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Budget Rent-A-Car System, Inc. v. Chappell

May 5, 2005


On Appeal from the United States District Court for the Eastern District of Pennsylvania (D.C. Civil Action No. 02-cv-08975) District Judge: Honorable Stewart Dalzell

The opinion of the court was delivered by: Ambro, Circuit Judge


Argued February 15, 2005

Before: SLOVITER, AMBRO and ALDISERT, Circuit Judges


We apply Pennsylvania's choice-of-law rules to determine which state's substantive law (New York's, Michican's or Pennsylvania's) governs the extent of vicarious liability of Budget Rent-a-Car System, Inc. ("Budget"), the owner of a vehicle involved in an accident that rendered Nicole Chappell ("Chappell"), a New York resident, permanently paralyzed. The accident occurred in Pennsylvania as Chappell and her boyfriend, Joseph Powell, III ("Powell"), a Michigan resident, were driving from New York to Michigan in a car Powell had rented from Budget in Michigan (and previously driven to New York).

Because the State of New York has the greatest interest in the application of its law to this dispute, we conclude that its law should apply. The contrary judgment of the District Court is reversed.

I. Pertinent Facts and Procedural History

On the morning of February 12, 2002, Powell rented a Nissan Xterra from Budget in Michigan. Later that day, he drove eight hours to New York to visit Chappell. Powell stayed with Chappell in New York for the rest of that week. On the evening of February 15, after Chappell completed her work week, she and Powell left New York in the Xterra, planning to drive to Michigan to spend the weekend together there.

While driving through Pennsylvania early the next morning, Powell fell asleep at the wheel. The car drifted from the left lane of Interstate 80 across the right lane and into the right guardrail, causing it to flip over. Powell escaped the crash without substantial physical injury. However, the force of the impact ejected Chappell from the Xterra, causing severe injuries. Shortly after the accident, a helicopter transported her to Mercy Hospital in Pittsburgh, where doctors diagnosed, among other injuries, spinal trauma that has rendered Chappell permanently paraplegic.

Budget initiated this action in the United States District Court for the Eastern District of Pennsylvania, seeking a declaratory judgment against Powell and Chappell and asking the Court to determine which state's substantive law governed its vicarious liability as the owner of the vehicle. *fn1 Budget argued that Michigan law should apply, capping its liability at $20,000. Chappell brought two counterclaims against Budget (vicarious liability and negligent entrustment) and a cross-claim against Powell. She argued that Budget faced unlimited vicarious liability under New York law.

The parties cross-moved for summary judgment on the choice-of-law issue, and the District Court granted summary judgment to Budget, holding that Pennsylvania law applied. Chappell moved for a certification of the issue and entry of a final judgment under Fed. R. Civ. P. 54(b). After the District Court granted that motion and entered a final judgment, Chappell timely appealed. We exercise appellate jurisdiction to review the District Court's final judgment under 28 U.S.C. § 1291.

II. Legal Framework

A. Pennsylvania Choice-of-Law

To determine which state's substantive law governs, we must refer to the choice-of-law rules of the jurisdiction in which the District Court sits, here Pennsylvania. Klaxon Co. v. Stentor Electric Mfg. Co., 313 U.S. 487, 496 (1941); Melville v. American Home Assur. Co., 584 F.2d 1306, 1308 (3d Cir. 1978). Under Pennsylvania law, we begin with an "interest analysis" of the policies of all interested states and then—based on the result of that analysis—characterize the case as a true conflict, false conflict, or unprovided-for case. LeJeune v. Bliss-Salem, Inc., 85 F.3d 1069, 1071 (3d Cir. 1996); Lacey v. Cessna Aircraft Co., 932 F.2d 170, 187 & n.15 (3d Cir. 1991).

A true conflict exists "when the governmental interests of [multiple] jurisdictions would be impaired if their law were not applied." Lacey, 932 F.2d at 187 n.15. If a case presents a true conflict, Pennsylvania choice-of-law rules "call for the application of the law of the state having the most significant contacts or relationships with the particular issue." In re Estate of Agostini, 457 A.2d 861, 871 (Pa. Super. Ct. 1983). As explained in the Second Restatement of Conflict of Laws,

the factors relevant to the choice of the applicable rule of law include (a) the needs of the interstate and international systems, (b) the relevant policies of the forum, (c) the relevant policies of other interested states and the relative interests of those states in the determination of the particular issue, (d) the protection of justified expectations, (e) the basic policies underlying the particular field of law, (f) certainty, predictability and uniformity of result, and (g) ease in the determination and application of the law to be applied.

Restatement (Second) of Conflict of Laws § 6 (1971).

"A false conflict exists if only one jurisdiction's governmental interests would be impaired by the application of the other jurisdiction's law." Lacey, 932 F.2d at 187. If there is a false conflict, we must apply the law of the only interested jurisdiction. See, e.g., Kuchinic v. McCrory, 222 A.2d 897, 899–900 (Pa. 1966); Griffith v. United Air Lines, Inc., 203 A.2d 796, 807 (Pa. 1964).

Finally, an unprovided-for case arises when no jurisdiction's interests would be impaired if its laws were not applied. Lex loci delicti (the law of the place of the wrong—here Pennsylvania) continues to govern unprovided-for cases. See, e.g., ...

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