[334] [335] Donald W. Madole, Chairman, Washington, D.C. (argued), Milton G. Sincoff, New York City (argued), George E. Farrell, Washington, D.C., for Plaintiffs' Steering Committee.

George N. Tompkins Jr., (argued), Desmond T. Barry, Edward De Vivo, Condon & Forsyth, New York City, Moffett B. Roller, Cynthia J. Larsen, Condon & Forsyth, Washington, D.C., for defendant Air Florida, Inc.

Walter E. Rutherford, Haight, Gardner, Poor & Havens (argued), New York City, William G. Schaffer, Jones, Waldo, Holbrook & McDonough, Washington, D.C., for defendant American Airlines, Inc.

William A. Gould, Elizabeth S. Merritt, Perkins, Coie, Stone, Olson & Williams, Washington, D.C., Keith Gerrard (of counsel), John D. Dillow (of counsel; argued), Thomas J. McLaughlin (of counsel), Perkins, Coie, Stone, Olson & Williams, Seattle, Wash., for defendant The Boeing Co.

MEMORANDUM OPINION AND ORDER

JOYCE HENS GREEN, District Judge.

Before the Court is the motion of defendant Air Florida, Inc., seeking reconsideration of those portions of this Court's Memorandum Opinion and Order of February 17, 1983 determining that, with respect to the majority of the actions in this consolidated proceeding, the law of the State of Washington shall govern the question of defendant The Boeing Company's liability for an assessment of punitive damages. Air Florida argues that under the applicable analysis, the law of the District of Columbia shall govern that issue. In the alternative, Air Florida seeks severance of the punitive damages issue from the liability trial or certification of the decision for interlocutory appeal. Because of the proximity of the scheduled trial date, the parties were directed to respond to the motion by noon, March 2, 1983. Boeing opposes the motion; the Plaintiffs' Steering Committee concurs with Air Florida, to the extent that Air Florida's motion supports the Plaintiffs' Steering Committee's previous position that District of Columbia punitive damages law shall apply to all defendants in all actions. Defendant American Airlines, Inc. has not filed an opposition to the motion. The arguing parties have briefed the issue more than adequately.

Choice of law questions in air disaster cases often have proven difficult of resolution. In In Re Paris Air Crash of March 3, 1974, 399 F.Supp. 732 (C.D.Cal.1975), Judge Pierson M. Hall, certainly one of the nation's most experienced judges in aviation cases, stated that

The law on "choice of law" in the various states and in the federal courts is a veritable jungle, which, if the law can be found out, leads not to a "rule of action" but a reign of chaos dominated in each case by the judge's "informed guess" as to what some other state than the one in which he sits would hold its law to be.

399 F.Supp. at 739. The Ninth Circuit once referred to the process of determining the law to be applied as involving an entry into "the wilderness in which courts sometimes find themselves when searching for solutions to problems arising under the judicial nightmare known as Conflict of Laws." Forsyth v. Cessna Aircraft Co., 520 F.2d 608, 609 (9th Cir.1975). Many have concluded that the only resolution of this recurring problem is by Congressional enactment of a uniform, national law governing airline tort liability. E.g., In Re Air Crash Disaster Near Chicago, Illinois on May 25, 1979, 644 F.2d 594, 632-33 (7th Cir.1981), see also Kennelly, Litigation Implications of the Chicago O'Hare Airport Crash of American Airlines Flight 191, 15 J.Mar.L.Rev. 273, 297-300 (1982). In an effort to resolve the problem in advance of legislative action, some courts have looked to federal common law or federal aviation regulations as a source of uniform principles. E.g., Kohr v. Allegheny Airlines, Inc., 504 F.2d 400, 403-05 (7th Cir.1974), cert. denied, Forth v. Allegheny [336] Airlines, Inc., 421 U.S. 978, 95 S.Ct. 1979, 44 L.Ed.2d 470 (1975) (federal common law rule of contribution and indemnity—decided by court to be a comparative fault rule—would control in light of pervasive federal regulation of aviation); Paris Air Crash, 399 F.Supp. at 746-47, 750-53 (federal interest evident to court in light of federal regulation of aviation, citing Kohr and Title 14, C.F.R. and appending relevant sections thereof to opinion; federal interest met by application of California law).

Indeed, in Chicago, the Seventh Circuit found it impossible under the governing choice of law rules to discern the law that properly applied to the question of the defendant manufacturer's liability for punitive damages. Employing the interest analysis approach of the Restatement, Second, of the Law of Conflict of Laws, that court found that the two states having the greatest interest in the matter were Missouri, the manufacturer's principal place of business, and California, where the plane was built. 644 F.2d at 613-14. Yet between these two states, the court concluded that neither's interest could be said to be greater than the other's. Id. at 615. Since Missouri law permitted an award of punitive damages while California law did not, the Seventh Circuit was faced with a true conflict. As the court decided that there seemed to be no way to escape from that conflict by reaching a "moderate and restrained" interpretation of either state's policy, the problem simply could not be resolved under the Restatement, Second interest analysis. Id. As a result, the Seventh Circuit was forced to go outside of the established choice of law principles and chose the law of a state acknowledged to be less interested, Illinois, the site of injury, to break the tie. Id.

In the absence of Congressional action or a decision of the Court of Appeals for this Circuit or the Supreme Court, this Court is constrained by the principles so aptly labeled by the Ninth Circuit a "judicial nightmare." This is not to say that the principles to which this Court is bound are in all cases necessarily unworkable. No party to the instant action has argued that, nor is it the view of this Court that a correct and fair resolution of these issues cannot be reached in this proceeding under the present rules. On the contrary. Recognizing this, the Court welcomes the opportunity to reconsider its prior decision in light of the arguments now before it and appreciates the fact that the pending motion provides the vehicle for that review.

Although Air Florida does not suggest any defect in the approach used by the Seventh Circuit in Chicago, the essence of its argument is that in seeking to determine the law applicable to the instant litigation this Court did not simply consider the legal reasoning of Chicago but also transposed the factual application of that analysis to the different facts of the case at bar. Air Florida also challenges the Court's selection of Washington State as the locus of Boeing's allegedly wrongful conduct, to the extent that such conduct complained of includes Boeing's alleged failure to warn Air Florida of dangers, which warnings need not have been made in that state. Air Florida does not disagree with this Court's conclusion that the two jurisdictions most interested in this issue are the District of Columbia and Washington State. Nor does Air Florida argue that the Court did not apply the proper choice of law principles. Air Florida's narrow challenge primarily focuses on the extent to which this Court found Chicago analogous to this case.

In response to Air Florida's motion, Boeing challenges Air Florida's standing to argue that punitive damages should be available against Boeing in that the airline is not a "party aggrieved" by an adverse ruling. However, the potential for jury confusion and prejudice are sufficient to establish on the part of Air Florida a stake in the resolution of the choice of law question as it affects the proceedings of the trial. Nevertheless, even if Air Florida did not have standing to raise the questions presented herein, the Court nonetheless could have entertained a reconsideration of its ruling sua sponte. Boeing also suggests that Air Florida in effect waived its right to argue the question of the law governing Boeing's liability for punitive damages because it did [337] not address the issue in its briefs or at oral argument. The Court finds otherwise. Certainly, in light of the alignment of the two parties on the same side of the case it would have made no more sense for Air Florida to argue for the application of a punitive damages law to Boeing than it would have for Boeing to argue the same with respect to Air Florida—which it did not. Air Florida's interest in the question arose only when this Court ruled that divergent punitive damages laws would govern these parties' liability.

With respect to the choice of law question itself, Boeing argues that the holding in Chicago is precisely on point, interpreting that holding as meaning that in a case such as this the state of injury (evidently as a matter of law) has a lesser interest in promoting its policies on punitive damages than either the state where the conduct allegedly occurred or the state in which the defendant had its principal place of business. Under Chicago, Boeing argues, the court should consider the interests of the state where injury occurred only where there is a conflict between the laws of the latter two jurisdictions.

There are a number of similarities between the facts of this case and those of Chicago. Both involved accidents which occurred upon takeoff. As such, in each case the state where the injury occurred had "very strong interests" in issues relating to the manufacturer's liability for punitive damages. 644 F.2d at 615. In each case no defendant had its principal place of business in the state of injury. Accordingly, in neither case could the state of injury be said to have had an interest in protecting the defendants from assessments of punitive damages. Similarly, in each case the aircraft was built or designed in a state other than the state of injury. Consequently, with respect to this issue neither state would have had a superior interest in such extraterritorial conduct causing injury within its borders, unless one of those states had a policy of punishing such conduct—which it would if its law provided for punitive damages.

There lies the rub. This is where the facts of the instant case depart from those of Chicago. Illinois' interest in the DC-10 manufacturer's liability for punitive damages vis a vis the interest of the other two potentially interested states, Missouri and California, was not as great as is the District of Columbia's interest in Boeing's liability vis a vis the interest of Washington State. Since Illinois did not impose punitive damages, Illinois would not have been disturbed by the application of California's equivalent law to the action. On the other hand, applying Missouri law would not have concerned it either, inasmuch as Illinois, as home of none of the defendants, had no interest in shielding any party from punitive damages. In the instant case, however, the policies of the District of Columbia of preventing air disasters and promoting safe air travel are advanced by the District's decision to allow punitive damage assessments in actions such as this. Those policies would be offended by resort to Washington's law, which denies such awards. As a result, unlike Illinois' interest in Chicago, the District of Columbia's interest in the question of Boeing's liability for punitive damages is by no means subordinate to that of the State of Washington. As another result, because the dilemma which forced the Seventh Circuit to look outside interest analysis is not present here, that analysis remains workable and useful toward resolving the instant choice of law problem.

As noted above, Air Florida disputes the extent to which Boeing's conduct can be said to have been located in Washington State. According to Air Florida, if the site of injury is "almost always fortuitous," Pittway Corp. v. Lockheed Aircraft Corp., 641 F.2d 524, 527-28 (7th Cir.1981), under this Court's reasoning Boeing's liability would always be protected by Washington State's policy against punitive damages.

Yet the inquiry as to the site of defendant's conduct is not an end in itself, but a part of the process of determining the defendant's nexus with the jurisdictions interested in the litigation. In the typical case where the site of an air crash is determined to be "fortuitous" that state is generally [338] not considered to be interested because it "might ... have no substantial relation to either the producer or the passenger." Reese, The Law Governing Airplane Accidents, 39 Wash. & Lee L.Rev. 1303, 1314 (1983). This process also embraces some due process considerations, on the theory that a manufacturer should not be exposed to the tort liability law of a jurisdiction when it could not reasonably foresee becoming subject to that law. Reese, id. at 1311-12.

Boeing has a much more substantial relationship to the District of Columbia than a manufacturer generally has to the site of injury in a typical "fortuitous crash" case. Boeing had to foresee that its small, short-haul 737 aircraft would be used for departures from Washington National Airport, one of the nation's busiest airports and a station limited by federal regulation to domestic flights of 1,000 statute miles or less. See 14 C.F.R. § 159.60 (1982). Certainly, the allegations against that defendant concern the aircraft's performance upon departure. Moreover, with respect to the allegations that Boeing failed to make proper warnings about the aircraft's takeoff performance, as noted above, the locus of any such alleged omissions need not be confined to the State of Washington.

Between the District of Columbia and the State of Washington, the former has the greater interest in the question of Boeing's liability for punitive damages in the instant litigation. While Washington State has made a considered choice not to allow the assessment of punitive damages, that choice necessarily includes a balancing of the interests of resident tortfeasors against the interests of that state in preventing harm caused by tortious conduct. Yet while Washington State, through its legislature, may weigh the rights of its own injured victims against its resident tortfeasors, the sovereignty of other states prevents it from placing on that scale the rights of those injured elsewhere. Accordingly, with respect to those actions in this litigation originally filed in jurisdictions following interest analysis choice of law principles, the law of the District of Columbia shall govern the question of Boeing's liability for punitive damages.

In consideration of the foregoing, it is, by the Court, this 3rd day of March, 1983,

ORDERED, that the motion of defendant Air Florida, Inc., for reconsideration of the Memorandum Opinion and the Order of February 17, 1983 be and hereby is granted, the relief sought in the alternative accordingly hereby being denied, and it is

FURTHER ORDERED, that the same Memorandum Opinion and Order are hereby vacated and withdrawn, and it is

FURTHER ORDERED, that a substitute Memorandum Opinion, and an Order appropriate thereto, shall issue this date, in accordance with the instant Memorandum Opinion and Order, and it is

FURTHER ORDERED, that the Memorandum Opinion to issue this date will differ from that vacated this date only as to (1) the matters discussed at pages 43-46 of that prior opinion requiring amendment in light of this Order, (2) modifications elsewhere in the opinion made necessary by such amendments, and (3) certain alterations sua sponte determined appropriate in the text of footnote 36 of that opinion.

MEMORANDUM OPINION

Before the Court are the several motions and "proposals" of the parties as to which state's law should govern the following issues to be resolved at the consolidated trial in this case: the defendants' liability for compensatory damages, apportionment of liability among defendants, and the defendants' liability for punitive damages. These questions of choice of law have been more than amply briefed, by all defendants, the Plaintiffs' Steering Committee (which is charged with responsibility for presenting the case at trial on behalf of all plaintiffs), and counsel for several of the plaintiffs whose individual actions were originally filed in other courts but transferred here.^[1] [339] A brief review of the facts surrounding this litigation is essential to a full appreciation of the complexity of the issues addressed herein.

This consolidated proceeding arises from the crash of a B-737 passenger jet (designed and built by The Boeing Company and operated by Air Florida, Inc.) in Washington, D.C. on January 13, 1982. The plane departed from Washington National Airport, located across the Potomac River from the city of Washington, in Arlington County, Virginia,^[2] and was bound for Tampa and Fort Lauderdale, Florida. Snow was falling before and during the takeoff. Shortly after the plane left the runway, it hit the Rochambeau Memorial Bridge (the northbound span of what is popularly known as the 14th Street Bridge) connecting Arlington, Virginia and the District of Columbia, damaging several automobiles on the bridge and injuring or killing their occupants. It then fell into the icy waters of the Potomac River below, within the District of Columbia. Five people aboard the flight were pulled from the river to safety, tragically, however, over 70 others died. Most of the victims were residents of the District of Columbia or the states in which its suburbs lie, Maryland and Virginia; other victims were from Florida, Massachusetts, Pennsylvania, Georgia, and Texas. Rescuers from various authorities, including the District of Columbia, the United States Park Police, and Arlington County, went into action as a result of the crash. The bridge, an interstate highway (Route I-395) owned by the District of Columbia and a major commuter route between the city of Washington and its Virginia suburbs, was damaged and remained closed for several days. By a horrible yet unrelated coincidence, within a half-hour of the plane crash a subway train of the Washington Metropolitan Area Transit Authority carrying a full load of passengers derailed in an underground tunnel. The derailment caused several fatalities and resulted in the partial disruption of the Metro subway system, which, like the 14th Street Bridge, is used by many commuters between the District of Columbia and Virginia. The closing of the bridge and the disruption of Metro service prompted the federal government to direct that "nonessential" employees working in the District of Columbia need not report for work for several days following.

Air Florida is a defendant in each of the cases embraced in the consolidated trial. The wrongdoing alleged against Air Florida centers around the actions of the cockpit crew and the procedures they followed before and during the takeoff, including their decisions regarding the necessity of undergoing additional wing deicing treatment before takeoff. Boeing likewise is a defendant in each case; in those cases wherein Boeing is not named in the complaint, Boeing has been impleaded by Air Florida. [340] The allegations against Boeing concern such matters as the design of the aircraft and its alleged tendency to "pitch up" upon takeoff in icy weather when adhering ice or snow may affect the wings' aerodynamics, and Boeing's alleged failure to issue proper warnings regarding such a phenomenon. American Airlines is a defendant in some cases for the reason that its employees at National Airport performed the deicing of the aircraft, pursuant to a maintenance contract with Air Florida. Those two parties assert that an indemnification provision in that contract should render Air Florida responsible for any activities of the American Airlines deicing crew that would create liability.^[3] Air Florida's corporate headquarters are in the State of Florida. The corporate headquarters of Boeing are in the State of Washington, the site of the design, construction, and certification of the 737, as well as the original sale of the particular aircraft involved in the crash. American Airlines has its corporate headquarters in the State of Texas.

There is no doubt that a number of states^[4] have an interest in some or all of the issues to be adjudicated at the consolidated liability trial. Since federal subject matter jurisdiction arises from the parties' diversity of citizenship, this Court must follow the choice of law rules of the states where the various actions were originally filed. Klaxon Co. v. Stentor Electric Manufacturing Co., 313 U.S. 487, 61 S.Ct. 1020, 85 L.Ed. 1477 (1941); Van Dusen v. Barrack, 376 U.S. 612, 84 S.Ct. 805, 11 L.Ed.2d 945 (1964); In Re Air Crash Disaster Near Chicago, Illinois on May 25, 1979, 644 F.2d 594 (7th Cir.), cert. denied, Lin v. American Airlines, 454 U.S. 878, 102 S.Ct. 358, 70 L.Ed.2d 187 (1981) [hereinafter referred to as Chicago]; In Re Air Crash Disaster at Boston, Massachusetts on July 31, 1973, 399 F.Supp. 1106 (D.Mass.1975) [hereinafter referred to as Boston].^[5] Therefore, the controlling [341] choice of law rules are those of the District of Columbia, Georgia, Illinois, Maryland, Massachusetts, Pennsylvania, Texas, and Virginia.

Most of these jurisdictions (the District of Columbia, Illinois, Massachusetts, Pennsylvania, and Texas) have discarded the lex loci delicti or "site of the injury" rule in favor of tests involving an exploration of the interests of the various states having some relationship to the parties or the crash. Illinois, Massachusetts, Pennsylvania, and Texas each have specifically adopted the test of the Restatement, Second, of the Law of Conflict of Laws (1971).^[6] The District of Columbia likewise has discarded the lex loci rule, but before the Restatement, Second was published. Tramontana v. S.A. Empresa de Viacao Aerea Rio Grandense, 350 F.2d 468 (D.C.Cir.1965), cert. denied, Tramontana v. Varig Airlines, 383 U.S. 943, 86 S.Ct. 1195, 16 L.Ed.2d 206 (1966). As such, most of the reported decisions of courts employing District of Columbia choice of law rules do so without reference to the formulae set forth in the Restatement, Second. See, e.g., Semler v. Psychiatric Institute of Washington, D.C., 575 F.2d 922, 924 (D.C.Cir.1978); In Re Air Crash Disaster Near Saigon, South Vietnam on April 4, 1975, 476 F.Supp. 521, 526 (D.D. C.1979). However, in a recent decision the District of Columbia Circuit used the factors enumerated in the Restatement, Second in applying the District of Columbia analysis. Hitchcock v. United States, 665 F.2d 354, 360-61 (D.C.Cir.1981), citing Restatement, Second §§ 145, 146. The Commonwealth of Virginia and the States of Georgia and Maryland have not formally discarded the lex loci delicti rule; the principles governing the cases transferred from those jurisdictions are discussed in part II of this Memorandum Opinion.

I. Choice of Law Under the Modern Analysis

Modern choice of law analysis regards an examination not simply of the various states' interests generally, but of their interests regarding the various distinct issues to be adjudicated. This is the concept of "dépeçage," and has been followed in other air crash cases. Chicago, 644 F.2d at 594; Reyno v. Piper Aircraft Co., 630 F.2d 149 (3d Cir.1980), rev'd on other grounds, 454 U.S. 235, 102 S.Ct. 252, 70 L.Ed.2d 419 (1981). The issues to be resolved at the consolidated trial, as noted above, include the questions of the defendants' liability for compensatory damages (in other words, whether their conduct created tort liability) and their liability for punitive damages. Within the question of liability for compensatory damages are the sub-issues of negligence, of whatever products liability lies on the part of Boeing, and of the method of apportioning liability or determining contribution among the defendants.

The District of Columbia method of "governmental interest analysis" directs the [342] court first to identify the state policies underlying each law in conflict and second to decide which state's policy would be advanced by having its law apply. Semler, 575 F.2d at 924. Under the Restatement, Second formula, by comparison, the court endeavors to determine which state has the most significant relationship to the occurrence and parties with respect to the issue being considered. Restatement (Second) of Conflict of Laws § 145(1).^[7] The potentially interested states are determined by looking to a list of contacts with the litigation— place of injury, place where conduct occurred, residence or domicile of parties, and center of the parties' relationship, if any— and evaluating the relative importance of the contacts with respect to the particular issue. Id., § 145(2); Hitchcock, 665 F.2d at 360.^[8] The Restatement, Second lists a number of factors relevant to choosing the applicable law; the most important of these in a tort case include the relevant policies of the forum and other interested states. Id. § 6;^[9] compare Saigon, 476 F.Supp. at 526 (the court must consider whether the public policy of a particular legislature would be furthered, frustrated, or irrelevant if applied to the case at bar). As such, the state with the "most significant relationship" should also be that whose policy would be advanced by application of the law, i.e., the state with the greatest interest in applying its law to the issue under the District of Columbia analysis.

A. Negligence

As there is no conflict as to the negligence law among the various interested jurisdictions the Court will apply the negligence law of the District of Columbia.^[10] [343] This issue resolved, the question of which state's products liability law to apply to the allegations against Boeing will be considered.

B. Products Liability

As noted above, the allegations of products liability against Boeing are essentially that the design of the 737 aircraft's wings was defective in that the plane had a tendency to lose control or "pitch up" on takeoff when ice or snow became adhered to the leading edges of the wings, and that operating manuals for the 737 did not adequately advise the users of this phenomenon. Aside from the matter of the manuals' adequacy,^[11] Boeing is also charged with failing to warn consumers of the alleged defective wing design.

In accordance with Hitchcock and section 145(2) of the Restatement, Second, the contacts to be considered include: (a) the site of injury, (b) the place where the conduct occurred, (c) the parties' domiciles, and (d) the place where the parties' relationship is centered. The Second Restatement further instructs that these contacts be evaluated according to their relative importance with respect to the particular issue; for example, while section 145(2)(c) lists residence of the parties as a relevant contact, with respect to the issue of tort liability, the states wherein the plaintiffs or victims resided have a negligible interest in regulating extraterritorial conduct causing injury outside their borders. Likewise, a simple mechanical application of these factors is inappropriate: the mere fact that one jurisdiction numerically satisfies more of these contacts than another is not dispositive of the question of which state has the "most significant relationship" regarding this issue. See Chicago, 644 F.2d at 613 (mere tabulation of states' interests insufficient); see also Saigon, 476 F.Supp. at 526 n. 11.

With respect to this issue of Boeing's liability, the jurisdictions having contacts to consider are: the District of Columbia (the place of injury), the State of Washington (the place of Boeing's alleged misconduct^[12] and its principal place of business), and whatever state in which the relationship between the parties can be said to be centered. Guidance on the question of where the parties' relationship is centered as well as some direction as to the relative importance of each of the four contacts to the particular issue at hand is provided in Reese, The Law Governing Airplane Accidents, 39 Wash. & Lee L.Rev. 1303 (1983) [hereinafter cited as Reese, Airplane Accidents].

Professor Reese has developed a useful approach to determining the law to apply to the various issues likely to arise in an air crash action. According to Professor Reese, in an action by a passenger against an aircraft manufacturer the question of whether the manufacturer's conduct was liability-creating is governed by the law of (1) the place of manufacture or design, (2) the manufacturer's principal place of business, (3) the place of the flight's departure, or (4) the place of the flight's intended [344] destination. Reese, Airplane Accidents, at 1310. Washington State, of course, is the site of the first two places, which are equivalent to alternatives (b) and (c) of the Restatement, Second's list of contacts in section 145(2). Places (3) and (4) in Professor Reese's analysis, which are the District of Columbia and Florida, are related to the question posed by contact (d) of the Restatement, Second (i.e., where is the relationship of the parties centered), in that those places "necessarily bear some relationship to the plaintiff[s]" since they are where the plaintiffs began and intended to complete their journeys and since the manufacturer "would have good reason to foresee" that its planes would come to either place.^[13] Id. at 1311-12. See also Chicago, 644 F.2d at 612 (while center of relationship "unclear," court noted probable importance of Illinois as site of departure and California as intended destination). The same difficulties as to determining the center of the parties' relationship are here just as in numerous other air crash cases involving allegations of a defective design created in a removed state. As between the District of Columbia and Florida, to the extent that the center of the parties' relationship can be discerned, the former is a more likely choice. The great majority of passengers were from the Washington, D.C. metropolitan area and were planning to return home after the trip. Likewise, the victims on the 14th Street Bridge were local residents. Furthermore, the municipality itself is a plaintiff.

The importance of the sites of departure and intended destination vis a vis that of the manufacturer's domicile and place of manufacture and design also bears some relationship to contact (a) of the Restatement, Second; site of injury. Professor Reese comments that the relative importance of the place of intended destination is not usually great, unless the plane happens to crash upon arrival. Id. at 1312. Accordingly, Florida's interest in this issue as the scheduled arrival point can be further discounted under the Reese analysis, inasmuch as the plane did not crash while landing. The Reese analysis appears to imply that where the site of injury coincides with the site of departure (or intended arrival), the interest of the relevant state qua site of injury is less likely to be discounted as the "result of a fortuity." This is especially appropriate to the facts of the instant case, where the allegations of fault refer to the actions of flight and ground crew and the performance of the aircraft on takeoff. Consequently, the District of Columbia's interest as the place of departure^[14] is augmented by its having been the place of [345] injury as well.^[15] The potentially interested states having been identified, the Court now considers whether their laws are in conflict. The District of Columbia has adopted the doctrine of strict liability in tort for product defects. Young v. Upright Scaffolds, Inc., 637 F.2d 810, 812-13 (D.C. Cir.1980), citing Russell v. GAF Corp., 422 A.2d 989 (D.C.App.1980); Restatement (Second) of Torts § 402A (1965). Under this doctrine, a merchant who sells an unreasonably dangerous product to a consumer is liable for resultant injuries, regardless of fault, or privity of contract. Id. However, if the product is unreasonably dangerous only because of the manufacturer's failure to warn of possible dangers, the manufacturer's fault is relevant to the question of his liability. As such, the issue of a failure to warn is governed by a negligence standard. Young, 637 F.2d at 814; Russell, 422 A.2d at 991. Even so, to the extent that the plaintiffs' allegations refer to inadequate warnings or instructions in Boeing's operating manuals for the 737, a strict liability standard may yet apply. As the United States Court of Appeals for this Circuit recently stated, "an allegation that there were defects in the aircraft encompasses one that there were defects in the manuals. The latter class of defects constitutes a subset of the former." Leachman v. Beech Aircraft Corp., 694 F.2d 1301, 1306 (D.C.Cir.1982).^[16]

The policies advanced by the District of Columbia's adoption of these doctrines are several. The existence of law providing for tort liability in the District of Columbia demonstrates, first of all, the District's interest in regulating—and preventing—conduct that could cause tortious injury. W. Prosser, Law of Torts § 4, p. 22 (4th ed. 1971). Furthermore, the adoption of the rule of strict products liability evinces additional interests: to do away with the harsh common-law requirement of privity in products cases and to hold manufacturers of defective products to a higher standard than that of negligence. See Berman v. Watergate West, Inc., 391 A.2d 1351, 1355-57 (D.C.App.1978), see also Greenman v. Yuba Power Products, Inc., 59 Cal.2d 57, 377 P.2d 897, 27 Cal.Rptr. 697 (1962) (quoted with approval in Berman).

Washington State recently has codified its judicially-acknowledged products liability law, by enacting the Washington Products Liability Act of 1981, Wash.Rev.Code §§ 7.72.010-.060 (1981).^[17] This act establishes [346] a negligence standard for a manufacturer's failure to issue warnings concerning dangers discovered after manufacture. Wash.Rev.Code § 7.72.030(1)(c). Likewise, negligence is the standard as regards allegations that adequate warnings or instructions were not provided with the product to prevent harm resulting from dangers present at the time of manufacture. Wash. Rev.Code § 7.72.030(1)(b). Finally, design defects are also considered under a negligence standard. Wash.Rev.Code § 7.72.030(1)(a). In the State of Washington, the strict liability standard only governs manufacturing defects and failures of a product to conform to the manufacturer's express warranties or the implied warranties created under Title 62A of the Revised Code of Washington. Wash.Rev.Code § 7.72.030(2).

While the newness of the Washington Products Liability Act of 1981 has resulted in a paucity of judicial interpretations thereof, the act's preamble conveniently provides a statement of the legislature's intent in enacting the statute. 1981 Wash. Laws ch. 27 § 1. The preamble notes first the process of tort reform in Washington and the resulting amelioration of the "harshness of many common law doctrines." It then states that "The purpose of this amendatory act is to enact further reforms in the tort law to create a fairer and more equitable distribution of liability among parties at fault." Id. at ¶ 2. This evident interest in providing fair treatment for defendants is explicated in the paragraph immediately following, wherein the preamble refers to these effects of modern changes in products liability law: increased costs of consumer and industrial goods because of rising premiums for product liability insurance and the related "disincentives to industrial innovation and the development of new products." Id. at ¶ 3. The remainder of the preamble continues in this vein.

The PSC asserts that there is no actual conflict between the Washington and District of Columbia laws for two reasons. First, the PSC asserts that the standards that would govern the relevant allegations against Boeing are essentially the same under the laws of the District of Columbia and Washington in that the claim is one for a "failure to warn" which is subject to a negligence charge either way. PSC Reply [347] Brief of Nov. 24, 1982, at 11-12. However, the PSC states that the "failure to warn" allegation also concerns the 737 operations manual, id. at 12, which, under Leachman v. Beech Aircraft Corp., might well require analysis under a design defect theory. Moreover, in responding to Boeing's liability contention interrogatories, the plaintiffs have acknowledged that they indeed are proceeding on a theory of defective design. See Transcript of Hearing, Jan. 11, 1983, at 21 (comments of Chairman, Plaintiffs' Steering Committee), 22-23 (comments of counsel for Boeing). Furthermore, the question of Boeing's design of the 737 will in any case most likely be an issue at trial, inasmuch as this is an important part of Air Florida's case against Boeing. See Jan. 11, 1983 Transcript at 34-35 (comments of counsel for Air Florida re slotted wing slat design alternative). As the laws of the District of Columbia and Washington address design defects differently, a conflict is strongly suggested.

Second, the PSC argues that although the laws of the two jurisdictions may differ, the policies they effectuate, i.e., the creation of a products liability doctrine not dependent on historical requirements of privity, are the same and that therefore District of Columbia law may be applied with no fear of a true conflict. The PSC cites an unreported opinion from this district, Cunningham v. Textron, Inc., Civil Action No. 75-0318 (May 15, 1978) (order granting plaintiff's motion in limine) to the effect that where states having different products liability laws have demonstrated similar policies, no actual conflict exists. Cunningham indeed involved a "false conflicts" situation, because the three interested states all followed in substance (if not in name) the rule of strict liability.^[18] In the case at hand, however, it can not be doubted that, with respect to design defects the two interested jurisdictions do not apply the same standard of care. Moreover, the two jurisdictions have expressed different policy objectives that are relevant to their particular interests in the parties. The decisions of the District of Columbia courts in strict products liability cases demonstrate a preeminent concern with the protection of plaintiffs. See Berman v. Watergate West, Inc., 391 A.2d at 1355-58. As the plaintiffs in the instant case have a strong relationship with the District of Columbia, this is a real interest. Washington, to the contrary, has articulated in no indefinite terms its concerns about the effects of its products liability laws upon local defendants, particularly those defendants which are industrial or commercial concerns. Washington Products Liability Act of 1981, Preamble, 1981 Wash.Laws ch. 27 § 1. As Boeing is a Washington defendant, that state's interest in the application of its law likewise is material. Accordingly, the laws are in conflict^[19] and this Court must determine which [348] of the two jurisdictions has the "most significant relationship" to the relevant matters at hand.

Boeing argues that the products liability law of Washington State rather than the District of Columbia law should govern because any interest the District has relevant to this issue is diminished because it was "fortuitous" that the plane crashed and caused injury here.^[20] Under this theory, since the site of injury resulting from a design or manufacturing defect is "almost always fortuitous," Pittway Corp. v. Lockheed Aircraft Corp., 641 F.2d 524, 528 (7th Cir.1981), less weight should be given to that state's concern because its interest in and ability to control or regulate wrongful conduct by deterrence or punishment or to protect defendants from liability is not as significant as that of the place of misconduct or principal place of business. Chicago, 644 F.2d at 615. No one disputes that as the abbreviated path of Flight 90 took it over the irregular shoreline of the Potomac River, the flight crossed the District of Columbia-Virginia boundary several times before the impact.^[21] (The boundary between these jurisdictions has long been established as the high water mark of the Potomac on the Virginia side of the river.)^[22]

[349] Bruce v. Martin-Marietta Corp., 418 F.Supp. 829 (W.D.Okl.1975), affirmed, 544 F.2d 442 (10th Cir.1976) involved a crash typical of the kind usually found to be fortuitous. After departing Kansas, the Utah-bound plane crashed in Colorado. The plaintiffs were from Oklahoma and Kansas, and the defendant manufacturer, against whom there was a products liability claim, had its principal place of business in Maryland, where the allegedly defective aircraft was designed and manufactured. The court found that place of injury was of "relatively minor importance" to the issues of liability because the crash occurred while the plane was merely passing through Colorado. 418 F.Supp. at 832-33. The court concluded that Maryland had the most significant relationship to the issue of Martin-Marietta's liability and applied the law of that state. Id., at 833. Similar results were reached in other cases involving crashes of transient aircraft. E.g., Halstead v. United States, 535 F.Supp. 782 (D.Conn.1982); Melton v. Borg-Warner Corp., 467 F.Supp. 983 (W.D.Tex.1979); O'Keefe v. Boeing Co., 335 F.Supp. 1104 (S.D.N.Y.1971). The Chicago court also noted a certain amount of fortuity in that case. In evaluating the various states' interests in the Chicago DC-10 crash, the Seventh Circuit suggested the nature of the supposed cause of the crash—allegedly wrongful conduct on the parts of the manufacturer and the airline maintaining the plane which resulted in cracked engine mounts, rendering the engines prone to falling off—meant that there was nothing special about the plane's presence in Illinois at the time of crash (with regard to the defendants' part in the litigation) and that "the injury might well have occurred in one of any number of states" on its route from Chicago to Los Angeles. 644 F.2d at 615. However, as explained below, this did not deprive Illinois of all interest in the Chicago crash. See id.

The fact that the site of injury might be fortuitous does not for every case answer the question of which state has the most significant relationship to this issue. Indeed, were that so, the lex loci delicti rule would simply be replaced by another equally rigid rule of lex loci actus. The unfairness of such a rule to those who suffered from the injury directly and indirectly is obvious, and denies what the Seventh Circuit recognized in Chicago, that the state where the injury occurred does have some interest in imposing liability on the wrongdoer, depending on the facts of the particular case. 644 F.2d at 615. This interest of the District of Columbia cannot be ignored inasmuch as its connection with the Flight 90 crash is much greater than the interests of the injury sites in the more typical "fortuitous crash" cases cited above. Unlike those cases, the instant case is not one where the injury might have occurred in "one of any number of states." Rather, the allegations as to the various defendants all concern the effect of their conduct on the takeoff procedure, which only involved but a portion of the scheduled Washington to Florida trip confined to some limited area centered upon Washington National Airport. Had Flight 90 cleared the bridge and proceeded on its way to Florida there is nothing to indicate that the alleged deficiencies of the 737's design or its operation by Air Florida would have jeopardized the flight's cruising at altitude or landing, inasmuch as those alleged problems are only relevant to takeoff.

[350] In fairness to Boeing's position, it must be recognized that the site of the crash was more fortuitous with respect to Boeing than with respect to Air Florida and American. Boeing's alleged defects could have manifested themselves upon any takeoff under the same circumstances present in the instant accident. However, one of the reasons for looking away from the site or injury in the typical "fortuitous crash" case is the concern of not holding a defendant manufacturer to a standard of law to which it could not foresee becoming subject. Reese, Airplane Accidents, at 1311-12. In a coast-to-coast flight, for example, it has been suggested that it would be unreasonable to require the manufacturer to govern its conduct in accordance with the laws of any state over which its product might pass. This problem is not present in the instant case. It is much more foreseeable that an aircraft with a takeoff deficiency would crash on departure from an airport that the manufacturer expected its plane would use than it is that a transient plane on an Oklahoma to Utah flight would crash in Colorado rather than either of those states or Arizona or New Mexico.

Furthermore, in the cases cited above an important reason why the sites of injury were determined fortuitous and therefore uninterested was that the plaintiffs had little or no connection with those states. Here, by contrast, the site of injury was Flight 90's site of departure. As such, many of the victims had some kind of settled relationship with the District of Columbia, be it residence, employment, or some other nexus, and the District of Columbia no doubt has an interest in protecting such individuals from harm. See Restatement (Second) of Conflict of Laws § 146, comment (e). Likewise, as suggested earlier, the District of Columbia has an interest in protecting those persons who use the services of its airport.^[23] The instant case is distinguishable from the typical "fortuitous crash" cases cited above inasmuch as the crash sites in those cases had no relationship to the parties on either side.^[24] The instant case is more like Chicago than those cases; as Illinois had an interest in the crash in light of the victims' relationship to Illinois and the severity of the disaster's impact on that state, so it is with the District of Columbia in the case at bar. Yet the District of Columbia has a greater interest in this litigation than Illinois had in Chicago. While the Chicago crash was purely fortuitous inasmuch as the DC-10's engine could have fallen off anywhere on that flight, 644 F.2d at 615, in the instant case the potential for harm was limited to the takeoff portion of a flight, which here was centered on National Airport.

The interest of the District of Columbia in regulating conduct so as to promote air safety is evidenced further by the aftermath of the crash. The crash had a direct and severe effect on people throughout metropolitan Washington.^[25] It caused death and injury to people using the District's bridge to enter into the city. The consequent closing of both spans of the bridge jammed commute routes into the suburbs for hours and, with the coincidental Metro subway disruption, caused the federal government's Washington offices virtually to shut down for several days. The resources of District of Columbia and other rescue units were taxed, and the District no doubt incurred substantial expense in the course of the rescue and clean-up, not to mention the repair of its bridge.^[26]

[351] Notwithstanding its location on the Virginia side of the Potomac, the operation of the Washington National Airport, through which, as noted elsewhere, the vast majority of those traveling by air come to the city, is of great concern to the District of Columbia as well. The municipality has a strong interest in seeing that ample air transportation is provided to its residents, as well as those who come to the city in the course of service to (or as) government officials, for business, or for tourism.

For these various reasons, the Court finds that the District of Columbia has a very strong interest in the application of its tort law principles to the question of Boeing's liability.

Nevertheless, the interest of Washington State in the resolution of this issue is evident as well. As the allegations against Boeing concern its conduct within the State of Washington, that state has, at the outset, a strong interest in the regulation of that conduct. That interest is strengthened further by the fact that Washington has made a legislative choice as regards the imposition of strict liability for design defects, after addressing how the issue concerns plaintiffs and corporate defendants doing business in Washington. See Washington Products Liability Act of 1981, Preamble, supra. The preamble to Washington's new products liability act demonstrates that state's interest in how the balance between providing remedies to plaintiffs and insuring the fiscal health of local corporate defendants is made. Indeed, as Boeing is one of the largest, if not the largest, employers in that state, Washington's interest in various issues relating to Boeing's products liability cannot be denied.

Yet, as regards the policies expressed in the preamble to the Washington Products Liability Act, the Court must examine how important the specific provisions of that act at issue here are toward effectuating those policies. The Washington Products Liability Act, according to Boeing, substantially duplicates the Uniform Products Liability Act, with the exception that it does not adopt the uniform law's rule providing for punitive damages. There is long-established policy in Washington against the award of punitive damages. See Maki v. Aluminum Building Products, 73 Wash.2d 23, 436 P.2d 186, 187 (1968) and cases cited therein. Washington considers the doctrine of punitive damages "unsound," id., and has refused to change that rule by statute or decision. See Boeing's Memorandum on Punitive Damages, Nov. 16, 1982 at 17-18. Boeing, however, directs the Court's attention to no similarly strong expression of a policy choice regarding the standard of care governing design defects. Accordingly, it is evident that the statements in the preamble to the Washington act have more to do with the denial of punitive damages than with the rule on the standard for products liability. Consequently, the Court finds that the interest of Washington State with regard to the question of Boeing's alleged products liability is not as great as the interest of the District of Columbia, and as the District of Columbia has the most significant relationship to this issue, its law shall control.

C. Apportionment of Liability

The jurisdictions interested in how fault is apportioned among the defendants follow two different rules on this subject. The District of Columbia and Virginia (which, it is argued, has an interest in apportionment because of the allegedly wrongful conduct of Air Florida and American Airlines which occurred there) both follow an equal-share rule, under which all culpable defendants contribute equal parts of the judgment, regardless of their relative fault.^[27] Air Florida argues in favor of the law of either jurisdiction; American concurs. Florida, Texas, and Washington (the principal places of business of Air Florida, American, and Boeing, respectively) all follow a comparative fault rule under which each tortfeasor is assessed a portion of the judgment proportional to its relative culpability.^[28] [352] Boeing supports application of this rule.

The policies behind the equal-share rule are (1) that of encouraging each member of the community to conform to a standard of due care and (2) that of facilitating the determination of each defendant's share of the judgment. The first policy is one in which the District of Columbia and Virginia are interested in the instant case, in that injury and conduct took place in those jurisdictions. As the second policy concerns efficient judicial administration, it is an interest of the District of Columbia, as this is the forum for the majority of the individual actions. The rationale behind a comparative fault rule essentially is to make certain that all defendants are treated fairly. There is no doubt that Washington has an interest in seeing its law applied in that it certainly would be concerned that one of its local corporations, a defendant who is alleged to have done a wrong in Washington, be treated fairly among its co-defendants. Similarly, Florida and Texas would be interested in the fair treatment of their citizens.

