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KATHENES v. QUICK CHEK FOOD STORES

October 9, 1984

NANCY KATHENES, Plaintiff,
v.
QUICK CHEK FOOD STORES; JOYCE BEVERAGES OF NEW JERSEY, INC.; OWENS-ILLINOIS COMPANY and THE SEVEN-UP COMPANY, Defendants



The opinion of the court was delivered by: DEBEVOISE

 Nancy Kathenes was injured when the cap of a soda bottle flew off and struck her in the eye. She instituted a personal injury products liability suit in state court against defendants, Quick Chek Food Stores, the retailer, Joyce Beverages, the bottler, and Owens-Illinois, the manufacturer of the allegedly defective bottlecap. Following extensive settlement negotiations, an "Order of Judgment" was filed by the state court judge on November 16th, 1983, entering judgment against Joyce and dismissing plaintiff's claims against Quick Chek and Owens. After entry of judgment, the only claims remaining in the case were Joyce's claims for contribution and indemnification from Owens. Owens removed the case to federal court on December 6, 1983.

 Owens now moves for summary judgment. Owens admits for purposes of this motion that the blank closure (the bottle cap) involved in this case was shipped by Owens to Joyce. It is undisputed that Owens sent an order acknowledgement form with each order to Joyce. *fn1" See Dreffer Aff. at paragraph 3. This order form provided at paragraph 8 that the contract between the parties would be governed by Ohio law. The order form also provided at paragraph 4 that:

 
Seller shall not be liable for any breach of this contract, or of any duty or obligation arising out of or relating hereto, in any amount in excess of the contract price of the articles with respect to which such breach occurs, and shall not be liable in any event for loss of contents or for special or consequential damages.

 The material facts on Owens' motion are not in dispute.

 In order to prevail on a motion for summary judgment, the moving party must prove that "there is no genuine issue as to any material fact and that [the movant] is entitled to judgment as a matter of law." Fed. R. Civ. P. 56. A motion for summary judgment may only be granted if there are no remaining issues of material fact which, if believed by the trier of fact, would justify a finding for the party opposing that judgment. Bryson v. Brand Insulations, Inc., 621 F.2d 556, 559 (3d Cir. 1980). All evidence submitted must be viewed in a light favorable to the party opposing the motion. Wahl v. Rexnord, 624 F.2d 1169, 1181 (3d Cir. 1980). However, the opposing party may not rest upon the mere allegations or denials of his pleadings, but his response must set forth specific facts showing a genuine issue for trial. DeLong Corp. v. Raymond International, Inc., 622 F.2d 1135, 1139 (3d Cir. 1980).

 At the outset, it will have to be determined whether New Jersey or Ohio law applies in this case. A federal district court of New Jersey sitting in diversity must apply New Jersey's choice of law rules. Klaxon v. Stentor Electric Manufacturing Co., 313 U.S. 487, 496, 85 L. Ed. 1477, 61 S. Ct. 1020 (1940); see e.g., Doyle v. Northrop Corp., 455 F. Supp. 1318, 1326 (D.N.J. 1978). New Jersey has adopted the Uniform Commercial Code (UCC) which allows the parties to contractually agree as to which forum's laws will govern their respective rights and duties. N.J. Stat. Ann. 12A:1-105(1). The only restriction upon this power is that the forum chosen must bear a "reasonable relationship" to the transaction involved. See UCC Comment 1 to Section 1-105 citing Seeman v. Philadelphia Warehouse Co., 274 U.S. 403, 71 L. Ed. 1123, 47 S. Ct. 626 (1927). The New Jersey study Comment to Section 1-105 indicates that the "reasonable relationship" requirements of Seeman "would give courts leeway to utilize the 'public policy' considerations set out in the Shotwell case." Shotwell v. Dairymen's League Co-op Association, Inc., 22 N.J. Misc. 171, 37 A.2d 420 (Dist. Ct. 1944) is a pre-UCC case which held that the parties' choice of law would be enforced as long as public policy would not be violated. Id. at 174. The New Jersey Study Comment to Section 1-105, thus, incorporated the holding of Shotwell into the "reasonable relationship" test of N.J. Stat. Ann. 12A:1-105.

 
The parties . . . may state that the law of another jurisdiction shall apply to some or all aspects of the contract, and the expressed intention will be given effect by the Courts so long as it does not violate a strong public policy of this state or try to avoid the law of the state for some unconscionable purpose.

 Id. (emphasis added).

 Thus, it is necessary to decide in the present case whether the application of Ohio law pursuant to paragraph 8 of Owens' order form would violate any public policy of New Jersey.

 Joyce asserts that New Jersey has a strong public policy in favor of applying its own law in products liability cases. See e.g., Monsanto v. Alden Leeds, 130 N.J. Super. 245, 326 A.2d 90 (Law Div. 1974). Joyce notes that by virtue of the settlement it has become liable to the ultimate consumer, Kathenes. Joyce concludes that the strong public policy in New Jersey of holding manufacturers of component parts strictly liable, cf. Michalko v. Cooke Color and Chemical Corp., 91 N.J. 386, 451 A.2d 179 (1982), dictates that New Jersey law be applied to this case. Joyce's argument totally misses the mark. It is true that New Jersey courts have enunciated a strong public policy to apply New Jersey law in the area of products liability. See e.g., Monsanto, 130 N.J. Super. at 245. However, that is not the issue in this case. Rather, the precise issue is whether there is a strong public policy in New Jersey which would prohibit merchants from assigning risks in a commercial transaction. I conclude that there is not.

 After the court in Monsanto noted New Jersey's policy reasons for applying New Jersey law to products claims, it nevertheless applied Missouri law in interpreting the contract which disclaimed all warranties and limited the buyer's remedies. "Since the contract specifies the law to govern its interpretation, and public policy does not dictate otherwise, the contract will be interpreted under Missouri law." Id. at 252. The instant suit is not a case where the seller has limited the remedies of the ultimate consumer. If it were such a case there might be strong policy reasons against applying any law other than New Jersey. However, this is merely a case which involves the allocation of risk between merchants. I find the reasoning of Judge Harding in Pepsi-Cola Metropolitan Bottling Co., Inc., v. Owens-Illinois Inc., to be an accurate statement on the law in New Jersey.

 
Between merchants dealing with each other, limiting a commercial loss on its face is not an unconscionable practice. Here the consumer recovered a personal injury claim against Pepsi. This suit seeks to pass off that recovery to Owens. It seems to the Court that two companies, in the roles of the buyer and seller, that the seller may properly say to the buyer: "Look, I'm going to sell you a certain parts item that you need. In the course of your manufacture, you take it and do with it what you want. I'm not dealing at first hand with the consumer. You are. I don't want to be bound by the consequential aspects of your sale. You can insure yourself, or take whatever steps are necessary to protect yourself against a consumer's claim. But I don't want to be bothered with that. I'm selling you bottle caps. Here they are. I'm going to limit my exposure or your remedy against me, to simply recovering, even if I give you a defective one, the cost of the item, itself." It seems to me that's something perfectly proper one corporation can say to another.

 Slip op. at 15. (Law Div. Middlesex County, November 27, 1978) (attached as an exhibit to Owens' brief). Therefore, I conclude that there is no public policy in New Jersey which would prohibit ...


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