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Final Examination in Conflict of Laws for Summer, 2002
Professor Lawrence Jones

Instructions

1. This is a closed-book examination. Please abide by all that that implies.

2. You have three hours in which to read, analyze, organize, write and submit your essay.

3. There is only one problem, entitled "Wi v. Hub for $1,000,000." It is set out on seven pages. Make sure that you have all seven.

4. The seven pages are divided into four pages that contain a lengthy introduction, a brief description of the laws of three states and the basic facts. These are followed by three pages of an appendix containing footnotes that elaborate on the laws and the reasons for them. One efficient way of approaching this exam is to begin by analyzing the issues and organizing your thoughts before reading these last three pages. Consult those footnotes located in the appendix as needed in order to clarify the rule that you are thinking about and for its potential scope and reach in time and across state lines.

Wi v. Hub for $1,000,000

INTRODUCTION

Red, White and Green are states of the United States of America. Red is on the east coast, Green is in the north, next to the Canadian border, and White lies between them.

Red courts replaced the traditional approach to choice of law with "governmental interest" analysis a half century ago, in Currie v. Beale (Red 1952). Since then, Red courts consistently cite with approval the essays by Professor Brainerd Currie, and all of the opinions assigned in our course that apply the "governmental interest" approach.

The Supreme Court of White, in Reese v. Borchers (White 2000), recently adopted the approach laid out in the Second Restatement of Conflict of Laws for all choice of law issues. It cited with approval all of the cases and materials assigned in our course under the Second Restatement's phrase, "the most significant relationship."

The Supreme Court of Green recently announced, in Fori v. Rehnquist (Green 2001), that Green courts will protect the purposes of its laws by applying the law of Green to all issues to the extent permitted by the Constitution of the United States.

Wi (think wife) has notified Insurco, Hub's liability insurance company, that she is thinking about suing her husband, Hub, for $1,000,000, in a court of one of these three states. She will allege that Hub was negligent and a proximate cause of all the personal injuries she suffered in a two car collision.

You must assume for purposes of this exam, that the jury, if asked, will find that her allegations are true and that her compensatory damages are $1,000,000. If asked, the jury will allocate this $1,000,000 verdict equally between "economic damages" (for medical expenses and loss of earnings) and "non-economic damages" (pain and suffering); in other words, $500,000 for "economic damages" and $500,000 for "non-economic damages."

Wherever Wi decides to file her claim, the attorneys will argue to the trial judge over the law to be applied on two issues. The first issue is whether Hub is liable at all to Wi in light of White's rule, as of the time of the accident, that one spouse is immune from tort liability to the other spouse for negligence ("interspousal immunity"). If Wi overcomes this immunity, then the case will be submitted to the jury which will render its verdict in favor of Wi for $1,000,000.

Such a verdict will raise a second issue as to the extent of Hub's liability to Wi. This question is created solely by the role that the driver of the other car, Otto (think other), played in the two-car collision. Wi has decided not to sue Otto because he has no liability insurance or any other means with which to satisfy any portion of a judgment against him.

Nevertheless, if asked to do so in light of the law chosen to apply to this issue, the jury will find that Otto is equally to blame as Hub (50% each) for the collision, and is a second and equally necessary and proximate cause of the collision and all of Wi's injuries and hence of $1,000,000 in compensatory damages. If the law of White governs this issue, the verdict will be reduced to a judgment for $500,000. If the law of Green governs this issue, then the judge will render a final judgment against Hub for the full amount of the $1,000,000 jury verdict. If the law of Red governs this issue, the verdict will be reduced to a judgment for $750,000.

Ultimately, you will be asked to advise Wi as to which of these three states she should file her complaint if Insurco does not settle her claim for $750,000 of more, in light of the law and the facts still to be described.

In the next part, I will describe the laws of White, Green and Red on these two issues. In footnotes to support the statements of state law, I will cite cases and other sources of state law. The footnotes are located at the end of this problem, in an Appendix. Some of these sources located in the Appendix will either quote directly from the primary source of law or will summarize the reasons the law-maker gave for the rule under discussion. Some of these footnotes give additional factual information about this case when they are germane to the reasons given. If no reasons are mentioned, then assume that no reasons were given other than precedent seemed to require it.

THE LAWS OF WHITE, GREEN AND RED ON INTERSPOUSAL IMMUNITY

White was the first state to adopt the traditional common law rule of interspousal immunity to tort liability (ftn 1). But as the high courts of Green and Red explained in abolishing the immunity in their states, the immunity was created at a time when neither spouse carried insurance for accidental injuries (ftn 2). However, the Supreme Court of White, in Time v. Time (2002), did not get around to over-ruling its prior rule of immunity until AFTER Wi's accident and the new rule was said to be not retroactive for reasons of insurance coverage (ftn 3).