Air Florida asserts that Florida, Texas, and Washington have no interest in the apportionment of fault where the injury was "extraterritorial" as to those states. However, as Boeing notes, the primary purpose of a comparative fault apportionment rule is not to punish or deter, but to ensure fair treatment of defendants. As such, with respect to this issue, a state where the conduct or injury took place is not necessarily the state of most significant relationship; rather, it is likely to be a state in which a protected defendant is located.

So it is with the instant case. The jurisdictions most interested in the application of the comparative fault rule are those in which the defendants are located. Moreover, applying this rule will not contravene the purposes of the rules of the other interested jurisdictions, the District of Columbia and Virginia, in that by apportioning responsibility in accordance with fault this rule, like the equal-share rule, serves the purpose of ensuring that parties act in conformance with a standard of due care. Indeed, by making sure that a highly-culpable defendant pays its fair share, rather than a per capita portion, which might be less, the comparative fault rule effectuates this policy even more completely and accurately than the older rule. As to the concern about the jury's ability to allocate fault upon a proportional basis, this Court is not convinced that a jury would be less equipped to entertain this task than it would be to consider other types of speculative matters typically assigned to juries. Finally, and most importantly, while applying the comparative fault rule in the instant case would not contravene the policies of the District of Columbia and Virginia, application of the equal-share rule would most certainly offend the legitimate and profound interests of the defendants' home states. The comparative fault rule will govern the apportionment of liability among the defendants.

D. Punitive Damages

This issue has generated much interest among numerous parties, who have provided the Court with a plethora of suggestions as to which jurisdiction's law should govern the liability of the various defendants. The PSC argues that, because of the obvious contacts this litigation has with the District of Columbia, that jurisdiction's law, which allows punitive damages in survival actions but not wrongful death actions,^[29] should apply. Alternatively, the PSC argues for the application of Florida law, because Air Florida trained its pilots and received Boeing's warnings and instructions for 737 operators [353] there. Florida permits punitive damage assessments in cases such as this.^[30] Air Florida and American suggest that Virginia law, which would not allow punitive damages in this case,^[31] should control their liability for punitive damages since the allegations as to their conduct relevant to this issue took place in that Commonwealth. Similarly, Boeing argues for Washington State's law to govern; as noted earlier, punitive damages would not be available under this law.^[32] Plaintiffs Fako, Izzo, and Donahue assert that the laws of their decedents' domiciles, which also are their transferor courts' locations (Pennsylvania for Fako; Massachusetts for the others) should apply to those individual actions. Both Commonwealths allow punitive damages claims.^[33] Finally, plaintiff Hamilton, a Maryland plaintiff, argues in favor of Florida punitive damages law. No party argues for the application of Texas law to American, but that state allows punitive damages.^[34]

The primary purpose of imposing punitive damage assessments is to punish egregious conduct of a defendant and deter future wrongful conduct by the defendant and others, not to compensate a plaintiff. Consequently, a state whose only connection with this litigation is that it was the domicile of a plaintiff or victim has no interest in the imposition of punitive damage liability. Chicago, 644 F.2d at 612; Jackson v. Koninklijke Luchtvaart Maatschappij N.V., 459 F.Supp. 953, 955-56 (S.D. N.Y.1978) (under California interest analysis, Pennsylvania punitive damages law would not apply to action involving crash of Dutch airliner in Spain, despite plaintiffs' domicile in that Commonwealth, because conduct causing the crash, being a local interest, was the concern of the jurisdiction in which the conduct occurred); Sibley v. KLM-Royal Dutch Airlines, 454 F.Supp. 425, 428-29 (S.D.N.Y.1978) (under Massachusetts choice of law rules, Massachusetts punitive damage law would not apply to same crash in Jackson despite plaintiffs' domicile in that Commonwealth, for same reason); Hurtado v. Superior Court, 11 Cal.3d 574, 522 P.2d 666, 114 Cal.Rptr. 106 (1974), W. Reese, Airplane Accidents, supra, at 1313, 1317.

Plaintiff Fako asserts that under the choice of law rules of the Commonwealth of Pennsylvania, which this Court must follow inasmuch as her action was transferred here from a federal court located there, Pennsylvania is the state most interested in the assessment of punitive damages. The cases cited by plaintiff Fako do not convince the Court that a Pennsylvania [354] court would depart from the settled rule and impose its punitive damages law in a case involving an extraterritorial tort. In Griffith v. United Air Lines, Inc., 416 Pa. 1, 203 A.2d 796 (1964), the Pennsylvania Supreme Court discarded the lex loci delicti rule in favor of a modern interest analysis approach, and ruled that the law of Pennsylvania (the decedent's domicile) should govern instead of that of Colorado (the lex loci delicti). However, the argument in Griffith concerned not the issue of the availability of punitive damages, but rather the amount of compensatory damages. Colorado law then imposed a limit on damage recoveries. In refusing to apply the Colorado limit, the Pennsylvania court noted that

Pennsylvania's interest in the amount of recovery, on the other hand, is great .... Our commonwealth, the domicile of decedent and his family, is vitally concerned with the administration of decedent's estate and the well-being of the surviving dependents to the extent of granting full recovery, including expected earnings.

203 A.2d at 807. The court then cited a Pennsylvania constitutional provision guaranteeing "reasonable compensation for injuries to employees arising in the course of their employment." Id., citing the relevant provision of the Pennsylvania Constitution. As such, the Pennsylvania court's decision concerned that Commonwealth's legitimate and substantial interest in ensuring adequate compensation for its citizens. Nowhere in that opinion did the Pennsylvania court suggest that Pennsylvania had any interest in the assessment of punitive damages. Similarly, the case of Kuchinic v. McCrory, 422 Pa. 620, 222 A.2d 897 (1966), also cited by plaintiff Fako, did not involve the issue of punitive damages but the question of whether Pennsylvania's simple negligence standard or Georgia's gross negligence rule should serve as the applicable standard of care. 222 A.2d at 899. Finally, the Third Circuit's opinion in Scott v. Eastern Airlines, Inc., 399 F.2d 14 (3d Cir.), cert. denied, 393 U.S. 979, 89 S.Ct. 446, 21 L.Ed.2d 439 (1968), the third case cited by plaintiff Fako, similarly concerned Pennsylvania's interest in compensatory, rather than punitive, damages. 399 F.2d at 23. Accordingly, the Court is reassured that the conclusion reached by the court in Jackson v. KLM under the California choice of law rules applies here as well, i.e., that under the interest analysis/"most significant relationship" rule of Pennsylvania, that jurisdiction would not be interested in the imposition of punitive damages in a case involving an out-of-state air crash.

The Izzo and Donahue plaintiffs argue that a court in Massachusetts, from which their actions were transferred, would be guided by that Commonwealth's "most significant relationship" test to apply its rule allowing punitive damages. These plaintiffs cite Massachusetts' law governing punitive damages, which provides for a mandatory, minimum $5,000 assessment of punitive damages where a defendant is found to have acted maliciously, willfully, wantonly or recklessly, or to have been grossly negligent. Mass.Ann.Laws ch. 229, § 2 (Michie/Law.Co-op.Cum.Supp.1982). In support of their position, plaintiffs Izzo and Donahue quote the following portion of Schulhof v. Northeast Cellulose, Inc., 545 F.Supp. 1200, 1206 (D.Mass.1982):

Massachusetts has a strong interest in applying its punitive damage provision .... Its punitive damage provision represents a legislative decision that ordinary tort damages do not sufficiently deter "willful, wanton or reckless" acts causing death.

Izzo/Donahue brief, at 11-12. The Court disposes of the argument of plaintiffs Izzo and Donahue by noting the sentence counsel has excised from the portion of the Schulhof opinion quoted in their memorandum: "As the place of the wrong, [Massachusetts] has an interest in deterring behavior which causes injury and death within its borders." 545 F.Supp. at 1206 (emphasis added). The Court will follow the sound interpretation of Massachusetts' interest in the punitive damages issue set forth by the [355] Southern District of New York in the Sibley case.^[35]

As the allegations against Air Florida and American refer to conduct before and upon takeoff from Washington National Airport, while those against Boeing primarily concern actions which took place in the State of Washington, the choice of law questions regarding these two groups of defendants must be examined separately. With regard to the conduct of Air Florida and American, the jurisdictions having some contact with this litigation relevant to the punitive damages issue are the District of Columbia (the site of injury), Virginia (the suggested locus of the alleged wrongful conduct), and Florida and Texas (the defendants' places of business).^[36] In determining which of these jurisdictions has the greatest interest, great respect must be given to both the decisions to allow punitive damages and the decisions to deny punitive damages. Chicago, 644 F.2d at 615; see also Restatement (Second) of Conflict of Laws § 6.

In Chicago, the Seventh Circuit was forced to choose between the site of injury (Illinois, considered fortuitous but nonetheless interested, see 644 F.2d at 615; a state denying punitive damages), the site of the airline's alleged misconduct (Oklahoma, the airline's maintenance base, which allowed punitives), the airline's principal place of business (New York, which denied punitives), and the center of the parties' relationship (Illinois and California, the origin and destination of Flight 191; both deny punitives). The court decided that since the interests of Oklahoma and New York were both very strong, it would not find one greater than the other. Consequently, it selected the law of the place of injury, Illinois, to govern the punitive damages question. Id. at 620-21.

In the instant case, Air Florida and American argue, persuasively, that as their conduct occurred outside of Florida and Texas, neither of those states would be interested in the regulation of such conduct.^[37] Although a state might be more interested in punishing extraterritorial conduct of one of its citizens than avenging harm caused to one of its citizens outside of its borders, for many of the same reasons, it is evident that jurisdictions having a greater interest in this issue would be those where the conduct or any non-fortuitous [356] injury took place. In the instant case, with respect to the actions of Air Florida and American, as the "corporate accountability" interests of Florida and Texas are lessened, the most interested jurisdictions are the District of Columbia and Virginia.

With regard to the conduct of Air Florida and American as alleged in the instant case, the District of Columbia and the Commonwealth of Virginia have a concurrent regulatory interest. As the allegations of wrongful conduct on the part of Air Florida's flight crew include their actions throughout the takeoff procedure (including decisions as to how much thrust to apply, and so on, while airborne), those allegations embrace conduct which could have taken place over either jurisdiction. Apart from that conduct which could actually have taken place in either or both jurisdictions, the District of Columbia shares with Virginia an interest in the safe operation of the airport—especially where the activities sought to be regulated are fraught with the potential for physical injury within the District and other damage or disruption to the commerce and public order of the municipality.

Between the District of Columbia and the Commonwealth of Virginia, the District of Columbia has the most significant relationship to this issue. As noted earlier, the injurious effects of the conduct were predominantly felt in the District of Columbia. Victims were rushed by rescue units stationed in the District of Columbia to hospital and other facilities within the District. The city's bridge was damaged. While commerce in most parts of Virginia proceeded as usual after the crash, business in the District of Columbia was brought to a standstill. Moreover, the fact that Virginia recently has changed its position on the denial of punitive damages and now will permit an assessment thereof is strongly suggestive that denying punitive damages was not a very significant policy concern of the Commonwealth at the time of the crash. Accordingly, the law of the District of Columbia will control the question of the liability of Air Florida and American for punitive damages.^[38]

In light of the foregoing analysis, the Court now considers Boeing's liability for punitive damages. There is no doubt that the State of Washington, the site of the alleged wrongful conduct (the designing of the 737) and Boeing's principal place of business is an interested jurisdiction. See Chicago, 644 F.2d at 614; Reese, Airplane Accidents, 39 Wash. & Lee L.Rev. at 1313. The PSC, as noted above, suggests that the District of Columbia, as the site of the injury, has the most significant relationship as to this issue.

In Chicago, the Seventh Circuit selected the law of Illinois, the site of injury, to govern the question of the manufacturer's liability for punitive damages. However, in doing so, the court expressly stated that Illinois' interest in the question was less than that of both California, the state where the plane was designed and built, and Missouri, the manufacturer's principal place of business. 644 F.2d at 615. Because California and Missouri were in conflict on the issue (the former would not allow an assessment of punitive damages, while the latter would), the Chicago court was unable to resolve the issue on interest [357] analysis alone. Id. Nor could it arrive at a "moderate and restrained" interpretation of the relevant policies that would allow such resolution. Id. Instead, it simply turned to the law of the site of injury to break the tie. Id. at 616. In using Illinois law to tip the balance, the court noted that in light of the nature of the alleged defect (an engine mount prone to cracking), "[t]hat the injury occurred in Illinois can only be described as fortuitous." Id. at 615. The court observed:

Because the place of injury is much more fortuitous than the place of misconduct or the principal place of business, its interest in and ability to control behavior by deterrence or punishment, or to protect defendants from liability, is lower than that of the place of misconduct.

Id. With respect to a manufacturing or design defect, unlike the case of a navigational error, the place of injury is almost always fortuitous. Pittway Corp. v. Lockheed Aircraft Corp., 641 F.2d at 527-28.^[39]

However, the inquiry as to the interest of the state of injury has two components: the state's connection with the defendant alleged to have caused the injury (explored by the Seventh Circuit in its conclusion that the site of the Chicago crash was fortuitous) and the state's connection with the injury itself. In considering the latter component, the Seventh Circuit recognized that the fact that the interest of the place of injury in Chicago was less than that of the places of the manufacturer's business headquarters and the alleged misconduct "does not mean that Illinois has no interest in the punitive damages question." 644 F.2d at 615. Illinois, like the District of Columbia in the instant case, had "very strong interests in not suffering air crash disasters and also in promoting airplane safety." Id. The court also took judicial notice of the fact that "the DC-10 crash sent shock waves throughout the metropolitan Chicago area," as the Flight 90 crash did in the District of Columbia, and noted that Illinois incurred great expense in the course of performing its rescue, clean-up, and other functions related to the disaster. Id. Moreover, the court noted that under the Restatement, Second, of Conflict of Laws, as interpreted by the forum (Illinois), "presumptive importance" is given to the place of injury. Id., at 616, citing Restatement (Second) of Conflict of Laws § 175.^[40]

[358] In the instant case, the District of Columbia's stake in the question of the manufacturer's liability for punitive damages is greater than that of Illinois in Chicago. In Chicago, since Illinois did not impose punitive damages, that state would not have been disturbed by the application of California's equivalent law to that action. On the other hand, applying Missouri law would not have concerned it either, inasmuch as Illinois, as home of none of the defendants, had no interest in shielding any party from punitive damages. In the instant case, however, the policies of the District of Columbia of preventing air disasters and promoting safe air travel are advanced by the District's decision to allow punitive damage assessments in actions such as this. Those policies would be offended by the application of a law such as the State of Washington's, which denies such awards.

Nevertheless, despite these apparently significant interests of Illinois (which the District of Columbia certainly holds in greater measure in the instant case) the court found that the concerns of California and Missouri were of sufficiently great importance to supplant Illinois' interest. A second look at the other component of the inquiry as to the interest of the state of injury, that state's connection with the defendant manufacturer, is necessary to understand why the Chicago court reached this conclusion. The Seventh Circuit noted in Pittway Corp. v. Lockheed Aircraft Corp. that a manufacturer often will be determined not to have any substantial contact with the site of injury since the fact that the injury occurs at a particular place usually has little relationship to the type of conduct in which the manufacturer is alleged to have been engaged. As a result, the jurisdictions with the greatest connection with the manufacturer's conduct frequently will be those in which the actual conduct occurred (the place of manufacture or design) or the place where ultimate responsibility for that conduct lies (the manufacturer's principal place of business). This was the case in Chicago. But this will not always be so. It must be kept in mind that the inquiry as to the site of conduct is not an end in itself but a means of determining the manufacturer's connections with the various states interested in the litigation, including the state of injury. This embraces some due process considerations: could the manufacturer foresee that a certain state's law would be applied to its conduct? Reese, Airplane Accidents, at 1311-12. For example, in the case of the Oklahoma to Utah flight in Bruce v. Martin-Marietta, Corp., discussed above, the manufacturer had no reason to expect that its aircraft would crash in Colorado, as it did, rather than any other state through which it passed enroute. In the instant case, on the other hand, although Boeing's conduct conceivably could have caused injury wherever a 737 took off under circumstances similar to those present at Flight 90's departure, the fact the likely places of resultant harm are limited to areas around commercial airports renders the site of injury in this case, with respect to Boeing, less fortuitous than the injury sites in cases such as Bruce v. Martin-Marietta, Corp.

Boeing has a much more substantial relationship to the District of Columbia than a manufacturer generally has to the site of injury in a typical "fortuitous crash" case. It reasonably could have foreseen, and no doubt desired, that its short-haul 737 aircraft would be used for flights out of Washington National Airport, one of the nation's busiest airports and a station limited by federal regulation to flights shorter than 1,000 statute miles. See 14 C.F.R. § 159.60 (1982). As the allegations against Boeing concern the aircraft's performance upon departure, it would not be unreasonable to hold Boeing, with respect to the issues of this case, to the standards of the District of Columbia. Moreover, the allegations include [359] not only that the plane was defectively designed but that Boeing failed to make proper warnings to Air Florida about the craft's takeoff performance under certain conditions. This lends further support to the position that Boeing's nexus to the litigation is not confined to the State of Washington.

For these reasons, in this case, unlike the Chicago case, it cannot be said that the state of injury necessarily has a lesser interest than the state in which the defendant's conduct occurred or its principal place of business was located. To resolve the conflict between the laws of the District of Columbia and the State of Washington, the Court now considers the policies behind those laws relevant to the substantive question of Boeing's liability for punitive damages.

Between the District of Columbia and the State of Washington, the former has the greater interest in the question of Boeing's liability for punitive damages in the instant litigation. While Washington State has made a considered choice not to allow the assessment of punitive damages, that choice necessarily includes a balancing of the interests of resident tortfeasors against the interests of that state in preventing harm caused by tortious conduct. Yet while Washington State, through its legislature, may weigh the rights of its own injured victims against its resident tortfeasors, the sovereignty of other states prevents it from placing on that scale the rights of those injured elsewhere. Accordingly, with respect to those actions in this litigation originally filed in jurisdictions following interest analysis choice of law principles, the law of the District of Columbia shall govern the question of Boeing's liability for punitive damages.

II. Choice of Law in Cases Transferred from Virginia, Georgia, and Maryland

Since interest analysis directs that the law of the District of Columbia is applicable to all issues but apportionment of liability, the law that shall govern actions subject to the lex loci delicti rule can possibly differ only with respect to that issue.

A. Virginia

The highest court of Virginia recently has reaffirmed its adherence to the lex loci delicti rule. McMillan v. McMillan, 219 Va. 1127, 253 S.E.2d 662, 663 (1979). Consequently, the law of the District of Columbia shall govern all issues in the action transferred from the Eastern District of Virginia.

B. Georgia

In determining what choice of law principles to apply to the action transferred from the United States District Court for the Northern District of Georgia, this Court must resolve the issue as the courts of the State of Georgia would. Imperial Enterprises, Inc. v. Fireman's Fund Insurance Co., 535 F.2d 287, 290 (5th Cir.1976). Although this Court is bound by the decisions of Georgia courts, Wansor v. George Hantscho Co., Inc., 595 F.2d 218, 220 n. 7 (5th Cir.1979), it is not "immutably" required to follow Georgia state court decisions where it appears that the Georgia Supreme Court, if considering the same questions, would not rely upon such decisions as precedent. Hood v. Dun & Bradstreet, 486 F.2d 25, 31 (5th Cir.1973), cert. denied, 415 U.S. 985, 94 S.Ct. 1580, 39 L.Ed.2d 882 (1974). This Court may make an educated guess as to what the Georgia courts would decide today. Trail Builders Supply Co. v. Reagan, 409 F.2d 1059, 1061 (5th Cir.1969).

It is by no means certain that the Georgia Supreme Court would today follow the doctrine of lex loci delicti in a case such as this. The United States District Court for the Northern District of Georgia, when recently faced with the question of what choice of law principles Georgia would use in a tort case stated that "the law of the place of the wrong—lex loci delicti—has always been the choice of law rule in this state." Harris v. City of Chattanooga, 507 F.Supp. 374, 376 (N.D.Ga.1981). However, the Harris court made no analysis of the contemporary state of Georgia law on the subject, the language quoted immediately above being the full [360] extent of its discussion of the issue, and cited no other authority than a 1952 decision of the Georgia intermediate appellate court: Craven v. Brighton Mills, Inc., 87 Ga.App. 126, 73 S.E.2d 248 (1952). In Craven, the Georgia Court of Appeals applied the lex loci delicti rule in consideration of a 1945 decision of that court and a 1908 Georgia Supreme Court opinion. 73 S.E.2d at 251. In the latter case, Lay v. Nashville C. & St. L. Ry. Co., 131 Ga. 345, 62 S.E. 189 (1908), the court gave no explanation for its application of the lex loci approach, evidently because this was the prevailing rule at the time.^[41] Research reveals no decision of the Georgia Supreme Court since the date of Craven addressing the question of the law to be applied in tort cases.

More recently than Harris, the District Court for the Northern District of Georgia has held that although the Georgia courts had not expressly addressed the question of whether to discard the lex loci rule in contracts actions, the "strong implication" was that Georgia would now follow the relevant theories of the Restatement, Second, of Conflict of Laws. Ryder Truck Rental, Inc. v. St. Paul Fire & Marine Insurance Co., 540 F.Supp. 66, 68 (N.D.Ga.1982). Boeing suggests that this indicates that the Georgia courts would now also be receptive to applying the modern choice of law principles in tort actions as well.

In Boston, that court was presented with a similar situation in regard to the law applicable to actions originally filed in Vermont. The court noted that the most recent case in which the Vermont Supreme Court had applied the lex loci delicti rule was a 1961 ruling, decided before the Restatement, Second and some 14 years before the Boston court was presented with the issue. 399 F.Supp. at 1109. In the interim, however, Vermont had adopted the Restatement, Second approach in contract actions. Id. at 1108, 1110. This decision provided the Boston court with "persuasive evidence" that the lex loci delicti rule would no longer be valid law in Vermont tort actions. Id. at 1110. Accordingly, the court applied the Restatement, Second interest analysis to the Vermont actions before it.

Nonetheless, the Boston court was not as fortunate as is this Court to have before it a recent decision of the transferor court discussing which state's choice of law rules would apply in an aviation case. Baltimore Football Club, Inc. v. Lockheed Corp., 525 F.Supp. 1206 (N.D.Ga.1981) was an action involving facts almost identical to those in Pittway Corp. v. Lockheed Aircraft Corp., noted above: a Lockheed Jetstar built in Georgia developed cracks in its mainframe somewhere during its travels, which were only discovered while the plane was on the ground in Wisconsin. As in Pittway, this was an action for damage to the aircraft, and there being no crash, the site of injury could not be determined. The court then considered the contacts analysis employed by the Seventh Circuit in Pittway, which it found "most persuasive." Id. at 1208. The court noted that "[w]hile Georgia courts do not follow the `most significant relationship test' [employed in Pittway], ... there is some room for policy considerations in a conflicts of law decision. Georgia courts will not enforce foreign statutory law in tort actions where the foreign law is contrary to Georgia's public policy." Id. at 1209 (citations omitted).

Although the Baltimore Football court's analysis of Georgia choice of law principles might be considered dicta inasmuch as that case had been transferred from a Wisconsin federal court on the defendant's motion and therefore was necessarily governed by the laws of that state, it nonetheless persuades this Court that it would be inappropriate at this time to rule that lex loci delicti is no longer the rule in Georgia tort actions. Indeed, the precedents which guided the Ryder Truck court toward departing from lex loci in that contract case were in existence at the time the Baltimore Football case was [361] being considered by the District Court for the Northern District of Georgia. Ryder Truck, 540 F.Supp. at 68-69.

This does not answer the entire question of what law should govern the action transferred here from the Georgia federal court. As noted in a portion of Baltimore Football quoted above, Georgia will not follow foreign laws in conflict with its own policy. Unlike the District of Columbia, Georgia has a comparative fault rule for contribution among tortfeasors. Ga.Code Ann. § 105-2011 (1968); Greyhound Lines, Inc. v. Cobb County, Ga., 523 F.Supp. 422, 424 (N.D.Ga.1981), aff'd, 681 F.2d 1327 (11th Cir.1982). The policy behind such a rule, as noted earlier, includes the forum's interest in fair treatment of all parties. It therefore is evident to this Court that a Georgia court would not apply the District of Columbia's equal-share rule to this action; consequently, while all other issues in this particular action shall be determined by the law of the District of Columbia, the Georgia rule of apportionment by comparative fault shall govern the liability of the various defendants.

C. Maryland

In determining what law should govern actions transferred from the Maryland federal court, this Court must attempt to determine what the highest Maryland state court would hold were that court faced with the issues present in the instant action. Sherby v. Weather Brothers Transfer Co., 421 F.2d 1243, 1244 (4th Cir.1970). A state court decision may lose its persuasive force without having been overruled expressly; such a decision need not be followed by a federal court if the state court would not do so. See, e.g., Boston, at 1109; see generally Snyder v. Hampton Industries, Inc., 521 F.Supp. 130, 137 (D.Md.1981).

The most recent statement of Maryland's highest court on the issue of choice of law principles was in 1975 when the Court of Appeals of Maryland noted that "the rule of lex loci delictus is applicable in tort actions brought in Maryland." Frericks v. General Motors Corp., 274 Md. 288, 336 A.2d 118, 123 (1975). Yet the court did not embark upon any analysis of the continued utility of the lex loci rule beyond making the above statement and, moreover, refused to consider the law of the injury state (North Carolina) on appeal, inasmuch as the parties who had sought to rely on that law did not specially plead it as required by a Maryland statute. Id.^[42]

White v. King, 244 Md. 348, 223 A.2d 763 (1966), cited by the Frericks court, 336 A.2d at 123, as authority for the use of the lex loci rule in Maryland, was a case in which the court considered, but elected not to adopt, the interest analysis approach found in the then-new Ninth Tentative Draft of the Restatement, Second. The court noted contemporary criticism of lex loci delicti, 223 A.2d at 765, and "recognize[d] the force" of arguments in favor of the Restatement proposal, whose features it discussed in detail. Id. 223 A.2d at 765-67. Nevertheless, because the new doctrine was "still in the process of development" and would benefit from "clarification on case-to-case decisions, as its application to different factual situations [would] present[] new difficulties to be resolved and new factors to be weighed," the Maryland court concluded that it would defer change to the legislature "until what we deem a sound, practical alternative is evolved." Id. 223 A.2d at 767.

Unlike the courts of Virginia and Georgia, the Maryland court left the door open to adopting the modern approach at an appropriate time. Citing White v. King, [362] the Maryland intermediate appellate court recently found no difficulty departing from the lex loci delicti rule in determining what law would govern a workers' compensation case. Connor v. Hauch, 50 Md.App. 217, 437 A.2d 661, 662 (1981). In performing what essentially was an analysis of the interests of the two states having some connection to the matter, the court noted that to apply the law of Delaware (the site of injury), which would defeat the action, "would be obnoxious to the public policy of Maryland." 437 A.2d at 665. In addition, the litigation was "not concerned" with the law of Delaware. Id.

Accordingly, the fact that the Maryland Court of Special Appeals, considering White v. King, believed itself unfettered to perform an analysis of the states' interests in the litigation strongly suggests that the rule of lex loci delicti in tort actions, questioned by the highest court of Maryland as early as 1966, no longer has vitality in that state and that the Court of Appeals of Maryland would not apply it were the instant matters now before it. Therefore, the law governing any action transferred to this Court from Maryland shall be the same as the relevant law governing those other actions subject to the analysis in Part I of this Memorandum Opinion.

An Order consistent with the foregoing accompanies this Memorandum Opinion.

ORDER

Consistent with the Memorandum Opinion issued in this proceeding this date, the following principles shall govern the consolidated trial on liability issues to commence March 31, 1983:

1. With respect to actions originally filed in the District of Columbia, the States of Illinois, Maryland, and Texas, and the Commonwealths of Massachusetts and Pennsylvania, the law of the District of Columbia shall govern the issues of (a) negligence of any party, (b) products liability of defendant Boeing, and (c) liability of all defendants for punitive damages. With respect to these actions the law of the States of Florida, Texas, and Washington shall govern apportionment of liability or contribution among defendants.

2. With respect to actions originally filed in federal or state courts in the Commonwealth of Virginia, the law of the District of Columbia shall govern all issues.

3. With respect to actions originally filed in federal or state courts in the State of Georgia, the law of the District of Columbia shall govern all issues except apportionment of liability or contribution among defendants, which issue shall be controlled by the law of the State of Georgia.

SO ORDERED.

[1]All actions arising from the air crash that were filed in other United States District Courts were transferred to this Court by the Judicial Panel on Multidistrict Litigation, pursuant to 28 U.S.C. § 1407(a), for purposes of pretrial discovery proceedings. This Court, on June 2, 1982, appointed a Plaintiffs' Steering Committee of three attorneys, to conduct pretrial proceedings relating to liability for the crash, on behalf of all of the plaintiffs in all actions involving the crash that were filed in this Court directly or transferred here by the Multidistrict Panel. Pretrial Order No. 1, June 2, 1982. Discovery proceedings were ordered to be completed by January 31, 1983.

After discovery was substantially under way, the Court ordered, sua sponte, that all actions transferred for discovery by the Judicial Panel be transferred pursuant to Rule 11(b) of the Rules of Procedure of the Panel and 28 U.S.C. § 1404(a) for purposes of trial on all liability issues. Order of December 6, 1982. The Court also consolidated all actions, except for those of plaintiffs claiming through victims of the crash who were Air Florida's crew members, for a single trial on liability issues to commence March 31, 1983. The Plaintiffs' Steering Committee, as previously constituted, was appointed to conduct the plaintiffs' case at trial. The "crew member plaintiffs," who, unlike all the other plaintiffs, did not sue Air Florida, have moved (through the appointed Crew Plaintiffs' Coordinating Counsel) to transfer their actions back to their transferor court, in the Southern District of Florida. That motion has been ordered held in abeyance until 60 days after the close of discovery. Id.

There is also before this Court a claim by the District of Columbia for property damage and for rescue and clean-up expenses, Civil Action No. 82-2506.

[2] See note 22, infra.

[3] Union Carbide, the manufacturer of the ethylene glycol deicing solution applied to the plane's wings by the American Airlines crew, and United Technologies, the manufacturer of the two Pratt & Whitney engines on the 737, have at times been defendants in some of the cases herein, but have been voluntarily dismissed from all cases. Until very recently, the United States of America was a defendant in all cases either through complaints by plaintiffs or third-party actions by Air Florida, but it since has been dismissed in all actions. The complaints and third-party complaints were premised upon the fact that Federal Aviation Administration employees provided air traffic control services to National Airport (which is owned by the federal government). The United States admitted no liability for the crash nor made any financial contribution in the course of obtaining dismissals from the other parties.

[4] For simplicity, references to "states" or "a state" in this Memorandum Opinion include the District of Columbia.

[5] Defendant Boeing argues that the choice of law rules of the District of Columbia should apply to certain cases originally filed in other states for the reason that the plaintiffs in those cases sought transfer to this district. While the doctrine of Van Dusen v. Barrack provides that an action transferred from the federal district court to another pursuant to 28 U.S.C. § 1404(a) generally is governed by the substantive law of the transferor court, it has been suggested that when such a transfer is made upon motion of a plaintiff, that doctrine does not apply and the transferee court's choice of law rules should control. Carson v. U-Haul Co., 434 F.2d 916, 918 (6th Cir.1970), see also Boston, 399 F.Supp. at 1122 n. 18. Wright, Miller, and Cooper, noting that the Supreme Court in Barrack reserved this question, 376 U.S. at 640, 84 S.Ct. at 821, stated that where a § 1404(a) transfer is effected upon the plaintiff's motion "it seems that the law of the transferee state should control." 15 C. Wright, A. Miller & E. Cooper, Federal Practice & Procedure § 3846 at p. 234 (1976). Although this Court entered its transfer order sua sponte,it did follow a motion by the Plaintiffs' Steering Committee and joined in by several plaintiffs.

The courts generally have not followed the suggestion of Wright, Miller, and Cooper. See, e.g., In Re Richardson-Merrell, Inc., 545 F.Supp. 1130, 1132, 1135 (S.D.Ohio 1982) (law of transferor state followed even though motion made by plaintiffs); see also Alexander v. Richardson-Merrell, Inc., 541 F.Supp. 93 (S.D. N.Y.1982) (opinion of transferor court). In the few cases where the law of the transferee state was applied following the plaintiff's motion to transfer under § 1404(a), the transfer was sought for reasons other than or in addition to convenience of parties and witnesses, for example, to avoid dismissal for lack of personal jurisdiction. E.g., Brown v. Merrow Machine Co., 411 F.Supp. 1162 (D.Conn.1976). Other cases involved actions against which the transferor state's statute of limitations had run. E.g., Schenk v. Piper Aircraft Corp., 377 F.Supp. 477, 480 (W.D.Pa.1974), aff'd mem., 521 F.2d 1399 (3d Cir.1975); Les Schwimley Motors, Inc. v. Chrysler Motors Corp., 270 F.Supp. 418, 420-21 (E.D.Cal.1967). Neither of those features are present in the instant actions before this Court.

Moreover, the theory of Wright, et al. has been criticized (see Note, Choice of Law in Federal Courts after Transfer of Venue, 63 Cornell L.Rev. 149, 154-59 (1977)), and the Sixth Circuit apparently has abandoned it. Martin v. Stokes, 623 F.2d 469, 471 (6th Cir.1980) (as regards choice of law rules to use "it should make no difference" which party made the motion; determining factor is whether transfer was made under § 1404(a) for convenience or under § 1406(a) to cure defective venue). Martin v. Stokes recently was followed by another judge of this court in a well-reasoned opinion for the principle set forth in the above parenthetical. Translinear, Inc. v. Republic of Haiti, 538 F.Supp. 141, 143 (D.D.C.1982). This court will not depart from that reasoning; accordingly, the choice of law principles of the states in which the various actions were first filed shall govern those individual actions.

[6] Evra Corp. v. Swiss Bank Corp., 522 F.Supp. 820, 827 (N.D.Ill.1981), rev'd on other grounds, 673 F.2d 951 (7th Cir.1982), see also Chicago, 644 F.2d at 610-11; Engine Specialties, Inc. v. Bombardier, Ltd., 605 F.2d 1, 19 (1st Cir.1979) (Massachusetts law); Conservation Council of Western Australia, Inc. v. Aluminum Co. of America, 518 F.Supp. 270, 281 (W.D.Pa.1981); Griffith v. United Air Lines, Inc., 416 Pa. 1, 203 A.2d 796, 805 (1964); Houston North Hospital Properties v. Telco Leasing, Inc., 688 F.2d 408, 409 (5th Cir.1982) (Texas law).

[7]Section 145 of the Restatement, Second provides:

(1) The rights and liabilities of the parties with respect to an issue in tort are determined by the local law of the state which, with respect to that issue, has the most significant relationship to the occurrence and the parties under the principles stated in § 6.

(2) Contacts to be taken into account in applying the principles of § 6 to determine the law applicable to an issue include:

(a) the place where the injury occurred.

(b) the place where the conduct causing the injury occurred.

(c) the domicil, residence, nationality, place of incorporation and place of business of the parties, and

(d) the place where the relationship, if any, between the parties is centered.

These contacts are to be evaluated according to their relative importance with respect to the particular issue.

[8] Contacts serve only as one means to ascertain the relevance of the policies of a state. Saigon, 476 F.Supp. at 526 n. 11, citing Semler.

[9]Section 6 of the Restatement, Second of the Law of Conflict of Laws provides:

(1) A court, subject to constitutional restrictions, will follow a statutory directive of its own state on choice of law.

(2) When there is no such directive, 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.

The importance of the factors listed in subsection (2) varies from field to field. For example, the "protection of justified expectations," while of substantial importance in a contract case, is a rather insignificant factor in a tort action, inasmuch as persons who cause injury (notably those committing unintentional torts) usually act without thinking about what law governs the legal consequences of such conduct. See Restatement (Second) of Conflict of Laws § 145, comment c.

[10] In each of the conceivably interested states the elements of a negligence action are (1) a standard of care due to the plaintiff and a duty on the defendant's part to exercise it, (2) a breach of that duty, (3) a proximate causal connection between that breach and the injury complained of, and (4) actual harm or damage. Hassan v. Hartford Insurance Group, 373 F.Supp. 1385 (D.Del.1974); Morrison v. MacNamara, 407 A.2d 555 (D.C.App.1979); Clark v. The Boeing Co., 395 So.2d 1226 (Fla.App. 1981); Bradley Center, Inc. v. Wessner, 161 Ga.App. 576, 287 S.E.2d 716, aff'd 250 Ga. 199, 296 S.E.2d 693 (1982); Illinois Housing Development Authority v. Sjostrom & Sons, Inc., 105 Ill.App.3d 247, 61 Ill.Dec. 22, 433 N.E.2d 1350 (1982); Cannon v. Sears, Roebuck & Co., 374 Mass. 739, 374 N.E.2d 582 (1978); Macina v. McAdams, 280 Pa.Super. 115, 421 A.2d 432 (1980); Mahavier v. Beverly Enterprises, Inc., 540 S.W.2d 813 (Tex.Civ.App.1976); Atlantic Co. v. Morrisette, 198 Va. 332, 94 S.E.2d 220 (1956); Hojem v. Kelly,93 Wash.2d 143, 606 P.2d 275 (1980).

When the laws of the various jurisdictions are not in conflict, for reasons of judicial efficiency the law of the forum may be applied. A strict application of this rule would require the Court to refer to several perhaps differently articulated but essentially identical theories of law inasmuch as the various individual actions were filed in a number of forums. Because of the inevitable peculiarities of the multidistrict proceeding, the negligence law to which this Court shall refer is the law of the transferee forum, the District of Columbia.

[11] An allegation that there were defects in an aircraft encompasses an allegation that there were defects in its manuals. Leachman v. Beech Aircraft Corp., 694 F.2d 1301, 1306 (D.C. Cir.1982). See note 16, infra, and accompanying text.

[12] The 737 was designed, built, certified, and delivered in Washington State. See Purvis affidavit, Exh. B to Boeing's memorandum in opposition to Air Florida's motion, filed Nov. 5, 1982.

[13] Despite National Airport's location on the Virginia side of the Potomac, the District of Columbia is more meaningfully considered the site of departure for the purposes of the analysis here. A literal application of the Reese approach conceivably could mean that the "place of departure" interest belongs to the Commonwealth of Virginia, on whose side of the Potomac River Washington National Airport lies. However, the precise physical location of National Airport does not answer the question of where the parties' relationship, with respect to this issue, is centered. The passengers on Flight 90 contracted for passage from Washington, D.C. to Florida. Flight 90, like all flights bound from Washington National Airport, was advertised and designated as a departure from Washington, D.C. Washington National Airport is the airport used by the vast majority of people traveling to or from Washington, D.C. by air. Compare, e.g., Bernhard v. Harrah's Club,16 Cal.3d 313, 546 P.2d 719, 128 Cal.Rptr. 215 (1976) (since defendant, a Nevada casino located near California state line, had advertised in and solicited trade from California, it had established a nexus with that state and voluntarily subjected itself to California tort law).

For these reasons, inter alia, the Court finds that the District of Columbia is appropriately considered the place of Flight 90's departure under the Reese approach and as that concerns section 145 of the Restatement, Second, of Conflict of Laws.

[14] This is not to say that the Commonwealth of Virginia does not have an interest in the safe condition and operation of planes at National Airport. On the contrary, the circumstances of the airport create among the District of Columbia and Virginia a concurrent interest in this and many related issues. On the facts of this case, however, since the effect of the accident was felt to a much greater extent by the District of Columbia, the District's interests necessarily will be greater than Virginia's.

[15] The special case of the "bridge plaintiffs" is also addressed by Professor Reese. In actions by such third persons against an aircraft manufacturer, the candidate laws for governing the liability issue are those of: (1) the place of manufacture or design, (2) the manufacturer's principal place of business, and (3) the place of injury. Reese, Airplane Accidents, supra, at 1320. This third choice corresponds not only to the identical "contact" in the Restatement, Second, but, like the departure and destination points in the passenger actions, to the Restatement alternative of the place where the parties' relationship is centered as well. "[I]t is the only place that is certain to have a contact with both the producer and the plaintiff. Id. In this case, of course, that place is Washington, D.C.

[16]The Court of Appeals observed:

"First, aircraft manuals are required by law to be in the plane, 14 C.F.R. § 91.31(b) (1982), so they are as much a part of the plane as if they were bolted to it. Second, the duty to manufacture a plane free of defects ... includes the duty to provide warnings and manuals that are also free of defects. Under products liability law, the plane's flight characteristics may be unreasonably dangerous and give rise to liability unless accompanied by warnings as to the dangers .... Thus, in certain circumstances, an allegation that an aircraft is defective may mean that the warnings that were supplied were inadequate or defective." Leachman v. Beech Aircraft Corp., at 1306. See also Martinez v. Dixie Carriers, Inc., 529 F.2d 457, 465 (5th Cir.1976); Berkebile v. Brantly Helicopter Corp., 462 Pa. 83, 100, 337 A.2d 893 (1975) (both quoted in Leachman).

[17]The section of the Act relevant to the instant inquiry provides:

7.72.030 Liability of manufacturers. (1) A product manufacturer is subject to liability to a claimant if the claimant's harm was proximately caused by the negligence of the manufacturer in that the product was not reasonably safe as designed or not reasonably safe because adequate warnings or instructions were not provided.

