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Allen v. Volkswagen of America Inc.

argued: April 1, 1977.



Seitz, Chief Judge, Aldisert and Hunter, Circuit Judges. Seitz, Chief Judge, concurring.

Author: Per Curiam

This appeal presents the question whether the court below, sitting in diversity, erred in "borrowing" the statute of limitations of California - the state where the cause of action arose - rather than applying the statute of limitations of New Jersey - the forum state. The district court improperly applied the governing state rules in reaching its decision to borrow the California statute. Nevertheless, we are convinced that the California statute should control. Therefore, we affirm.


Sheryl Lynne Allen, a resident of California was injured in an automobile accident on September 20, 1973. On September 19, 1975, she and her husband filed a complaint in the District of New Jersey against the manufacturer and the importer of the automobile she had been driving - Volkswagenwerk Aktiengesellschaft, a West German corporation, and Volkswagen of America, Inc., a New Jersey corporation. Jurisdiction was founded on diversity. The complaint sought damages against both defendants for negligent design, manufacture, and sale of the vehicle in question, breach of express and implied warranties, and strict liability.

Defendants moved for summary judgment, contending that California's one-year statute of limitations, Cal. Code Civ. Proc. ยง 340, applied and necessitated dismissal. Plaintiffs opposed the motion, arguing that New Jersey's two-year statute of limitations, N.J. Stat. Ann. 2A:14-2, applied. Both sides submitted briefs, and defendants submitted two affidavits of the "Products Liaison Manager" of Volkswagen of America. Despite requests by both sides for oral argument, the court decided on the basis of the papers submitted that California's one-year statute of limitations applied. It dismissed the complaint with prejudice and entered judgment on May 26, 1976. This appeal followed.


In diversity cases, "the federal courts must follow conflict of law rules prevailing in the states in which they sit." Klaxon Co. v. Stentor Co., 313 U.S. 487, 494, 85 L. Ed. 1477, 61 S. Ct. 1020 (1941). Confronted by a conflict between two competing statutes of limitations, the district court in this case properly turned to the New Jersey case governing the subject, Heavner v. Uniroyal, Inc., 63 N.J. 130, 305 A.2d 412 (1970).

In Heavner, the Supreme Court of New Jersey reconsidered the common law rule that the statute of limitations of the forum state is always to be applied:*fn1

We are convinced the time has come, for the reasons previously outlined, to discard the mechanical rule that the limitations law of this state must be employed in every suit on a foreign cause of action. We need go no further now than to say that when the cause of action arises in another state the parties are all present in and amenable to the jurisdiction of that state, New Jersey has no substantial interest in the matter, the substantive law of the foreign state is to be applied, and its limitation period has expired at the time suit is commenced here, New Jersey will hold the suit barred. In essence, we will "borrow" the limitations law of the foreign state. We presently restrict our conclusion to the factual pattern identical with or akin to that in the case before us, for there may well be situations involving significant interests of this state where it would be inequitable or unjust to apply the concept we here espouse.

This court has interpreted Heavner as adopting the "governmental interest approach" to resolving conflicts of law as to statutes of limitation. Henry v. Richardson-Merrell, Inc., 508 F.2d 28, 32 (3d Cir. 1973). That approach involves two steps: "The court determines first the governmental policies evidenced by the laws of each related jurisdiction and second the factual contacts between the parties and each related jurisdiction." Id. Quite clearly, this second step requires the balancing of the various factual contacts. Id. at 35. According to Henry, the Heavner court did not perform the first step - policy examination. But it did make clear, by reference to the five factors listed in the paragraph quoted above, that "there were insufficient factual contacts to justify application of New Jersey law." 508 F.2d at 33. In other words, the Henry court read Heavner as establishing New Jersey's method of performing the second step in the governmental interest analysis. It requires the balancing of all five factors enumerated in the quoted passage: (1) where the cause of action arose; (2) amenability to suit in other states; (3) the substantial interest, if any, of New Jersey in the suit; (4) which state's substantive law will apply; and (5) whether the other state's limitations statute has run.*fn2

In spite of this clear mandate to weigh all five of the Heavner factors when determining the relative "factual contacts" of competing jurisdictions, the court below examined only the first two and concluded that they dictated the outcome of the third and fourth:

As stated in Heavner, 63 N.J. at 141, the cause of action arose in California, all of the parties were "present" and amenable to jurisdiction there, and consequently "New Jersey has no substantial interest in the matter." Under these conditions, the California law is to be applied, and New Jersey, as well as this court, will "borrow" the California statute of limitations.

Appendix at 21a (emphasis added). This completely misinterprets the Henry court's view of the Heavner test.*fn3 Determination as to where the cause of action arose and where the parties are amenable to suit do not lead inexorably to findings that New Jersey has no substantial interests or would not apply its substantive law. Under Henry, all are determinations to be reached independently and balanced against one another.*fn4 ...

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