THE LAWS OF GREEN, WHITE AND RED
ON THE EXTENT OF HUB'S LIABILITY

At first, all three states adopted the traditional common law rule called "joint and several" liability. This rule makes each negligent driver liable for all the harm he proximately causes, even if another negligent driver is also a proximate cause of all of the same injuries, as in this case. But only Green still retains this rule (ftn 4). Thus, if Green law governs, the jury verdict for $1,000,000 will not be reduced and a final judgment for that amount will be rendered against Hub.

In contrast, the Supreme Court of White replaced this rule some time ago and replaced it with a rule that limits each defendant's liability in proportion to that defendant's fault.

Thus, under the law of White, if Hub is liable at all, his liability to Wi would be reduced to $500,000 in light of the jury's finding that Hub bore only 50% of the total blame for the two-car collision (ftn5).

The law of Red lies between the rules of Green and White on this issue. In 1986, the legislature enacted a statute, as it had to under the constitution of the state of Red, to implement an Initiative Proposal submitted directly to the voters of Red and approved by a comfortable majority of them. The statute adopts White's rule of proportional liability for "non-economic" damages for Wi's pain and suffering, but retains Green's rule for "economic" damages for her medical expenses and loss of earnings (ftn 6). Thus, if the law of Red governs this issue, then Hub's liability would be reduced from $1,000,000 to $750,000, to reflect the jury's findings that Wi's compensatory damages should be equally divided between "economic" and "noneconomic" damages.

THE FACTS

Wi and Hub were born, raised, educated and married in Red. They continue to have a happy life together. And they lived in Red until last week, despite the hectic pace of life and the dangerous commutes on its congested highways in this densely populated area.

A few years ago, Hub purchased a small used red car. It had air bag protection only for the driver's side. He registered the red car at the office of the Red Department of Motor Vehicles nearest their apartment in Red.

Hub went to Insurco's office in Red and filled out an application for a standard insurance policy that would insure Hub against having to pay any liability of up to $1,000,000 to "any one person for any accident anywhere in North America proximately caused by the negligence" of Hub in regard to his insured red car. This language makes Wi an intended third party beneficiary of the contract that Insurco made with Hub soon thereafter.

Insurco is a liability insurance company that has offices and does business in Red and White. But Insurco does not do business in Green. The price ("premiums") Hub was asked to pay for such coverage was the highest that Insurco charges in Red or White, primarily because of the high rate of traffic accidents in the area where Hub and Wi lived.

Hub's application was sent electronically to White, where Insurco was incorporated and has its principal place of business. There, the application was quickly read and approved and returned electronically to its office in Red. Before Hub even left the office, he learned of the acceptance and paid the premiums.

The tragic accident occurred in White one month ago. They were on their way to take a vacation in Green, a state that neither of them had ever visited. Hub was negligently driving his small used red car with Wi securely buckled up in a seat belt on the passenger side. Suddenly, a big white car negligently driven by Otto appeared. Because of the resulting braking by both Hub and Otto, the front of the large white car struck the passenger side of the small red car. Because of their airbags and seatbelts, neither Otto nor Hub suffered measurable injury. Otto was driven to his small apartment in White by a White Highway Patrol officer.

But Wi was nearly killed. If it had not been for the expert care she received in the ambulance and in the emergency room of the White Public Hospital near the scene of the accident, she would have died.

When it was safe to do so, Wi was moved to a hospital in Red near the apartment that Wi and Hub were renting in Red. Hub visited her in the hospital as often as possible. Their conversations persuaded them that the accident had changed their priorities. Their prior dreams of well-paid positions that would allow them to pay their mounting medicals bills, pay off their college loans, buy a comfortable home in the suburbs, and go to fine restaurants, no longer seemed attractive. They decided to fly to Green as soon as Wi was released and see for themselves whether the slower-paced, simpler life-style that they had heard so much about would make for a better life together.

They made the trip to Green and fell in love with it. Yesterday, they officially moved to a charming village in Green where they began planning a new environmentally-friendly business with money to be borrowed from a local bank. They rented an apartment on the edge of the village near a peaceful lake in a green forest.

Wi consulted a local attorney who knew only the favorable law of Green, and was unable to tell her what the law of Red or White was. But you do.