(a) A product is not reasonably safe as designed, if, at the time of manufacture, the likelihood that the product would cause the claimant's harm or similar harms, and the seriousness of those harms, outweighed the burden on the manufacturer to design a product that would have prevented those harms and the adverse effect that an alternative design that was practical and feasible would have on the usefulness of the product.

(b) A product is not reasonably safe because adequate warnings or instructions were not provided with the product, if, at the time of manufacture, the likelihood that the product would cause the claimant's harm or similar harms, and the seriousness of those harms, rendered the warnings or instructions of the manufacturer inadequate and the manufacturer could have provided the warnings or instructions which the claimant alleges would have been adequate.

(c) A product is not reasonably safe because adequate warnings or instructions were not provided after the product was manufactured where a manufacturer learned or where a reasonably prudent manufacturer should have learned about a danger connected with the product after it was manufactured. In such a case, the manufacturer is under a duty to act with regard to issuing warnings or instructions concerning the danger in the manner that a reasonably prudent manufacturer would act in the same or similar circumstances. This duty is satisfied if the manufacturer exercises reasonable care to inform product users.

(2) A product manufacturer is subject to strict liability to a claimant if the claimant's harm was proximately caused by the fact that the product was not reasonably safe in construction or not reasonably safe because it did not conform to the manufacturer's express warranty or to the implied warranties under Title 62A RCW.

(a) A product is not reasonably safe in construction if, when the product left the control of the manufacturer, the product deviated in some material way from the design specifications or performance standards of the manufacturer, or deviated in some material way from otherwise identical units of the same product line.

(b) A product does not conform to the express warranty of the manufacturer if it is made part of the basis of the bargain and relates to a material fact or facts concerning the product and the express warranty proved to be untrue.

(c) Whether or not a product conforms to an implied warranty created under Title 62A RCW shall be determined under that title.

(3) In determining whether a product was not reasonably safe under this section, the trier of fact shall consider whether the product was unsafe to an extent beyond that which would be contemplated by the ordinary consumer.

[18] Texas had adopted the strict liability doctrine of section 402A of the Second Restatement of Torts. No Utah state court had addressed the issue, but the Tenth Circuit had applied the doctrine on the theory that Utah would were it given the opportunity. Virginia's legislature had eliminated the privity requirement from warranty actions; judicial decisions resulting from that enactment had created a doctrine "identical" to strict liability. Cunningham v. Textron, Inc., slip op. at 6.

[19] This case is distinguishable from Reyno v. Piper Aircraft Co., where the Third Circuit found that an asserted conflict between one jurisdiction's law of strict liability and another's of negligence was actually a false conflict. Reyno involved an air crash in Scotland of an aircraft manufactured in Pennsylvania. While Pennsylvania had a strict products liability law, Scottish law employed a negligence standard. The court noted that strict liability and negligence serve the same policies of deterrence and compensation and differ only in where they strike the balance in searching for optimal deterrence of harmful conduct and allocating the costs of injuries among producers and consumers, negligence being more producer-protective and strict liability being more consumer-protective. 630 F.2d at 167. Scotland's interest associated with its negligence rule—encouraging industry by protecting manufacturers—was immaterial to the Reyno case inasmuch as the defendant did not engage in manufacturing in that country, and therefore was not impaired by the court's application of the stricter Pennsylvania standard. Id. at 168. In the instant case, however, Washington State is undoubtedly interested in having its more producer-protective rule govern the liability of its local defendant Boeing.

[20] Air Florida and American likewise assert that the "fortuity" of the crash reduces the District of Columbia's interests in issues concerning those defendants. See part I-D, infra.

[21]According to a National Transportation Safety Board diagram appended by American Airlines to its November 15, 1982 memorandum as Exhibit A, Flight 90 began its departure on a runway at National Airport within the Commonwealth of Virginia. It was airborne by the time it passed over the land's end at the runway's terminus, at which point it crossed over an inlet of the Potomac River, which is in the District of Columbia. After this brief flight over District of Columbia waters, its path took it over a point where Virginia land again juts out into the river. Further on, the waterline evidently was just below the aircraft's route; as such, Flight 90 conceivably could have crossed the state line several times during this portion of the flight. Finally it hit the 14th Street Bridge at a point over the river and therefore in the District of Columbia, but a matter of feet away from Virginia.

The question of whether the relevant events happened in the District of Columbia or Virginia was a troubling matter to resolve in another case involving a fatal crash of a commercial passenger plane at or near Washington National Airport, Union Trust Co. of District of Columbia v. United States, 113 F.Supp. 80 (D.D.C. 1953) aff'd in part and rev'd in part, United States v. Union Trust Co., 221 F.2d 62 (D.C. Cir.), aff'd, United States v. Union Trust Co., 350 U.S. 907, 76 S.Ct. 192, 100 L.Ed. 796 (1955). On November 1, 1949, an Eastern Air Lines DC-4, carrying 51 passengers and four crew members from Boston to Washington, collided with a Bolivian P-38 military plane while the passenger plane was "approximately 300 feet in the air on final approach on runway number 3 at the Washington National Airport, Washington, D.C." 113 F.Supp. at 81. Lex loci delicti being the law of the forum at the time, the question of where the accident occurred was an important one as a Virginia statute then limited recovery for wrongful death to $15,000 while the District of Columbia had no statutory limit. The question was submitted to the jury. Commenting on the jury's finding that the accident "occurred in the District of Columbia," Judge McGuire noted that "This particular question was not easy of resolution." Id. at 85. The judge upheld the finding, noting "such pertinent and persuasive factors" leading to the jury's conclusion as, inter alia, "the narrowness, so to speak, of the geographical area involved in relation to the line of demarcation between the District of Columbia and the Commonwealth of Virginia." Id.

In that crash, the DC-4 was cut in two, its forward portion falling in the Potomac and the after portion on the Virginia shore. Eastern Air Lines Inc. v. Union Trust Co., 221 F.2d 62, 64 (D.C.Cir.1955). The plane's landing pattern involved a southward path over Virginia to a point south of the city of Alexandria, then eastward until over the Potomac, then northwest to a distance northeast of Alexandria. Id. A map prescribing the landing pattern for Runway 3 and generally conforming to this description is found at 17 Fed.Reg. 7178 (Aug. 7, 1952); 14 C.F.R. § 60.18-7(h) (1952).

[22] D.C.Code § 1-101(a) (Michie 1981) provides that "The District of Columbia is that portion of the territory of the United States ceded by the State of Maryland for the permanent seat of government of the United States, including the river Potomac in its course through the District, and the islands therein." The reach of Maryland's cession on January 24, 1791 to the District of Columbia was equivalent to that of the 1632 charter of Charles I granting Maryland to Lord Baltimore; to "the farther bank of the said [Potomac] river and following it." Smoot Sand & Gravel Corp. v. Washington Airport, Inc., 283 U.S. 348, 350-51, 51 S.Ct. 474, 475, 75 L.Ed. 1109 (1931); Marine Railway & Coal Co. v. United States,257 U.S. 47, 63, 42 S.Ct. 32, 33-34, 66 L.Ed. 124 (1921).

Because no one could any longer be certain of the location of the January 24, 1791 high water mark, in 1945 Congress enacted a statute establishing the boundary between the District of Columbia and Virginia for law enforcement purposes as the existing mean high water mark as may be altered by natural or artificial forces. Act of Oct. 31, 1945, 59 Stat. 552. This statute was relied upon by the courts which have held that Washington National Airport is located in Virginia. Pfister v. Director, Office of Workers' Compensation Programs, 675 F.2d 1314, 1315 (D.C.Cir.1982), citing Bryan v. District Unemployment Compensation Board, 342 A.2d 45, 47 (D.C.App.1975). However, it has been held that the Act of 1945 did not establish a jurisdictional boundary between the District of Columbia and Virginia for all purposes, and that the boundary for some purposes, including court jurisdiction over certain actions involving title to land, remains the 1791 line. United States v. Herbert Bryant, Inc., 543 F.2d 299, 303-04 (D.C.Cir.1976), citing Smoot. This case was not cited by the court in Pfister.

[23] See note 13, supra.

[24] The various district court cases involving "fortuitous crashes" and cited above turned to section 145 of the Restatement, Second for the contact to consider. They did not, however, make reference to sections 146 or 175, which are the special cases for personal injury and wrongful death actions, respectively. Each of these sections provides that the local law of the state where the injury occurred presumptively governs the issues of liability, unless another state has a more significant relationship to the event and the parties under the considerations of section 6.

[25] Judicial notice may be taken of these facts. See Chicago, 644 F.2d at 615.

[26] The District of Columbia has filed a claim against Air Florida to recover such expenses. Boeing is a third-party defendant in this case. District of Columbia v. Air Florida, Civil Action No. 82-2506.

[27] Early Settlers Ins. Co. v. Schweid, 221 A.2d 920, 923 (D.C.App.1966); North River Ins. Co. v. Davis, 274 F.Supp. 146, 149 (E.D.Va.1967), aff'd, 392 F.2d 571 (4th Cir.1968).

[28] Fla.Stat.Ann. § 768.31(3)(a) (West Supp. 1981); Wash.Rev.Code § 4.22.040(1) (West Supp.1981); Tex.Stat.Ann. art. 2212a § 2 (Vernon Supp.1981).

[29] Runyon v. District of Columbia, 463 F.2d 1319, 1322 (D.C.Cir.1972) (while punitive damages are available in survival actions, they are not available in wrongful death actions, where the sole purpose is to compensate). See also Saigon, 476 F.Supp. at 527 n. 13; D.C.Code §§ 12-101, 16-2701 (Michie 1981).

[30] Martin v. United Security Services, Inc., 314 So.2d 765, 771-72 (Fla.1975) (Florida Wrongful Death Act of 1973, Fla.Stat.Ann. §§ 768.16-.27, did not repeal the right to claim punitive damages for negligently caused death).

[31] Under the Virginia Death by Wrongful Act law as it existed on January 13, 1982, punitive damages were not available. Va.Code §§ 8.01-50, -52 (1967); Wilson v. Whittaker, 207 Va. 1032, 154 S.E.2d 124, 129 (1967) (since purpose of statute not to punish wrongdoers, punitive damages could not be assessed). This law was amended in 1982, after the date of the Flight 90 crash, to allow an assessment of punitive damages in the case of "willful or wanton conduct, or such recklessness as evinces a conscious disregard for the safety of others." Va.Code §§ 8.01-52(5) (Supp.1982).

[32] As noted above, the Washington Supreme Court has held that "the doctrine of punitive damages is unsound in principle and [punitive damages] cannot be recovered in this jurisdiction, absent statutory authorization." Maki v. Aluminum Building Products, 436 P.2d at 187. Accord, Kammerer v. Western Gear Corp., 96 Wash.2d 416, 635 P.2d 708, 711 (1981); Barr v. Interbay Citizens Bank of Tampa, Florida, 96 Wash.2d 692, 635 P.2d 441, 443-44 (1981). There is no statutory provision in the Revised Code of Washington allowing punitive damages awards in actions such as those before this Court.

[33] E.g., Focht v. Rabada, 217 Pa.Super. 35, 268 A.2d 157 (1970). In Pennsylvania punitive damages are available even where compensatory damages are not awarded, and the amount of a punitive damages assessment need bear no relationship to actual damages awarded. Rhoads v. Heberling,___ Pa.Super. ___, 451 A.2d 1378, 1383 (1982).

Mass.Ann.Laws ch. 229 § 2 (Michie/Law Co-op. Cum.Supp.1982).

[34] Tex. Const., art. 16 § 26; Tex.Stat.Ann., art. 4673.

[35] The Court wishes to emphasize its displeasure with counsel's misrepresentation of the legal conclusions reached by the United States District Court for the District of Massachusetts. For counsel to "[k]nowingly make a false statement of law or fact" is a violation of the Code of Professional Responsibility and will not be tolerated. Model Code of Professional Responsibility DR 7-102(a)(5); Rules of the Supreme Judicial Court of Massachusetts, ___ Mass. ___ (1981). The negligent making of a false statement of law or fact is also reprehensible. It should be noted that counsel for these plaintiffs moved for leave to file their brief and to present oral argument only several days before the hearing, after hundreds of pages of briefing had been filed by the other parties over the course of a number of weeks. Every court should be able to rely upon the accuracy of the statements made by members of the Bar—and indeed, given the limited resources of a judge's staff, must be able to do so without hesitation. Vargas v. McNamara, 608 F.2d 15, 19 (1st Cir. 1979). The rule cited above serves in part to protect this interest. The fact that the deleted language, which concerns a material issue, was removed from within the quoted passage rather than merely dropped from the end of the quotation suggests that the omission may not have been inadvertent. Counsel, accepting responsibility for the omission, has represented that he had no intent to mislead the Court. No disciplinary action will be initiated; however, this misquotation calls for strong condemnation. Quality Molding Co. v. American National Fire Ins. Co., 287 F.2d 313, 315-16 (7th Cir.), cert. denied, 368 U.S. 826, 82 S.Ct. 45, 7 L.Ed.2d 29 (1961).

[36] To the extent that it can be determined where the relationship between the parties is centered, that place is the District of Columbia. See note 13, supra.

[37] In a case where a Texas-domicile defendant corporation allegedly engaged in conduct in Illinois also causing injury in Illinois, the Fifth Circuit decided that since the tort remedy's primary purpose was to deter or punish, Illinois, as the state where the conduct took place, was the "state of dominant interest and thus that of most significant relationship." Houston North Hospital Properties v. Telco Leasing, 688 F.2d 408, 409 (5th Cir.1982), quoting Restatement (Second) of Conflict of Laws § 145, comment b on subsec. (1), at 416.

[38] This is consistent with the Reese approach, which suggests that the three potentially interested jurisdictions in an action by a passenger for punitive damages against a carrier are (1) the carrier's place of business, (2) the place where the plane was maintained, in a case where the injury resulted from a failure to inspect or repair the plane, and (3) the place of navigational error, in a case where the injury resulted from such error. Reese, Airplane Accidents, supra, at 1317-18. As discussed above, Florida and Texas have a lessened interest in this issue because the allegedly wrongful conduct took place outside of their borders. Site (2) applies to the allegations against American, and refers to National Airport. Site (3) applies to Air Florida, and similarly refers to National Airport. As the District of Columbia and Virginia together are concerned with the regulation of conduct at National Airport they both therefore have an interest in the application of their laws. Between them, as injury was felt primarily in the District of Columbia, the District has the more significant relationship to the issue.

[39] Pittwaywas an action against a manufacturer for cost of repairing an airplane's cracked mainframe and for economic loss. There was no crash in this case, but the owner was forced to put its plane out of service when the crack was discovered while the plane was on the ground in Wisconsin. As such, the location of the aircraft at the time the crack occurred was indeterminable. 641 F.2d at 524.

Even if the court were able to fix the site of injury, however, the court stated that it "could not agree that it is the state with the most significant relationship to the litigation." Id. at 528. Noting that the Restatement, Second, of Conflict of Laws provides, at § 145, subsec. 2, comment (b), that where the place of injury is indeterminate or fortuitous, the law of the place of misconduct should be given greater weight, the court concluded that the law of Georgia, where the plane was built, should control. 641 F.2d at 528.

[40] Section 175 states that the law of the site of injury determines the "rights and liabilities of the parties" unless some other state has a more significant relationship under the principles of section 6 to the occurrence and the parties. However, it concerns the law generally to be applied in wrongful death actions, and does not specifically refer to the question of liability for punitive damages. Indeed, section 175, comment (f), which discusses the case where conduct and injury occur in different states, suggests that the injury state's law is most likely to be applied where the decedent had a settled relationship to that state (e.g., was a domiciliary or resident thereof). This suggests a concern with compensation, which is not a factor in the issue of imposing punitive damages. Compare Reese, Airplane Accidents, supra, at 1313, wherein the author suggests that the two jurisdictions which properly have an interest in the imposition of punitive damages in a case by a passenger against a manufacturer are (1) the place of manufacture or design, and (2) the manufacturer's principal place of business. Professor Reese notes that while the state where the crash occurred "could also be said to have an interest in deterring the manufacture of defective planes ... [it] might, however, have no substantial relation to either the producer or the passenger." Id. at 1314. This suggests that the Reese formula would include the state of injury in this list in a case where these parties in fact have a connection with that jurisdiction. In a third person's (bridge plaintiff's) action against a manufacturer, the same states would be the "most substantial[ly]" interested. Id. at 1320. The state where the injury happened is not included on this list because while that state would be very interested in securing sufficient compensation for his injuries, it might have a "slight or fortuitous" contact with the manufacturer. Id. at 1320-21. Again, this suggests that the manufacturer's contact will not invariably be fortuitous.

[41] Ironically, in neither Lay nor Craven was the law of the loci delicti applied, because inasmuch as the laws of those states (Alabama and South Carolina, respectively) were not pleaded specifically, the common law as interpreted by the courts of Georgia was to be followed. Lay, 62 S.E. at 189; Craven, 73 S.E.2d at 251.

[42] In two recent decisions, the United States District Court for the District of Maryland has stated that lex loci delicti is Maryland's choice of law rule in tort cases. Grodinsky v. Fairchild Industries, Inc., 507 F.Supp. 1245, 1252 (D.Md.1981); President & Directors of Georgetown College v. Madden, 505 F.Supp. 557, 569 (D.Md.1980). However, in neither of those cases did the court examine the question of whether Maryland would still follow that rule in light of White v. King and subsequent developments; moreover, those cases predate the Maryland intermediate appellate decision in which lex loci delicti was not followed, which case is discussed in text below.

[794] [795] Charles Brewer, Phoenix, Ariz., Stanley Chesley, Cincinnati, Ohio, Lee Kreindler, New York City, Gerald Lear, Thomas Meehan, Washington, D.C., Richard Schaden, Birmingham, Mich., for plaintiff's Steering Committee.

Carroll E. Dubuc, Washington, D.C., for defendant Northwest Airlines.

John J. Hennelly, Los Angeles, Cal., Donald E. Shely, Detroit, Mich., for defendant McDonnell Douglas.

ORDER

JULIAN ABELE COOK, Jr., Chief Judge.

This Order is designed to resolve the plethora of pleadings that have raised choice of law issues in this multidistrict litigation.^[1] In a case of this magnitude, in which one hundred fifty-seven claims have been filed in four federal judicial districts against two defendants that are incorporated in different states, the choice of law questions are numerous. Yet, all of them must be resolved as expeditiously as possible. The prospect of deciding choice of law questions in a multidistrict context prompted Judge Pierson M. Hall to state:

The law on "choice of law" in the various states and in the federal courts is a veritable jungle, which, if the law can be found out, leads not to a "rule of action" but a reign of chaos dominated in each case by the judge's "informed guess" as to what some other state other than the one in which he sits would hold its law to be.

In re Paris Air Crash of March 3, 1974, 399 F.Supp. 732, 739 (C.D.Cal.1975).

In the case sub judice, the legal quagmire known as choice of law has once again reared its ugly head in the multidistrict context and currently requires the immediate attention and resources of this Court. For the following reasons, this Court concludes that (1) the law of California shall apply to all Plaintiffs' product liability claims against McDonnell Douglas Corporation (MDC), (2) the law of Michigan shall apply to all Plaintiffs' punitive and exemplary damage claims except those cases that were filed in California against MDC, in which case, the law of California shall apply, and (3) the parties must rebrief the choice of law issues concerning the Plaintiffs' claims for compensatory damages on a date which shall be established by this Court.^[2]

I

On August 16, 1987, Northwest Airlines Flight 255, a DC-9 aircraft which was designed and manufactured by MDC, crashed shortly after takeoff from Detroit Metropolitan Airport and resulted in the death of one hundred fifty-six persons. Cecelia Cichan, four years of age, was the sole surviving passenger of the crash.

Less than two weeks later (August 28, 1987), the first case was filed in the Eastern District of Michigan. On December 9, 1987, the Judicial Panel on Multidistrict Litigation ordered the transfer of all Flight 255 federal cases to this district for consolidated pretrial proceedings.

On August 18, 1989, this Court issued an Order in which it (1) transferred and consolidated all cases relating to the Flight 255 matter, see 28 U.S.C. § 1404(a); Fed.R. [796] Civ.P. 42(a), (2) bifurcated the issue of liability from the issue of damages, see Fed. R.Civ.P. 42(b), and (3) scheduled the commencement of a joint liability trial, which was designed to resolve all liability issues, for October 2, 1989. See In re Air Crash Disaster at Detroit Metropolitan Airport on August 16, 1987, 737 F.Supp. 391 (E.D. Mich.1989).

As of the date of this Order, one hundred fifty seven cases have been filed in this matter on behalf of the passengers and flight attendants on the accident aircraft who died or were injured in the crash, and those persons who were killed or injured as a result of being present at the accident site at the time of the crash. These cases were originally filed in Michigan, Arizona, California, and Florida.^[3] The Defendants, Northwest Airlines, Inc. (Northwest) and McDonnell Douglas Corporation (MDC), have also filed cross claims and third party claims against each other.^[4]

Generally, the Plaintiffs have filed wrongful death claims in which they seek compensatory, as well as punitive, damages from MDC and Northwest.^[5] The Plaintiffs' allegations of wrongdoing by Northwest focuses on (1) the preflight and take-off conduct of the flight crew, (2) the maintenance of the accident aircraft, and (3) the training of the flight crew. With regard to the alleged misconduct of MDC, the Plaintiffs' claims center on (1) the design, testing, and manufacture of the accident aircraft, and (2) the failure to warn of known deficiencies of certain components and instruments on the accident aircraft.

The parties in this case maintain that choice of law issues exist in the following contested matters: (1) MDC's potential liability for the alleged design defects, (2) Northwest's and MDC's potential liability for punitive or exemplary damages, and (3) Plaintiffs' individual claims for compensatory damages. These are the issues that will now be resolved by this Court.^[6]

II

At the onset of any case in which legally significant facts have occurred in more than one state, the Court must identify those states that have sufficient contacts with this litigation. Once these states have been identified, this Court must determine whether the various substantive laws at issue differ with regard to the particular issues in contest. Should the substance of the relevant state laws differ or conflict, then it will become necessary to apply the choice of law rules of the forum states. See e.g., In re Air Crash Disaster Near Chicago, Illinois, 644 F.2d 594, 605 (7th Cir.), cert. denied, 454 U.S. 878, 102 S.Ct. 358, 70 L.Ed.2d 187 (1981).

This may result in the application of "the rules of different states to determine different issues in the same case."^[7] Reese, Depecage: A Common Phenomenon in Choice of Law, 73 Colum.L.Rev. 58, 75 (1973). The parties in the instant cause have, in large part, ignored this principle by arguing that the law of a particular state should govern all issues which relate to a particular defendant. In most states that have abandoned the lex loci delicti rule, the resolution of the choice of law [797] analysis will depend upon the issue in question. The search in these cases is not to determine which state law will be applied to all of the issues in a case, but to identify the rule of law that will be applied to each particular issue in which a conflict is presented.

It is well settled that a federal court, which sits in diversity matters, must apply the choice of law rules of the forum state. Klaxton Co. v. Senator Electric Mfg. Co., 313 U.S. 487, 61 S.Ct. 1020, 85 L.Ed. 1477 (1942); Erie R. R. v. Tompkins, 304 U.S. 64, 58 S.Ct. 817, 82 L.Ed. 1188 (1938). It has also been established that when a case is transferred pursuant to 28 U.S.C. § 1404, the transferee court must apply the choice of law rules of the transferor forum.^[8] Van Dusen v. Barrack, 376 U.S. 612, 84 S.Ct. 805, 11 L.Ed.2d 945 (1964); In re Benedectin Litigation, 857 F.2d 290, 306 (6th Cir.1988), cert. denied, 488 U.S. 1006, 109 S.Ct. 788, 102 L.Ed.2d 779 (1989); Martin v. Stokes, 623 F.2d 469, 471-74 (6th Cir.1980). On the basis of the record in the case sub judice, the relevant choice of law rules at issue are those of Michigan, Arizona, California, and Florida.

All of these states have abandoned the lex loci delicti doctrine as a methodology for resolving choice of law questions. Instead, these jurisdictions have adopted an approach which focuses on, in varying ways, the interest that each state has in having its substantive law apply in a particular case.

Michigan, which has refused to adopt an established choice of law methodology, essentially considers whether there exists a "rational reason" to displace the law of the forum in favor of the law of another state. See Olmstead v. Anderson, 428 Mich. 1, 400 N.W.2d 292 (1987). Both Arizona and Florida have adopted the approach of the Restatement (Second) of Conflict of Laws (Restatement). See Bishop v. Florida Specialty Paint Co., 389 So.2d 999 (Fla.1980); Schwartz v. Schwartz, 103 Ariz. 562, 447 P.2d 254 (1968). California has incorporated the so-called "comparative impairment" approach. See Bernhard v. Harrah's Club, 16 Cal.3d 313, 128 Cal.Rptr. 215, 546 P.2d 719 (1976). The following is a concise discussion of the choice of law principles in these four states.

A

In Sexton v. Ryder Truck Rental, 413 Mich. 406, 320 N.W.2d 843 (1982), the Michigan Supreme Court abandoned lex loci delicti as an absolute rule, but declined to adopt a particular choice of law rule. However, in Olmstead v. Anderson, 428 Mich. 1, 29-30, 400 N.W.2d 292, 304-05 (1987), the Michigan high court determined that, when presented with conflicting laws, the courts must consider whether there exists a "rational reason to displace Michigan law in th[e] case," which focused upon (1) the particular interest that each state has in having its substantive law apply to the precise issue in question, and (2) whether applying lex loci delicti will advance the interests of certainty, predictability of results, and prevention of forum shopping.^[9]

[798] B

In the context of an alleged tort involving a foreign element, the Arizona and Florida courts apply the principles of the Restatement (Second) of Conflicts of Laws (Restatement) in order to identify the substantive law that is to be applied to the issue presented. See Bates v. Superior Court of Arizona, 156 Ariz. 46, 749 P.2d 1367 (1988); Schwartz v. Schwartz, 103 Ariz. 562, 447 P.2d 254 (1968); Bishop v. Florida Specialty Paint Co., 389 So.2d 999 (Fla.1980).

With regard to wrongful death claims, the Restatement (Second) essentially reflects a presumption that the laws of the state where the injury occurred should govern "unless, with respect to the particular issue, some other state has a more significant relationship under the principles stated in § 6." RESTATEMENT (SECOND) OF CONFLICT OF LAWS § 175 (1971).^[10] Restatement § 6(2) outlines the various "relevant factors" that should be considered in a choice of law analysis:

(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 the 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 CONFLICTS OF LAWS § 6(2) (1971).

The particular contacts that are to be taken into account in applying the factors in § 6(2) are (1) the place of the injury, (2) the place of misconduct, (3) the domicile, residence, nationality, place of incorporation, and place of business of the parties, and (4) the place where the relationship between the parties is centered. RESTATEMENT (SECOND) OF CONFLICTS OF LAW § 145(2).

The Arizona Supreme Court, in Bates, 156 Ariz. at 50, 749 P.2d at 1370, stated "[t]he inquiry is qualitative, not quantitative. Ambrose v. Illinois-California Express, Inc., 151 Ariz. 527, 530, 729 P.2d 331, 334 (App.1986). The Court must evaluate the contacts `according to their relative importance with respect to the particular issue.' Restatement § 145(a)."

C

California employs a "comparative impairment" approach to choice of law questions. Offshore Rental Co., Inc. v. Continental Oil Co., 22 Cal.3d 157, 148 Cal.Rptr. 867, 583 P.2d 721 (1978); Bernhard v. Harrah's Club, 16 Cal.3d 313, 128 Cal.Rptr. 215, 546 P.2d 719 (1976). Under this approach, the Court must first determine whether the substantive laws of the involved states differ on the point in issue. If an apparent conflict exists between the laws of the interested states, the Court should then ascertain whether a "moderate and restrained interpretation" of the policies [799] suggests that only one state has a legitimate interest in the application of its law. Bernhard, 16 Cal.3d at 320, 128 Cal. Rptr. at 219, 546 P.2d at 723.

Should a more moderate and restrained interpretation fail to resolve the conflict, then the court is presented with a "true conflict." Under this comparative impairment approach, the "true conflict should be resolved by applying the law of the state whose interest would be the more impaired if its law were not applied." Id. at 320, 128 Cal.Rptr. at 219, 546 P.2d at 723. The process of weighing conflicting state interests does not depend on a determination of which law "manifest[s] the `better' or the `worthier' social policy on the specific issue." Offshore Rental, 22 Cal.3d at 165, 148 Cal.Rptr. at 872, 583 P.2d at 726.

In assessing the relative interests of the involved states, the Courts should consider (1) whether a particular statute is "archaic" and "isolated" from the more "prevalent and progressive" laws, (2) the "fit" between the purpose of the law and the factual context presented in the instant action, and (3) whether the policy that is reflected in the law at issue can be satisfied by some means other than its application to the case at bar. Offshore Rental, 22 Cal.3d at 165-66, 148 Cal.Rptr. at 872-73, 583 P.2d at 726-27.

III

This Court will now examine the choice of law questions that have been presented in the several design defect claims.

A

With regard to those claims that were filed against MDC by Michigan claimants, the states having contacts are Michigan (the place of the injury and where the Michigan Plaintiffs filed), Missouri (its principal place of business),^[11] and California (the place of MDC's alleged misconduct).^[12] Having identified the relevant states, this Court must now determine whether the relevant states have conflicting laws pertaining to design defects. If so, Michigan's choice of law rule must be applied in order to resolve such a conflict.

The Michigan Supreme Court has refused to adopt the doctrine of strict liability in tort for product defects. See Prentis v. Yale Manufacturing Co., 421 Mich. 670, 682 n. 9, 687 n. 24, 365 N.W.2d 176, 181 n. 9, 184 n. 24 (1984). In Prentis, the Michigan Supreme Court stated that "the proper test for determining a manufacturer's liability for defective design is negligence." [800] Id. at 687 n. 25, 365 N.W.2d at 184 n. 25. In those cases in which liability against a manufacturer is predicated upon defective design, the Michigan courts follow a pure negligence risk-utility test. In essence, this test focuses on whether the manufacturer exercised reasonable care in making its design choices in light of the alternatives and risks that were presented under the circumstances. Id. at 688-691, 365 N.W.2d at 184.

In contrast to Michigan, the Missouri Supreme Court has adopted the rule of strict liability in tort as set forth in the Restatement (Second) of Torts § 402A (Restatement). See Klein v. General Electric Co., 714 S.W.2d 896 (Mo.App.1986); Blevins v. Cushman Motors, 551 S.W.2d 602, 607 (Mo.1977) (en banc); Keener v. Dayton Electric Manufacturing Co., 445 S.W.2d 362 (Mo.1969) (en banc). Under the Restatement approach, a manufacturer is strictly liable for selling any product in a "defective condition unreasonably dangerous." Under Missouri's model of strict liability, "the primary inquiry in a design defect case is whether the product — because of the way it is designed — creates an unreasonable risk of danger to the consumer or user when put to normal use." Nesselrode v. Executive Beechcraft, Inc., 707 S.W.2d 371, 375 (Mo.1986) (en banc).^[13]

The California Supreme Court has refused to follow the "unreasonably dangerous" requirement of the Restatement § 402, and, instead, allows a plaintiff to recover in a strict products liability litigation upon establishing that the product was merely "defective." In Barker v. Lull Engineering Co., 20 Cal.3d 413, 143 Cal.Rptr. 225, 573 P.2d 443 (1978), the California Supreme Court developed a two-pronged test under which a plaintiff may establish that a design was defective. Under this approach, a product is defectively designed if the plaintiff proves that (1) a product is not safe as an ordinary consumer might expect when used in an intended or reasonably foreseeable manner, or (2) the product's design was the proximate cause of the injury and the defendant fails to prove that the benefits of the product as designed outweigh the inherent risks in such a design. Id. at 418, 143 Cal.Rptr. at 228, 573 P.2d at 446.^[14]

As is evident from this discussion, the substance of the product liability laws of the three involved states are in conflict. Therefore, this Court must apply choice of law rule in the State of Michigan in order to determine which products liability law a Michigan court would apply in this case.

The Michigan choice of law doctrine centers on whether there is rational reason to [801] displace its own law in favor of the law of a foreign state. In order to answer this question, it is necessary to identify (1) the policies that are reflected in each state's products liability law, and (2) the interest, if any, of each state in applying its own law in order to implement the policies that have been incorporated into its product law.

As was intimated in Reyno v. Piper Aircraft Co., 630 F.2d 149, 167 (3d Cir.1980), the standards of strict liability and negligence essentially further the same policies of regulation and compensation. They differ only when there is an attempt to balance those policies. The Reyno Court stated:

The choice between holding a manufacturer liable only for negligence and holding it strictly liable for any dangerous products or design is, practically speaking, a matter both of searching for optimal deterrence of harmful conduct and of allocating the costs of injuries either to producers or consumers. A negligence standard is, broadly speaking, more protective of producers, while strict liability is more solicitous of consumers.

Id.

Michigan's negligence risk-utility products liability law reflects a producer protective policy. Such a doctrine is designed to induce companies to conduct business in Michigan by protecting domiciled producers from excessive financial liability. By protecting the economic health of companies that conduct business in Michigan, the state derives substantial revenues in sales and taxes, directly and indirectly, and furthers the economic well being of the entire state.

In contrast, the strict product liability laws of California and Missouri reflect a consumer protective and a producer regulatory policy.^[15] First, these laws are intended to encourage the design of safe products, thereby reducing the incidence of injuries by making the producer incur the monetary consequences that are associated with defective goods. In addition, strict liability reflects a determination that the costs of damaging events, which result from defective products, can best be born by the entities that produce and sell the products. See Keener v. Dayton Electric Manufacturing Co., 445 S.W.2d at 362, 364 (Mo.1969) (en banc). Second, strict products liability laws reflect a concern that the injured party receive adequate compensation and not become a ward of the state.

With respect to the Plaintiffs' design defect claims against MDC, there is a rational reason to displace the Michigan products liability law. In the factual situation, which has been presented in the case at bar, Michigan does not have a strong interest in the application of its producer protective products law. An application of the law of Michigan in this case would not induce MDC, or other similarly situated companies, to conduct business in Michigan or stimulate the economy. MDC is only affiliated with Michigan because Northwest, one of its purchasers, does business in that state. It is not only unlikely, but implausible, that an airplane manufacturer would be induced to contract with an airline company, which does business in Michigan, based on that state's favorable product liability laws. Invariably, each state would have some tort or contract law that would be favorable to MDC's interest and some that would be detrimental to its interest. Obviously, MDC would not decide whether to contract with a particular airline company on this basis. Michigan simply has no interest in applying its law to protect a foreign state producer that supplies products for a company doing business in that state.^[16]

[802] In contrast, however, both California and Missouri have a strong interest in applying its products liability law in this case. Their strict liability laws reflect a desire to (1) regulate culpable conduct occurring within its borders, (2) induce corporations to design safe products and deter future misconduct, and (3) impose the financial repercussions, which have been incurred by the user of a defective product, upon the producer. Therefore, Missouri, MDC's principal place of business, and California, the place of manufacture and design of the accident aircraft, have a significant interest in applying its design defect standards in order to effectuate the regulatory policy which is reflected in their laws.^[17]

Because Missouri and California have a strong interest in having its products liability law apply to the conduct of MDC, there exists a rational reason to displace Michigan law in this case. Although the elements and the evidentiary standards of the strict products liability laws of Missouri and California vary, the interests of these two states would not be compromised by the application of the law of the other state. In choosing between these two states, this Court believes that California has a greater interest in applying its own law since the alleged wrongful conduct by MDC occurred within its borders. While Missouri has a general concern for controlling the activities of its corporations, California has an interest in controlling any specific conduct (decisions by MDC regarding the design of the aircraft) that primarily takes place within that state. For the foregoing reasons, this Court concludes that the Michigan claimants must establish their contention of design defects against MDC pursuant to the products liability law of California.

B

With regard to the claims that were filed in Arizona, the states with contacts to the instant litigation include Michigan (place of injury), California (place of the alleged misconduct), and Missouri (MDC's principal place of business). However, unlike the analysis under Michigan's choice of law rules, a fourth state, Arizona (domicile or residence of many Plaintiffs) also has a connection with this litigation which must be taken into account. See RESTATEMENT (SECOND) OF CONFLICT OF LAWS § 145(2) (1971).

The products liability laws of Michigan, California, and Missouri were outlined above and were deemed to be in conflict, thereby necessitating the application of the forum's choice of law rules. However, before applying Arizona's choice of law rules in this context, it is necessary to determine its product liability standards and how it relates to the standards of the three other states in which legally significant events occurred.

In O.S. Stapley Co. v. Miller, 103 Ariz. 556, 447 P.2d 248 (1968) (en banc), the Arizona Supreme Court adopted the strict liability standard in § 402A of the Restatement. Unlike its California neighbor, Arizona has not eliminated the element of "unreasonably dangerous condition" as a strict liability requirement. However, the Arizona Supreme Court has stated that California's products law is nothing more than a "logical refinement" of Arizona's products doctrine. Dart v. Wiebe Manufacturing, Inc., 147 Ariz. 242, 245, 709 P.2d [803] 876, 879 (1985) (en banc).^[18] The Dart Court stated that the question of defective and unreasonably dangerous condition, which represent the basic elements of its strict product liability law, should be resolved primarily on the basis of the consumer expectation test. However, in those cases in which "that test is inapplicable because the ordinary consumer would not form an expectation with regard to the relevant safety feature," the plaintiff may pursue a strict liability risk-benefit analysis as outlined in Dorsey v. Yoder Co., 331 F.Supp. 753 (E.D.Pa.1971), aff'd, 474 F.2d 1339 (3d Cir.1973). Dart, 147 Ariz. at 248, 709 P.2d at 882 (construing Byrns v. Riddell, 113 Ariz. 264, 550 P.2d 1065 (1976)).

In summary, the products liability laws of the states with relevant contacts to the instant litigation under the Arizona choice of law rules are as follows: Michigan follows the negligence risk-utility test, Missouri follows the Restatement's strict liability test, and California and Arizona follow a two pronged strict liability test. As was the case with the claims which were filed in Michigan, there exists a significant distinction in the substantive products liability laws that must be resolved by the choice of law rules of Arizona.

Accordingly to Arizona's choice of law methodology, the products liability of Michigan, the place where the injury occurred, should apply "unless, with respect to the particular issue, some other state has a more significant relationship under the principles stated in § 6." RESTATEMENT (SECOND) OF CONFLICTS OF LAW § 175 (1971). However, one of the "relevant factors" of substantial import on this issue, a concern for the "relevant policies of other interested states and the relative interests of those states in the determination of the particular issue," id. § 6(2), counsels that the law of California should apply.

California has a very strong interest in the application of its producer regulatory products liability law to those companies that are located within its borders. In contrast, Michigan has only a slight interest in the application of its producer protective laws to a nondomiciliary corporation. Arizona has a strong interest in applying its strict products liability laws in favor of its own residents in order to further the consumer protective policy which is reflected in its laws. However, Arizona's interest would not be compromised by the application of California law because (1) the products liability laws of these two states are nearly identical and (2) the law of California would equally further the consumer protective policy which is reflected in Arizona's law.

The application of the law of California to a corporation which conducts significant business in that state, would not upset the "justified expectations" of MDC. Certainly, MDC could not maintain that it did not expect that its conduct in designing the accident aircraft would not be subject to the product liability standards of California. In addition and for the purposes of trial, the presentation of one standard of liability for allegedly defective products — in this instance, California — to the jury would (1) simplify the matter for the jurors and (2) result in consistent findings on this issue regardless of where the claim was filed. Such a uniform result would also discourage and minimize forum shopping.^[19]

[804] Therefore, for the foregoing reasons, this Court concludes that an Arizona court would apply the products liability law of California to the design defect contentions of the Arizona claimants.

C

With regard to those parties who filed their claims which sound in products liability in Florida, the courts in that state have adopted the strict liability standard of the Restatement. West v. Caterpiller Tractor Co., 336 So.2d 80, 87 (Fla.1976). Because Florida, like Arizona, has incorporated the "most significant relationship" test of the Restatement as its choice of law methodology and its products law similarly reflects consumer protective and producer regulatory policies, the conflicts analyses by these states with regard to this issue are the same. Therefore, based on the rationale, which was discussed with regard to the Arizona claims, this Court determines that the law of California shall also apply to those claims that were filed in Florida on this issue and sound in products liability.

D

With regard to the claimants who initiated their lawsuits in California, the states having relevant contacts are Michigan (the place of the injury), Missouri (principal place of business), and California (place of the alleged wrongdoing and the domicile or residence of some California claimants). As has been previously discussed at length, a conflict exists between the products liability laws of these three involved states which render it necessary to employ California's "comparative impairment" choice of law doctrine.

The adoption of a "moderate and restrained interpretation" of the policies in the product liability standards of Michigan, California, and Missouri, as required under a "comparative impairment" approach, will reveal that only California has a legitimate interest in the application of its strict liability law in the case sub judice. Simply stated, because the application of Michigan's producer protective products law would not advance the protection of the domiciliary producers from excessive liability, Michigan has a slight interest in having its laws apply in favor of MDC in this case. In contrast, California has a paramount interest in the application of its producer regulating and consumer protective policies in a case in which the plaintiffs are residents or domicilaries of that state and the defendant conducts significant business within its borders. Moreover, the application of California law would not contravene the producer regulatory policy which is reflected in Missouri's products liability law.

Inasmuch as Michigan has no legitimate interest in the application of its law in this case, and no true conflict exists between the laws of California and Missouri,^[20] this Court believes that, under the "comparative impairment" doctrine, California would apply its own law on the issue of whether MDC had defectively designed the component parts in question.

