's law should apply, the Court simply decided where the situs of the accident was and applied the law of that state. Uniformity, certainty, predictability of result, as well as ease of application, were advantages of this rule.

 The more flexible governmental interest approach, however, eschews the mechanical application of strict rules, and recognizes that one state may have an interest in having its law applied to the rights and liabilities of parties to an event which occurred in another state. Mellk v. Sarahson, 49 N.J. 226, 229, 229 A.2d 625 (1967). Indeed, the foreign state's interest in applying its law may outweigh the interest of the forum state on a particular issue. It is not unusual for the forum to demonstrate little or no interest in a given issue at all. Henry v. Richardson-Merrell, Inc., 508 F.2d 28 (3rd Cir. 1975); Heavner v. Uniroyal, Inc., supra. The function of the Court is thus to apply the law of the state which has the greatest interest in having its law govern the particular matter in issue.

 In order to determine which state has the greatest interest in the application of its own law, each issue must be analyzed separately. Governmental interest is determined by closely scrutinizing the underlying interests and public policy of the forum law vis-a-vis the interests and policies of other states whose laws are at variance with forum law, but whose laws, nevertheless, are at least arguably applicable. Breslin v. Liberty Mutual Insurance Co., 125 N.J.Super. 320, 310 A.2d 527 (L.Div.1973). If a strong state policy or interest will be neither fostered by applying that state's law, nor frustrated by the failure to apply it, it is highly unlikely that that state has any interest whatsoever in blanketing that particular issue with its law.

 In determining where a state's interests lie, the Court must consider the significant facts or contacts which relate an issue to that state. Such contacts are considered, however, only to the extent that they are relevant to the purposes of the particular laws in conflict. For example, the situs of an accident will certainly be relevant on the issue of the standard of care, since a state clearly has an interest in regulating conduct within its borders. Pfau v. Trent Aluminum Co., supra; Tooker v. Lopez, 24 N.Y.2d 569, 301 N.Y.S.2d 519, 249 N.E.2d 394 (1969). On the issue of the nature of the remedy, however, the situs may be less relevant, especially if another state has a predominant interest in regulating the relationship between the parties. Miller v. Miller, 22 N.Y.2d 12, 19, 290 N.Y.S.2d 734, 237 N.E.2d 877 (1968).

 It is not enough merely to apply the law of the jurisdiction which numerically has the most contacts with a particular issue, for such an exercise would be as mechanical and unjust as an automatic application of the lex loci delicti. On the contrary, it is the quality, not the quantity, of a state's contact with an issue which ultimately determines whether its law should be applied. Mullane v. Stavola, 101 N.J.Super. 184, 189, 243 A.2d 842 (L.Div.1968).

 The governmental interest analysis, providing as it does a progressive, fluid alternative to the ritualistic application of lex loci delicti, by its very nature does not lend itself to a brief encapsulated rule of operation. New York Court of Appeals Judge Burke, however, enunciated a concise and succinct statement of guidelines, worthy of repetition, within which such an analysis should be conducted:

 
It is necessary first to isolate the issue, next to identify the policies embraced in the laws in conflict, and finally to examine the contacts of the respective jurisdictions to ascertain which has a superior connection with the occurrence and thus would have a superior interest in having its policy or law applied.

 Dym v. Gordon, 16 N.Y.2d 120, 124, 262 N.Y.S.2d 463, 466, 209 N.E.2d 792, 794 (1965).

 II

 As has been previously noted, the only issue sub judice is the extent of a vehicle owner's liability for the negligence of one to whom the vehicle is leased.

 New Jersey and Pennsylvania adhere to the common law with respect to an owner's liability. Generally, ownership alone is not sufficient in those states to impose liability upon the owner for the negligent operation of his vehicle by another. *fn3" In order to recover damages from an owner, it must be shown that the driver of the vehicle was on the owner's business as his agent, that the driver was an employee within the course of his employment, or that some other master-servant relationship existed between owner and driver. *fn4"

 Under the common law in those states, an automobile owner who loans or rents his vehicle to another is not liable for the bailee's negligence unless there is proof that the owner was himself negligent in renting to a reckless, incompetent or irresponsible bailee. *fn5" Absent a showing of agency, or negligent choice of bailee, even an owner in the business of leasing automobiles may not be held liable for the bailee's negligence under the common law. *fn6"

 Although New York formerly recognized these common law principles, that state's legislature has abrogated them to a great extent by the passage of Section 388 of the New York ...


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