YOUR TASKS

1. Discuss in any order the likely outcome in Red, White and Green if Wi were to sue Hub. Discuss the issue of interspousal immunity before discussing the issue of the extent of Hub's liability.

2. Wi's goal is to collect the largest amount of money that Insurco can be forced to pay. In light of your analysis above, advise Wi of the best and second best state in which to file her claim against Hub.

APPENDIX

Below are the footnotes to the parts describing the laws of the three states on the issues of interspousal liability and the extent of Hub's liability. The cases cited below had no multi-state complications.

Interspousal Immunity

1. Self v. Self (White 1898). The court justified interspousal immunity in the following language, "Husband and wife are one and one cannot sue oneself. We are not inclined to set this doctrine aside without good reason. The state's writ should not be allowed to enter the family home where every man is a king in his own castle. To allow it is to allow the wife to set herself against her husband in full public view, making it difficult to compromise and resolve their dispute by their own more-private dispute resolution methods. The state should not disturb their chances for domestic tranquility and family harmony."

2. The Supreme Court of Green, in Free v. Free (Green 1955), asserted that where, as in the case before them, the defendant-spouse's liability insurance would pay the injured spouse, the risk of disturbing marital harmony was nonexistent. Indeed, the court felt that in that situation, the real risk was that the insured defendant would be too sympathetic of the goals of his spouse and would stretch the truth and testify that he was negligent in causing the accident, so as to transfer money from the insurance company to the injured spouse, and at no expense to the defendant since the insurance company had the duty of selecting and paying for the defendant's attorney.

But the Green court felt that this risk of colluding against the insurance company was not confined to parties that are married to each other. The court cited the legislature's repeal of Green's automobile guest statute so as to allow a friend of the driver to succeed in establishing liability in a situation where, once again, the defendant driver may be motivated to help his friend by admitting to being negligent when his first instincts is to deny blame for the accident.

It should be noted that no state involved in Wi's claim had an automobile guest statute that would have required her to prove more than just ordinary negligence to establish liability.

The Supreme Court of Red, well before this accident, in Hip v. Hip (Red 2000), followed the majority rule elsewhere and noted that the rule of spousal immunity was "anachronistic."

3. Time v. Time (White 2002) was decided one week after Wi's injuries. The court stated that the new rule would apply retroactively. The court explained that this delay would allow parties to liability insurance contract the time need to make changes in them in light of the new rule of no immunity to tort liability.

There is good reason for this. Many insurers have added language to their insurance contracts that exclude coverage of claims by members of the same household as the insured car driver. When this exclusion is brought home to the insured, a rational alternative to insurance against tort liability within the family becomes evident: "no-fault first-party" insurance. For example, most companies offer to sell, as an option for an additional premium, "medical pay" insurance.. Under this option, the insurance company pays the medical bills of the passengers in the insured car were injured in an accident regardless of whether they could prove that the driver was negligent. Hub rejected this "medical pay" option when the Insurco agent in Red offered it to him, even though Wi and Hub have no medical insurance of any kind.

The Extent of Hub's Liability

4. In Prudence v. Rich (Green 1955), the Supreme Court of Green retained the traditional common law rule of "joint and several" liability and applied it to a case where, as here, the plaintiff sued only the one negligent driver that could pay. The court reasoned that it was better to put the burden of collecting from the uninsured driver on the one who paid the injured victim more than his proportionate share of the total blame than on the injured plaintiff.

In states such as Green, a procedure, usually called "contribution," exists that would give such a defendant (or here, Insurco, if it satisfied Wi's judgment) the right to try to collect up to $500,000 from Otto. The right to try is of little value in this case.

5. The Supreme Court of White adopted this principle of proportionality, termed "several" liability in this context, in Biker v. Red Motorcycle, Inc. (White 1970). Under this rule, there is no payment in excess of one's fair share and hence no need to give the payor an action for "contribution" against another who failed to pay his fair share.

In Biker, the Supreme Court of White reasoned that the retention of "joint and several" liability was inconsistent with the adoption of some form of comparative fault which converted the contributory negligence of the plaintiff from a complete defense to a partial defense proportioned to the fault of the plaintiff compared with that of the defendant. This principle of proportionality was applied even if the defendant failed to prove that the plaintiff was at fault but did prove, as here, that another driver was as much at fault as the defendant.

6. The officially adopted purposes are stated in Red Civil Code section 1431.
and the rules are stated in section 1431.2. These sections follow:

(Added by Initiative Measure number 5, approved by the People of Red, June 3, 1995).