IV

A

With regard to the punitive damages claims against Northwest, the states having legally significant contacts are Michigan (place of injury) and Minnesota (place of alleged misconduct and principal [805] place of business). However, unlike the choice of law analysis that was employed by this Court regarding the issue of products liability, the domicile or residence of the plaintiff is not relevant to an evaluation of the choice of law issues concerning punitive damages because the decision by a state on whether to allow punitive damages focuses solely on corporate regulatory versus corporate protective policies.

The policy, which is reflected in those laws that prohibit an award of punitive damages, is the protection of domicilary defendants from excessive financial liability. Those states which have refused to impose punitive damages on its defendants have done so in order to promote (1) the financial stability of the businesses that conduct their affairs within its borders, and (2) the overall economic well-being of its citizenry.

Similarly, those states that permit the imposition of punitive damages do so in order to further the regulatory and deterrent policies within their laws. Certainly, all states have a strong interest in assuring that its claimants are adequately compensated for their injuries. However, this interest is satiated by an award of compensatory damages. Once its plaintiffs are made whole by the recovery of compensatory damages, the interest of the plaintiff's state of domicile is satisfied. See In re Air Crash Disaster Near Chicago, Ill., 644 F.2d 594, 612-13 (7th Cir.), cert. denied, 454 U.S. 878, 102 S.Ct. 358, 70 L.Ed.2d 187 (1981); Dobelle v. National R.R. Passenger Corp., 628 F.Supp. 1518 (S.D.N.Y. 1986); Keene Corp. v. Insurance Company of North America, 597 F.Supp. 934 D.D.C.1984). Therefore, this Court will review the punitive damages laws of the relevant states to determine if a conflict exists.

B

In Michigan, the courts of that State refuse to allow the recovery of punitive damages. See Kewin v. Massachusetts Mutual Life Ins. Co., 409 Mich. 401, 295 N.W.2d 50 (1980); Currie v. Fiting, 375 Mich. 440, 134 N.W.2d 611 (1965); Hicks v. Ottewell, 174 Mich.App. 750, 436 N.W.2d 453 (1989); Kirk v. Ford Motor Co., 147 Mich.App. 337, 383 N.W.2d 193 (1985); Association Research & Development Corp. v. CNA Financial Corp., 123 Mich.App. 162, 333 N.W.2d 206, leave to appeal den., 418 Mich. 858 (1983). While exemplary damages are distinct from punitive damages and are designed to compensate plaintiffs for humiliation, outrage, and indignity resulting from a defendant's wilful, wanton, or malicious conduct, see CNA Financial, 123 Mich.App. at 171, 333 N.W.2d at 211, neither form of damages is available under the Michigan Wrongful Death Act, M.C.L.A. § 600.2922 (West 1986). This Act has been construed by the Michigan Supreme Court as the statute which provides the exclusive remedies for those injuries which result in death, see Endykiewicz v. State Highway Commission, 414 Mich. 377, 387-88, 324 N.W.2d 755 (1982); Courtney v. Apple, 345 Mich. 223, 228, 76 N.W.2d 80, 83 (1956), and that statute does not provide for punitive or exemplary damages. See Bernier v. Board of County Road Commissioners, 581 F.Supp. 71, 80 (W.D.Mich.1983); cf. Currie, 375 Mich. 440, 134 N.W.2d 611.

The Plaintiffs' Steering Committee (PSC) in the case at bar concedes that punitive and exemplary damages are not available under Michigan's Wrongful Death Act. However, the PSC contends that a recent decision by the Michigan Supreme Court in Hardy v. Maxheimer, 429 Mich. 422, 416 N.W.2d 299 (1987), indicates that exemplary damages may be permissible in a wrongful death action under Michigan's Survival Act, M.C.L.A. § 600.2921 (West 1986).

For the following reasons, this Court declines to adopt the PSC's position on the issue of the availability of punitive or exemplary damages in wrongful death cases under Michigan law.^[21]

[806] In Hardy, the Michigan Supreme Court addressed whether the term "action which survives by law" within a statute of limitations savings provision applies only in those cases in which death was noninstantaneous (a survival action at common law), and not in cases in which death was instantaneous (a wrongful death action at common law). In its response, the Court concluded that the right to recover damages for a wrongful death "survives by law," regardless of whether death was instantaneous or noninstantaneous because a cause of action under the Wrongful Death Act accrues at the time that the injury was inflicted, not upon death. Thus, it was determined that the savings provision at issue tolled the statute of limitations in those actions which had been brought pursuant to the Wrongful Death Act without regard to whether the death of the decedent was, or was not, instantaneous.

In support of its decision, the Hardy Court noted that the Wrongful Death Act was enacted in 1939 in order to consolidate the common law survival and the wrongful death actions into a single cause of action in all cases in which injuries result in death. Id. at 433, 416 N.W.2d at 303-04. In the opinion of the Court, "the Legislature's intention in creating one unified cause of action for wrongful death under [M.C.L.A. § 600.2922] was to end the predicament created by the need to distinguish between instantaneous and noninstantaneous death." Id. M.C.L.A. § 600.2921, the Survival Statute under which the PSC desires to obtain punitive damages, clearly states that all injuries resulting in death must be pursued pursuant to the terms of the Wrongful Death Act, M.C.L.A. § 600.2922.

The Hardy rationale indicates that regardless of whether a decedent dies noninstantaneously or instantaneously, or whether his claims "survive by law," the Wrongful Death Act is the sole cause of action and remedy that is available to redress those injuries which result in death. Therefore, because punitive damages are not available under the Michigan Wrongful Death Act, this Court concludes that the Plaintiffs may not pursue such damages under Michigan law.

In contrast to Michigan, it is conceded that the Minnesota Wrongful Death Act was amended in 1983 to provide for awards of punitive damages. Minn.Stat. § 573.02(1) (1984). Having identified a conflict between the laws of Michigan and Minnesota regarding punitive damages, this Court must determine whether a rational reason exists to displace Michigan's law on this issue. The first step under Michigan's choice of law rules is to determine the purpose reflected in the relative law of each involved state.

The law of Michigan, which denies the application of punitive damages in wrongful death cases, reflects the same corporate protection policy in those states that refuse to impose strict products liability in tort. By insulating those companies, which conduct extensive business within its borders, the nonpunitive damages states hope to promote corporate migration into its economy. The protection of the financial stability of domiciliary corporations is designed to enhance the economic climate and well being of the state by generating revenues. See Chicago, 644 F.2d at 614.

The law of Minnesota, which permits the imposition of damages that are punitive in nature, is designed to punish its corporate defendants and deter future misconduct. See Chicago, 644 F.2d at 613. Therefore, Minnesota's law reflects a corporate regulatory policy.

Having identified the policies within the substantive laws at issue, this Court must next examine, as mandated by Michigan's jurisdiction selection provision, the precise [807] interest that each state has in applying its damages law in the case sub judice.

Michigan has a very strong interest in the application of its law which prohibits the imposition of punitive damages on companies doing substantial business within its borders. In fact, an application of Michigan's anti-punitive damages law to Northwest, a corporation which maintains a major "hub" within the metropolitan Detroit area and conducts a substantial amount of business in that state, would further the precise interest in its law. If Michigan did not apply its corporate protective law in this context, foreign corporations, as well as Northwest, might refuse to locate and conduct any business in the state. However, by applying its law to protect the financial integrity of corporations which generate substantial revenues for its citizens, Michigan may indeed induce other businesses to enter the state with the assurance that, although responsible for its own torts, a company shall be immune from excessive financial liability. For these various reasons, Michigan has a very strong interest in the application of its anti-punitive damages law to the question of Northwest's financial liability in the case at bar.^[22]

The State of Minnesota, Northwest's principal place of business, also has an obvious interest in deterring and preventing any wrongful conduct by those corporations which locate their corporate headquarters within its borders. The application of Minnesota's law in this case would further the regulatory policy within its punitive damages law. See Chicago, 644 F.2d at 615; Emmart v. Piper Aircraft Corp., 659 F.Supp. 843, 845-46 (S.D.Fla.1987); In re Air Crash at Stapelton International Airport, Denver, Colorado, on November 15, 1987, 720 F.Supp. 1445 (D.Col.1988).

Allowing the Plaintiffs in this case to recover punitive damages against Northwest under Minnesota law would undermine Michigan's law, which is designed to protect those Defendants, who conduct substantial business within its borders, from excessive liability. By contrast, an application of Michigan's law that precludes plaintiffs from requesting punitive damages in wrongful death cases, would significantly undermine Minnesota's regulatory policy regarding the deterrence of tortious conduct. Therefore, inasmuch as Michigan and Minnesota have a strong interest in the application of their respective laws, the application of the law of one state will undermine the policy which is reflected in the law of the other state.

In applying Michigan's choice of law rules, this Court concludes that there is no rational reason to abandon Michigan law. Since the Michigan Supreme Court issued its seminal decision in Sexton v. Ryder Truck Rental, Inc., 413 Mich. 406, 320 N.W.2d 843 (1982), the application of its choice of law rules to the "true conflict" has not been adjudicated by the courts of that state. This Court concludes, however, that in those cases in which Michigan has a strong interest in applying its laws in order to implement its own policies, the Michigan courts would not displace its own laws in [808] favor of the law from a foreign state.^[23]

While this Court concedes that Minnesota has a very strong interest in applying its law to further the regulatory policy which is evident within its punitive damages law, this interest is not so overwhelming that it should displace the application of Michigan law in this case. Therefore, with regard to the issue of Northwest's potential liability for punitive damages, Michigan substantive law shall apply.^[24]

Turning next to MDC, the states with legally significant contacts for jurisdiction selection purposes are Michigan (place of injury), California (place of misconduct), and Missouri (principal place of business).

Michigan prohibits the imposition of punitive damages in wrongful death actions. Similarly, with regard to the laws of California, it is well established and uncontested that punitive damages may not be recovered in a wrongful death action. See Tarasoff v. Regents of University of California, 17 Cal.3d 425, 131 Cal.Rptr. 14, 551 P.2d 334 (1976); Ford Motor Co. v. Superior Court of Alameda County, 120 Cal. App.3d 748, 175 Cal.Rptr. 39 (Cal.Dist.Ct. App.1981).

It is further uncontested that the Missouri Wrongful Death Act, like Michigan's Wrongful Death Act, does not allow for punitive damages. Mo.Stat.Ann. § 537.080 et seq. (Vernon 1988). However, it remains a point of contention as to whether damages for "aggravating circumstances" are available in death cases. The Seventh Circuit Court of Appeals addressed this issue in In re Air Crash Disaster Near Chicago, Illinois, 644 F.2d 594, 607 (7th Cir.), cert. denied, 454 U.S. 878, 102 S.Ct. 358, 70 L.Ed.2d 187 (1981) and concluded that "the damages allowed under Missouri law with regard to `aggravating circumstances' can be considered within the meaning of `punitive' damages as sought by the plaintiffs."

MDC maintains that the Seventh Circuit Court of Appeals' erred in treating damages for "aggravating circumstances" as the equivalent of punitive damages in wrongful death cases. In support of its position, MDC cites Glick v. Ballentine Produce, Inc., 396 S.W.2d 609, 616-17 (Mo. 1965), in which the Missouri Supreme Court stated:

While added damages because of "aggravating circumstances" may, in a sense, be punitive in nature, they are not to be submitted as such nor are they to be submitted separately, nor in any total [809] verdict and judgment to exceed the statutory limit. Within that total limit the jury may exercise a broad discretion.

In Chicago, a case in which MDC was a litigant, the Seventh Circuit Court of Appeals addressed (1) the Glick case, and (2) the merits of MDC's interpretation of that case. The Chicago Court noted that MDC's argument was based on a "selective quotation" and ignored critical language within the Glick decision which indicated that while "there [is] no recovery under Missouri law for punitive damages, `as such,' ... `aggravating circumstances' [can] be considered by the jury so long as the total verdict [does] not exceed the statutory limit." Chicago, 644 F.2d at 607. Moreover, the Chicago court believed that MDC's position on this issue was contrary to well established Missouri case law:

Damages for "aggravating circumstances" have been permitted by Missouri wrongful death statutes since 1855, and have consistently been considered punitive or exemplary by the Missouri Supreme Court.

Id. at 606 (citations omitted). For the foregoing reasons, the Court of Appeals for the Seventh Circuit concluded that "aggravating circumstances" damages, the "equivalent" of punitive damages, were available in wrongful death actions under Missouri law.

The Missouri Court of Appeals decision in Blum v. Airport Terminal Services, Inc., 762 S.W.2d 67 (Mo.App.1988), which reflects the most recently published Missouri case to examine the correlation between punitive and aggravating circumstances damages, supports the decision of the Seventh Circuit Court of Appeals in Chicago. The Blum court stated:

Aggravating circumstances damages are punitive in nature. Williams v. Excavating & Foundation Co., 230 Mo.App. 973, 93 S.W.2d 123 (1936). It is their purpose to punish the defendant and deter future wrongdoing. Morrissey v. Welsh Co., 821 F.2d 1294 (8th Cir.1987). They are in that respect akin to punitive damages. Accordingly, an award for more than compensatory damages in a wrongful death case is permissible only if the decedent would have been entitled to punitive damages had he lived. Dougherty v. Smith, 480 S.W.2d 519 (Mo.App.1972).

Contrary to the contentions of MDC, it appears that the Missouri courts construe damages for aggravating circumstances as the "equivalent" of punitive damages in wrongful death cases. Therefore, this Court agrees with the analysis and conclusion in Chicago and concludes that, subject to the protective caveats in Glick, the Missouri courts would allow a jury to consider aggravating circumstances that would justify an award of damages, which are punitive in nature, in excess of any compensatory damages award in a wrongful death case.

In summary, the laws of Michigan and California do not provide for the imposition of punitive damages while Missouri law would permit the recovery of damages that are punitive in nature. As in Chicago, this case presents a "true conflict" in which the law of the principal place of business conflicts with the law of the place of misconduct. The application of California law, which is designed to protect corporate defendants from excessive liability, would frustrate the regulatory policy within the law of Missouri. Conversely, the application of Missouri's law would impair the corporation protective policy of the law of California.^[25]

When confronted with this same situation, the Seventh Circuit Court of Appeals in the Chicago case noted that there was [810] no principled basis upon which to decide which state has a greater interest than the other.^[26] In this situation, the Chicago court determined that under the Restatement methodology, the law of the place injury should apply to the conduct of MDC:

[A]pplication of [the law of the place of injury] comports with the general criteria of the Restatement (Second) which emphasize certainty, predictability, uniformity of result, and ease in the determination and application of the law to be applied. In this case, it is important to resolve the conflict between states by a principled means. Determining that all other facts being equal, that law of the place of injury shall be used, provides a principled means of decision which also creates certainty.

Future defendants cannot predict, of course, where airplane disasters will occur. But air transportation companies will now be on notice that, under the "most significant relationship" test, when there is a true conflict between the laws of state having equal interests in the issue of punitive damages, and when the place of injury has a strong interest in air safety and in protection of air transportation corporations, the law of the place of injury will apply. Our result also comports with the Restatement (Second)'s principle that choice of law rules should be relatively simply and easy to apply.

Chicago, 644 F.2d at 616 (citations & footnote omitted).

This Court adopts and incorporates the reasoning and rationale of the Seventh Circuit Court of Appeals in Chicago, in that it similarly believes that the application of the law of the place of injury is a principled and reasonable way in which to resolve the conflict in this case. An application of the law of the State of Michigan, the site of the accident, will further the interests of certainty, predictability of result and the prevention of forum shopping, which together constitutes the second-prong of Michigan's choice of law analysis. In fact, the Chicago court warned MDC, and other similarly situated corporations, that they should expect the law of the place of injury to apply when confronted with the law of states with equal interests in the issue of punitive damages. Clearly, MDC, who was a defendant in the Chicago litigation, cannot maintain that it could not have anticipated that the law of the place of the injury would apply in this context.

For these reasons, this Court will employ the rule which was fashioned in Chicago and apply the punitive damages law of Michigan, the place of the injury, in order to resolve the true conflict in which two involved states have an equal interest in applying its punitive damages law. The fact that the Chicago analysis pertained to the Restatement Second, which differs from Michigan's choice of law rules, does not alter this result.^[27]

[811] For the foregoing reasons, this Court believes that the Michigan choice of law rules mandate that, with regard to the issue of punitive damages, the law of Michigan shall apply to both Northwest and MDC.

C

This Court now turns its attention to the punitive claims that were filed in Arizona and Florida. Both states apply the Restatement methodology to resolve choice of law issues. Under the Restatement approach, the law of the state where the injury occurred should apply in a wrongful death action unless another forum has "a more significant relationship" to the occurrence or to the parties. In essence, the states having legally significant contacts with regard to the issue of punitive damages and the relative interests involved under the Restatement approach parrot the contacts and interests presented under Michigan's choice of law approach in this case.

Therefore, because the conflicts analysis with regard to Arizona and Florida law is essentially the same as Michigan's conflicts analysis on this issue, this Court similarly concludes that Michigan law applies to the punitive damage claims against both Northwest and MDC.

D

With regard to the actions filed in California, this Court concludes that the claims for punitive damages that have been filed against Northwest in the case at bar are also governed by Michigan law, while the punitive damage requests against MDC are governed by California law.

Applying California's "comparative impairment" approach to Northwest, it is quite evident that Michigan (place of injury) and Minnesota (principal place of business) once again have a legitimate interest in the application of its own law. As such, a "true conflict" exists. Neither state's law regarding punitive damages can be construed to be "archaic" or more progressive since the law on punitive damages in wrongful death cases varies considerably throughout the United States. In addition, there is a precise "fit" between the purpose which supports the law of Michigan and Minnesota and its application in the case at bench. However, Minnesota's regulatory and deterrence policy may be advanced by some means other than the application of its law in this case while Michigan's corporate protection policy cannot be similarly satisfied absent the application of its law.

Minnesota could further its corporation regulatory policy by initiating criminal prosecution against Northwest in certain [812] circumstances. It was suggested in the Chicago case that Michigan could similarly further its corporation protective policy by allowing Northwest to insure against punitive damages. This Court believes, however, that while criminal sanctions would satisfy the regulatory and deterrence policies reflected in Minnesota's law, the mere availability of insurance against awards of punitive damages would not satisfy Michigan's protective policy.

By refusing to protect Northwest from excessive financial liability and instead allowing corporations to sustain the imposition of punitive damage awards, Michigan would be significantly increasing the cost of conducting business in its borders in the form of ever increasing insurance premiums. Such an alternative would contravene Michigan's policy of protecting corporations from excessive awards in order to stabilize and stimulate its local economy. Therefore, while the interests of both states would be impaired if the punitive damage law of the other state was applied, Michigan's interest would be more impaired under the California "comparative impairment" approach.

In addition, even if both states have equally strong commitments to their respective policies, this Court believes that California would invoke the Chicago rule, which represents a reasoned and consistent procedure for resolving a true conflict, and apply the law of the state of the accident. Therefore, the punitive damage law of Michigan shall apply to the conduct of Northwest.^[28]

With regard to the punitive damage claims that have been raised against MDC by California claimants, this Court concludes that the California courts would apply its own law, thereby precluding an award of such damages.

The states having legally significant contacts for purposes of the punitive damage issue concerning MDC are Michigan (place of the accident), California (place of misconduct), and Missouri (principal place of business). As previously noted, both Michigan and California preclude punitive damage awards in wrongful death cases while Missouri permits wrongful death claimants to recover damages that are punitive in nature.

This Court has repeatedly stated that the application of Michigan's corporate protective law in favor of MDC would not further its interest in inducing corporation migration. A true conflict exists, however, between the interests of California and Missouri. This Court believes that a California court, if presented with this precise fact-law pattern, would conclude that its own interest would be most impaired by the application of another state's law. This Court reasons, therefore, that the punitive damage law of California would apply to the conduct of MDC under the "comparative impairment" approach.^[29] Thus, with regard to the claims that were filed in California, the availability of punitive damages against MDC shall be governed by California law.

V

On April 3, 1989, the PSC moved for a determination that the damages law of the transferor court will govern the transferred cases.^[30] In its prayer for relief, the PSC merely requested "that the whole law of the forum in which each suit in this litigation was brought, including its choice [813] of law rules, shall be applied to determine the compensatory damages to which each plaintiff is entitled." PSC's Amended Motion For A Determination That The Law Of The Transferor Court, Including Its Choice Of Law Rules, Will Govern The Transferred Cases With Respect To Damages at 11 (April 17, 1989).

On May 1, 1989, Northwest and MDC filed separate response briefs, in which they reasoned that the compensatory damages law of Michigan should apply to all cases that have been filed in this litigation.

Unfortunately, the parties provided this Court with an incomplete presentation of the conflict, if any, between the substantive laws of the involved states on the issue of compensatory damages. Without an awareness of the legal parameters of the substantive law in question, this Court cannot make the threshold determination of whether a conflict exists between the substantive laws of the involved states.

Therefore, this Court will (1) hold in abeyance any choice of law decision concerning compensatory damages, and (2) subsequently issue a briefing schedule on this issue in which the parties shall ascertain whether the laws of the involved states differ on the issue of compensatory damages and, if so, present a choice of law analysis consistent with this Order.

VI

Both Defendants, MDC and Northwest, have moved to dismiss or for the entry of a partial summary judgment against all wrongful death claimants who seek punitive and exemplary damages.^[31] This Court has determined that, with regard to the punitive damage claims alleged against MDC and Northwest, Michigan law shall apply to those cases which were filed in Michigan, Arizona, and Florida. Concerning those claims that were filed in California, this Court reasoned that Michigan law would apply to the claims against Northwest and California law would apply to the claims against MDC.

Because neither the law of Michigan or California allow wrongful death claimants to recover punitive damages, the motions of MDC and Northwest for a partial summary judgment on all wrongful death claims for punitive and exemplary damages must be granted.^[32]

Orders for dismissal are also entered against those claimants who seek punitive damages in those cases that are governed by the Warsaw Convention. This Court recognizes that there is conflicting authority over whether the Warsaw Convention precludes awards of punitive or exemplary damages. Compare Floyd v. Eastern Air Lines, 872 F.2d 1462 (11th Cir.1989), order stayed, No. 86-5381 (11th Cir. June 5, 1989); In re Air Crash at Gander, Newfoundland, 684 F.Supp. 927 (W.D.Ky.1987); Harpalani v. Air India, Inc., 634 F.Supp. 797 (N.D.Ill.1986) (punitive damages barred by Warsaw Convention) with In re Aircrash in Bali, Indonesia, 684 F.2d 1301 (9th Cir.1982); Hill v. United Airlines, 550 F.Supp. 1048 (D.Kan. 1982) (punitive damages not barred by Warsaw Convention). However, even if the Warsaw Convention does not preclude the recovery of punitive damages, the claimants in the instant case concede that such damages are available only when granted by local law. See, e.g., Harris v. Polskie Linie Lotnicze, 820 F.2d 1000, 1002 (9th Cir.1987); Mertins v. Flying Tigers Lines, 341 F.2d 851, 858 (2d Cir.), cert. denied, 382 U.S. 816, 86 S.Ct. 38, 15 L.Ed.2d 64 (1965). Since local law has been construed to preclude an award of punitive damages in this case, the Warsaw claimants are similarly precluded from pursuing such damages. See, e.g., In re Aircrash in Bali, Indonesia, 684 F.2d at 1315; Cohen v. Varig Airlines, 380 N.Y.S.2d 450, 85 Misc.2d 653 (N.Y.Civ.Ct.1975).

[814] VII

At the expense of reiterating the well worn request of a weary judiciary, this Court urges the Congress to fashion a federal statutory methodology that will resolve conflict of law issues in an expedited, predictable, and uniform manner. The unpredictability of the current approach (1) prevents citizens from confidently structuring transactions, (2) precludes attorneys from accurately assessing the merits of a case at an early state of the litigation, thereby frustrating settlement negotiations, and (3) places an undue burden on judicial resources. The most noted choice of law scholar, the late Brainerd Currie, once stated years ago:

The conflict of interest between states will result in different dispositions of the same problem, depending upon where the action is brought. If with respect to a particular problem this appears seriously to infringe a strong national interest in uniformity of decision, the court should not attempt to improvise a solution sacrificing the legitimate interests of its own state, but should leave to Congress, exercising its power under the full faith and credit clause, the determination of which interest should be required to yield.^[33]

The federal judiciary has waited long for the Congress to relieve it of the burdens of Klaxton Co., supra. The immediate passage of a uniform law which will govern the issues of liability and damages in mass tort litigation, is an absolute necessity if an efficient administration of justice for resolving choice of law disputes is to be achieved.

IT IS SO ORDERED.

[1] This Order addresses the merits of the following motions: (1) PSC Motion for a Determination That Damages Law Of Transferor Court Will Govern Transferred Cases (April 3, 1989); (2) PSC Memorandum Of Law Seeking The Application Of Michigan Law To The Conduct Of Northwest And California Law To The Conduct Of MDC (June 15, 1989); (3) Northwest's Motion To Dismiss All Claims Against It For Punitive Or Exemplary Damages (July 17, 1989); (4) MDC Motion To Dismiss Or For Partial Summary Judgment (Punitive And Exemplary Damages) (July 17, 1989).

[2] This Order does not attempt to resolve all choice of law issues that have been presented in this multidistrict litigation.

[3] Some Plaintiffs have filed identical complaints in the Eastern District of Michigan and in a transferor court.

[4] Northwest also filed third party claims against Texas Instruments, Inc., National Car Rental Systems, Inc. and the United States of America. On February 21, 1989, this Court severed these third party claims from the instant dispute between the Plaintiffs, Northwest, and MDC.

[5] Although all of the Plaintiffs have not (1) sued MDC, (2) alleged identical theories of recovery, or (3) lodged the same prayer for relief, their claims are sufficiently similar to be generally characterized as wrongful death actions.

[6] When the substantive laws of the various states are not in conflict on a particular issue, judicial efficiency counsels that the law of the forum may be applied. In re Air Crash Disaster at Washington, D.C., 559 F.Supp. 333, 342-43 (D.D.C.1983); see also S. SPEISER & C. KRAUSE, AVIATION TORT LAW § 2.1 at 63 & n. 11 (1978).

[7] Such a process in the context of a conflict of law analysis is commonly referred to as depecage.

[8] While Northwest concedes "the precedential value of Martin v. Stokes, it reserves the right to argue on appeal that the Van Dusen principle does not apply in cases where plaintiffs have sought the transfer," citing In re Korean Air Lines Disaster, 829 F.2d 1171, 1173 n. 4 (D.C.Cir. 1987). The Sixth Circuit Court of Appeals, however, recently addressed this issue and concluded that Van Dusen applies regardless of which party sought a § 1404 transfer. In re Bendectin Litigation, 857 F.2d 290, 306 (6th Cir.1988).

[9]MDC contends that the Michigan legislature has expressly resolved all choice of law issues in the Plaintiffs' claims which sound in tort and occur on an airplane while in Michigan airspace. In support of its position, MDC cites M.C.L.A. § 259.177, which provides:

All crimes, torts and other wrongs committed by or against an airman or passenger while in flight over this state shall be governed by the laws of this state; and the question whether damages occasioned by or to an aircraft while in flight over this state constitutes a tort crime or other wrong by or against the owner of such aircraft, shall be determined by the laws of this state.

M.C.L.A. § 259.177 (West 1977).

This Court disagrees governing the forum selection issue in this litigation. When the forerunner to this statute was enacted in 1923, see Mich.Pub.Acts, 1923, No. 224, § 7, the lex loci delicti rule was firmly entrenched in Michigan law. In those cases involving air crashes on Michigan soil, the Michigan courts applied its own substantive law under the lex loci doctrine. This being the case, it would have been redundant for the Michigan legislature to codify the "site of the injury" rule when such a standard was firmly established in the common law doctrine of the state.

The literal language of this statute clearly indicates that it was designed to resolve choice of law issues in those cases in which a tort, such as an assault or battery, occurred on board an aircraft while traveling in Michigan airspace. In such a case, it would be difficult to determine where the "site of the injury" occurred under the traditional lex loci approach.

Interestingly, this Court has not found, and the parties have been unable to cite, any case authority in which a Michigan court has applied § 259.177 to resolve choice of law issues in cases containing a foreign element which results from an aircraft accident. It would be improvident to adopt MDC's construction of § 259.177 given (1) the historical context in which it was enacted, and (2) the dearth of Michigan case authority to support such a proposition.

[10] With regard to damages, the Restatement (Second) provides that "[t]he law selected by application of the rule of § 175 determines the measure of damages in an action for wrongful death." RESTATEMENT (SECOND) OF CONFLICTS OF LAWS § 178 (1971).

[11] Another contact, which is typically considered in most choice of law methodologies, is the place where the relationship between the parties is centered. While there is some disagreement among the parties on this point, this Court concludes that the relationship in the case at bar is centered on the aircraft itself. See Pittway Corp. v. Lockheed Aircraft Corp., 641 F.2d 524, 527 n. 2 (7th Cir.1981); Wert v. McDonnell Douglas Corp., 634 F.Supp. 401, 404 n. 3 (E.D.Mo.1986).

[12]MDC argues that the alleged misconduct did not occur in California where the aircraft was manufactured and designed, in part, because the components at issue (the P-40 circuit breaker, the Central Aural Warning System, and the Flight Director) were individually designed and manufactured in Massachusetts, Missouri, and Arizona, respectively. MDC's Brief Concerning Choice of Law on Liability and Punitive Damages at 10 (July 17, 1989).

However, to pare the Plaintiffs' design defect claims into subcategories and thereby conduct a separate choice of law analysis for each component, which has been alleged to be defective, would complicate and obfuscate the complex choice of law issues in this case and would require the jury to apply various and, possibly different, product liability standards in the same case dependent upon the particular component at issue. MDC also recognizes the problems that are associated with conducting a separate choice of law analysis for each component part:

Although the Court could conceivably apply different laws [ ... ] to different claims against MDC (e.g. Massachusetts law to claims based on the circuit breaker, Arizona law to claims based on the Flight Director, and Missouri law to the claims based on the central aural warning computer), this would hopelessly confuse and complicate the case. The jury instructions would be multitudinous, inconsistent, and incomprehensible to the jury.

MDC's Brief Concerning Choice of Law on Liability and Punitive Damages Issues at 13-14 (July 17, 1989).

Therefore, given that MDC manufactured and partially designed the accident aircraft in California, it believes that situs best represents the "place of the alleged misconduct" for purposes of the design defect claims.

[13] Some states, which purport to adopt the § 402A strict liability standard, utilize a consumer expectation test in evaluating design hazards. This approach derives from Comment (i) of § 402A, which essentially states that a product is unreasonably dangerous if it is dangerous to an extent beyond that which would be contemplated by the ordinary consumer or user who possesses common knowledge as to the products characteristics. Other courts attempt to define "unreasonably dangerous" by employing a risk-utility test. On a general level, this approach focuses on whether the magnitude of the danger outweighs the utility of the product at issue. See, e.g. Turner v. General Motors Corp.,584 S.W.2d 844, 850-51 (Tex.1979).

However, in Nesselrode, the Missouri Supreme Court noted that it had neither incorporated the consumer expectation test nor the risk-utility test into the lexicon of its products liability law. Nesselrode, 707 S.W.2d at 377-78. Instead, the Missouri high court stated that "[u]nder our model of strict tort liability the concept of unreasonable danger, which is determinative of whether a product is defective in a design case, is presented to the jury as an ultimate issue without further definition." Id. at 378 (footnote omitted).

[14]In rejecting the Restatement test, the California Supreme Court recognized the following:

This is not to say that the expectations of the ordinary consumer are irrelevant to the determination of whether a product is defective, for ... we believe that ordinary consumer expectations are frequently of direct significance to the defectiveness issue. The flaw in the Restatement analysis, in our view, is that it treats such consumer expectations as a "ceiling" on a manufacturer's responsibility under strict liability principles, rather than as a "floor." As we shall explain, past California decisions establish that at a minimum a product must meet ordinary consumer expectations as to safety to avoid being found defective.

Barker, 20 Cal.3d at 425 n. 7, 143 Cal.Rptr. at 233 n. 7, 573 P.2d at 451 n. 7 (emphasis in original).

[15] Although there are doctrial variations between the strict products liability laws of California and Missouri, these laws reflect the same basic policy considerations for the purposes of choice of law consideration.

[16] Michigan has no interest in applying its law to the detriment of those who initiated legal action in its courts. Michigan's products liability law, which reflects a policy favoring producers, is not conversely designed to punish its plaintiff-consumers. Michigan's negligence risk-utility doctrine is, for choice of law purposes, consumer neutral. It is also doctrinally incomplete for the parties to contend that, since the accident occurred at the airport in Detroit, the State of Michigan has a strong interest in applying its products liability law in order to prevent similar disasters from occurring within its borders and to promote air safety. On a general level, all states, including Michigan, would endorse these safety concerns. However, under the Michigan choice of law rules, this Court must identify those policies within the particular substantive law at issue and, on the basis of these policies, determine whether Michigan has an interest in having its law apply to a particular fact pattern. In the case at bar, the application of its products liability law, which reflects a producer protective policy, would not further either of these safety concerns.

[17] This Court acknowledges that a second policy, which assures the citizens of Missouri and California that they will be adequately compensated for their injuries, would not be advanced by the application of the law of either state to Michigan claimants. However, this does not detract from both states' interest in applying its law to further the strong regulatory policy within those laws.

[18] The Court in Dart noted that it declined to eliminate the "unreasonably dangerous" requirement in the Restatement only because "we believe that retaining the formulation helps avoid the risk that jurors will decide that any product which causes an injury is `defective' and thus averts the conversion of products liability law into absolute liability. Despite the cirumlocation, we suspect that the `unreasonably dangers' test may have a very pragmatic meaning for jurors." Dart, 147 Ariz. at 244 n. 1, 709 P.2d at 878 n. 1. The California Supreme Court disagrees with Dart on this point. See Barker, 20 Cal.3d at 426 n. 8, 143 Cal.Rptr. at 234 n. 8, 573 P.2d at 452 n. 8.

[19]The other relevant factors that are listed in the Restatement include (1) the needs of the interstate system, (2) the basic policies underlying the particular field of law, and (3) the ease in the determination and application of the law to be applied.

The first two factors are not particularly instructive in this case because (1) the application of a negligence or strict liability standard will not affect the manner in which the interstate system works, and (2) while the basic policies underlying products liability statutes seem to favor the consumer protective and producer regulatory policies that are reflected in strict liability laws, these policies are not universal and conflict with the producer protective policies of some states.

[20] Even if a true conflict existed between the laws of California and Missouri, the interests of the State of California would be more impaired if its law was not applied to this issue. This is because there is a more solid "fit" between the purpose of California's law and its application to the resident plaintiffs and defendants of that state. An application of California law in this context will advance a desire (1) to compensate its own residents and (2) to deter any future designing misdeeds of a putative tortfeasor. In contrast, the application of the law of Missouri would only further that state's regulatory interest, but would not further its compensatory purpose since the California litigants are not Missouri residents.

[21]The PSC also maintains that a choice of law determination on the issue of punitive damages is premature at this stage of the litigation. In support of this contention, the PSC states that "[t]he punitive damage issue ... involves more complex choice of law issues and may be affected by which cases remain unsettled (and, consequently which choice of law rules apply) when the liability trial commences." PSC Memorandum of Law Seeking Application of Michigan Law to the Conduct of Northwest and California Law to the Conduct of MDC at 21 (June 15, 1989).

This Court disagrees. Inasmuch as a joint trial on all liability issues in this case is scheduled to commence on October 2, 1989, a choice of law determination at this time cannot be considered premature. The settlement of some of the cases subsequent to the issuance of this Order will not affect the choice of law analysis by this Court on the issue of punitive damages.

[22] This Court rejects any suggestion that it was merely fortuitous that the Northwest aircraft crashed in Michigan, thereby minimizing the interest of the place of the accident. The accident in question does not present the typical "fly over" case in which a plane crashes while passing through its airspace. In the classic "fly over" case, the crash site is fortuitous since there is an equal likelihood that the crash could have occurred in one of any number of states over which the plane was scheduled to travel. See Pittway Corp. v. Lockheed Aircraft Corp., 641 F.2d 524, 528 (7th Cir.1981); Halstead v. United States, 535 F.Supp. 782 (D.Conn.1982); Melton v. Borg-Warner Corp., 467 F.Supp. 983 (W.D. Tex.1979); Bruce v. Martin-Marietta Corp., 418 F.Supp. 829 (W.D.Okl.1975), aff'd,544 F.2d 442 (10th Cir.1976).

However, in this case, Northwest chose Michigan to serve as a regional "hub" through which it would conduct substantial flight operations. Certainly, a crash at the "hub" of an airline company, the destination and point of departure of substantial air traffic, is not fortuitous, in that it is foreseeable that an accident might occur there. It is also significant that the alleged wrongdoing by Northwest and MDC focuses, in large part, on the takeoff procedures and portion of the flight, which was centered at Detroit Metropolitan Airport. See In re Air Crash at Washington, D.C., 559 F.Supp. 333, 350 (D.D.C.1983).

[23]The late Brainerd Currie, creator of the "governmental interest analysis" as a choice of law methodology, would agree with the conclusion that Michigan law should apply in this case:

The sensible and clearly constitutional thing for any court to do, confronted with a true conflict of interests, is to apply its own law. In this way it can be sure at least that it is consistently advancing the policy of its own state. It should apply its own law ... simply because a court should never apply any other law except when there is good reason for doing so. That so doing will promote the interests of a foreign state at the expense of the interests of the forum state is not a good reason.

B. CURRIE, SELECTED ESSAYS ON THE CONFLICT OF LAWS 119 (1963).

[24] This holding is not inconsistent with the Chicago opinion. In Chicago, the court intimated that the interests of the place of the alleged misconduct or the principal place of business, taken separately, would have a greater interest than the state where the accident occurred. If presented with the same facts as in the Chicagocase, this Court would conclude that the interest of Michigan, the place of the injury, should yield to the interest of Minnesota, Northwest's principal place of business.

However, the fact that Detroit Metropolitan Airport is a regional "hub" for Northwest, which results in the influx of significant revenues that stimulates and stabilizes the local economy, alters the balance of interests and, thus, distinguishes Chicago from the instant case. This Court concedes that most airlines will not be dissuaded from doing business in a major city, such as Chicago, merely because the State of Illinois does not apply its anti-punitive damages law in favor of the business community. However, with regard to choosing the location of a regional "hub," Michigan's refusal to apply its favorable law may have altered Northwest's decision making process. In addition, the failure to apply Michigan law in an effort to protect Northwest from an excessive liability award is not likely to induce additional corporate migration into the state. In sum, the factual distinctions between this case and the Chicago case warrant the different results on this issue and, therefore, the choice of law analyses should not be construed as conflicting.

[25] Missouri's interest in applying its punitive damages law is greater that its interest in applying its products liability law. With regard to products liability issues, Missouri's interest is subordinate to California's interest because the alleged malfeasance at issue occurred in large part within the state of California. However, the analysis relating to punitive damages differs because the decisions and actions of MDC are not limited to conduct that occurred exclusively in California but may include corporate decisions, if any, that were made in Missouri. Thus, it is impossible to make a reasoned decision as to which state law should apply solely on the respective interests of California and Missouri.

[26] For the reasons that have been stated in the section relating to products liability, this Court similarly believes that Michigan has a remote interest in applying its corporation protective law to MDC since its application would not further the corporate migration policy in that law. See supra note 16 and accompanying text. See also infranote 27. In this context, in which the forum is relatively disinterested and a true conflict exists between the laws of two foreign states, Brainerd Currie acknowledged the unresolvable doctrinal flaw with the interest analysis methodology to choice of law issues:

When the forum state is disinterested, and there is a genuine conflict of interests between two (or more) other states, there is a difficult problem that cannot be satisfyingly dealt with by applying the law of the forum, which is the reasonable solution when the forum is interested. For these cases it is perhaps feasible to construct general principles for choice of law on a reasonable basis; thus far, however, I have been unable to visualize a satisfactory system.

Currie, Comments on Babcock v. Jackson, 63 Colum.L.Rev. 1233, 1242 (1963); see also Currie, Conflict, Crisis and Confusion in New York, 1963 Duke L.J. 1, 32-33. Apparently, the Seventh Circuit Court of Appeals, by fashioning a rule that requires the application of the place of injury in this context, was attempting to construct a choice of law rule to be applied universally in resolving the conflict when two nonforum states have equal interests in applying the law of their forum.

[27] Contrary to the result that was reached by the Chicago Court, the decision in the case sub judice has not been altered by the fact that Michigan, as the place where the injury occurred, has a very small interest in applying its law in favor of MDC. In Chicago, the state where the injury occurred, Illinois, did not allow punitive damages in wrongful death cases. In addition, the Chicago court noted that the "purpose underlying the disallowance of punitive damage is protection of defendants from excessive liability." Chicago, 644 F.2d at 613. The Court reasoned, however, that because "Illinois has very strong interests in not suffering air crash disasters and also in promoting airplane safety, ... it would have a strong interest in allowing punitive damages to deter corporate misconduct relating to air safety." Id.at 615.

On a general level, every state and all persons desire to prevent air crash disasters which devastate the lives of so many persons. However, for purposes of choice of law analysis, the "interests" of a state with regard to a particular issue is gleaned from the policies that are reflected in the substantive law in question. With regard to the law of Illinois and Michigan concerning punitive damages, the policy within its laws are not regulatory policies but are corporation protection policies. These policies are not altered and transformed into regulatory policies based on the egregiousness of the tort involved in a particular case.

Further, the Chicago court concluded that Illinois has "a strong interest in air safety and in protection of air transportation corporations" on the punitive damage issue. Id. at 616. However, in the punitive damages context, a state may not have a regulatory and a corporation protection policy because these concepts are incongruous and diametrically opposite.

Regardless of whether this Court or the Chicago court correctly assessed the interest of Michigan and Illinois, both states were the sites of the accident and both denied the imposition of punitive damages. Therefore, the interest of Illinois in Chicago, and the interest of Michigan in the case at bar, are identical. The analysis in Chicago, which has been adopted by this Court, represents a reasoned and consistent manner in which to resolve a case wherein a true conflict exists between two non-forum states with equally compelling interests in applying its law.

[28] In a true conflict situation, it is impossible to determine whose state interest would be most impaired if its laws are not applied. Under such circumstances, a California court may choose to resolve the conflict by applying the law of the forum. Hence, California law would apply. Therefore, regardless of whether the California court would apply the law of the place of the injury or the law of the forum when presented with the true conflict, punitive damages would not be recoverable against MDC.

[29] When presented with an irresolvable true conflict, the California courts may choose to apply (1) the law of the place of the injury, or (2) the law of the forum. Under either approach, punitive damage awards are unavailable.

[30] On April 17, 1989, the PSC filed an "Amended Motion for a Determination that the Law of the Transferor Court, Including Its Choice of Law Rules, Will Govern the Transferred Cases With Respect to Damages."

[31] See Northwest's Motion to Dismiss All Claims Against It for Punitive or Exemplary Damages (July 17, 1989); MDC Motion to Dismiss or for Partial Summary Judgment (July 17, 1989).

[32] This Court notes that the approval of the dismissal motions of Northwest and MDC does not address the merits of the punitive or exemplary damage claims of personal injury claimants.

[33] Currie, Comments on Babcock v. Jackson, 63 Columb.L.Rev. 1233, 1243 (1963).

[1426] Philip H. Corboy, Francis Patrick Murphy, Corboy & Demetrio, Lead Counsel, Kevin M. Forde, Kevin M. Forde, Ltd., Liaison Counsel, Chicago, Ill., for plaintiffs.

John W. Adler, Fred C. Begy, III, Adler, Kaplan & Begy, Chicago, Ill., for United Airlines, Inc.

Norman J. Barry, Daniel Cummings, Alan S. Madans, Rothschild, Barry & Myers, Chicago, Ill., John J. Hennelly, Jr., Steven L. Hogan, Bonita L. Churney, Bryan, Cave, McPheeters & McRoberts, Los Angeles, Cal., for McDonnell Douglas Corp.

H. Blair White, Charles W. Douglas, Sara J. Gourley, Sidley & Austin, Chicago, Ill., for Gen. Elec. Co.

MEMORANDUM OPINION AND ORDER

CONLON, District Judge.

In this consolidated multidistrict litigation arising from an air crash at Sioux City, Iowa, defendants United Airlines, Inc., McDonnell Douglas Corporation and General Electric Company (collectively "defendants") move the court to dismiss all punitive damages claims under Fed.R.Civ.P. 12(b)(6).^[1] In the alternative, defendants request an order determining the state law governing punitive damages in each of the eighteen cases before this court.

I. Background

On July 19, 1989, United Airlines Flight 232 from Denver to Chicago crashed during an attempted emergency landing at Sioux City, Iowa, after the aircraft lost hydraulic power. Of the 296 people on board, 112 were killed in the tragic crash. The aircraft, owned and operated by United Airlines, was a DC-10 manufactured by McDonnell Douglas. General Electric manufactured the CF6-6 engines utilized on the aircraft.

Flight 232 passengers were from thirty states and two foreign countries. Ninety-three passengers were from Colorado. Eighteen cases were transferred to the Northern District of Illinois for pretrial purposes by order of the Judicial Panel on Multidistrict Litigation. The cases were transferred from district courts located in ten states.

[1427] United Airlines is a Delaware corporation with its principal place of business in Illinois. United maintained the aircraft in California. United's flight crew training center is located in Colorado. The aircraft's builder, McDonnell Douglas, is a Maryland corporation with its principal place of business in Missouri. McDonnell Douglas designed and manufactured the aircraft in California. The third defendant, General Electric, is a New York corporation with its principal place of business in New York. General Electric designed and manufactured the engines on Flight 232 in Ohio.

Defendants argue that plaintiffs may not bring claims for punitive damages in this action. They maintain that punitive damage claims should be dismissed because they violate the due process clause of the Fourteenth Amendment. In addition, defendants argue that the Federal Aviation Act preempts punitive damage claims in air crash incidents. In the alternative, defendants request the court to determine the state law governing punitive damages as to each claim.

II. Due Process Limitations On Punitive Damages

Defendants argue that the due process clause of the Fourteenth Amendment categorically bars state law actions for punitive damages in this case. Defendants assert that in some states, a jury is afforded unbridled discretion in visiting this form of punishment upon defendants. In addition, defendants contend that multiple punitive damage awards for the same course of conduct are inherently unfair.

The due process clause does not bar punitive damages per se. Twice in the last two years, the Supreme Court has declined opportunities to hold that punitive damage awards violate due process. Browning-Ferris Indus. of Vermont v. Kelco Disposal, Inc., ___ U.S. ___, 109 S.Ct. 2909, 106 L.Ed.2d 219 (1989); Bankers Life & Casualty v. Crenshaw, 486 U.S. 71, 108 S.Ct. 1645, 100 L.Ed.2d 62 (1988). Concurring opinions in these decisions suggest that five individual members of the Court would hold that due process constrains imposition of punitive damages in some circumstances.^[2] Defendants imply that a Supreme Court decision barring punitive damages on due process grounds is imminent. However, in November 1989, the Court denied certiorari in two appeals raising due process objections to punitive damage awards. Ainsworth v. Combined Insur. Co. of Am., 763 P.2d 673 (Nev.1988), cert. denied ___ U.S. ___, 110 S.Ct. 376, 107 L.Ed.2d 361 (1989); Clardy v. Sanders, 551 So.2d 1057 (Ala.1989), cert. denied ___ U.S. ___, 110 S.Ct. 376, 107 L.Ed.2d 362 (1989). On February 20, 1990, the Court denied certiorari in another case raising the due process issue. HealthAmerica v. Menton, 551 So.2d 235 (Ala.1989), cert. denied ___ U.S. ___, 110 S.Ct. 1166, 107 L.Ed.2d 1069 (1990). A categorical bar of claims for punitive damages is simply not supported by the case law. Eichenseer v. Reserve Life Insur. Co., 881 F.2d 1355, 1365 (5th Cir.1989).

Defendants argue that the circumstances of this case preclude fair application of punitive damages. Defendants contend that their exposure to multiple claims precludes punitive damages in this case. In one recent mass tort action, a district court expressly disavowed the defendants' argument. Leonen v. Johns-Manville Corp., 717 F.Supp. 272, 286 (D.N.J.1989) (permitting punitive damages in asbestos litigation in spite of defendant's multiple exposure to liability). See also, Ah You Man, Harry N. Sato v. Raymark Indus., 728 F.Supp. 1461 (D.Hawaii 1989) (Supreme [1428] Court has not given any indication that punitive damages are unconstitutional as a matter of law in the mass tort context). Accordingly, defendants' motions to dismiss punitive damages claims on due process grounds are denied.

III. Preemption Of Punitive Damages By The Federal Aviation Act

Defendants argue that the Federal Aviation Act, 49 U.S.C. App. §§ 1304-1551, preempts state law actions for punitive damages. However, the Supreme Court decision in Silkwood v. Kerr McGee Corp., 464 U.S. 238, 248, 104 S.Ct. 615, 621, 78 L.Ed.2d 443 (1984) and the recent seventh circuit decision in Bieneman v. City of Chicago, 864 F.2d 463 (7th Cir.1988), cert. denied ___ U.S. ___, 109 S.Ct. 2099, 104 L.Ed.2d 661 (1989) conclusively establish that punitive damages are not preempted by the FAA. In Silkwood, the Court held that an award of compensatory or punitive damages under state law was not preempted by comprehensive federal regulation of the nuclear power industry. In Bieneman, the seventh circuit decided the FAA did not preempt common law damages and penalties in the aviation field.^[3]

In section 1106 of the FAA, Congress expressly determined not to preempt certain state remedies:

Nothing contained in this Act shall in any way abridge or alter the remedies now existing at common law or by statute, but the provisions of this chapter are in addition to such remedies.

FAA, 49 U.S.C.App. § 1506. In reliance upon section 1106, the seventh circuit concluded in Bieneman that the FAA did not preempt state tort law claims:

"Silkwood ... highlights the extreme reluctance of the modern Court to find preemption." Ronald D. Rotunda, Sheathing the Sword of Federal Preemption, 5 Constitutional Commentary 311, 317 (1988). If no preemption is the conclusion notwithstanding the absence from nuclear safety legislation of a statute such as § 1106, it must be the appropriate treatment of air travel as well.

864 F.2d at 472. Defendants concede that compensatory damages are not preempted by the FAA. See, Air Crash Disaster at JFK Int'l Airport, 635 F.2d 67, 74 (2d Cir.1980). Defendants assert that section 1106 excludes punitive damages because punitive damages are not a traditional remedy existing at common law.

Bieneman and Silkwood support the proposition that punitive damages are included in section 1106. In Bieneman, the seventh circuit noted that punitive and compensatory damages are methods of regulating safety. 864 F.2d at 472. The court did not distinguish punitive and compensatory damages when interpreting section 1106. In Silkwood, the Supreme Court expressly rejected defendants' proposed distinction regarding nuclear safety regulation:

Kerr-McGee [the defendant] focuses on the differences between compensatory and punitive damages awards and asserts that, at most, Congress intended to allow the former. This argument, however is misdirected because our inquiry is not whether Congress expressly allowed punitive damages awards. Punitive damages have long been a part of traditional state tort law. As we noted above, Congress assumed that traditional principles of state tort law would apply with full force unless they were expressly supplanted. Thus, it is Kerr-McGee's burden to show that Congress intended to preclude such awards.

464 U.S. at 255, 104 S.Ct. at 625 (emphasis added). Together, Silkwood and Bieneman establish a presumption against preemption by the FAA. Defendants offer no evidence that Congress sought to segregate punitive damages from other traditional "remedies ... existing at common law" under section 1106. Accordingly, defendants' motions to dismiss punitive damages claims based on preemption by the FAA are denied.

[1429] IV. Determination Of State Law Applicable In Each Case

Alternatively, defendants request the court to determine the law applicable to punitive damages in each case.^[4] A federal court ordinarily must apply the choice of law principles of the state in which it sits. Klaxon Co. v. Stentor Electric Mfg. Co., 313 U.S. 487, 61 S.Ct. 1020, 85 L.Ed. 1477 (1941). When a case is transferred, the transferee court must apply the choice of law rules of the state where the transferor court sits. Van Dusen v. Barrack, 376 U.S. 612, 84 S.Ct. 805, 11 L.Ed.2d 945 (1964); Air Crash Disaster Near Chicago, 644 F.2d 594, 610 (7th Cir.), cert. denied sub nom, Lin v. Am. Airlines, 454 U.S. 878, 102 S.Ct. 358, 70 L.Ed.2d 187 (1981) ("Air Crash"). In this litigation, at least twelve cases originating in eight different states assert claims for punitive damages.^[5]

In Air Crash, the seventh circuit resolved the choice of law issues in consolidated multidistrict litigation regarding an air crash in Illinois. The court expressly adopted the concept of depecage, "the process of applying rules of different states on the basis of the precise issue involved." Id. at 611. Accordingly, this opinion resolves the choice of law question regarding only the issue of punitive damages.

Plaintiffs have not complied with this court's order regarding briefing the choice of law issues relating to punitive damages, nor have they responded to defendants' briefs on the issue. Plaintiffs simply respond that the issue has been raised prematurely. This court does not agree.

The choice of law question regarding punitive damages should be resolved as early as possible. First and foremost, this determination may facilitate settlement negotiations and thus enable victims of the crash to be compensated expeditiously. Defendants have offered not to contest liability for compensatory damages as to any claimant who waives claims for punitive damages. Defendants offer to pay compensatory damages within thirty days after the amount is determined. The applicable state law may not permit punitive damages in every case. Most states do not permit punitive damages in wrongful death actions. See, id. at 607. States differ over whether to permit punitive damages in survival actions.^[6] Finally, although all relevant states permit punitive damages in personal injury actions, the applicable standards differ from state to state.^[7] Consequently, [1430] the settlement value of an individual claim is difficult to measure without first determining whether punitive damages are available and, where available, the standard for recovery. Once the choice of law question is resolved, some plaintiffs may choose to forego lengthy and expensive discovery and accept defendants' offer not to contest liability.

Plaintiffs complain that resolving punitive damages requires choice of law analysis involving many different states. Plaintiffs argue that individual plaintiffs should be permitted to litigate the choice of law question after the cases are returned to the courts where they were filed. The patent inefficiency of plaintiffs' proposal dictates that the punitive damages choice of law question be resolved by this court rather than by a significant number of other federal courts. Moreover, a plaintiff's domicile plays no role in determining which state law governs punitive damages. Air Crash, 644 F.2d at 612-613. The choice of law question depends entirely on activities conducted by defendants. These activities are common to all the consolidated cases. Consequently, plaintiffs need not litigate this choice of law issue individually. Resolving the punitive damages choice of law issue in this consolidated litigation also insures consistent and efficient rulings.

Plaintiffs also declined to respond to the choice of law issue because no discovery has been conducted on the issue of liability^[8] and "there exists no basis for a reasoned decision as to which state's law should be applied to each of these cases." Plaintiffs' response at 3, 25. Plaintiffs' purported need for discovery on this issue is stated in general and conclusory terms. Their complaints contain allegations as to the situs of defendants' respective principal places of business. Plaintiffs have not suggested that any material issue of fact exists concerning where defendants' corporate nerve centers are located or where defendants' alleged wrongful conduct occurred. Indeed, plaintiffs have identified defendants' personnel whose depositions are essential on the liability issue. See plaintiffs' response, exhibit 2. Those deponents are located in precisely the same states defendants assert are the locations where the conduct at issued occurred: Colorado (United Airlines), Ohio (General Electric), and California (McDonnell Douglas).

Plaintiffs do not argue there is any good faith dispute as to any factual consideration relevant to a choice of law analysis. Yet plaintiffs suggest that defendants' motions to dismiss punitive damage claims must be treated as motions for summary judgment because "defendants have referred to factual matters outside the pleadings ... without supporting affidavits." Plaintiffs' response at 25. A similar argument was asserted by plaintiffs in Air Crash and rejected by the seventh circuit. 644 F.2d at 619. See also In re Air Crash Disaster at Stapleton Intern., 720 F.Supp. 1455, 1463 (D.Colo.1988) (factual disputes do not foreclose determination of choice of law analysis regarding punitive damages). In the interest of fundamental fairness, however, plaintiffs shall be given a reasonable opportunity to demonstrate a particularized need for expedited discovery on any specific factual predicate for this court's choice of law analysis; plaintiffs may move for reconsideration accordingly.

A. Cases Transferred From California

Three cases were filed in federal courts located in California.^[9] California employs a "comparative impairment" analysis. Under this analysis, when a true conflict exists, a court should apply the law of the state whose interests would be more impaired if its law were not applied. Bernhard v. Harrah's Club, 16 Cal.3d 313, 320, 128 Cal.Rptr. 215, 219, 546 P.2d 719, 723 (1976).

Initially, the court must determine which states' interests to consider. In Air Crash, the court applied California's comparative impairment test. Air Crash, 644 F.2d at 621-628. The court restricted the analysis [1431] to three states representing the principal place of business, the place of the alleged misconduct and the state in which the injury occurred.^[10] The court noted that the domiciliary states of the plaintiffs or their representatives are not relevant to the question of punitive damages. Id. at 622.

After narrowing the analysis to the relevant states, the court must determine whether an apparent conflict exists between the punitive damages laws of those states. Id. at 621, citing Offshore Rental Co. v. Continental Oil Co., 22 Cal.3d 157, 148 Cal.Rptr. 867, 870, 583 P.2d 721, 724 (1978). If an apparent conflict exists, the court examines the applicable law to see if a "moderate and restrained interpretation" of the law reveals that only one state has a legitimate interest in the application of its policy. Air Crash, 644 F.2d at 621, citing Bernhard, 16 Cal.3d at 320, 128 Cal.Rptr. at 219, 546 P.2d at 723. When a restrained or moderate interpretation of state law fails to resolve the conflict, a "true" conflict exists.

True conflicts are resolved by applying the law of the state whose interest would be the more impaired if its law were not applied. Id.; Clothesrigger, Inc. v. GTE Corp., 191 Cal.App.3d 605, 614, 236 Cal. Rptr. 605, 614 (1987). The process is "`essentially a process of allocating respective spheres of lawmaking influence.'" Air Crash, 644 F.2d at 622, quoting Offshore Rental, 22 Cal.3d at 165, 148 Cal.Rptr. at 872, 583 P.2d at 726 (citations omitted). The court must consider (1) whether one state's punitive damages provision is more strongly held than that of other interested states, and (2) the "fit" between the purpose of each potentially applicable punitive damages provision and the circumstances of the case. Air Crash, 644 F.2d at 622 (citations omitted).

In this case, the injury occurred in Iowa. However, Iowa was not the place of departure or scheduled destination. Under any theory of liability, the fact that the accident occurred in Iowa was a mere fortuity. Consequently, Iowa's interest in the action does not merit further consideration under California choice of law principles. The analysis is limited to the principal place of business of each defendant and the place of the conduct at issue.

1. United Airlines

Under the comparative impairment test, the punitive damages laws of Illinois, California and Colorado must be considered regarding United Airlines. United has its principal place of business in Illinois. Both California and Colorado may have been the site of United's alleged wrongful conduct. The alleged wrongful conduct could relate to United's maintenance, testing and inspection of the aircraft in California. Punitive damages may be based upon the conduct of United's crew. United's flying personnel are principally trained in Colorado.

The punitive damages laws of these states substantially differ. California does not permit punitive damages in wrongful death actions. Air Crash, 644 F.2d at 607 citing Tarasoff v. Regents of the Univ. of Cal., 17 Cal.3d 425, 450, 131 Cal.Rptr. 14, 33, 551 P.2d 334, 353 (1976). California does permit punitive damages in survival actions and personal injury actions. Cal. Civ.Code § 3294. California requires clear and convincing evidence of oppression, fraud, or malice. Id. Under California law, "malice" is defined as conduct intended to cause injury to the plaintiff or despicable conduct carried on with a willful and conscious disregard of the rights and safety of others, and "oppression" means despicable conduct done in conscious disregard of the victim's rights. Id.

Colorado does not permit punitive damages in wrongful death or survival actions. Mangus v. Miller, 35 Colo.App. 335, 535 P.2d 219, cert. dismissed, 189 Colo. 481, 569 P.2d 1390 (1975); Beikmann v. Int'l Playtex, Inc., 658 F.Supp. 255, 257 (D.Colo. 1987); Estate of Burron v. Edwards, 42 Colo.App. 141, 594 P.2d 1064, 1065 (1979). In other actions, Colorado requires that conduct supporting punitive damages be [1432] proven "beyond a reasonable doubt." Colo.Rev.Stat. § 13-25-127 (1987). In addition, Colorado limits punitive damages awards for personal injury to the amount of actual damages unless the court determines that the defendant has continued the behavior in a willful and wanton manner. Colo.Rev.Stat. § 13-21-102 (1987).

In general, Illinois does not permit punitive damages in wrongful death or survival actions. Poole v. Alpha Therapeutic Corp., 698 F.Supp. 1367, 1372 (N.D.Ill. 1988); Mattyasovszky v. West Towns Bus Co., 61 Ill.2d 31, 330 N.E.2d 509 (1975).^[11] Punitive damages are awarded in other actions "when torts are committed with fraud, actual malice, deliberate violence or oppression, or when the defendant acts willfully, or with such gross negligence as to indicate a wanton disregard of the rights of others." Kelsay v. Motorola, Inc., 74 Ill.2d 172, 23 Ill.Dec. 559, 565, 384 N.E.2d 353, 359 (1978).

A true conflict exists in the availability of punitive damages under the laws of Colorado, California and Illinois. These laws reflect a balance reached by each state between deterrence of wrongful conduct and protection of defendants from excessive financial liability. Air Crash, 644 F.2d at 610. Illinois, Colorado and California all have legitimate interests in controlling the activity of defendant United Airlines. Colorado and California's interests are limited to activity within their states. Illinois has an interest in activity performed in all three states. The appropriate method to resolve the conflict is to determine which state interest would be most impaired by failure to apply its law.

United Airlines argues that Illinois is not as committed to its punitive damages law as Colorado or California because Illinois common law rather than statutory authority defines the right to punitive damages. Common law authority is not necessarily inferior to statutory authority of another state. See, id. at 613-614, 625, 626 (finding that California, Missouri, Illinois and New York all have strong commitments to their respective approaches to punitive damages). The state legislature may have purposefully acquiesced in the judicial resolution of the punitive damages standard. Defendants do not cite a case in which a state was found to lack a commitment to its punitive damages law. Consequently, the choice of law decision will be based upon the "fit" between the purpose of each state's punitive damages law and the circumstances of the case. id. at 622 (citations omitted).

In general, plaintiffs raise two separate bases for punitive damages against United. First, plaintiffs contend that United recklessly maintained, tested or inspected the aircraft. United asserts that these alleged reckless acts could only occur in California. United contends that California has a direct deterrent interest in faulty maintenance performed in California and that California law should apply. The second basis for punitive damages is alleged reckless operation of the aircraft. United contends that allegations concerning the flight crew relate to the crew's training in Colorado. United asserts that Colorado law should govern punitive damages claims regarding the activity of the flight crew.

However, United is not engaged in the business of manufacturing planes or training flight crews. Although United may bring its aircraft to California for servicing and train its flight crews in Colorado, United's primary activity is to carry passengers. United's central hub and principal place of business are located in Illinois. Flight 232 was destined for Illinois. United argues that the locale of the wrongful conduct is closely associated with the conduct "because the likelihood of injury from the conduct is generally greater in that place." United Memorandum at 28. However, injury is unlikely to occur at the site of United's training or maintenance. It is [1433] likely to occur at United's primary place of business, where United flights frequently arrive and depart.^[12]

Illinois is an appropriate forum to balance the deterrent function of punitive damages against the need to protect United Airlines from excessive financial liability. Illinois benefits from United's presence and Illinois risks the consequences of United's wrongful conduct. Illinois' interest in its law respecting punitive damages would be impaired more than either Colorado's or California's if its law were not applied. As United's principal place of business, Illinois law regarding punitive damages governs claims against United Airlines.

2. McDonnell Douglas

McDonnell Douglas designed and built the aircraft in California. Its principal place of business is Missouri. In Air Crash, McDonnell Douglas was a defendant. Under analogous circumstances, the seventh circuit wrestled with the question whether Missouri or California punitive damages policies would be more impaired if they were not applied. The court concluded that both states' policies would be equally impaired. The court decided that a California court would escape the quandary by applying Illinois law. Air Crash, 644 F.2d at 622-626.

Subsequent decisions by California state courts indicate that in the event California shares an equal interest in application of its law with another state, a California court would apply California law. See, Am. Nat'l Bank of Commerce v. Corondoni, 169 Cal.App.3d 368, 215 Cal.Rptr. 331 (1985) (California's general preference is to apply its own law). California courts have "repeatedly asserted that California has an important interest in regulating products manufactured in California." Corrigan v. Bjork Shiley Corp., 182 Cal.App.3d 166, 180, 227 Cal.Rptr. 247, cert. denied sub nom. Shiley Inc. v. Corrigan, 479 U.S. 1049, 107 S.Ct. 921, 93 L.Ed.2d 973 (1987). Since Missouri and California law would be equally impaired if not applied, California law governs claims for punitive damages against McDonnell Douglas.

3. General Electric

General Electric manufactured the engines on Flight 232 in Ohio. Its principal place of business is New York. As discussed above, Iowa was the fortuitous site of the crash, and Iowa has no real interest in imposing punitive damages against General Electric. Colorado has some interest in having its punitive damages law applied in this case because Denver has a busy airport from which Flight 232 departed. However, Ohio and New York have stronger interests than either Colorado or Iowa. Consequently, the comparative impairment analysis is limited to Ohio and New York.

A brief summary of the punitive damage laws of Ohio and New York reveals that a true conflict exists. Ohio prohibits punitive damage awards in wrongful death actions. Rubeck v. Huffman, 54 Ohio St.2d 20, 374 N.E.2d 411, 413 (1978). In order to award punitive damages in other actions, a jury must find clear and convincing evidence that a manufacturer "manifested a flagrant disregard of the safety of persons who might be harmed by the product in question." Ohio Rev.Code § 2307.80(A).

New York permits awards of punitive damages in wrongful death actions, N.Y. Est. Powers & Trusts Law § 5-4.3(b), survival actions, N.Y. Est. Powers & Trusts Law § 11-3.2(b), and ordinary personal injury actions. New York allows imposition of punitive damages for conduct that is "morally culpable, or is actuated by evil and reprehensible motives." Walker v. Sheldon, 10 N.Y.2d 401, 404, 179 N.E.2d 497, 498, 223 N.Y.S.2d 488, 490 (1961).

General Electric argues that Ohio has expressed a stronger, more recent interest [1434] in the imposition of its punitive damages law. General Electric points out that Ohio law is codified and offers greater protection to a corporation than New York law. However, the fact that New York's punitive damage provision was not codified may imply that the state legislature agrees with the judicial resolution of the punitive damages standard. The fact that Ohio law affords greater protection to defendants than New York law indicates only that Ohio has struck a different balance between deterrence and protection than New York.

Ohio interests would be more impaired if its punitive damages policy were not applied. General Electric manufactures aircraft engines in Ohio and not in New York. General Electric's principal place of business is in New York because other holdings, including the National Broadcasting Company, Kidder, Peabody Group, Inc. and GE Turbine Operations, are located in New York. Since the alleged wrongful acts occurred in Ohio, and Ohio is the principal place of business of General Electric's aircraft engine manufacturing division, Ohio has a greater opportunity to balance interests of deterrence against protection of General Electric regarding airplane engine manufacturing. Ohio law governs the punitive damage claims against General Electric.

4. Conclusion

The three cases originally filed in California each assert claims for punitive damages based upon personal injuries. The punitive damage claims against United Airlines shall be governed by Illinois law. The claims against McDonnell Douglas shall be governed by California law. The claims against General Electric shall be governed by Ohio law.

B. Cases Transferred From Colorado, Iowa, New York, and Georgia and cases filed in Illinois

Six cases stating claims for punitive damages were filed in Colorado, Iowa, Illinois, New York and Georgia.^[13] Colorado, Iowa, Illinois and New York all apply the "most significant relationship" test described in § 145 et seq. of the Restatement (Second) of the Conflict of Laws ("the Restatement").^[14] The Supreme Court of Georgia has never decided whether the Restatement should be applied in air crash cases, but Georgia would adopt the Restatement if the question were raised.^[15] The seventh circuit delineated the Restatement test in Air Crash, 644 F.2d at 611-612:

The Restatement (Second) provides two sets of criteria for the measurement of the "most significant relationship." The first set of criteria includes general factors such as the needs of the interstate [1435] system; relevant policies of the forum and other interested states; protection of justified expectations; the basic policies underlying the particular field of law; certainty, predictability and uniformity of result; and ease in the determination and application of the law to be applied. The second set of criteria includes the contacts to be taken into account in applying these principles. These contacts are: (1) the place of the injury; (2) the place of misconduct; (3) the domicile, residence, nationality, place of incorporation and place of business of the parties; and (4) the place where the relationship between the parties is centered. These contacts are to evaluated according to their relative importance to the issue involved and according to the purposes sought to be achieved by the relevant rules of the interested states.

The most significant relationship test must be applied independently to each defendant.

1. United Airlines

The first issue is which states to consider. In this action, the states that must be considered are: Iowa, the place of the injury; Colorado and California, the places of the alleged misconduct; Illinois, the principal place of business of United Airlines; Delaware, the place of incorporation of United Airlines.^[16] It is difficult to ascertain where the relationship between the parties is "centered." Since the relationship must have been centered in Colorado, California, Iowa or Illinois, the question need not be resolved. The interests of these states will be considered. The states of domicile of the plaintiffs are not relevant to the choice of punitive damage laws. Air Crash, 644 F.2d at 612-613.

The interests of each state in application of its punitive damage laws must be considered. The purpose of punitive damages is punishment of the defendant and deterrence of future wrongdoing. These purposes are balanced against the danger of imposing excessive financial liability on the defendant.

As the site of the injury, Iowa has presumptively significant interests in the action. However, the eventual crash in Iowa was fortuitous. Iowa's interest or ability to deter United's conduct depended upon an unforeseen emergency landing in Sioux City. Illinois, Colorado and California each have a substantial connection to United's business activity, and a corresponding interest in balancing deterrence against protection of a defendant like United.

California has an interest in monitoring United's maintenance activity conducted in California. Colorado has an interest in regulating the training of United's flight crews in Colorado. United proposes that California law govern punitive damage claims arising from alleged faulty maintenance and Colorado law govern punitive damage claims arising from training the crew. However, it is unclear that corporate decisions resulting in allegedly wrongful acts by United would necessarily have occurred in either California or Colorado. Colorado and California derive substantial sales and income taxes, as well as other revenues, directly or indirectly from United's activities in their states.

United's principal place of business is Illinois. As discussed earlier, Illinois benefits from United's economic activity within the state, and Illinois suffers a substantial risk that wrongful behavior will result in an accident occurring on flights scheduled to arrive in or depart from Chicago. United may have committed wrongful acts relating to maintenance of the aircraft or training of its flight crew. Allegations concerning United's wrongful conduct may easily be recharacterized as permitting passengers to travel upon a faulty aircraft flown by an ill-trained crew. Illinois has the most significant relationship to United's passenger business. Consequently, Illinois is well placed to achieve a balance between deterrence of wrongful conduct and protection from excessive liability.

United argues that potential defendants would be encouraged to choose their principal [1436] place of business to minimize punitive damage liability. However, defendants are just as likely to manipulate the location of their maintenance or training centers to minimize liability. The application of Illinois law achieves certainty, predictability and ease of application, as well as the purposes of punitive damages. Applying a single standard to the issue of punitive damages with respect to United's activities simplifies the issue. Accordingly, punitive damage claims in the consolidated cases subject to the Restatement are governed by Illinois law. As discussed earlier, Illinois does not permit punitive damage claims in survival actions or wrongful death actions.

2. McDonnell Douglas

The Restatement analysis regarding McDonnell Douglas is limited to California, site of the alleged wrongful conduct, Missouri, McDonnell Douglas' principal place of business, Maryland, its place of incorporation^[17] and Iowa, the site of the injury. For the reasons stated above, Iowa law will not be applied. As between California and Missouri, in Air Crash the seventh circuit determined that these states had an equal interest in the application of their punitive damage laws and resolved the conflict by application of Illinois law, the site of the crash. Since no acceptable alternative to California or Missouri law exists in this case, a resolution to the conflict must be reached.

The Restatement § 145, comment c, provides: "if the primary purpose of the tort rule involved is to deter or punish misconduct, ... the state where the conduct took place may be the state of dominant interest and thus that of most significant relationship...." See, Houston North Hosp. Prop. v. Telco Leasing, Inc., 688 F.2d 408, 409, n. 3b (5th Cir.1982). See also, Restatement § 145 comment e. At this early stage of the litigation, some doubt exists about the site of allegedly wrongful conduct. Conceivably, wrongful conduct resulting in the accident could have occurred in either state. However, the design and manufacture of the aircraft occurred in California. Since faulty design and manufacture are the basis for the punitive damage claims against McDonnell Douglas, California law appropriately governs these actions. California does not permit punitive damages in wrongful death actions but does permit punitive damages in survival actions.

3. General Electric

General Electric manufactured and designed the aircraft's engine in Ohio. New York is General Electric's principal place of business. General Electric's aircraft engine business takes place predominantly in Ohio. As discussed above, New York's relationship to General Electric's aircraft engine manufacturing business is objectively less than Ohio's interest. Accordingly, Ohio law governs punitive damage claims against General Electric. Ohio law permits punitive damages in survival actions but not in wrongful death actions.

C. Cases Transferred From Pennsylvania and the District of Columbia

Two cases asserting punitive damage claims were originally brought in Pennsylvania and the District of Columbia.^[18] Pennsylvania and the District of Columbia apply a combination of the governmental interest analysis and the most significant relationship test.^[19] In Hercules, the District of Columbia Court of Appeals concurred with Judge Joyce Green in In re Air Crash Disaster, 559 F.Supp. 333, 342 (D.D. C.1983) that "the state with the `most significant [1437] relationship' should also be the state whose policy is advanced by application of [its] law." Hercules, 566 A.2d at 41 n. 18. In Air Crash, the seventh circuit observed that "the tests to be used, although containing significant differences, mandate an analytical inquiry which is basically the same." Air Crash, 644 F.2d at 610. Since California's governmental interest analysis and the Restatement test produced the same result for each defendant, it is unnecessary to repeat the analysis with regard to the combined tests employed by Pennsylvania and the District of Columbia.

The choice of law rules of Pennsylvania and the District of Columbia would result in application of Illinois law to punitive damage claims against United, California law to claims against McDonnell Douglas and Ohio law to claims against General Electric.

V. Conclusions

Defendants' motions to bar punitive damage claims are denied. Plaintiffs' claims for punitive damages against United Airlines are governed by Illinois law. Plaintiffs' claims for punitive damages against McDonnell Douglas are governed by California law. Plaintiffs' punitive damage claims against General Electric are governed by Ohio law.

Plaintiffs may move to take expedited discovery as to any specifically identified disputed fact material to this court's choice of law analysis.

[1] McDonnell Douglas's motion is styled a motion in limine. For practical purposes, McDonnell Douglas seeks to dismiss punitive damages claims. Consequently, its motion is treated as a Rule 12(b)(6) motion to dismiss.

[2] In Browning-Ferris Indus., Inc. v. Kelco Disposal, Inc., ___ U.S. ___, 109 S.Ct. 2909, 106 L.Ed.2d 219 (1989), the Court declined to address due process constraints on punitive damages because the issue was not preserved on appeal. Justice Brennan, joined by Justice Marshall in a concurring opinion, stated that lack of clear guidelines in punitive damage actions may violate due process. Id. 109 S.Ct. at 2923. Justice O'Connor, joined by Justice Stevens, criticized unbridled discretion afforded to jurors under punitive damages provisions. Id. at 2324. In another concurring opinion by Justice O'Connor in Bankers Life & Casualty Co. v. Crenshaw, 486 U.S. 71, 86-89, 108 S.Ct. 1645, 1654-1656, 100 L.Ed.2d 62 (1988), Justice Scalia joined in criticizing unbridled discretion afforded jurors regarding punitive damages.

[3] McDonnell Douglas briefed the issue whether punitive damages were preempted by the FAA without addressing or citing Bieneman.

[4] The court previously requested that choice of law considerations relating to punitive damages be briefed. See orders of November 27, 1989 and January 16, 1990.

[5] Cases asserting punitive damage claims include: Folkvord No. 90 C 0296, McKelvey No. 89 C 9172, Musick No. 89 C 8465, (California); Gillespie No. 90 C 0079, (Colorado); Gomez No. 89 C 8466, (District of Columbia); Vaziri No. 90 C 0535, (Georgia) (a case is pending in Georgia to determine who may properly bring this claim); Biggs No. 89 C 8482, Cameron No. 89 C 9295 (Iowa); Walmsley No. 89 C 6471 (Illinois); Halizak No. 90 C 0334 (New York); and Mackin No. 89 C 8408, Bealer No. 89 C 8773, (Pennsylvania).

[6] For example, Illinois law does not permit punitive damages in wrongful death or survival actions. Poole v. Alpha Therapeutic Corp., 698 F.Supp. 1367, 1372 (N.D.Ill.1988). California does not permit punitive damages in wrongful death actions. Air Crash, 644 F.2d at 607. However, California does permit punitive damages in survival actions. Cal.Civ.Code § 3294 (West 1990).

[7] For example, California, Colorado and Illinois all apply different standards to the award of punitive damages. California requires a plaintiff to provide clear and convincing evidence of oppression, fraud, or malice in order to recover punitive damages. Under California law, "malice" is defined as conduct intended to cause injury to the plaintiff or despicable conduct carried on with a willful and conscious disregard of the rights and safety of others, and "oppression" means despicable conduct done in conscious disregard of the victim's rights. Id. Colorado requires that conduct supporting punitive damages be proven "beyond a reasonable doubt." Colo.Rev.Stat. § 13-25-127 (1987). In addition, Colorado limits punitive damages awards for personal injury to the amount of actual damages unless the court determines that the defendant has continued the behavior in a willful and wanton manner. Colo.Rev.Stat. § 13-21-102 (1987). Finally, in Illinois, punitive damages are awarded in personal injury actions "when torts are committed with fraud, actual malice, deliberate violence or oppression, or when the defendant acts willfully, or with such gross negligence as to indicate a wanton disregard of the rights of others." Kelsay v. Motorola, Inc., 74 Ill.2d 172, 23 Ill.Dec. 559, 565, 384 N.E.2d 353, 359 (1978).

[8] Discovery on the issue of compensatory damages is scheduled for completion by March 15, 1990, as to all cases originally transferred to this court. Order of January 16, 1990.

[9] Folkvord, No. 90 C 0296; McKelvey, No. 89 C 9172; and Musick, No. 89 C 8465.

[10] The court considered the interests of Illinois, the state in which the injury occurred, because "it is a state in which both the policies of protection of airline corporations and deterrence of misconduct are peculiarly important." Air Crash, 644 F.2d at 622.

[11] Neither the Illinois Wrongful Death Act, Ill. Rev.Stat. ch. 70, ¶ 2, nor the Illinois Survival Act, Ill.Rev.Stat. ch. 110½, ¶ 27-6, expressly provides for punitive damages. However, the general rule against punitive damages under the Survival Act has two exceptions. Punitive damages claims survive death of a plaintiff when there exists a statutory basis for the claim or when strong equitable considerations compel survival. Raisl v. Elwood Indus., 134 Ill.App.3d 170, 89 Ill.Dec. 100, 479 N.E.2d 1106 (Ill.App. 1985).

[12] The most recent data from the National Transportation Safety Board shows that 30.4% of all airline accidents in 1986 occurred during the taxi, takeoff and climb phase of operation, 43.4% occurred during the descent, approach and landing phase and only 17.4% occurred during the cruise phase. From 1981-1985, 55% of the fatal accidents occurred during the taxi, takeoff and climb phase, 25% occurred during descent, approach and landing, and 10% occurred during the cruise. United's motion, App. B. National Transportation Safety Board, Annual Review of Aircraft Accident Data—U.S. Air Carrier Operations Calendar Year 1986.

[13] These cases are: Gillespie No. 90 C 0079 (Colorado); Biggs No. 89 C 8482, Cameron No. 89 C 9295 (Iowa); Walmsley, No. 89 C 6471 (Illinois); Halizak No. 90 C 0334 (New York) (claims against United Airlines and McDonnell Douglas only); Vaziri, Nos. 90 C 0535 and 90 C 0509 (Georgia) (a case is pending in Georgia to determine who may properly bring this claim).

[14] Colorado: In re Air Crash Disaster At Stapleton Int'l, 720 F.Supp. 1445, 1448, citing First Nat'l Bank v. Rostek,182 Colo. 437, 514 P.2d 314 (1973).

Iowa: Goetz v. Wells Ford Mercury, Inc., 405 N.W.2d 842 (Iowa 1987).

Illinois: Air Crash, 644 F.2d at 611, citing Ingersoll v. Klein, 46 Ill.2d 42, 262 N.E.2d 593, 596 (1973).

New York: The New York test is the functional equivalent of the Illinois (Restatement) test. Air Crash, 644 F.2d at 628-629.

[15] Georgia's intermediate courts have applied the antiquated lex loci delecti rule. Risdon Enterprises Inc. v. Colemill Enterprises, Inc., 172 Ga.App. 902, 324 S.E.2d 738, 740 (1984). However, lower state court decisions are "not binding evidence of what the [state] Supreme Court would do in a similar case." Green v. J.C. Penney auto Insur. Co., 806 F.2d 759, 761 (7th Cir. 1986). Citing the difficulty of applying the lex loci rule, in Baltimore Football Club, Inc. v. Lockheed Corp., 525 F.Supp. 1206, 1208-1209 (N.D.Ga.1981) the same Georgia court from which Vaziri was transferred relied on the seventh circuit's "most significant relationship" analysis in Pittway v. Lockheed Aircraft Corp., 641 F.2d 524 (7th Cir.1981). The Georgia Supreme Court is not likely to apply the lex loci rule in air crash cases. Cf., Saloomey v. Jeppesen & Co., 707 F.2d 671, 674 (2d Cir.1983) (predicting that Connecticut Supreme Court would adopt the modern "most significant relationship" approach in the unique context of "a wrongful death action arising from an aviation accident," notwithstanding that Connecticut previously applied lex loci).

[16] Delaware's interest in this incident results from the formality of incorporation in Delaware. No activity related to the air crash occurred in Delaware. Consequently, Delaware's interest need not be discussed further.

[17] Given the obviously greater interests of the other states, Maryland's interest as the formal place of incorporation need not be discussed.

[18] Those cases are: Mackin No. 89 C 8408 (Pennsylvania); and Gomez No. 89 C 8466 (District of Columbia).

[19] District of Columbia: Hercules & Co. v. Shama Restaurant Corp., 566 A.2d 31, 40 (D.C.App. 1989) (District of Columbia approach is a "constructive blending" of governmental interest analysis and the Restatement approach); Pearce v. E.F. Hutton Group, Inc.,664 F.Supp. 1490, 1496 (D.D.C.1987).

Pennsylvania: Giovanetti v. Johns-Manville Corp., 372 Pa.Super. 431, 539 A.2d 871, 873 (Pa.Super.Ct.1988) (combining government interest analysis and significant relationship approach of the Restatement).

[233] [234] Elizabeth `Smith, Jodi Westbrook Flowers, Ronald L. Motley, Michael Edward Elsner, Mary F. Schiavo, Donald A. Migliori, [235] Motley Rice LLC, Mount Pleasant, SC, Jayne Conroy, Clinton B. Fisher, Hanly Conroy Bierstein Sheridan Fisher & Hayes, LLP, Paul J. Hanly, Jr., Hanly Conroy Bierstein & Sheridan LLP, Kenneth Foard McCallion, McCallion & Associates, LLP, Frank H. Granito, Jr., Speiser, Krause, Nolan and Granito, Justin Timothy Green, Marc S. Moller, Kreindler & Kreindler, New York, NY, Floyd A. Wisner, Nolan Law Group, Chicago, IL, Samuel Jay Rosenthal, Barish Rosenthal, Philadelphia, PA, Kristopher E. Kuehn, Michael E. Callahan, Michael Kuckelman, Timothy W. Triplett, Warden, Triplett, Grier, Overland Park, KS, Percy M. Samuel, Percy M. Samuel, P.C., Elmont, NY, for Plaintiffs.

David J. Pyper, Sunrise, FL, pro se.

Jacqueline Keller, Kevin J. O'Neill, Gogick, Byrne & O'Neill, L.L.P., Cozen, O'Connor, John J. McDonough, Cozen, O'Connor, Peter James Gallagher, Kennedy Johnson Gallagher, LLC, Marguerite D. Peck, Downing & Peck, P.C., James Frederick Rittinger, Robert M. Callagy, Veronica Logatti Maginnis, Alun Griffiths, Satterlee Stephens Burke & Burke LLP, Robert Joseph Rrown, Brown, Gavalas & Fromm, L.L.P., Brian V. Otero, Michelle R. Parker, Hunton & Williams, LLP, Jeffrey J. Ellis, Veronica Spicer, Brian Patrick Sexton, Quirk and Bakalor, P.C., Charles Edward Koob, Joseph F. Way land, Michael J. Hogsten, Simpson Thacher & Bartlett LLP, Jeffrey W. Moryan Connell, Foley, L.L.P. Bruce R. Wilder muth, Edward J. McMurrer, Mendes & Mount, L.L.P., Jon Paul Robbins, McLaughlin and Stern, LLP, James P. Connors, Jones, Hirsch, Connors & Bull, P.C., Jonathan I. Blackman, Cleary Gottlieb Steen & Hamilton, LLP, John L. Altieri, Jr., Marissa Bea Mole, Paul Robert Koepff, Willard Mark Wood, O'Melveny & Myers LLP, Karen M. Berberich, Dombroff & Gilmore, P.C., Richard Arthur Williamson, Flemming Zulack Williamson Zauderer, LLP, David J. Bloomberg, Mary M. Chang, Bryan Cave LLP, Timothy Gerard Stickelman, The Port Authority of New York and New Jersey, George Spencer Kolbe, Jr., Friedberg & Raven, LLP, Richard T. Marooney, Jr., King & Spalding LLP, New York, NY, Mark Seiden, Milber Makris Plousadis & Seiden, LLP, White Plains, NY, Mary P. Gaston, Todd W. Rosencrans, Mack H. Shultz, Jr., Steen C. Minson, Thomas Jeffrey McLaughin, Perkins Coie LLP, Seattle, WA, H. Rowan Gaither, IV, Richards Kibbe & Orbe, LLP, Mark A. Dombroff, Michael W. Kerns, Dombroff & Gilmore, P.C., Washington, DC, Kurt Bernard Gerstner, Kathleen Marie Guilfoyle, Richard Paul Campbell, Campbell Campbell Edwards & Conroy, Christopher D. Moore, F. Dennis Saylor, IV, Paul F. Ware, Jr., Goodwin Proctor LLP, Boston, MA, James A. Gallagher, Jr., Michael J. Crowley, Gallagher, Gosseen, Faller, Kaplan & Crowley, Garen City, NY, Michael Rowe Feagley, Mayer, Brown, Rowe & Maw, Robert P. Conlon, Lord, Bissell & Brook, L.L.P., Gary William Westerberg, Chicago, IL, Jonathan P. McHenry, Connell Foley LLP, Roseland, NJ, H. Lee Godfrey, Jonathan Jeffrey Ross, Laurie Gallun, Max Tribble, Susman Godfrey LLP, Houston, TX, Ralph Vincent Pagano, Mendes & Mount, LLP, Newark, NJ, Clinton H. Coddington, Coddington, Hicks & Danforth, Redwood City, CA, Robert S. Murphy, Mineola, NY, for Defendants.

McLaughlin and Stern LLP, New York, NY, pro se.

Royal Indemnity Company, pro se.

OPINION AND ORDER REGARDING PUNITIVE AND COMPENSATORY DAMAGES

HELLERSTEIN, District Judge.

There are two motions before me in these 9/11 cases seeking recovery for [236] wrongful death and personal injury against the airlines, airport operators, airport security companies, and aircraft manufacturer: (1) a motion to decide whether Plaintiffs may recover punitive damages against these defendants; and (2) a motion to decide whether Pennsylvania law should govern claims for compensatory damages brought by eight plaintiffs who died on board United Airlines Flight 93, when that airplane crashed into a field near Shanksville, Pennsylvania.

For the reasons stated below, I h that Plaintiffs may not recover punitive damages, and that the claims for compensatory damages brought by the eight who died on board United Airlines Flight 93 shall be governed by the law of the plaintiffs domicile state.

Background

On September 11, 2001, al Qaeda terrorists hijacked four commercial jetliners a made them weapons of mass destruction The hijackers crashed American Airlines Flight 11 into the North Tower, and United Airlines Flight 175 into the South Tower, of the World Trade Center in New York, American Airlines Flight 77 into the Pentagon in Virginia, and United Airlines Flight 93 into an open field near Shanksville, Pennsylvania. The legal successors of those who died, the persons in the World Trade Center and in the Pentagon who were injured, and those who suffered damage to their property or their insurance subrogees, brought lawsuits against the airlines, airport operators, airport security companies, and the aircraft manufacturer having a connection to the four flights, alleging that Defendants' wrongful behavior proximately caused their injuries. Plaintiffs' master complaints for wrongful death and personal injury demanded relief in the form of compensatory damages and punitive damages; the complaints for property damage sought compensatory damages.

In earlier proceedings in these cases, I denied Defendants' motion to dismiss based on their claim of absence of duty to ground victim plaintiffs, see In re September 11 Litig., 280 F.Supp.2d 279, 289-97 (S.D.N.Y.2003), and regulated the pretrial old proceedings by several case management orders and discovery rulings, see e.g., In re September 11 Litig., 236 F.R.D. 164 (2006). Of the 95 wrongful death and personal injury cases that were filed in this Court on behalf of 96 victims who opted to pursue traditional tort lawsuits in preference to proceedings before the Special Master of the Victim Compensation Fund, 53 cases have settled, one was dismissed, and 41 cases (on behalf of 42 victims) remain.^[1] Discovery proceedings continue for the cases that remain, and for the property damage claims, slowed by the difficulties of filtering depositions and document production through the Transportation Security Administration to assure against disclosure of Sensitive Security Information. See id. With assistance of the parties, several cases have been identified for trials of the issues of damages, with issues of liability to be tried when discovery of those issues is completed.

In anticipation of such trials, and because of the need to define the scope of potential recoveries, Defendants have moved to strike Plaintiffs' claims for punitive damages, and Plaintiffs have moved, in connection with claims arising from the [237] terrorist-related crash of United Airlines Flight 93 in Shanksville, Pennsylvania, for a declaration that Pennsylvania law, as the law of the state where the crash occurred, should govern the scope and extent of compensation that a jury may award with respect to those who died aboard that flight. I heard argument on June 14, 2007, and now deliver my rulings.

Discussion

I. Air Transportation Safety and System Stabilization Act

The Air Transportation Safety and System Stabilization Act ("Stabilization Act") creates a federal cause of action for damages arising from; or in connection with, the terrorist-related aircraft crashes of September 11, 2001, and confers exclusive jurisdiction on the United States District Court of the Southern District of New York to hear such actions. The Act provides aggregate monetary limits of recovery, limiting recoveries against the various aviation defendants to their aggregate insurance coverage. The Act further provides that although the cause of action is federal, the law of the state in which the crash occurred shall be the law for decision, in both its choice of law and its substantive aspects, except to the extent that such law is inconsistent with, or preempted by, federal law. The following excerpts from Section 408 of the Stabilization Act, 49 U.S.C. § 40101 note, set out these provisions.

(a) In general.

(1) Liability limited to insurance coverage. Notwithstanding any other provision of law, liability for all claims, whether for compensatory or punitive damages or for contribution or indemnity, arising from the terrorist-related aircraft crashes of September 11, 2001, against an air carrier, aircraft manufacturer, airport sponsor, or person with a property interest in the World Trade Center, on September 11, 2001 . . . shall not be in an amount greater than the limits of liability insurance coverage maintained by that air carrier, aircraft manufacturer, airport sponsor, or person.

(2) . . .

(3) Limitations on liability for New York City. Liability for all claims, whether for compensatory or punitive damages or for contribution or indemnity arising from the terrorist-related aircraft crashes of September 11, 2001, against the City of New York shall not exceed the greater of the city's insurance coverage or $ 350,000,000.

(b) Federal cause of action.

(1) Availability of action. There shall exist a Federal cause of action for damages arising out of the hijacking and subsequent crashes of American Airlines flights 11 and 77, and United Airlines flights 93 and 175, on September 11, 2001. Notwithstanding section 40120(c) of title 49, United States Code,[^[2]] this cause of action shall be the exclusive remedy for damages arising out of the hijacking and subsequent crashes of such flights.

(2) Substantive law. The substantive law for decision in any such suit shall be derived from the law, including choice of law principles, of the State in which the crash occurred unless such law is inconsistent with or preempted by Federal law.

Plaintiffs contend that because the Stabilization Act contemplates recoveries of [238] punitive damages, in limiting liability of aviation defendants to their aggregate liability insurance coverage, "whether for compensatory or punitive damages or for contribution or indemnity, arising from the terrorist-related aircraft crashes of September 11, 2001," punitive damages must therefore be recoverable, as a matter of federal law and regardless of whether the relevant state law would allow such recoveries. In the words of the statute, any inconsistent state law would not be the law for decision.

The phrase "punitive damages" appears twice in the text of the statute. Stabilization Act § 408(a)(1), (3). Both times, however, the phrase is used in the context of a limitation on a defendant's liability, not in the context of creating a right or remedy for a plaintiff. Put another way, the provision in which the words "punitive damages" appears is not "phrased in terms of the persons benefited." Gonzaga Univ. v. Doe, 536 U.S. 273, 284, 122 S.Ct. 2268, 153 L.Ed.2d 309 (2002). Rather, the provision is intended to benefit the aviation defendants, not those who sue the aviation defendants, and thus does not create a federal punitive damages remedy.

An important purpose of the Stabilization Act was to protect the airlines in particular, and companies involved in aviation generally, against the possibility of ruinous liability arising from the terrorist-related aircraft crashes of September 11, 2001. See McNally v. Port Authority (In re World Trade Center Disaster Site), 414 F.3d 352, 377 (2d Cir.2005) (citing 147 Cong. Rec. 59594 (Sept. 21, 2001) (statement of Sen. McCain); 147 Cong. Rec. H5914 (Sept. 21, 2001) (statement of Rep. Conyers)). Thus the Act provided that the liability of such companies, in the aggregate, was to be limited to the insurance coverage that they carried. In the context of the airlines' exposure to potentially ruinous liability, and the equity of providing sufficient funds so that all claimants would have equal right to the fullest compensation to, which they might be entitled under law, the argument against punitive damage recoveries is strong. Punitive damages are recovered unevenly, in large and small amounts and by different plaintiffs and, in the context of a limited fund, endanger the capacity of the fund to compensate all plaintiffs in accordance with their provable injuries. If not for the provisions in the Stabilization Act that contemplated the possibility of punitive damage recoveries, Stabilization Act § 408(a)(1), (3), the Stabilization Act could well be interpreted as expressing a policy against punitive damage recoveries. See 147 Cong. Rec. 59595 (Sept. 21, 2001) (statement of Sen. Hatch) ("I am pleased that we consolidated the causes of action in one Federal court so that there will be some consistency in the judgments awarded.").^[3]

Thus for the reasons stated, I reject Plaintiffs' argument that the Stabilization Act should be interpreted to provide for punitive damage recoveries, even when such a recovery is not allowed under the applicable state's law. The Stabilization Act neither bars nor provides for punitive damages recoveries. Instead, the Act leaves the issue of punitive damages to the state in which the dash occurred, for both choice of law and substantive law principles. [239] Stabilization Act § 408(b)(2). The next step in analysis, therefore, is to analyze the law of the state in which the crash occurred.

II. American Airlines Flight 11 and United Airlines Flight 175

American Airlines Flight 11 and United Airlines Flight 175 crashed into the North and South Towers, respectively, of the World Trade Center, in New York. Thus New York law applies, including its choice of law principles. Stabilization Act § 408(b)(2).

New York's choice of law principles require an "interest analysis." Schultz v. Boy Scouts of America, Inc., 65 N.Y.2d 189, 197, 491 N.Y.S.2d 90, 480 N.E.2d 679 (N.Y.1985). "Interest analysis" entails finding "the jurisdiction having the greatest interest in the litigation," where the jurisdiction's interest is measured in terms of the "purpose of the particular law in conflict." Id. (internal brackets omitted). The purpose of punitive damages is to regulate standards of conduct. See In re Air Crash at Belle Harbor, 2006 WL 1236688, 2006 U.S. Dist. Lexis 27387 (S.D.N.Y.2006) (citing In re Air Crash Disaster Near Chicago, 644 F.2d 594, 617 (7th Cir.1981)); Wang v. Marziani, 885 F.Supp. 74, 77 (S.D.N.Y. 1995). "[W]hen the conflicting rules involve the appropriate standards of conduct . . . the law of the place of the tort `will usually have a predominant, if not exclusive, concern.'" Schultz, 65 N.Y.2d at 198, 491 N.Y.S.2d 90, 480 N.E.2d 679 (quoting Babcock v. Jackson, 12 N.Y.2d 473, 483, 240 N.Y.S.2d 743, 191 N.E.2d 279 (N.Y. 1963)). Therefore lex loci delicti — the law of the place of the tort — applies to Plaintiffs' claims for punitive damages.

Where the defendant's misconduct and the plaintiffs injury occur in different jurisdictions, the place of the tort is the jurisdiction where the "last event necessary" to make the defendant liable occurred. Schultz, 65 N.Y.2d at 195, 491 N.Y.S.2d 90, 480 N.E.2d 679. Here, the place of the tort could plausibly be Massachusetts, because defendants screened Flight 11 and Flight 175 hijackers at Logan Airport in Boston, or New York, where the crash, the last event necessary to give rise to wrongful death liability, occurred. For claims arising out of a "disaster befalling a plane aloft," however, "the place of the crash is often random or, as here, fixed by a warped mind," Pescatore v. Pan American World Airways, Inc., 97 F.3d 1, 13 (2d Cir.1996) (internal parentheses omitted), and thus legitimate reasons to deviate from the lex loci delicti rule may exist. See e.g., In re Air Crash at Belle Harbor, supra (applying admiralty law to passengers' punitive damages claims arising out of aircraft disaster in New York).

Thus, "interest analysis" requires me to consider both the law of Massachusetts and the law of New York. Both states, it appears, hold that punitive damages are not permissible if the source of recovery would come from insurance funds, a proposition that is more clearly stated in the New York cases, but which neither party disputes. If, however, a choice must be made between the laws of New York and Massachusetts, I find that New York has the greater interest in having its law applied.

New York was the target of the terrorists. As long as it remains the commercial center of the United States and, indeed, of the world, New York will be a target for terrorists. Although other cities and. states may be a target for the depredations of terrorists and, in that sense, as Plaintiffs' counsel argued, no state has "a higher interest than any other in deterring the conduct that led to 9/11," Hearing Tr. [240] at 181 (June 14, 2007), Mew York has a very strong interest in regulating that which may affect its security, and that of the nation. See Jason Mazzone, The Security Constitution, 53 U.C.L.A. L.REV. 29, 44 (2005) ("[N]o part of the Union ought to feel more anxiety . . . than New York") (quoting THE FEDERALIST No. 41 (James Madison)).

The attack on the World Trade Center was an attack on the City of New York, the State of New York, and the United States, and Defendants' alleged negligence in failing to prevent the attack had special effect in this jurisdiction. Several thousand New Yorkers were killed, and billions of dollars of New York property was destroyed. New York, rather than the several domiciles of the passengers on board Flights 11 and 175, or of the defendants who were sued in connection with their involvement in those flights, has the greatest interest in applying its conduct-regulating law. For these reasons, I rule that New York's substantive law should govern the issue of Plaintiffs' ability to recover punitive damages. My ruling is consistent with my decision denying Defendants' motion at the outset of this case, applying New York law in relation to the issues of Defendants' duty and proximate cause. See In re Sept. 11 Litig., 280 F.Supp.2d 279, 289 (S.D.N.Y.2003).

Plaintiffs concede that, if New York law applies, punitive damages are not available in cases arising under the Stabilization Act. See Hearing Tr. at 181-82. The Stabilization Act requires that damages shall not exceed the limits of liability insurance coverage maintained by Defendants, with the effect that recovery for claims arising under the Act must come from insurance funds, and nowhere else. Because an insurer cannot be compelled to indemnify an insured for punitive damages under any circumstances, see Pub. Serv. Mut. Ins. Co. v. Goldfarb, 53 N.Y.2d 392, 400, 442 N.Y.S.2d 422, 425 N.E.2d 810 (N.Y.1981), the subrogated insurers in this case cannot be compelled to satisfy a punitive damages judgment. Punitive damages are therefore unavailable as a matter of law, and Defendants' motion to strike the allegations of the Master Complaint claiming punitive damages is GRANTED as to all the defendants affiliated with American Airlines Flight 11 and United Airlines Flight 175.^[4]

With respect to American Airlines Flight 77, which crashed in Virginia, the parties agree, assuming the Stabilization Act does not control, that Virginia law applies and that under Virginia law, each physically injured and each wrongful death plaintiff could recover a statutory maximum of $350,000, in the aggregate, from all defendants named in the particular action. See Hearing Tr. at 161.

III. United Airlines Flight 93

Thanks to the brave resistance of the passengers on board United Airlines Flight 93, the aircraft did not reach the terrorists' intended target, presumably the Capitol or White House in Washington, D.C., but crashed, instead, in Pennsylvania. Thus Pennsylvania law applies, including its choice of law principles. Stabilization Act § 408(b)(2).

With regard to the eight plaintiffs who sue for wrongful death with respect to United Airlines Flight 93; I am asked to consider the proper choice of law to govern both punitive damages and compensatory damages claims. Pennsylvania, like New [241] York, requires an "interest analysis" to make choice of law determinations. The interest analysis for these eight cases is complicated, however, by the different "interests" that might be considered in relation to the different purposes that punitive and compensatory damages serve. The complication is resolved by making different choices of law for different issues in a single case, as is appropriate in these cases. See Griffith v. United Air Lines, Inc., 416 Pa. 1, 203 A.2d 796 (1964) ("The state in which the [plane crash] occurred has relatively little interest in the measure of damages to be recovered unless it can be said with certainty that defendant acted in reliance."); Broome v. Antlers' Hunting Club, 595 F.2d 921 (3d Cir.1979) ("A Pennsylvania court, consonant with the rule of Griffith, supra, would consider applying the law of different states to the separate issues of liability and damages.").

A. Punitive Damages Under Pennsylvania Law

Under Pennsylvania's `interest analysis," the policies of all interested states are considered. Budget Rent-Car Sys., Inc. v. Chappell, 407 F.3d 166, 170 (3d Cir.2005). The interested states are the state where the injury occurred; the state where the conduct causing the injury occurred; the domicile, residence, nationality, place of incorporation, and place of business of the parties; and the state where the relationship between the parties is centered. See Restatement (Second) of Conflict of Laws § 145; Grosshandels-Und Lagerei-Berufsgenossenschaft v. World Trade Center Properties, LLC, 435 F.3d 136, 139 (2d Cir.2006) (applying Pennsylvania law). Here, the states with the strongest Interest in relating and deterring Defendants' conduct by imposition of punitive damages are Pennsylvania, where United Airlines Flight 93 crashed, and New Jersey, where, at Newark Airport, the hijackers were ticketed and screened. Other states with an interest in Defendants' conduct are Illinois, where United Airlines maintains its principal place of business, Washington, where Boeing maintains its principal place of business and, arguably, Plaintiffs' states of domicile.

In Pennsylvania, New Jersey, Illinois, and Washington, as in New York, an insurer cannot be compelled to indemnify an insured for punitive damages awarded against the insured. See Martin v. Johns — Manville Corp., 508 Pa. 154, 169, 494 A.2d 1088 (Pa.1985) ("In Pennsylvania, the function of punitive damages is to deter and punish egregious behavior. Consistent with that theory, [the court] preclude[s] insurance against them."); Johnson & Johnson v. Aetna Cas. & Surety Co., 285 N.J.Super. 575, 667 A.2d 1087, 1091 (1995) ("New Jersey sides with those jurisdictions which proscribe coverage for punitive damage liability because such a result offends public policy and frustrates the purposes of punitive damage awards."); Beaver v. County Mut. Ins. Co., 95 Ill.App.3d 1122, 1125, 51 Ill.Dec. 500, 420 N.E.2d 1058 (1981) ("[P]ublic policy prohibits insurance against liability for punitive damages that arise out of one's own misconduct."); Dailey v. N. Coast Life Ins. Co., 129 Wash.2d 572, 919 P.2d 589, 590 (1996) ("Since its earliest decisions, this court has consistently disapproved punitive damages as contrary to public policy."). As for Plaintiffs' states of domicile, I hold that they have very slight, if any, connection with Defendants' conduct, since no conduct relating to the crash of United Airlines Flight 93 took place in those states.

Thus, I hold that punitive damages are not available in connection with United Airlines Flight 93. Defendants' motion to strike the allegations, in the Master Complaint [242] claiming punitive damages is GRANTED as to all defendants, except as to defendant Argenbright Security.

In 2001, the General Services Administration "debarred" Argenbright Security from obtaining federal contracts. See Declaration of Justin B. Kaplan [regarding punitive damages], June 25, 2007, Ex. A (Excluded Parties List System report). In 2002, Congress enacted the Homeland Security Act, which amended the Stabilization Act such that air transportation security companies that had been disbarred for any period within six months of February 17, 2002 were not covered by the Stabilization Act's limits on liability. See Stabilization Act § 402(1); 148 Cong. Rec. H5823 (July 26, 2002) (statement of Rep. Armey); Hearing Tr. at 182. That being the case, a punitive damages recovery against Argenbright can be paid without insurance proceeds, and the limitations of the state laws do not apply. The motion is DENIED as respects Argenbright Security.

B. Compensatory Damages Under Pennsylvania Law

Different states have strong policy interests with regard to the compensation of their domiciliaries for injuries caused by the faults of others. Thus, a "true" conflict of laws is said to be presented. See Chappell, 407 F.3d at 170. The issue of compensatory damages is of greatest interest to the states of Plaintiffs' domiciles, and to the states where Defendants maintain their headquarters or principal places of business. The state of a plaintiffs domicile has an interest in ensuring that its citizens obtain adequate compensation for injury, see e.g., Griffith, 416 Pa. at 24-25, 203 A.2d 796, while the state of a defendant's headquarters or principal place of business has an interest in maintaining the health and vitality of its companies and their employments and in protecting them against undue and unpredictable liability. See Taylor v. Mooney, 464 F.Supp.2d 439 (E.D.Pa.2006) (holding that Georgia's statute of repose barred strict products liability claims arising out of aircraft crash in Pennsylvania). A true conflict arises with respect to compensatory damages because the many interested states, including Florida, Illinois, New Jersey, New York, Pennsylvania, and Washington, measure compensatory damages in substantially different ways, such that state law favoring Plaintiffs operates to the detriment of states where Defendants maintain their principal place of business, and vice versa.

Plaintiffs argue that to ensure uniformity of result and adequacy of compensation, Pennsylvania law should apply. Application of Pennsylvania law would not impair the interests of the states of Plaintiffs' domicile in "the well-being of . . . surviving dependents," Griffith, 416 Pa. at 25, 203 A.2d 796, because, they argue, Pennsylvania law provides for greater recovery than the states of Plaintiffs' domiciles. See Plaintiffs' Reply at 5 (citing Harsh v. Petroll, 840 A.2d 404, 418 (Pa. Cmwlth.2003)). Plaintiffs' argument disregards, however, the effect that application of Pennsylvania law would have on Defendants, and whether such effect would impair the interests of the states in which Defendants are headquartered or do business — an effect the Stabilization Act explicitly recognized.

Pennsylvania has minimal interest in having its law of compensatory damages applied to these eight pending cases. Pennsylvania rendered some aid to the families of the decedents, conditioned on a right of subrogation `up to the full amount of its aid — approximately $20,000 in one case, see Declaration of Justin B. Kaplan [regarding compensatory damages], June 25, 2007, Ex. A (Letter from Suzanne N. [243] Hueston to Donald A. Migliori, Aug. 22, 2006), but that is a minimal interest. The involvement of Pennsylvania, as the state where the crash occurred, is "wholly fortuitous." Kuchinic v. McCrory, 422 Pa. 620, 624, 222 A.2d 897 (Pa.1966) (applying Pennsylvania law to claims arising out of aircraft crash in Georgia); see also Griffith supra (applying Pennsylvania law to claims arising out of aircraft crash in Colorado); Taylor, supra (applying Georgia law to claims arising out of aircraft crash in Pennsylvania). The terrorist hijackers did not intend to strike Pennsylvania and, alas, the passengers did not select the place of their heroic sacrifice. Nor did Defendants, even if negligent, intend for this disaster to befall Pennsylvania. Unlike the crashes of Flights 11, 77, and 175, the crash of United Airlines Flight 93 was "fortuitous" — a product of unusual and unintended circumstance. Pennsylvania's governmental interest in having its law applied is considerably less than the governmental interest of the parties' domicile states with respect to compensatory damages.

I hold that the law governing the compensatory damages to which each plaintiff is entitled, should he prove his case, shall be the law of the plaintiff's state of domicile. The interest of a plaintiff's domicile state in protecting the well-being of surviving dependents will be fully vindicated by application of its own law. And since each case is unique with respect to the issues of compensation, the interest of uniformity of result is much less important. Cf. Grosshandels-Und Lagerei-Berufsgenossenschaft, 435 F.3d at 139-40 (German subrogation law not applied where it would compromise rules of recovery from Victim Compensation Fund).

Accordingly, for the reasons stated, Plaintiffs' motion for a determination, with respect to United Airlines Flight 93, that Pennsylvania law shall govern the issues of compensatory damages is DENIED. The law for deciding such issues shall be law of the states of Plaintiffs' respective domiciles.

Conclusion

For the foregoing reasons, Defendants' motion to strike Plaintiffs' claims for punitive damages is GRANTED, except as to claims against Argenbright Security, and Plaintiffs' motion for a determination that Pennsylvania law shall apply to their claims for compensatory damages arising out of United Airlines Flight 93 is DENIED.

SO ORDERED.

[1] Of these 42 victims' claims, five claims arise from American Airlines Flight 11; fifteen arise from American Airlines Flight 77; ten arise from United Airlines Flight 175; and eight arise from United Airlines Flight 93. Four additional claims filed against American and United involve personal injuries sustained at or near the World Trade Center; the precise location where these plaintiffs sustained their injuries is unknown.

[2] Section 40120(c) provides that remedy under this part is in addition to any other remedies provided by law."

[3] Recognizing the possible effect of punitive damages on the availability of settlement funds, Plaintiffs offered to refrain from enforcing punitive damages awards until all other claims, including property damages claims, had been resolved. See Hearing Tr. at 178-79. Plaintiffs' suggestion addresses the danger that punitive damages will exhaust, Defendants' insurance coverage, but does not address Congress's concern for consistency of award, or the difficulty of administering the proposed escrow-like regime.

[4] For Massachusetts law to the same effect, see Santos v. Lumbermen's Mut. Cas. Co., 408 Mass. 70, 556 N.E.2d 983 (1990).

(Murray R. Garnick, David S. Eggert, Heather A. Pigman, Eric Suter, and Arnold & Porter, Washington, D.C.), for Defendant-Appellant Philip Morris USA Inc.

Theodore M. Grossman, Cleveland, OH (Robert H. Klonoff, Michael S. Fried, Washington, DC; Harold K. Gordon, George Kostolampros, New York, NY; and Jones Day, of counsel), for Defendant-Appellant R.J. Reynolds Tobacco Company.

(Peter A. Bellacosa and Kirkland & Ellis, LLP, New York, NY), for Defendant-Appellant Brown & Williamson Tobacco Corporation, individually and as successor by merger to The American Tobacco Company.

(Alan E. Mansfield, Stephen L. Saxl, and Greenberg Traurig, LLP, New York, NY), for Defendant-Appellant Lorillard Tobacco Company.

(Aaron H. Marks, New York, NY, Leonard A. Feiwus and Kasowitz, Benson, Torres & Friedman, LLP), for Defendant-Appellant, Liggett Group, Inc.

Elizabeth J. Cabraser, New York, N.Y. (Richard M. Heimann, Steven E. Fineman, Lieff Cabraser Heimann & Bernstein, LLP; Samuel Issacharoff, New York, NY; Perry Weitz, John M. Broaddus, Weitz & [127] Luxenberg, P.C., New York, NY; M. Frederick Pritzker, Gregory T. Arnold, Brown Rudnick Freed & Gesmer, P.C., Boston, MA; Dianne M. Nast, Roda & Nast, P.C., Lancaster, PA; Norwood Wilner, Spohrer Wilner Maxwell & Matthews, P.A., Jacksonville, FL; and Stanley M. Chesley and Waite, Schneider, Bayless & Chesley Co., Cincinnati, OH, of counsel), for Plaintiffs-Appellees.

(Kenneth S. Geller, Miriam R. Nemetz, Carl J. Summers, Mayer, Brown, Rowe & Maw, LLP, Washington, DC; and Robin S. Conrad, National Chamber Litigation Center, Inc., of counsel, Washington, DC), for Amicus Curiae Chamber of Commerce of the United States, in support of Defendants-Appellants.

(Daniel J. Popeo, Richard A. Samp, and Washington Legal Foundation, Washington, DC), for Amici Curiae Washington Legal Foundation and The National Association of Manufacturers, in support of Defendants-Appellants.

(Jeffrey R. White, Center for Constitutional Litigation, Washington, DC; Mary E. Alexander, President, The Association of Trial Lawyers of America, Washington, DC, of counsel), for Amicus Curiae The Association of Trial Lawyers of America, in support of Defendants-Appellants.

(John H. Beisner, Jonathan D. Hacker, Shannon M. Pazur, O'Melveny & Myers, LLP, Washington, DC; and Hugh F. Young, Jr., Product Liability Advisory Council, Inc., Reston, VA, of counsel), for Amicus Curiae Product Liability Advisory Council, Inc., in support of Defendants-Appellants.

(David C. Vladeck, Georgetown University Law Center, Washington, DC; and Richard A. Daynard, Northeast University Law School, Boston, MA, of counsel), for Amici Curiae American Cancer Society, American Heart Association, American Lung Association, National Center for Tobacco-Free Kids, Tobacco Control Resource Center, Center for a Tobacco Free New York, Tobacco Control Legal Consortium, and Dr. C. Everett Koop, in support of neither party.

Before OAKES, POOLER and WESLEY, Circuit Judges.

OAKES, Senior Circuit Judge.

Defendant-appellant tobacco companies appeal from the September 19, 2002, order and October 22, 2002, supplemental memorandum and order of the United States District Court for the Eastern District of New York, Jack B. Weinstein, Judge, which certified a nationwide non-opt-out class of smokers seeking only punitive damages under state law for defendants' alleged fraudulent denial and concealment of the health risks posed by cigarettes. Having granted permission to appeal pursuant to Federal Rule of Civil Procedure 23(f), we must decide whether the district court properly certified this class under Rule 23(b)(1)(B).

Defendant-appellants challenge the propriety of certifying this action as a limited fund class action pursuant to a "limited punishment" theory. The theory postulates that a constitutional limit on the total punitive damages that may be imposed for a course of fraudulent conduct effectively limits the total fund available for punitive awards.

We hold that the order certifying this punitive damages class must be vacated because there is no evidence by which the district court could ascertain the limits of either the fund or the aggregate value of punitive claims against it, such that the postulated fund could be deemed inadequate to pay all legitimate claims, and thus plaintiffs have failed to satisfy one of the presumptively necessary conditions for [128] limited fund treatment under Ortiz v. Fibreboard Corp., 527 U.S. 815, 119 S.Ct. 2295, 144 L.Ed.2d 715 (1999).

While we expressly limit our holding to the conclusion that class certification is incompatible with Ortiz, the circumstances warrant some discussion of whether the order is incompatible with the Supreme Court's intervening decision in State Farm Mutual Automobile Insurance Co. v. Campbell, 538 U.S. 408, 123 S.Ct. 1513, 155 L.Ed.2d 585 (2003). As we discuss in Part II, Section F, of this opinion, it appears that the order fails to ensure that a potential punitive award in this action would bear a sufficient nexus, and be both reasonable and proportionate, to the harm or potential harm to the plaintiff class and to the general damages to be recovered, as required by State Farm.

Based on our holding, we vacate the district court's certification order and remand for further proceedings.

I.

FACTS AND PROCEDURAL HISTORY

The district court certified the class proposed by the Third Amended Consolidated Class Action Complaint and an accompanying motion for class certification, both filed on July 26, 2002. The district court's September 19, 2002, order and the supplemental memorandum and order of October 22, 2002, are published together at In re Simon II Litigation, 211 F.R.D. 86, 96, 101 (E.D.N.Y.2002), and will be referred to collectively as the "Certification Order."

Plaintiffs sought certification to determine defendants' fraudulent course of conduct and total punitive damages liability to a class consisting of those who suffered from, or had died from, diseases caused by smoking. Plaintiffs did not seek a class-wide determination or allocation of compensatory damages or seek certification of subclasses. The certification followed extensive briefing and argument, not to mention numerous iterations of both the complaint and the proposed class.

An abbreviated history of the course of the litigation is outlined below. Additional procedural history of the cases related to this litigation appears in the district court's Certification Order. See 211 F.R.D. at 131-38.

A.

The industry conspiracy prompting this litigation is described briefly in the allegations of the Third Amended Complaint and in considerable detail in the Certification Order. See 211 F.R.D. at 114-26. We will simply excerpt a relevant portion of the district court's description of the allegations:

Plaintiffs allege, and can provide supporting evidence, that, beginning with a clandestine meeting in December 1953 at the Plaza Hotel in New York City among the presidents of Philip Morris, R.J. Reynolds, American Tobacco, Brown & Williamson, Lorillard and U.S. Tobacco, tobacco companies embarked on a systematic, half-century long scheme to ...:(a) stop competing with each other in making or developing less harmful cigarettes; (b) continue knowingly and willfully to engage in misrepresentations and deceptive acts by, among other things, denying knowledge that cigarettes caused disease and death and agreeing not to disseminate harmful information showing the destructive effects of nicotine and tobacco consumption; (c) shut down research efforts and suppress medical information that appeared to be adverse to the Tobacco Companies' position that tobacco was not harmful; (d) not compete with respect to making any claims relating to [129] the relative health-superiority of specific tobacco products; and (e) to confuse the public about, and otherwise distort, whatever accurate information about the harmful effects of their products became known despite their "[efforts to conceal such information.]"

211 F.R.D. at 114 (quoting ¶ 104 of the complaint in Blue Cross & Blue Shield of New Jersey, Inc. v. Philip Morris, Inc., 178 F.Supp.2d 198 (E.D.N.Y.2001) (alteration in original), and citing Falise v. Am. Tobacco Co., 94 F.Supp.2d 316, 329-33 (E.D.N.Y.2000), to which the Simon II Third Amended Complaint refers for description of the fraudulent conduct).

In 1999, a group of cigarette smokers filed a class action captioned Simon v. Philip Morris Inc., No. 99 CV 1988(JBW) ("Simon I"), on behalf of 20-pack-year smokers. They sought a determination of both compensatory and punitive damages for personal injury or wrongful death caused by lung cancer. Plaintiffs limited the class to 20-pack-year smokers because their medical and scientific experts had determined that, for that class, general and specific causation merged, and both could be proved class-wide without individual trials.

The Simon I class moved for certification in April 2000. Without ruling on the certification motion, the district court issued an order on April 18, 2000, consolidating Simon I and seven other tobacco-related suits pending before it "for purposes of settlement and for no other purpose." In re Tobacco Litig., 192 F.R.D. 90, 95 (E.D.N.Y.2000).^[1] Following a discussion in chambers among counsel concerning possible settlement, the district court issued an order on May 9, 2000, that raised questions for continued discussion, including whether there was a limited fund for punitive damages, given the actual and potential individual and class action punitive damages sought, and whether a final punitive award, rather than multiple repeated punitive awards, would be equitable. See In re Tobacco Litig., 193 F.R.D. 92, 93 (E.D.N.Y.2000).

On September 6, 2000, individual and representative plaintiffs in ten existing actions filed a consolidated class action complaint, In re Simon (II) Litigation, No. 00-CV-5332 (JBW) (E.D.N.Y.) (hereinafter "Simon II"), on behalf of a proposed comprehensive nationwide class^[2] seeking, pursuant to Fed.R.Civ.P. 42(a) and (b) and Fed.R.Civ.P. 21, a joint trial of the common [130] questions of law and fact determining defendants' total liability for punitive damages on all claims and theories of relief. Plaintiffs also sought declaratory judgment under Fed.R.Civ.P. 57 to determine and provide for the equitable allocation of a punitive damages award. The complaint listed six "Class Claims Supporting and/or Serving As Compensatory Predicates for Punitive Damages," namely, a claim for fraud or fraudulent concealment, a claim of civil conspiracy, a claim for unjust enrichment, restitution and disgorgement, a claim for violations of New York or other states' consumer protection laws, and two federal civil RICO claims.

On December 22, 2000, plaintiffs filed the First Amended Consolidated Class Action Complaint in Simon II^[3] and moved for class certification. The district court had denied the pending class certification motion in Simon I by order filed November 6, 2000, stating that "[e]ven though Simon I is a viable class action," denial of certification "would better preserve court resources to certify the broader Simon II class for trial." On March 15, 2001, the district court heard oral argument on the Simon II motion for certification and issued an order reserving decision and inviting the parties to make any additional submissions.

Following an April 30, 2002, status conference, plaintiffs decided to narrow Simon II to include only the three cigarette smoker class actions, Simon I, Decie, and Ebert, see supra n.2, and accordingly filed the Second Amended Consolidated Class Action Complaint on May 28, 2002, and an amended motion for class certification. In the Second Amended Complaint, plaintiffs asserted a total of seven "Class Claims": four for product liability (design defect, failure to warn, negligent design, and negligent failure to warn), one for fraudulent concealment or conduct, one for conspiracy, and another for unjust enrichment. Balancing the approaches taken in Simon I and initially in Simon II, the amended and renewed motion for class certification of May 28, 2002, sought certification on behalf of two classes: a class of 20-pack-year smokers with lung cancer to be certified for all purposes, including compensatory and punitive damages, and a broader disease-based class solely for purposes of determining class-wide punitive damages. The first was to be an opt-out class under Rule 23(b)(3) and the latter a non-opt-out punitive damages class under Rule 23(b)(1)(B). Following briefing and oral argument, the district court reserved decision and suggested class counsel revise their class proposal.

During a July 2, 2002, hearing on the certification motion, the district court expressed reservations about plaintiffs' proposal to limit a smokers' class to persons with lung cancer only or to persons with a 20-pack-year history of cigarette smoking only. The district court indicated that it was not inclined to certify a portion of the class for compensatory damages purposes, but that the majority of the class could be certified for punitive damages only.

On July 26, 2002, Plaintiffs filed the Third Amended Complaint and an accompanying amended and renewed motion for class certification, which precipitated the Certification Order at issue here. Plaintiffs sought certification of a single class of smokers suffering from various diseases which the medical community attributes to smoking, including 20-pack-year smokers [131] with lung cancer, for the sole purpose of determining defendants' total liability for punitive damages.

B.

Upon considering the class proposed by plaintiffs' Third Amended Complaint and the motion for certification, the district court certified a punitive damages non-opt-out class pursuant to Rule 23(b)(1)(B). See 211 F.R.D. at 99. The class definition included current and former smokers of defendants' cigarettes who are U.S. residents, or who resided in the U.S. at time of death, and were first diagnosed between April 9, 1993, and the date of dissemination of class notice, with one or more of the following diseases: lung cancer, laryngeal cancer, lip cancer, tongue cancer, mouth cancer, esophageal cancer, kidney cancer, pancreatic cancer, bladder cancer, ischemic heart disease, cerebrovascular heart disease, aortic aneurysm, peripheral vascular disease, emphysema, chronic bronchitis, or chronic obstructive pulmonary disease. The class excluded persons who had obtained judgment or settlement against any defendant, persons against whom defendants had obtained judgment, members of the certified class in Engle v. R.J. Reynolds Tobacco Co., No. 94-08273 CA-22, 2000 WL 33534572 (Fla.Cir.Ct. Nov.6, 2000),^[4] persons who reasonably should have realized they had the disease prior to April 9, 1993, and persons whose diagnosis or reasonable basis for knowledge predated tobacco use. See 211 F.R.D. at 99-100.

The district court determined that the class action would proceed in three stages. In the first stage, a jury would make "a class-wide determination of liability and estimated total value of national undifferentiated compensatory harm to all members of the class." Id. at 100. The sum of compensatory harm would "not be awarded but will serve as a predicate in determining non-opt-out class punitive damages." Id. The same jury would determine compensatory awards, if any, for individual class representatives, although the class itself did not seek compensatory damages. In the second stage, the same jury would determine whether defendants engaged in conduct that warrants punitive damages. Id. In the third stage, the same jury would determine the amount of punitive damages for the class and decide how to allocate damages on a disease-by-disease basis. The court would then distribute sums to the class on a pro-rata basis by disease to class members who submit appropriate proof. Any portion not distributed to class members would be "allocated by the court on a cy pres basis to treatment and research organizations working in the field of each disease on advice of experts in the fields." Id. The order specified that the [132] jury would apply New York law according to conflicts of laws principles, id., and reiterated that the court was not presented with and did not rule upon a compensatory class. Id. at 101. The district court noted that although plaintiffs chose the more limited course in pursuing a punitive class only, certification "for determination of compensatory damages to be distributed using an appropriate matrix would be possible and might be desirable in coordination with the class now certified." Id.

II.

DISCUSSION

A. Standard of Review

We review the district court's order granting class certification for abuse of discretion, a deferential standard. See Parker v. Time Warner Entm't Co., 331 F.3d 13, 18 (2d Cir.2003). "A district court `abuses' or `exceeds' the discretion accorded to it when (1) its decision rests on an error of law (such as the application of the wrong legal principle) or a clearly erroneous factual finding, or (2) its decision—though not necessarily the product of a legal error or a clearly erroneous factual finding—cannot be located within the range of permissible decisions." Zervos v. Verizon N.Y., Inc., 252 F.3d 163, 169 (2d Cir.2001) (footnotes omitted).

We note that this case raises issues of first impression insofar as this Circuit has never squarely passed on the validity of certifying a mandatory, stand-alone punitive damages class on the proposed "limited punishment" theory.^[5]

B. Prerequisites for a Class Action under Rule 23(a)

The district court found that the proposed class satisfied the Rule 23(a) requirements of numerosity, commonality, typicality, and adequacy of representation. See 211 F.R.D. at 189-90. Appellants do not contest these particular findings. Rather, they direct their arguments to the district court's conclusion that this class action could be maintained under Rule 23(b)(1)(B).

C. Standards for Maintaining a Class Action under Rule 23(b)(1)

In addition to showing that the class action prerequisites set out in Rule 23(a) have been met, a plaintiff must show that a class action is maintainable under either Rule 23(b)(1), (2) or (3). Fed.R.Civ.P. 23. [133] Rule 23(b)(1)(A) and (B) state the circumstances that would justify binding absent class members to avoid prejudice to a party adversary to the class, or to members of the proposed class, respectively:

(b) Class Actions Maintainable. An action may be maintained as a class action if the prerequisites of subdivision (a) are satisfied, and in addition:

(1) the prosecution of separate actions by or against individual members of the class would create a risk of

(A) inconsistent or varying adjudications with respect to individual members of the class which would establish incompatible standards of conduct for the party opposing the class, or

(B) adjudications with respect to individual members of the class which would as a practical matter be dispositive of the interests of the other members not parties to the adjudications or substantially impair or impede their ability to protect their interests[.]

Fed.R.Civ.P. 23(b)(1).

Plaintiffs in this case sought certification under Rule 23(b)(1)(B),^[6] for which the relevant inquiry is whether separate actions by individual members of the class create a risk that individual adjudications would as a practical matter dispose of other class members' interests in punitive damages or substantially impair or impede their ability to protect their interests.

Suits under Rule 23(b)(1) are often referred to as "mandatory" class actions because they are not subject to the Rule 23(c) provision for notice to absent class members or the opportunity for potential class members to opt out of membership as a matter of right. See Ortiz v. Fibreboard Corp., 527 U.S. 815, 833 n. 13, 119 S.Ct. 2295, 144 L.Ed.2d 715 (1999). The Advisory Committee's Note for the 1966 Amendment of Rule 23 explains that "[t]he vice of an individual action would lie in the fact that the other members of the class, thus practically concluded, would have had no representation in the lawsuit." 39 F.R.D. 69, 101 (1966). The Committee Note cites by way of illustration several suits pre-dating the amendment that had warranted class treatment, including a suit by policyholders against a fraternal benefit association to attack the financial reorganization of the society, a suit by shareholders to compel declaration of a dividend or to compel proper recognition and handling of redemption and preemption rights, and an action charging a breach of trust by an indenture trustee or fiduciary, affecting a class of security holders or beneficiaries and requiring an accounting or other measure to restore the subject of the trust. Id.

Regarding the subset of these cases involving a limited fund, the Committee's Note remarks:

In various situations an adjudication as to one or more members of the class will necessarily or probably have an adverse practical effect on the interests of other members who should therefore be represented in the lawsuit. This is plainly the case when claims are made by numerous persons against a fund insufficient to satisfy all claims. A class action by or [134] against representative members to settle the validity of the claims as a whole, or in groups, followed by separate proof of the amount of each valid claim and proportionate distribution of the fund, meets the problem.

Id.

D. Limited Fund Class Action Based on the "Limited Punishment" Theory

The district court, in certifying the punitive damages class under Rule 23(b)(1)(B), cited recent scholarship and court decisions that "have concluded that the theory of limited punishment supports a punitive damages class action." 211 F.R.D. at 184. "Under this theory," the district court stated, "the limited fund involved would be the constitutional cap on punitive damages, set forth in BMW v. Gore [517 U.S. 559, 116 S.Ct. 1589, 134 L.Ed.2d 809 (1996)] and related cases." Id.^[7]

The premise for this theory is that there is a constitutional due process limitation on the total amount of punitive damages that may be assessed against a defendant for the same offending conduct. Whether the limitation operates to prejudice the respective parties, it seems, turns on two contrary assumptions. For the potential [135] plaintiff, piecemeal individual actions or successive class actions for punitive damages would operate to his disadvantage if punitive awards in earlier-filed suits subtract from the constitutional total and thereby reduce or preclude punitive damages for future claimants. This proposition assumes that courts identify and successfully enforce the postulated total limit, and that plaintiffs have an interest in a ratable portion of the permissible damages. For defendants, piecemeal individual or successive class actions would pose a threat of excessive punishment in violation of their due process rights if successive juries assess awards that exceed the limit of what is necessary for deterrence and retribution. This proposition, to the contrary, assumes that early suits exhaust or exceed the constitutional limit and successive trial or appellate courts fail to enforce it by either reducing or barring awards. It is not clear whether the theory supposes that successive individual awards, which considered alone may be constitutionally permissible if they are reasonable and proportionate to the given plaintiff's harm and bear a sufficient nexus to that harm, may reach a point where the goals of punitive damages have been served, and successive victims of the same tortious course of conduct by the tortfeasor should be unable to recover punitive damages.

The notion of a constitutional cap on total allowable aggregate punitive damages awards, or on the number of times punitive awards can be made, has never been squarely articulated by the Supreme Court, but is said to derive from its precedents regarding punitive damages. In the Supreme Court's most recent punitive damages decision, State Farm Mutual Automobile Insurance Co. v. Campbell, 538 U.S. 408, 123 S.Ct. 1513, 155 L.Ed.2d 585 (2003), Justice Kennedy, writing for the majority, reiterated what the Court's precedents had made clear: "While States possess discretion over the imposition of punitive damages, it is well established that there are procedural and substantive constitutional limitations on these awards. The Due Process Clause of the Fourteenth Amendment prohibits the imposition of grossly excessive or arbitrary punishments on a tortfeasor." Id. at 416, 123 S.Ct. 1513 (internal citations to Cooper Indus., Inc. v. Leatherman Tool Group, Inc., 532 U.S. 424, 121 S.Ct. 1678, 149 L.Ed.2d 674 (2001), BMW v. Gore, 517 U.S. 559, 116 S.Ct. 1589, 134 L.Ed.2d 809 (1996), Honda Motor Co. v. Oberg, 512 U.S. 415, 114 S.Ct. 2331, 129 L.Ed.2d 336 (1994), TXO Prod. Corp. v. Alliance Res. Corp., 509 U.S. 443, 113 S.Ct. 2711, 125 L.Ed.2d 366 (1993), Pac. Mut. Life Ins. Co. v. Haslip, 499 U.S. 1, 111 S.Ct. 1032, 113 L.Ed.2d 1 (1991) omitted.) The Court pointed to concerns voiced in earlier cases: "To the extent an award is grossly excessive, it furthers no legitimate purpose and constitutes an arbitrary deprivation of property." State Farm, 538 U.S. at 417, 123 S.Ct. 1513 (quoting Justice O'Connor's dissent in Haslip, 499 U.S. at 42, 111 S.Ct. 1032 (1991) ("Punitive damages are a powerful weapon. Imposed wisely and with restraint, they have the potential to advance legitimate state interests. Imposed indiscriminately, however, they have a devastating potential for harm. Regrettably, common-law procedures for awarding punitive damages fall into the latter category.")).

"Punitive damages have long been a part of traditional state tort law," and Congress has provided for punitive damages in a number of statutes. Haslip, 499 U.S. at 15, 17 n. 6, 111 S.Ct. 1032 (internal quotation omitted). While compensatory damages "are intended to redress the concrete loss that the plaintiff has suffered by reason of the defendant's wrongful conduct," punitive damages, "which have been described [136] as `quasi-criminal,' operate as `private fines' intended to punish the defendant and to deter future wrongdoing." Cooper Indus., 532 U.S. at 432, 121 S.Ct. 1678 (internal citation omitted); see also BMW v. Gore, 517 U.S. at 568, 116 S.Ct. 1589 (punitive damages may further a "State's legitimate interests in punishing unlawful conduct and deterring its repetition"). In addition to serving the goals of punishment and deterrence, punitive damages have been "justified as a `bounty' that encourages private lawsuits seeking to assert legal rights." Smith v. Wade, 461 U.S. 30, 58, 103 S.Ct. 1625, 75 L.Ed.2d 632 (1982) (Rehnquist, J., dissenting); see also TVT Records v. Island Def Jam Music Group, 279 F.Supp.2d 413, 425 (S.D.N.Y. 2003) (the punitive remedy "recognizes and rewards the unique risks the victims bear and the form of public service they render in enforcing the law against major offenders who otherwise might go unpunished and undeterred").

Despite the long-recognized possibility that defendants may be subjected to large aggregate sums of punitive damages if large numbers of victims succeed in their individual punitive damages claims, see, e.g., Roginsky v. Richardson-Merrell, Inc., 378 F.2d 832, 839 (2d Cir.1967) (Friendly, J.) ("We have the gravest difficulty in perceiving how claims for punitive damages in such a multiplicity of actions throughout the nation can be so administered as to avoid overkill."), the United States Supreme Court has not addressed whether successive individual or class action punitive awards, each passing constitutional muster under the relevant precedents, could reach a level beyond which punitive damages may no longer be awarded.

E. The Traditional "Limited Fund" Class Action Under Ortiz v. Fibreboard Corp.

This brings us to appellants' chief argument—that class certification under Rule 23(b)(1)(B) is precluded by the Supreme Court's decision in Ortiz v. Fibreboard Corp., 527 U.S. 815, 119 S.Ct. 2295, 144 L.Ed.2d 715 (1999), because the proposed class plaintiffs have failed to demonstrate what the Supreme Court identified as the "presumptively necessary" conditions for certification in limited fund cases. See id. at 842, 119 S.Ct. 2295. Although Ortiz considered a set of circumstances quite unlike those in the instant case when it reviewed the certification of a Rule 23(b)(1)(B) mandatory settlement class on a limited fund theory,^[8] it identified, in the [137] historical antecedents to Rule 23, the characteristic conditions that justified binding absent class members. It summarized those characteristics as "a `fund' with a definitely ascertained limit, all of which would be distributed to satisfy all those with liquidated claims based on a common theory of liability, by an equitable, pro rata distribution." Id. at 841, 119 S.Ct. 2295. Given the presumptive necessity of these characteristics, "the burden of justification rests on the proponent of any departure from the traditional norm." Id. at 842, 119 S.Ct. 2295.

The first characteristic, a fund "with a definitely ascertained limit," usually entailed a situation where "the totals of the aggregated liquidated claims and the fund available for satisfying them, set definitely at their maximums, demonstrate the inadequacy of the fund to pay all the claims." Id. at 838, 119 S.Ct. 2295. "The concept driving this type of suit was insufficiency, which alone justified the limit on an early feast to avoid a later famine." Id. The second characteristic required that "the whole of the inadequate fund was to be devoted to the overwhelming claims." Id. at 839, 119 S.Ct. 2295. In other words, the defendant with the inadequate fund "had no opportunity to benefit himself or claimants of lower priority by holding back on the amount distributed to the class," thus ensuring that the limited fund case "did not give a defendant a better deal than seriatim litigation would have produced." Id. The third characteristic required that "the claimants identified by a common theory of recovery were treated equitably among themselves. The cases assume that the class will comprise everyone who might state a claim on a single or repeated set of facts, invoking a common theory of recovery, to be satisfied from the limited fund as the source of payment." Id.

While neither the Rule itself, nor the Advisory Notes accompanying it, purports to delineate the outer limits of the Rule's application in the particular subset of "limited fund" cases, the Supreme Court in Ortiz has read the "limited fund" case as being moored to the Rule's historical antecedents, describing the classic actions as involving, for instance, "claimants to trust assets, a bank account, insurance proceeds, company assets in a liquidation sale, proceeds of a ship sale in a maritime accident suit, and others." Id. at 834, 119 S.Ct. 2295 (quoting Herbert B. Newberg & Alba Conte, 1 Newberg on Class Actions § 4.09, at 4-33 (3d ed.1992)). In these cases, "equity required absent parties to be represented, joinder being impractical, where individual claims to be satisfied from the one asset would, as a practical matter, prejudice the rights of absent claimants against a fund inadequate to pay them all." Id. at 836, 119 S.Ct. 2295.

The Ortiz Court sounded a number of cautionary notes, expressing its extreme hesitation to apply Rule 23 in ways that would have been beyond the contemplation of the drafters of the Advisory Committee Notes. See id. at 842, 119 S.Ct. 2295 ("the Advisory Committee looked cautiously at the potential for creativity under Rule 23(b)(1)(B), at least in comparison with Rule 23(b)(3)," and was "consciously retrospective with intent to codify pre-Rule categories under Rule 23(b)(1), not forward looking as it was in anticipating innovations under Rule 23(b)(3)").

Keeping in mind that the Court has thus counseled "against leniency in recognizing mandatory limited fund actions in circumstances markedly different from the traditional paradigm," id. at 864, 119 S.Ct. 2295, we hold that the first fundamental requisite for limited fund treatment is [138] lacking here, because there was no "evidence on which the district court may ascertain the limit and the insufficiency of the fund." Id. at 849, 119 S.Ct. 2295.

The proposed fund in this case, the constitutional "cap" on punitive damages for the given class's claims, is a theoretical one, unlike any of those in the cases cited in Ortiz, where the fund was either an existing res or the total of defendants' assets available to satisfy claims. The fund here is—in essence—postulated, and for that reason it is not easily susceptible to proof, definition, or even estimation, by any precise figure. It is therefore fundamentally unlike the classic limited funds of the historical antecedents of Rule 23.

Not only is the upper limit of the proposed fund difficult to ascertain, but the record in this case does not evince a likelihood that any given number of punitive awards to individual claimants would be constitutionally excessive, either individually or in the aggregate, and thus overwhelm the available fund.^[9]

Without evidence indicating either the upper limit or the insufficiency of the posited fund, class plaintiffs cannot demonstrate that individual plaintiffs would be prejudiced if left to pursue separate actions without having their interests represented in this suit, as Rule 23(b)(1)(B) would require.

Defendant-appellants also argue that there are two ways in which the class certified fails to exhibit the third presumptively necessary characteristic of a limited fund case, namely, that "the claimants identified by a common theory of recovery were treated equitably among themselves." Ortiz, 527 U.S. at 839, 119 S.Ct. 2295. First, they argue that the class is fatally under-inclusive, and, second, they argue that the Certification Order fails to provide for equitable treatment among class members. The Ortiz Court found that these same two issues undermined the requirement of equity among class members for the settlement class in that case. See id. at 854-55, 119 S.Ct. 2295. Because we decertify the class on other grounds, we need not resolve the equity question, which would be relevant only if the class were going forward as certified.

F. Punitive Awards After State Farm Mutual Automobile Life Ins. Co. v. Campbell

While our holding in this case rests exclusively on the conclusion that certification is incompatible with Ortiz, we have an additional concern that warrants some discussion. It seems that a punitive award under the circumstances articulated in the Certification Order is likely to run afoul of the Supreme Court's admonitions in State Farm, a decision handed down several months after the Certification Order issued. See State Farm Mut. Auto. Ins. Co. v. Campbell, 538 U.S. 408, 123 S.Ct. 1513, 155 L.Ed.2d 585 (2003). In certifying a class that seeks an assessment of punitive damages prior to an actual determination and award of compensatory damages, the district court's Certification Order would fail to ensure that a jury will be able to assess an award that, in the first instance, will bear a sufficient nexus to the actual and potential harm to the plaintiff class, and that will be reasonable and proportionate to those harms.

[139] In State Farm, the Supreme Court held that the state appellate court erred in reinstating a $145 million punitive damages award that the jury had assessed for an automobile liability insurer's bad faith refusal to settle an accident claim on behalf of the Campbells, its insureds. See 538 U.S. at 429, 123 S.Ct. 1513. The Court held that the excessive punitive award violated due process where compensatory damages were $1 million and evidence of out-of-state conduct unrelated to the insureds' specific harm permitted the jury to condemn State Farm for its nationwide policies. See id. at 420, 123 S.Ct. 1513. Although the Court was considering an award in an individual, not a class, action, it noted that punishment on any basis that does not have a nexus to the specific harm suffered by the plaintiff "creates the possibility of multiple punitive damages awards for the same conduct; for in the usual case nonparties are not bound by the judgment some other plaintiff obtains." Id. at 423, 123 S.Ct. 1513. In addressing the punitive award to the Campbells, the Court stated, "we have been reluctant to identify concrete constitutional limits on the ratio between harm, or potential harm, to the plaintiff and the punitive damages award. We decline again to impose a bright-line ratio which a punitive damages award cannot exceed." Id. at 424-25, 123 S.Ct. 1513 (citation omitted). Recognizing that "there are no rigid benchmarks," the Court noted that greater ratios may be warranted "where a particularly egregious act has resulted in only a small amount of economic damages" or "where the injury is hard to detect or the monetary value of noneconomic harm might have been difficult to determine." Id. at 425, 123 S.Ct. 1513 (internal quotations omitted). "In sum," the Court concluded, "courts must ensure that the measure of punishment is both reasonable and proportionate to the amount of harm to the plaintiff and to the general damages recovered." Id. at 426, 123 S.Ct. 1513.

Furthermore, with respect to the evidence to be considered at the punitive damages stage, State Farm indicates that a jury could not consider acts of as broad a scope as the district court in this case anticipated. The Certification Order in this case provides:

This class action is intended to cover all punitive damages nationwide. This could include punitive damages due to outrageous conduct by defendants towards non-class members. The punitive function served by this certified class could be utilized in part for persons outside the class as, for example, passive breathers of the smoke exuded by others, those with diseases other than those represented by this certified class, and future diseased persons.... Allowing the jury to consider evidence of damage to others at this stage in setting the punitive award is appropriate in a nationwide class action where a portion of the harmful behavior may not be correlatable with class members.

211 F.R.D. at 186.

State Farm made clear that conduct relevant to the reprehensibility analysis must have a nexus to the specific harm suffered by the plaintiff, and that it could not be independent of or dissimilar to the conduct that harms the plaintiff. 538 U.S. at 422-23, 123 S.Ct. 1513. Harmful behavior that is not "correlatable" with class members and the harm or potential harm to them would be precluded under State Farm.

G. Defendant-Appellants' Other Arguments

Defendant-appellants also contend the Certification Order runs afoul of the Rules Enabling Act, 28 U.S.C. § 2072(b) (2000), because, on a number of counts, it alters or [140] abridges the parties' substantive rights. Defendant-appellants challenge the imposition of class-wide liability for punitive damages in the absence of individualized proof of the elements of the causes of action on which punitive damages would be predicated. They also claim that the trial plan to resolve individual compensatory claims in separate follow-on actions to the class-wide punitive damages determination would subject the facts underlying the compensatory claims to re-examination by successive juries in violation of the Seventh Amendment.

Because we have held that certification is incompatible with Ortiz, we need not address whether the district court's proposed statistical aggregation of proof, or its invocation of a "fraud-on-the-market" theory, would have been appropriate for a class-wide approximation of compensatory liability in this case, or for proof of any given element going toward actual liability in a conventional class action for compensatory and punitive damages. Our holding also disposes of any need to address the controversy surrounding the challenged follow-on actions.

Defendant-appellants also challenge the Certification Order's determination that "the single law of New York's compensatory and punitive damages will apply." 211 F.R.D. at 167. The district court did not certify the class to determine compensatory damages but, rather, called for New York law to be applied "to determine compensatory damages primarily as a predicate for punitive damages ...." 211 F.R.D. at 174. Because it is unclear what course plaintiffs may ultimately seek on remand regarding class certification, we need not address the hypothetical question of whether the district court could apply only New York law to a yet-undefined potential compensatory and/or punitive damages class.

III.

CONCLUSION

The proposed class having failed to satisfy the threshold requirements for certification set forth in Ortiz and Rule 23(b)(1)(B), we must vacate the district court's certification order and remand for further proceedings.

[1] The April 18, 2000, Order consolidated Nat'l Asbestos Workers Med. Fund v. Philip Morris, Inc., No. 98-CV-1492; Blue Cross & Blue Shield of New Jersey, Inc. v. Philip Morris, Inc., No. 98-CV-3287; Raymark Indus., Inc. v. Am. Tobacco Co., No. 98-CV-0675; H.K. Porter Co. v. Am. Tobacco Co., No. 97-CV-7658; Falise v. Am. Tobacco Co., No. 99-CV-7392; Bergeron v. Philip Morris, Inc., No. 99-CV-6142; Liggett Group Inc. v. Latham & Watkins, No. 99-CV-7529; with Simon v. Philip Morris, Inc., No. 99-CV-1988. See 192 F.R.D. 90.

[2] The actions listed and consolidated in the September 6, 2000, complaint under the caption In re Simon II Litigation included four smokers' class actions [Simon I; Decie v. Am. Tobacco Co., No. 00-CV-2340 (JBW) (E.D.N.Y.); Ebert v. Philip Morris Inc., No. 00-CV-4632 (JBW) (E.D.N.Y.); and Mason v. Am. Tobacco Co., No. 00-CV-4442 (JBW) (E.D.N.Y.)], two union health fund class actions [Nat'l Asbestos Workers Med. Fund v. Philip Morris, Inc., No. 98-CV-1492 (JBW) (E.D.N.Y.) and Bergeron v. Philip Morris, Inc., No. 99-CV-6142 (JBW) (E.D.N.Y.)], a third-party payor action [Blue Cross & Blue Shield of New Jersey, Inc. v. Philip Morris, Inc., No. 98-CV-3287 (JBW) (E.D.N.Y.)], and three actions by asbestos entities or asbestos entities' trusts [H.K. Porter Co. v. Am. Tobacco Co., No. 97-CV-7658 (JBW) (E.D.N.Y.); Raymark Indus., Inc. v. Am. Tobacco Co., No. 98-CV-0675 (JBW) (E.D.N.Y.); and Falise v. Am. Tobacco Co., No. 99-CV-7392 (JBW) (E.D.N.Y.)].

[3] The Simon II First Amended Complaint filed December 22, 2000, dropped two federal RICO claims listed in the original complaint, but retained the remaining four "Class Claims Supporting an Award of Punitive Damages." The complaint distinguished between a "Fraudulent Conduct Class" and a "Punitive Damages Class."

[4] In Engle, a class action by Florida smokers against cigarette manufacturers, a jury determined punitive damages in the aggregate for the entire class. The evidence indicated the class could comprise up to several hundred thousand people; the court found that a punitive damages award of approximately $145 billion bore a reasonable relationship to damages proved and injuries suffered, and that the award was in keeping with the degree of the wrongful conduct without "sending the defendant into bankruptcy." 2000 WL 33534572, at *31. The trial court therefore denied the defendants' motion for a new trial or, in the alternative, a remittitur, on the grounds of excessiveness of the punitive damages award. On May 31, 2003, however, the Florida District Court of Appeal reversed, with instructions to decertify the class, which could thereupon pursue individual claims, and held that the punitive award was precluded by Florida's 1997 Settlement Agreement with the tobacco companies. Liggett Group Inc. v. Engle, 853 So.2d 434 (Fla.Dist.Ct.App. 2003). The Supreme Court of Florida recently granted review, Engle v. Liggett Group, Inc., 873 So.2d 1222 (Fla.2004) (unpublished table decision), oral argument was heard on November 3, 2004, and to this date the appeal is still pending.

[5] In a brief decision in In re Diamond Shamrock Chemicals Co., 725 F.2d 858 (2d Cir. 1984), a panel of this Court denied a petition for mandamus to decertify both a Rule 23(b)(3) compensatory damages class and a Rule 23(b)(1)(B) punitive damages class certified in In re "Agent Orange" Product Liability Litigation, 100 F.R.D. 718 (E.D.N.Y.1983). Noting Judge Weinstein's justification for a punitive damages class in that case, namely that "adjudication with respect to individual members of the class ... would as a practical matter be dispositive of the interests of the other members not parties to the adjudication," we found simply that "[g]iven the large number of potential claimants, estimated by the Special Master to be over 40,000 and given the fact that punitive damages ought in theory to be distributed among the individual plaintiffs on a basis other than date of trial, the argument against his ruling does not justify issuance of a writ of mandamus." Id. at 862. The panel in In re Joint Eastern and Southern District Asbestos Litigation commented that while the denial of mandamus in In re Diamond Shamrock "does not imply approval," In re Diamond Shamrock "presented a situation much closer to the traditional concept of a limited fund than occurs whenever an entity becomes insolvent." 982 F.2d 721, 736 (2d Cir.1992) (permitting use of non-opt-out settlement class certified on theory that the inadequacy of a trust's assets, the trust being a creature of a plan of reorganization, constituted the limited fund, so long as district court designated appropriate subclasses), opinion modified on rehearing, 993 F.2d 7 (1993).

[6] Plaintiffs did not move for certification under Rule 23(b)(1)(A), although the Third Amended Complaint invokes Clause (A) and asserts that separate punitive awards "would establish incompatible standards of conduct for Defendants." Compl. at 20. We express no opinion regarding whether the circumstances here could satisfy Clause (A)'s requirements. "Courts are still struggling to develop guidelines governing the scope of Rule 23(b)(1)(A)." Herbert B. Newberg & Alba Conte, 2 Newberg on Class Actions § 4:4 (4th ed.2005).

[7] The district court referred to its discussion, earlier in the Certification Order, of BMW v. Gore, 517 U.S. 559, 116 S.Ct. 1589, 134 L.Ed.2d 809 (1996), TXO v. Alliance Resources, 509 U.S. 443, 113 S.Ct. 2711, 125 L.Ed.2d 366 (1993), Pacific Mutual Life Ins. Co. v. Haslip, 499 U.S. 1, 111 S.Ct. 1032, 113 L.Ed.2d 1 (1991), and Cooper Industries v. Leatherman Tool Group, Inc., 532 U.S. 424, 121 S.Ct. 1678, 149 L.Ed.2d 674 (2001), see 211 F.R.D. at 163-64, as well as to articles by Elizabeth J. Cabraser & Thomas M. Sobol, Equity for the Victims, Equity for the Transgressor: The Classwide Treatment of Punitive Damages Claims, 74 Tulane L.Rev.2005, 2023 (2000) (authored in part by Plaintiffs' counsel, setting forth the theory); Joan Steinman, Managing Punitive Damages: A Role for Mandatory "Limited Generosity" Classes and Anti-Suit Injunctions?, 36 Wake Forest L.Rev. 1043 (2001); John C. Coffee, Jr., The Tobacco Wars: Peace in Our Time?, N.Y.L.J., July 20, 2000, at 1 (examining limited punishment in the context of tobacco litigation); Richard A. Nagareda, Punitive Damage Class Actions and the Baseline of Tort, 36 Wake Forest L.Rev. 943, 945-46 (2001) (assuming for purposes of the article existence of implied due process limit on cumulative punitive damage awards, but suggesting mandatory class actions were not appropriate); Samuel Issacharoff, "Shocked": Mass Torts and Aggregate Asbestos Litigation After Amchem and Ortiz, 80 Tex. L.Rev.1925 (2002); and Mark A. Behrens, Some Proposals for Courts Interested in Helping Sick Claimants and Solving Serious Problems in Asbestos Litigation,54 Baylor L.Rev. 331, 352-57 (2002). 211 F.R.D. at 184-85.

The district court also discussed In re Exxon Valdez, a case in which an Alaska district court successfully certified a limited fund punitive damages class in order to prevent two separate punitive awards in the already-scheduled state and federal class action trials, but where the defendants, who faced a real risk of large punitive damages awards in the already certified compensatory claims, were the proponent of the class, invoking plaintiffs' interests under 23(b)(1)(B) as justification for certification under the limited fund theory. In re Exxon Valdez, No. A89-0095-CV (HRH), Order No. 180 Supplement at 8-9. The unpublished order is part of the record in this appeal, see Joint Appendix at 3207-19. The Alaska district court noted that the Exxon case involved "an unusual convergence of identity of occurrence, law, and fact," unlike most mass tort class actions, Joint Appendix at 3216, and that it mattered little whether the punitive damages claim was adjudicated in state or federal court; because the case sounded in admiralty, federal maritime law and any applicable Alaska state law applied in both the state and federal court actions. Id. at 3210. The 9th Circuit was later able to review the jury's punitive award of $5 billion and order that it be reduced. See In re Exxon Valdez, 270 F.3d 1215, 1246-47 (9th Cir. 2001); see also In re Exxon Valdez, 296 F.Supp.2d 1071 (D.Alaska 2004) (finding $5 billion did not violate State Farm, but reducing award to $4.5 billion to comply with remand order).

[8] Ortiz held that "applicants for contested certification on this rationale must show that the fund is limited by more than the [settlement] agreement of the parties, and has been allocated to claimants belonging within the class by a process addressing any conflicting interests of class members." Ortiz, 527 U.S. at 821, 119 S.Ct. 2295. In Ortiz, the defendant Fibreboard Corporation, a former manufacturer of products containing asbestos, negotiated a global settlement of its personal injury liability with its insurance providers and plaintiffs' counsel. When one insurer conditioned its participation in any settlement on a guarantee of "total peace" that ensured against unknown future liabilities, "talks focused on the feasibility of a mandatory class action, one binding all potential plaintiffs and giving none of them any choice to opt out ...." Id. at 824, 119 S.Ct. 2295. Presented with the difficulty of settling both pending and potential future claims, the parties agreed to segregate and settle an inventory of pending claims. Id. The parties struck a global settlement agreement to set aside $1.535 billion. Pursuant to the settlement agreement, a group of plaintiffs filed an action seeking certification for settlement purposes of a mandatory class comprising three groups of plaintiffs: personal injury claimants who had not yet brought suit or settled, potential future claimants who had dismissed their claims but retained their right to sue, and past, present and future relatives of exposed class members. The class excluded claimants with pending suits and claimants who had settled and retained only limited rights to future claims. Id. at 825-27, 119 S.Ct. 2295.

[9] We are not here presented with what might be a closer question—that is, if a standard class action had resulted in a verdict for compensatory damages for the class in one stage of a trial, and the mandatory class proponent wished to bind absent class members to any determination of a punitive award in a subsequent stage, because the given number of outstanding individual claims and the anticipated punitive award could demonstrably result in an unconstitutionally large punitive award.

[999] [1000] [1001] Andrew L. Frey (argued), Mayer, Brown, Rowe & Maw, New York, NY, Evan M. Tager and Miriam R. Nemetz (briefed), Mayer, Brown, Rowe & Maw, Washington, DC, and W. Chris Wicker (briefed), Woodburn & Wedge, Reno, NV, for the appellant.

Shanin Specter (argued), Kline & Specter, P.C., Philadelphia, PA, Don Nomura, Laxalt & Nomura, LTD., Reno, NV, for the appellees.

Before WOOD^[1], KLEINFELD, and GRABER, Circuit Judges.

Opinion by Judge Kleinfeld; Partial Concurrence and Partial Dissent by Judge Graber.

OPINION

KLEINFELD, Circuit Judge:

This decision addresses several issues, the most important of which relate to punitive damages.^[2]

[1002] Facts

This case went to jury trial, but on the critical factual points, there is not much dispute. Where there is, the facts are of course taken favorably to the verdict.^[3]

On October 9, 1994, Jimmie White parked his company's 1993 Ford F-350 pickup truck in his driveway. The driveway is sloped, not level, and the truck was parked on the slope pointing downhill. Mr. White testified that he put the truck into first gear, set the parking brake by stepping on the brake pedal, and went inside. He did not lock the truck.

The Whites' three-year-old son Walter was playing outside, with Mrs. White checking on him through the window from time to time. While she wasn't watching, Walter got into his father's pickup truck. The Whites' theory of the case was that Walter pulled or kicked it out of first gear into neutral. The gearshift lever is a long stalk sticking up from the floor. A piggy bank turned up under the seat after the accident, so Walter may have been clambering after his lost piggy bank. The parking brake didn't hold the truck after it was shifted from first to neutral, and it started rolling. Walter got out the passenger door, possibly falling out when the truck rolled over a bump. Tragically, the rear dual wheels of the truck rolled over the little boy's chest and killed him.

The Whites brought this products defect case against Ford and against Orscheln Company, which made the parking brake for Ford. The Whites alleged strict product liability (defective design), negligence, failure to warn, intentional misrepresentation, and negligent infliction of emotional distress. Orscheln settled during the trial. The jury came back with a verdict against Ford for $2,305,435 in compensatory damages and $150,884,400 in punitive damages. The district court remitted the punitive damages to $69,163,037.10.

The plaintiffs' theory of the case was that the parking brake let go despite being set, and let the truck roll. Ford knew the parking brake was prone to failure, but kept selling it without recalling it and without warning consumers of the danger. Mr. White testified that if he had been informed that Ford had a problem with the parking brake sometimes letting go, he wouldn't have parked his truck on a slope, and if he'd been advised of a recall, he would have brought the truck in immediately to be fixed.

Ford offered alternative theories of how the accident could have occurred. One was that Mr. White had put the car in first gear but not pressed the parking brake down, and the little boy pulled the gear shift into neutral. If this is how the accident occurred, then the theory on which the Whites recovered damages, that the parking brake sometimes allowed trucks to roll despite being engaged and that Ford should have warned its customers, would be irrelevant to this accident. But taking the evidence most favorably to the plaintiff, we assume that the jury believed Mr. White's recollection that he had engaged the parking brake. Mr. White's account was bolstered by testimony that the boy couldn't have pulled the truck out of first gear into neutral, had the parking brake not been engaged, because when it was on a slope the force needed to pull it out of first was considerable.

Parking brakes work with a cable pulled by the pedal, a ratchet wheel, and a pawl. A pawl is a hinged or pivoted finger that [1003] sticks into a tooth of the ratchet wheel. Parking brakes tend to get loose over time, because the cable stretches. In the early nineties, Orscheln designed a parking brake for Ford that was self-adjusting, so that even as the truck aged, the parking brake would still stay tight. Ford started production in 1991 of model year 1992 F-series pickup trucks with the Orscheln self-tightening parking brake.

By 1990, Ford had pre-production reports of potential problems with the parking brake being designed for the 1992 F-series trucks. By the time the F-series trucks were in production, the reports had increased, from many different sources. Sometimes, customers reported, the parking brake pressed freely right down to the floor without engaging. Ford called this the "skip-through-on-apply" or "skip out" problem. Also, some customers reported that their trucks rolled despite the parking brake being engaged. Ford called this the "rollaway" problem.

Ford told Orscheln to figure out what was going wrong and fix it, and threatened to change suppliers if Orscheln couldn't fix it. Orscheln had a great deal of difficulty getting any parking brakes to fail in laboratory conditions, unless they subjected the brake to extraordinary abuse. In fact, Orscheln and Ford at first believed that the brake could not fail unless subjected to severe abuse. The evidence allowed for the conclusion that the reason why they couldn't easily replicate the failure was because it was a rare event or, alternatively, because it happened only with severe abuse. Of the roughly 785,000 1992 and 1993 F-series trucks with this brake, there were only 73 reports of skip-throughs or rollaways between 1992 and 1993, affecting about one truck in ten thousand.

In 1992, Ford established its own engineering group headed by a somewhat junior design engineer, Timothy Rakowicz, to try to figure out the problem. Following Orscheln's tests, by November 1992, Ford and Orscheln had narrowed in on the problem. Sometimes the tip of the pawl would slip over the tops of the teeth instead of engaging in one of the gaps between the teeth of the ratchet wheel. In April 1993, Mr. Rakowicz wrote a draft report saying that a "tip-on-tip" condition could cause disengagement of the parking brake and that this problem rendered the brakes "defective." Mr. Rakowicz wrote that this phenomenon could cause vehicles parked on an incline to roll down a hill, and that it warranted a field campaign and owner notification. But more senior engineers at Ford disagreed with the draft and required Mr. Rakowicz to tone it down, saying instead that the Orscheln test was not valid. Meanwhile, the evidence of problems with F-series brakes piled up, and by March 1993, the National Highway Traffic Safety Administration had become involved in the investigation, having received reports of rollaways.

By May of 1993, Orscheln had developed a fix. All it took was a plastic wedge over the pawl, to make sure it pressed down between the teeth instead of skipping over them. By August 1993, enough of the plastic wedges were manufactured so that Ford could install them in all the trucks on the road. Of course, if all the trucks on the road were modified with the wedge, it would also take the expense of notifying all the customers and paying for the shop labor to disassemble the truck enough to put in the fifteen cent plastic wedge. In addition to the expense, there were other reasons not to recall all the trucks and put in the wedge. The fix eliminated the self-adjusting feature of the parking brakes. Thus, with the fix installed, the skipovers and rollaways from this cause would be eliminated, but as the trucks aged, the parking brakes would get loose. Also, the [1004] Orscheln engineers thought the "skip out" was more an inconvenience than a safety problem, because the user would feel the brake going to the floor with no resistance instead of engaging, and had only to release it and press it down again to get it to engage.

For these reasons, instead of recalling the pickup trucks, Ford issued a Technical Service Bulletin to dealers, in November 1993. The bulletin told dealers to install the wedges if customers complained. Meanwhile, though, reports of rollaways were continuing to accumulate, and the National Highway Transportation Office of Defect Investigation was pressuring Ford to recall the trucks. These problems were reported in only a tiny percentage of trucks sold, about one in ten thousand. But still, big pickup trucks rolling downhill without drivers are dangerous, even if only one of these had so far actually involved an injury.

The White truck rolled down the driveway and killed Walter White in October 1994. It had been purchased in September 1993. By then Ford had already figured out that there was a potential rollaway problem. At the end of August 1994, which was before the White accident, Ford decided to recall the pickup trucks to install the plastic wedges. But by the time the recall notice was formulated and mailed out to dealers, it was November, after the White accident. Thus the accident happened after the brake problem was discovered and figured out, after the technical bulletin to dealers had gone out, and after Ford had decided to recall the trucks to install the fix, but before the recall notices or any warnings to ultimate consumers were sent out.

In response to a form entitled "Special Verdict," the jury found that the brakes had a defective design but found that this defect was not a proximate cause of Walter White's death. The jury also found that the brakes were defective on account of Ford's failure to warn and that this defect was a proximate cause of Walter White's death.

Analysis

1. Inconsistent verdicts

Ford's first argument is that the verdicts are inconsistent and, accordingly, require judgment for Ford as a matter of law. Here are the relevant verdicts, preceding the damages awards:

SPECIAL VERDICT

We, the jury in the above-entitled action, find as follows on particular questions of fact:

1. Was the product in question defective in design?

Answer: Yes X No ____

If you answered "no" to Question 1, do not answer Question 2. If you answered "yes" to question[sic] 1, answer the next question.

2. Was this defect a proximate cause of the death of Walter White?

Answer: Yes ____ No X

3. Was the product in question defective for defendant Ford's failure to warn?

Answer: Yes X No ____

If you answered "no" to Question 3, do not answer Question 4. If you answered "yes" to Question 2[sic], answer the next question.

4. Was the defect for failure to warn a proximate cause of the death of Walter White?

Answer: Yes X No ____

5. Was defendant Ford negligent with respect to the product in question?

[1005] Answer: Yes X No ____

If you answered "no" to Question 5, do not answer Question 6. If you answered "yes" to Question 5, answer the next question.

6. Was Ford's negligence a proximate cause of the death of Walter White?

Answer: Yes X No ____

....

10. Is Ford liable to plaintiffs' [sic] Jimmy [sic] and Ginny White for negligent infliction of emotional distress?

Answer: Yes X No ____

11. Is Ford liable to plaintiffs' [sic] Jimmy [sic] and Ginny White for intentional misrepresentation?

Answer: Yes X No ____

Ford's theory is that once the jury found that the product defect did not proximately cause the death, the verdict had to be for no liability. As Ford reads this verdict, "the jury accepted plaintiffs' contention that the parking brake had a dangerous tendency to disengage spontaneously, but concluded that it did not spontaneously disengage on this occasion."^[4] If that is what the verdict necessarily means, then Ford is correct. A plaintiff cannot recover damages for injuries occasioned by the use of a defective product, where the product worked fine in his use and his injury was caused by something else.

The Whites argue that Ford waived its objection to inconsistency of the verdicts, because it did not object before the jury was discharged. Whether failure to object before discharge of the jury constituted waiver raises a potentially complicated issue under Federal Rule of Civil Procedure 49(b) and our decisions in Los Angeles Nut House v. Holiday Hardware Corp.^[5] and Home Indemnity Co. v. Lane Powell Moss & Miller.^[6] But we need not resolve the waiver issue because, assuming for purposes of discussion that Ford did not waive inconsistency, there was none.

As we explained in Floyd v. Laws,^[7] "a court has a duty under the seventh amendment to harmonize" a jury's "seemingly inconsistent answers" if a fair reading allows for it.^[8] In Los Angeles Nut House, we held that "the jury verdict must be upheld unless it is impossible to harmonize the answers under a fair reading," though we will not save the general verdict if that would "require us to torture a fair reading."^[9] In an inconsistent verdict case, a court asks, not whether the verdict necessarily makes sense under any reading, but whether it can be read in light of the evidence to make sense.

In this case, Ford's reading is plausible: the brakes were defective, but they didn't fail here, and the jury was punishing Ford for making defective brakes and selling them to the general public even though the defect didn't cause this accident. But that isn't the only plausible reading. After reading the record, we agree with the district court that, as the case was presented to the jury, there was an alternative plausible understanding that makes sense of the verdicts.

The jury reasonably could have thought that this particular parking brake was defective and did let go, allowing the truck to [1006] run over Walter White. But the jury could nevertheless have concluded that the brake design defect wasn't the "proximate" cause of the death. The brake had been designed years before the accident, with many intervening events. The judge instructed the jury that "[f]or proximate causation to be established, you must find that the injury or damage to plaintiffs was the natural and probable consequence of the defendant's negligence or wrongful act, and that the injury or damage was foreseeable in light of the attending circumstances." The jury could have reasoned that the accident wasn't the "natural and probable consequence" of the brake design defect, because the natural consequence of a manufacturer's discovering a dangerous design defect would be to warn the customers and recall the product for a fix, rather than to leave the dangerous trucks on the street and leave the drivers ignorant of the hazard. Mr. White testified that, had he known that the brake could let go despite being set, he wouldn't have parked the truck on a slope.

That is approximately how the district court, having heard all the evidence, reconciled the verdicts. On our review of the evidence and arguments, it makes sense of the verdicts to us. There is no irreconcilable conflict.

2. Evidentiary issues

Ford argues that reversal is necessary because the district court erroneously admitted certain expert testimony and evidence of prior incidents. We review a district court's evidentiary rulings during trial, including its rulings on the admissibility of expert testimony, for abuse of discretion,^[10] and we reverse only where "such nonconstitutional error more likely than not affected the verdict."^[11]

a. Testimony of Dr. Campbell Laird

The Whites called Campbell Laird, Ph.D., as an expert witness. Dr. Laird's training and experience, mostly academic but including five years working for Ford Motor Company, was as a metallurgist. He was a professor of material science and engineering. He testified that that meant he taught about how steel is made and molded into useful shapes, how big a rail had to be to carry the weight of a railroad and how long it would last, the crystal structure of materials, and how materials break when stressed. The great majority of his many publications dealt with how materials break.

Dr. Laird was not an accident reconstruction expert. Nor did he have any training or experience to which he testified in designing or manufacturing products. He had never looked at a brake assembly before examining the Ford parking brake in this case and another related case. He did not do any experiments with the brake parts in this case. Although he examined them, he relied largely on the Orscheln tests and the Orscheln and Ford engineering departments' memoranda rather than on results of his own tests.

Dr. Laird examined the pawl and ratchet wheel of the Whites' truck's brake using a scanning electron microscope. He observed wear patterns indicating repeated tip-on-tip engagement. That meant that this particular brake had been repeatedly subject to the problem that Ford and Orscheln had discovered, of the pawl sticking [1007] on the tip of a tooth instead of settling fully into the gap between teeth of the ratchet wheel. Ford does not dispute that this evidence was admissible.

Ford appeals admission over objection of two other opinions to which Dr. Laird was allowed to testify. He testified that the tip-on-tip engagement could produce spontaneous disengagement of the parking brake if the truck was "subject to perturbation," a fancy way of saying that the brake could let go if someone slammed the door or shook the truck. Second, he testified that such spontaneous disengagement of the parking brake occurred in this case, causing the rollaway that killed the Whites' child.

In considering Daubert v. Merrell Dow Pharmaceuticals, Inc.,^[12] the district court concluded that under our decision in McKendall v. Crown Control Corp.^[13] the Daubert factors for "gatekeeping" could not be applied to mechanical engineers. We had held in McKendall that the Daubert factors "are relevant only to testimony bearing on `scientific' knowledge" and did not apply to an expert testifying on how a product ought to have been designed.<sup>[14]</sup> Our attempt so to limit Daubert was rejected by Kumho Tire Co., Ltd. v. Carmichael.<sup>[15]</sup> The Supreme Court there held that Federal Rule of Evidence 702 "makes no relevant distinction between `scientific' knowledge and `technical' or `other specialized' knowledge."^[16] We recognized in United States v. Hankey^[17] that McKendall was overruled to the extent that it held that Daubert did not apply to "non-scientific" testimony.^[18] Thus Daubert and Kumho Tire did indeed require that the judge apply his gatekeeping role under Daubert to all forms of expert testimony, not just scientific testimony.^[19] The Rule 702 inquiry under Daubert, however, "is a flexible one,"^[20] and the "factors identified in Daubert may or may not be pertinent in assessing reliability, depending on the nature of the issue, the expert's particular expertise, and the subject of his testimony."^[21] We are required to apply an abuse of discretion standard to review of a district court's decision, "as much to the trial court's decisions about how to determine reliability as to its ultimate conclusion."^[22]

The trial judge thought the two opinions to which exception is taken on appeal were admissible under Rule 702. As to the first opinion, that the tip-on-tip engagement could produce spontaneous disengagement of the parking brake if the truck was "subject to perturbation," the judge was within his discretion. Although Dr. Laird had not done any of the experiments himself, his training would make him competent to read the Orscheln and [1008] Ford reports, and those reports supported the opinion he gave.^[23] It's hard to see how he was saying any more in this opinion than the Orscheln and Ford experimental results had said, which would make any error in admitting his opinion harmless.^[24] The trial judge was also within his discretion in determining that such scientific bolstering as published articles in reference journals was not required, because there is no reason to suppose that this detail of parking brake manufacture was of general interest to the scientific community and would generate a peer-reviewed literature.^[25]

The second opinion to which exception is taken is a close question. Dr. Laird testified that such spontaneous disengagement of the parking brake occurred in this case, causing the rollaway that killed the Whites' child. The foundation for this opinion was skimpy. Dr. Laird, well within his metallurgical expertise, identified wear on the ratchet wheel of the brake that showed repeated tip-on-tip engagement rather than the proper engagement. That justified the inference that even though the tip-on-tip engagement might be a one in ten thousand phenomenon as applied to all the Ford pickup trucks, it had indeed happened on this particular truck.

The way Dr. Laird got from the metal wear, showing repeated tip-on-tip engagement, to his opinion on how the accident occurred, did not rely on his metallurgy expertise at all. He just relied on simple logic. He assumed, for purposes of his opinion, that Mr. White had parked on the sloping driveway, engaged the brake, and put the truck in first gear. Mr. White's testimony provided a basis for those assumptions. Dr. Laird testified, based on Mr. White's deposition testimony and an Orscheln engineer's reports, that the brake must have been engaged, because otherwise the little boy could not have moved the shifter from first gear to neutral. The brake must have let go after the car was shifted into neutral, because otherwise the truck would not have rolled. And the boy was probably too small to have disengaged the parking brake.

This opinion took advantage of Dr. Laird's expertise in metallurgy only for his knowledge that the particular brake had repeatedly engaged in the tip-on-tip position from which spontaneous disengagement could occur. Beyond that, Dr. Laird established no more foundation than anyone trained in any kind of engineering, or even a lay person not trained in engineering, would have to venture the opinion.

If Mr. White's testimony was correct, and we must assume that the jury so found, the truck did roll, despite being parked in first gear with the parking brake on. Dr. Laird did apply his metallurgical expertise and scientific procedures (electron microscopy) to which no objection is made on appeal, to determine that this brake had repeatedly been subject to the tip-on-tip phenomenon that, Ford and Orscheln had determined, could lead to spontaneous disengagement and a rollaway if the truck was disturbed. For the part of Dr. Laird's opinion not requiring special training or experience, arguably the district court had discretion to admit the opinion under Federal Rule of Evidence 701. The question is close. A layman, which is what an expert witness is when testifying outside his area of expertise, [1009] ought not to be anointed with ersatz authority as a court-approved expert witness for what is essentially a lay opinion. We need not decide whether the district court abused its discretion in allowing the opinion into evidence in this case, because we reverse on other grounds.^[26]

b. Evidence of prior rollaways

Ford argues that the district court abused its discretion in admitting evidence of other rollaways. The court allowed another Ford pickup truck owner, Tammy Bobb, to testify by deposition that her truck had rolled despite the parking brake's being set, and allowed Dr. Laird to testify about the Bobb rollaway. The court also allowed the Whites to put an exhibit into evidence showing that Ford had received a number of customer complaints of rollaways. Ford's contention is that insufficient foundation to show substantial similarity was established and that the customer reports were hearsay.

A "showing of substantial similarity is required when a plaintiff attempts to introduce evidence of other accidents as direct proof of negligence, a design defect, or notice of the defect."^[27] Minor or immaterial dissimilarity does not prevent admissibility.^[28] We review a district court's decision to allow such evidence for abuse of discretion.^[29]

Ford's theory of dissimilarity for the Bobb rollaway is that it was caused by a manufacturing defect, not the design defect at issue in this case. But the testimony about that was somewhat ambiguous. Dr. Laird testified that the spring that helps the pawl engage properly between the teeth was not up to specifications on the Bobb brake, but he also said that the design defect was the same and that he attributed the rollaway to the design defect. The district court was within its discretion in concluding that there was sufficient similarity to allow the evidence of the Bobb rollaway to go to the jury.

As for the customer reports, they were clearly admissible under the business records exception to the hearsay rule to show that Ford had notice of rollaways,^[30] and the district court redacted reports of dissimilar rollaways and post-White accident rollaways. Ford argues that it was error to admit the reports for the truth of the matter asserted, because even if they were not hearsay for purposes of proving that Ford had received them, they were hearsay for purposes of proving what the customers reported about rollaways. We need not resolve whether this was error, because it was harmless.^[31] Other evidence of rollaways such as government reports and Orscheln's experiments came in, and it is highly unlikely that the customer reports affected whether the jury believed that the tip-on-tip problem could and did cause rollaways.

3. Sufficiency of evidence for punitive damages

Ford argues that it was entitled to judgment as a matter of law on [1010] punitive damages, because the evidence was insufficient to support an award. The district court ruled that "[t]here was sufficient evidence for a reasonable jury to find that the cure for the brake problem was known and in Ford's hands before the White vehicle was sold, and that Ford did not apply it." Ford argues that this was "utterly at odds with the evidence." We review de novo the district court's denial of a Rule 50(b) renewed motion for judgment as a matter of law.^[32] The test is whether "the evidence, construed in the light most favorable to the nonmoving party, permits only one reasonable conclusion, and that conclusion is contrary to that of the jury."^[33]

Ford argues that the evidence showed that it investigated the rollaway reports carefully and promptly turned the matter over to the brake manufacturer for investigation and remedy, but that the engineers disagreed on whether there was anything wrong with the design. Out of 884,000 vehicles using the brake, only three injuries occurred. There was evidence to support that view, and the jury could have so concluded. But it apparently didn't. There was also evidence from which the jury could conclude that Ford knew the parking brake could engage in the tip-on-tip position and let a pickup truck roll away, didn't fix it, didn't recall it, and didn't warn drivers of the trucks, all prior to the White accident.

Ford concedes that the applicable legal standard is that the Whites had to prove by clear and convincing evidence that Ford acted with conscious disregard for the rights or safety of others. There are alternative and additional grounds for punitive damages under the Nevada statute, but we need not consider them, because the evidence was sufficient under the standard Ford concedes was applicable.

Although it certainly could have concluded otherwise, the jury could permissibly conclude that Ford knew a parking brake tip-on-tip engagement could result in a rollaway, and failed to warn people driving pickup trucks about the brake in conscious disregard of their safety (that is, knowing that someone could be injured or killed and deliberately failing to warn). The jury could have accepted Ford's case, that the engineers were hard at work trying to replicate and cure the problem, but they could also have accepted the plaintiffs' case, essentially that when the engineers had figured out the problem and the fix for it, Ford covered it up with a euphemistic notice to dealers, rather than consumers, instead of a plain warning and immediate recall. The jury could have accepted Ford's claims that "skip-through," where a person pressed the parking brake with his foot and felt no resistance, and rollaway, where the parking brake seemed to engage but didn't prevent the truck from rolling away, were two different things. It could also have accepted the evidence that they were both the same thing, failure of the pawl to drop properly between the teeth of the ratchet wheel. As for the small number of injuries, the jury could have concluded that it was so unlikely that an accident would occur that Ford should not be punished for it. Or it could accept the plaintiffs' case, that once Ford knew that pickup trucks could be rolling down hills without drivers behind the wheel, it was obvious that someone was likely to be killed if Ford didn't do something about it.

[1011] The part of Ford's argument that gives us the most hesitancy is its citation to the Nevada authorities. The Nevada Supreme Court decision in Maduike v. Agency Rent-A-Car^[34] affirmed the dismissal of a punitive damages claim. In Maduike, a young family driving a rental car on vacation reported a brake problem to the rental agency, but the agency refused to fix it, leaving the family stranded unless they drove the car home. They tried to do so and had an accident. The decision affirmed on the ground that no jury could have found that the car rental agency "subjected the Maduikes to `cruel and unjust hardship with conscious disregard of the rights of the person.'"^[35] Ford correctly says that the uncontradicted evidence showed that it exercised more care for the safety of its customers than did the car rental agency in Maduike.

Since Maduike, the Nevada Supreme Court has recognized in Evans v. Dean Witter Reynolds, Inc.,^[36] that "Nevada law requires clear and convincing evidence of malice before punitive damages may be recovered."^[37] The term "malice" is a specially defined term of art in Nevada law, and means something less than the ordinary definition, "a desire to harm others or to see others suffer."^[38] A Nevada statute broadens malice to include "implied" malice, which covers not only "conduct which is intended to injure a person" but also "despicable conduct which is engaged in with a conscious disregard of the rights or safety of others."^[39] The Nevada statute defines "conscious disregard" as "knowledge of the probable harmful consequences of a wrongful act and a willful and deliberate failure to act to avoid those consequences."^[40]

The Nevada Supreme Court, before Maduike, had upheld punitive damages in Granite Construction Co. v. Rhyne,^[41] and Maduike does not cite or purport to overrule Granite Construction. In Granite Construction, a woman hit a bull on the interstate highway and sued a construction company that was supposed to have built a fence to keep livestock off the highway. The jury could have concluded that the construction company decided not to build the fence, despite its contractual obligation to the state to do so, in order to save time and money. The jury could also have concluded that the state had waived the fence requirement because no livestock were thought to be in the area and it wanted to avoid delay, and when the single bull was discovered, the construction company reasonably tried to find the owner and have him remove the bull. Taking the evidence most favorably to the verdict, however, the Nevada Supreme Court upheld the punitive damages on the ground that the construction company "consciously and deliberately disregarded known safety procedures" and was "guilty of malice, express or implied."^[42]

We held in Coughlin v. Tailhook Association^[43] that, under Granite Construction, [1012] punitive damages were permissibly awarded against a hotel for failing to do anything about a rowdy party in which a woman was "attacked, groped, grabbed, and handled by a throng of men."^[44] We held in Coughlin that the 1995 statutory amendment to the Nevada punitive damages statute "indicates that Granite's definition of `malice, express or implied,' was correct,"<sup>[45]</sup> and punitive damages could be awarded on the theory that "a `conscious disregard for the safety of others' amount[s] to implied malice."^[46]

The Nevada Supreme Court has not stated the principle of law that reconciles the Nevada authorities. After Maduike, the Nevada Supreme Court in Dow Chemical Co. v. Mahlum^[47] vacated an award of punitive damages following its reversal of intentional tort claims against the defendant.^[48] The Court's opinions in Maduike and Dow Chemical do not cite or discuss Granite Construction.

We are bound by our interpretation of Nevada law in Coughlin. The interpretation we adopted there, that "a `conscious disregard for the safety of others' amount[s] to implied malice,"^[49] allows for the punitive damages in this case, taking the evidence most favorably to the prevailing party. The White jury was asked "[d]o you find by clear and convincing evidence that Ford acted with oppression or malice in the conduct upon which you base your finding of liability for the death of Walter White?" and the jury answered "Yes." In addition to the jury's determination that Ford was liable on the basis of defective design, negligence, failure to warn, and negligent infliction of emotional distress, punitive damages are bolstered by the jury's special verdict finding of "intentional misrepresentation," which is an intentional tort and would both fall within Evans^[50] and survive the Nevada Supreme Court's rejection of punitive damages in Dow Chemical.^[51]

4. Excessiveness of punitive damage award and extraterritoriality

Ford argues that errors in instructions require a new trial. We review a district court's formulation of jury instructions in a civil case for abuse of discretion.^[52] Jury instructions must fairly and adequately cover the issues presented, must correctly state the law, and must not be misleading.^[53] Prejudicial error results from jury instructions that, when viewed as a whole, fail to fairly and correctly cover the substance of the applicable law.^[54]

The judge gave a Nevada pattern jury instruction to guide the jury's judgment on the amount of punitive damages, telling [1013] the jury only to act "without passion or prejudice" and to consider reprehensibility and deterrence. The instruction said:

Members of the jury, you've now heard the evidence of the financial condition of the defendant Ford Motor Company. Because you have answered yes to special verdict question number fifteen, you may, in your discretion, award punitive or exemplary damages against defendant Ford for sake of example and by way of punishment. Your discretion should be exercised without passion or prejudice. In arriving at any award of punitive damages, you are to consider the following: [o]ne, the reprehensibility of the conduct of the defendant; two, the amount of punitive damages which will have a deterrent effect on the defendant in light of defendant's financial condition. That's the complete jury instruction on punitive damages, and you'll have this instruction with you in the jury room.

Ford requested an instruction on extraterritoriality. It would have barred the jury from punishing Ford for impact other than on Nevadans:

In determining the amount of punitive damages, if any, that is necessary for punishment and deterrence, you may consider only Defendant's wrongful conduct that has had an impact on the citizens of Nevada. You may not award any punitive damages for the purpose of punishing Defendant relative to the sale of vehicles in other States, or for the purpose of punishing or deterring Defendant's conduct outside the State of Nevada.

The district court refused to give this instruction, any part of this instruction, or anything equivalent.

Ford's argument for its "only Defendant's wrongful conduct that has had an impact on the citizens of Nevada" instruction was based on the federalism discussion in BMW of North America, Inc. v. Gore.^[55] The Court held in BMW that "the federal excessiveness inquiry appropriately begins with an identification of the states' interests that a punitive award is designed to serve."^[56] BMW involved deceptive trade practices and failure to disclose pre-sale repairs that affected the value of a new car. The Court noted that "the States need not, and in fact do not, provide such protection in a uniform manner."^[57] In addition to noting the diverse ways states had actually protected consumers from such deception, the Court noted such hypothetical policy choices that a state might make, such as "plausibly conclud[ing] that the administrative costs associated with full disclosure would have the effect of raising car prices to the State's residents."^[58]

The Court in BMW imposed a territorial limitation on punitive damages in the interest of federalism. This federalism includes the flexibility for a state to have whatever policy it chooses, subject to constitutional and congressional limits. For that flexibility to exist, no state can be permitted to impose its policies on other states. Because no single state could "impose its own policy choice on neighboring [1014] States," the Court held that "a State may not impose economic sanctions on violators of its laws with the intent of changing the tortfeasors' lawful conduct in other States."^[59] Alabama, the Court held, "does not have the power ... to punish [a defendant] for conduct that was lawful where it occurred and that had no impact on [the punishing state] or its residents," nor may it "impose sanctions on [a defendant] in order to deter conduct that is lawful in other jurisdictions."^[60] Evidence of extraterritorial conduct, such as sales in other states, "may be relevant to the determination of the degree of reprehensibility of the defendant's conduct,"^[61] but admissibility of evidence of reprehensibility does not, under BMW, go the extra and substantial step of entitling a state to award enough money to deter conduct (or at least lawful conduct) in other states.^[62]

The question whether a state can impose punitive damages sufficient to punish unlawful (as opposed to lawful) conduct in other states was left open by BMW. The Court noted in BMW that because "the verdict was based in part on out-of-state conduct that was lawful where it occurred, we need not consider whether one State may properly attempt to change a tortfeasor's unlawful conduct in another state."^[63] We avoided the need to consider this question in Neibel v. Trans World Assurance Co.,^[64] a RICO case involving fraudulent sale of insurance and sham tax shelters. Compensatory damages were $259,366, and we held that the $500,000 in punitive damages was "supported by [California's] interest in protecting its own consumers and its own economy" and that, considering the evidence and the amount, "it [was] clear that only California interests [were] involved."^[65]

[1015] That means of avoiding the question is unavailable in this case. The evidence focused on the number of vehicles Ford sold nationally, and the number of parking brake failures reported nationally. The national evidence was not limited by any jury instructions or admonitions to limit its relevance to reprehensibility. The jury was permitted, despite Ford's request for instructions to cure this error, to award damages to vindicate the interests of all Ford pickup truck buyers everywhere. In essence, the jury was asked to measure damages by Ford's harm to the whole country.

Plaintiffs' closing argument sought damages that would punish Ford for its conduct toward consumers in all states, not just Nevada. Plaintiffs' attorney emphasized that "there are 884,000 people in this country who have these vehicles that got a letter that didn't tell them the truth as to why these vehicles were being recalled" and "your verdict for punitive damages must be loud enough so that it is on the front page of every newspaper tomorrow morning, so every person in this country knows, if they have that vehicle, they can take it into the shop and get it fixed."^[66] Plaintiffs' attorneys told the jury that Ford knew its actions would cause deaths of children "across the country." Plaintiffs' attorney repeated the "across the country" phrase several times, using a repetitive mantra for emphasis, in his "send them a message" argument. The emotional argument wound up with plaintiffs' attorney's statement that he had prosecuted criminals in the district attorney's office for twenty years, and "[his] work hasn't changed so much after all." Nothing in the argument addressed how many trucks were sold in Nevada, and our attention has not been directed to any evidence about how many trucks were sold in Nevada. The entire thrust of the argument was that this Nevada jury now should vindicate the interests of all Ford truck owners everywhere with a verdict that would make the front page of every newspaper in the country, so that the chief executive officer and other top officers of Ford Motor Company would "pour[ ] out of their chairs like water and crumple[ ] on the floor." With this evidence and argument, and the denial of the instruction, we cannot conclude, as we did in Neibel, that even without the instruction, the jury plainly was vindicating only the state's interest in protecting its citizens or that it was addressing Ford's reprehensibility only in the case at bar.^[67]

After the verdict, and in light of BMW, Ford moved for a remittitur based on excessiveness and on the extraterritoriality rule in BMW. The district court denied the motion on extraterritoriality, saying that Ford had not shown that its conduct would be legal in other jurisdictions. But the district court conceded that Ford had submitted materials arguing that "many states do not recognize a post-sale duty to warn and that at least five states would not permit punitive damages in this type of case." The district court attempted to distinguish BMW on the theory that the 884,000 pickup trucks Ford "marketed in North America was universal market conduct performed centrally; it was not peculiar [1016] to or necessarily performed in a given state."

But we cannot adopt that distinction. In BMW, BMW marketed its cars nationally, too, and the punitive damages in that case were imposed because BMW "had adopted a national policy in 1983 concerning cars that were damaged in the course of manufacture or transportation."^[68] In that case, a national policy affected a sale of a car in Alabama, in this case a pickup truck in Nevada. No material difference. Thus in this case, the Nevada jury was asked to impose punitive damages to protect people in other states with Ford pickup trucks, and the district court refused to reduce the punitive damages on account of the extraterritorial aspect. The district court expressly rejected the argument that the award should be limited to punishment for the conduct that had taken place in Nevada. The court refused to limit the damages to vindication of Nevadans' rights because Ford's conduct was "performed centrally."

We cannot conclude that the ratio analysis by which the district court explained its remittitur limited the damages to vindicating the rights of Nevadans. The jury was encouraged by argument to award damages for Ford's wrongs to the entire country, and the court rejected an instruction that would have told the jury to vindicate only the wrongs done in Nevada. Possibly the jury would have chosen as large an award had it been told to vindicate only the rights of Nevadans, but possibly it would have chosen a substantially lower award. For all we know, the jury would have applied a much lower ratio than the thirty to one the court chose, or the sixty-six to one that the jury initially chose, had it been told that it should limit its scope to the interests of Nevadans. A punitive damages award that encompasses a defendant's extraterritorial conduct may be unconstitutional even if the size of the award itself, as compared to the compensatory damages, is not outside the bounds of due process.^[69]

[1017] The logic and language of BMW suggest that if the Court were to "consider whether one State may properly attempt to change a tortfeasor's unlawful conduct in another state,"^[70] the answer would have to be "No." The Tenth Circuit, the only other Circuit to have considered the question so far, reaches that conclusion.^[71] "Despite this comment we read the opinion [BMW] to prohibit reliance upon inhibiting unlawful conduct in other states."^[72] That makes sense for two reasons. First, the core conduct in BMW, consumer fraud, would likely be wrongful to some degree in all states. The diversity of state approaches to consumer fraud the BMW Court pointed to was in part in how the conduct is sanctioned rather than whether it is permitted. The Court's discussion was in part hypothetical, conceiving of potential rather than actual diversity in treatment. The Court said a state legislature "might plausibly conclude that the administrative costs associated with full disclosure would have the effect of raising car prices to the State's residents."^[73] That comment protected a hypothetical state legislature that might take a different approach from Alabama's, even if no actual legislature had taken a different position.

Perhaps most important, the variation in policies of punishment, even where the conduct is unlawful in all states, amounts to an important distinction in policy. For example, Nevada has no ceiling on punitive damages in a case such as this.^[74] In this case, because the jury vindicated the rights of all Ford pickup truck drivers everywhere, Nevada has effectively imposed $70 million in punitive damages in part to protect Alaskans, among others, from failure to warn of defects in pickup trucks. But Alaska has quite a different policy on punishment by means of punitive damages: its legislature imposed a ceiling, probably $7 million in this case,^[75] with fifty cents on the dollar payable to the Alaska state treasury.^[76]

By imposing ten times what Alaska would allow, with all the money going to the Whites and their attorneys, rather than half of it to the state government, Nevada has created very different incentives from Alaska for manufacturers, distributors, and plaintiffs' attorneys. A manufacturer of an innovative but untried product, such as the self-tightening parking brake in this case, faces much more risk selling it in Nevada than in Alaska. A national company sometimes limits its sales according to variations in risk, as [1018] when liability insurers pull out of high-verdict states or mail-order companies refuse orders from some states. The Nevada legislature has chosen an arguably more safety-oriented approach, the Alaska legislature a less risk-averse approach friendlier to innovation. Even though both states treat distribution of defectively designed products and failure to warn of dangerous defects as tortious, the difference in how they penalize the tortious conduct expresses significantly different policy choices.

The Supreme Court in BMW, speaking of BMW's being a large corporation, said "its status as an active participant in the national economy implicates the federal interest in preventing individual States from imposing undue burdens on interstate commerce. While each State has ample power to protect its own consumers, none may use the punitive damages deterrent as a means of imposing its regulatory policies on the entire Nation."^[77] This federalism concern applies strongly to the case at bar. Nevada is free, in the absence of federal legislation to the contrary, to choose a policy that may sacrifice some innovation in favor of safety, and Alaska is free to choose a policy that may sacrifice some safety in favor of innovation. Or, Alaska may think it gets more rather than less safety by limiting the penalties for innovations and economies, even though some turn out to have unanticipated risks.^[78] Neither state is entitled, in our federal republic, to impose its policy on the other. If Nevada imposes an award based on vindicating a national interest in safety, as the jury was encouraged to do in this case and as the district court expressly permitted, then it may deter not only conduct tortious in other states, but also innovations and economies of production that other states have purposely tailored their laws not to discourage so strongly. Measured by the Alaska legislative policy, Nevada's policy would be overdeterrence.^[79]

All of this suggests that under BMW, "a State may not impose economic sanctions on violators of its laws with the intent of changing the tortfeasors' ... conduct in other States,"^[80] whether the extraterritorial conduct is lawful or not. Though no other circuit court has yet held one way or the other, the dictum previously quoted from the Tenth Circuit takes this position,^[81] and several district and state courts have so held.^[82] An Eastern District of [1019] New York products liability case approves a jury instruction telling the jury it could consider "what is reasonably required to vindicate New York State's legitimate interests in punishment and deterrence, if any,"^[83] but that it was "not authorized to impose punitive damages to protect people outside the State of New York."^[84] We agree with the Eastern District that that instruction was consistent with BMW.

Even if the BMW territorial limitation applied only to conduct lawful in other states, as opposed to unlawful conduct differently sanctioned by other states, we would be compelled to reverse because of the extraterritorial award in this case. The failure to warn found unlawful here is probably not unlawful in all states. The jury in this case found that although the brake was defective in design, that design defect did not proximately cause Walter White's death. It imposed liability for Ford's failure to warn, not for the design defect, after having been instructed that "[a] manufacturer has a responsibility to warn of a defective product after it has been manufactured and sold, if the manufacturer becomes aware of the defect."

But not all states agree with that instruction. Some impose a post-sale duty to warn, some don't. Arkansas,^[85] Illinois,^[86] Nebraska,^[87] and Texas,^[88] to name a few, do not impose a post-sale duty to warn. Pennsylvania recognizes a post-sale duty to warn only if the plaintiff can demonstrate that the product was defective from the date of manufacture and that the manufacturer had notice of the defect.^[89] Thus, while we assume that the court's instruction in this case was correct as a matter of Nevada law (which has not been challenged), it is not the law everywhere.

Even among the states that impose a post-sale duty to warn, there are differences in who is supposed to be warned. The Whites, for example, were neither purchasers nor owners of the pickup truck, so they needed a rule that a warning must be calculated to go beyond purchasers and owners to actual users. Kansas, though it requires a post-sale warning, limits the post-sale duty to warn to "ultimate consumers who purchased the product,"^[90] which would leave out the Whites. Thus the jury in this case was invited to award punitive damages to vindicate the interests of Ford pickup truck drivers all over the country, but the conduct for which the jury punished Ford was actually lawful in a number of other states.

BMW reminds us, in prohibiting just such extraterritorial punishment as was imposed in this case, that "[t]o punish a person because he has done what the law plainly allows him to do is a due process violation of the most basic sort."^[91] The [1020] district court's refusal to limit the jury to consideration of Nevada's interests, combined with the plaintiffs' lawyers exhortations to let the decision resonate "across the country," compels us to conclude that the jury here was permitted to engage in "a due process violation of the most basic sort" when it arrived at its punitive damages award. We therefore reverse the decision of the district court as to Ford's Rule 50(b) motion for a new trial on punitive damages.

Because we reverse on the ground that the punitive damages award unconstitutionally allowed a Nevada jury to punish Ford for out-of-state conduct, we do not need to address de novo whether these punitive damages were unconstitutionally excessive under the BMW guideposts, as is normally required of us by the Supreme Court's ruling in Cooper Industries, Inc. v. Leatherman Tool Group, Inc.^[92] Nor do we consider whether the award is excessive under Nevada law. On remand, the jury must decide on a punitive damages award within the territorial restraint established by BMW. Extraterritorial conduct is admissible for its bearing on degree of reprehensibility, but the jury must be limited to punitive damages reasonably required to vindicate Nevada's legitimate interests in punishment and deterrence, if any, and prohibited from imposing punitive damages to protect people or punish harm outside of Nevada. The jury's award on remand may yet be constitutionally excessive, or, it may be within the limits of BMW. We do not speak on this issue, because we need not reach it.

While we are troubled by the possibility that the jury award in this case may also have been unduly influenced by the inflammatory closing argument of the plaintiffs' attorneys, we need not reach the issue of whether the argument requires reversal, and trust that on remand the district court will take care to ensure that the proceedings are not tainted by inflammatory argument appealing to passion or prejudice.^[93]

AFFIRMED as to liability determination and compensatory damages. REVERSED AND REMANDED as to punitive damages. Each party to bear its own costs on appeal.

GRABER, Circuit Judge, concurring in part and dissenting in part:

I concur in the majority's opinion except as to Part 4. In my view, the majority fails to adhere to the Supreme Court's guidance in analyzing punitive damages.^[94] Therefore, I respectfully dissent from Part 4 and from the remand for further proceedings.

A. Standard of Review

In civil cases, we generally review de novo the question whether a jury instruction misstates the applicable law. Navellier v. Sletten, 262 F.3d 923, 944 (9th Cir.2001), cert denied, ___ U.S. ___, 122 S.Ct. 2623, 153 L.Ed.2d 806 (2002). We generally review the particular formulation of civil jury instructions for abuse of discretion. Neibel v. Trans World Assurance Co., 108 [1021] F.3d 1123, 1129 (9th Cir.1997); Fikes v. Cleghorn, 47 F.3d 1011, 1013 (9th Cir.1995); Oviatt ex rel. Waugh v. Pearce, 954 F.2d 1470, 1481 (9th Cir.1992). "In evaluating jury instructions, prejudicial error results when, looking to the instructions as a whole, the substance of the applicable law was [not] fairly and correctly covered." Swinton v. Potomac Corp., 270 F.3d 794, 802 (9th Cir.2001) (alteration in original) (citations and internal quotation marks omitted), cert. denied, 535 U.S. 1018, 122 S.Ct. 1609, 152 L.Ed.2d 623 (2002).

Our civil cases appear to be inconsistent in describing what standard of review applies to the denial of a requested jury instruction. Compare Neibel, 108 F.3d at 1129 (reviewing for abuse of discretion the district court's decision not to deliver the defendant's requested instruction), with Ortiz v. Bank of Am. Nat'l Trust & Sav. Ass'n, 852 F.2d 383, 386 (9th Cir.1988) (stating that a "defendant is entitled to an instruction if it is supported by law, and the failure to submit a proper jury instruction is a question of law which we review de novo" (citations omitted)). However, those cases can be reconciled by reviewing de novo any questions of law that are involved in the failure to give a requested instruction, for example, whether the requested instruction states the law incorrectly and whether its absence results in a misleading statement of the law. Other questions involved in the failure to give a requested instruction are reviewed for abuse of discretion, for example, whether the party's theory is adequately covered by other instructions.

B. The Punitive Damages Instructions

The court gave the following instruction on punitive damages:

Members of the jury, you've now heard the evidence of the financial condition of the defendant Ford Motor Company.

Because you have answered yes to special verdict question number fifteen,^[95] you may, in your discretion, award punitive or exemplary damages against defendant Ford for [the] sake of example and by way of punishment.

Your discretion should be exercised without passion or prejudice.

In arriving at any award of punitive damages, you are to consider the following: One, the reprehensibility of the conduct of the defendant; two, the amount of punitive damages which will have a deterrent effect on the defendant in light of defendant's financial condition.

That instruction is the Nevada pattern instruction, Nev. J.I. 10.20, with the appropriate modifications to identify the defendant.

The court refused to give the following instruction, requested by Defendant:

In determining the amount of punitive damages, if any, that is necessary for punishment and deterrence, you may consider only Defendant's wrongful conduct that has had an impact on the citizens of Nevada. You may not award any punitive damages for the purpose of punishing Defendant relative to the sale of vehicles in other States, or for the purpose of punishing or deterring Defendant's conduct outside the State of Nevada.

It is the court's refusal to give that particular "non-extraterritoriality" instruction on which the majority relies to reverse and remand for a new trial.

[1022] C. Nevada Law

Because this is a diversity case, the first step in the analysis is to examine the fit between the instructions given and the substantive law of Nevada. "In a diversity action, or in any other lawsuit where state law provides the basis of decision, the propriety of an award of punitive damages for the conduct in question, and the factors the jury may consider in determining their amount, are questions of state law." Browning-Ferris Indus. of Vt., Inc. v. Kelco Disposal, Inc., 492 U.S. 257, 278, 109 S.Ct. 2909, 106 L.Ed.2d 219 (1989).

The majority errs by analyzing the sufficiency of the instructions as a matter of federal substantive law in the first instance. (Majority Opinion at 1012-13, 1016.) Defendant does argue that, even if a non-extraterritoriality instruction is not constitutionally required, it is required by general federal-law principles pertaining to jury instructions. However, the Supreme Court rejected a similar argument in Browning-Ferris, when it declined to hold that the federal common law provides a basis for finding a punitive damages award to be excessive in a diversity case. 492 U.S. at 278-80, 109 S.Ct. 2909.^[96]

The district court here sufficiently informed the jury of Nevada law on punitive damages. The court used the standard pattern instruction for Nevada. Although there are no Nevada cases analyzing whether the pattern instruction is consistent with Nevada law, a review of Nevada cases demonstrates that it is.

In Nevada, "[t]he proper end of punitive damages is to punish and deter culpable conduct." Ace Truck & Equip. Rentals, Inc. v. Kahn, 103 Nev. 503, 746 P.2d 132, 134 (1987). Specifically, Nevada Revised Statute § 42.005 allows a plaintiff to recover punitive damages "in an action for the breach of an obligation not arising from contract, where it is proven by clear and convincing evidence that the defendant has been guilty of oppression, fraud or malice, express or implied, ... for the sake of example and by way of punishing the defendant." Nev.Rev.Stat. § 42.005(1).

"The amount of punitive damages appropriate to the stated purpose of punishment and deterrence lies in the discretion of the fact-finder." Ace Truck, 746 P.2d at 134. Nevertheless, the fact-finder's discretion is not "unbridled." Id. Instead, it is subject to post-verdict scrutiny by the trial and appellate courts for "legal excessiveness":

Punitive damages are legally excessive when the amount of damages awarded is [1023] clearly disproportionate to the degree of blameworthiness and harmfulness inherent in the oppressive, fraudulent or malicious misconduct of the tortfeasor under the circumstances of a given case. If the awarding jury or judge assesses more in punitive damages than is reasonably necessary and fairly deserved in order to punish the offender and deter others from similar conduct, then the award must be set aside as excessive.

....

In arriving at the ultimate judgment of where excessiveness begins, courts can legitimately take into account any circumstances which relate to the limits of punishment and deterrence that can be properly imposed in a given case. Relevant circumstances included such matters as the financial position of the defendant, culpability and blameworthiness of the tortfeasor, vulnerability and injury suffered by the offended party, the extent to which the punished conduct offends the public's sense of justice and propriety, and the means which are judged necessary to deter future misconduct of this kind.

Id. at 136-37 (footnote omitted).

In view of the statute and case law, the pattern instruction adequately informed the jury of the Nevada law on punitive damages. It explained that the statutory purpose of such damages is to set an example and to punish the defendant. It clarified that the damages were not mandatory, but instead could be awarded by the jury in its discretion, a discretion that should not include passion or prejudice. The pattern instruction then identified some of the factors germane to postverdict excessiveness review, thereby limiting the jury's discretion. The instruction drew the jury's attention to the blameworthiness of Defendant's conduct and the manner in which Defendant's conduct offended the public's sense of justice and propriety by focusing on "reprehensibility." The instruction also informed the jury that the amount needed to deter Defendant should be set by reference to its financial condition.

By contrast, the instruction requested by Defendant was neither required nor supported by Nevada law. First, Defendant's statement that punitive damages must bear a reasonable relationship to compensatory damages does not state Nevada law accurately. As summarized above, Nevada law requires a punitive damages award to be "reasonably necessary" to punish the defendant for the challenged conduct and to deter others from engaging in like conduct. That is, the reasonable relationship is between the amount of punitive damages and the challenged conduct, not between the amount of punitive damages and the award of compensatory damages.

Second, Defendant's requested extraterritoriality instruction is not required by Nevada law. Nevada law does not prohibit the jury from considering a defendant's out-of-state conduct; indeed, it explicitly authorizes the jury's consideration of a defendant's financial condition, a piece of information that has an out-of-state component in many cases. Nev.Rev.Stat. § 42.005(4).

Because the instructions accurately and sufficiently summarized Nevada law, I turn next to the more difficult issues raised by Defendant: whether the Nevada instructions comply with federal due process standards. These are constitutional questions, rather than questions of instructional error. And as to such questions — including "those issues involving the proper review of the jury award by a federal district court and court of appeals" — federal law controls. Browning-Ferris, 492 U.S. at 278-79, 109 S.Ct. 2909.

[1024] D. Procedural Due Process

In Pacific Mutual Life Ins. Co. v. Haslip, 499 U.S. 1, 111 S.Ct. 1032, 113 L.Ed.2d 1 (1991), the Supreme Court articulated a standard for determining whether the procedures governing an award of punitive damages comply with due process. The Court held that Alabama's system of jury instructions, trial-court review, and appellate review — taken together — protected a civil defendant's due process interests. Id. at 20-24, 111 S.Ct. 1032.

The Court first reviewed the Alabama trial court's jury instructions on punitive damages.^[97] It concluded that "[t]he instructions ... enlightened the jury as to the punitive damages' nature and purpose, identified the damages as punishment for civil wrongdoing of the kind involved, and explained that their imposition was not compulsory." Id. at 19, 111 S.Ct. 1032. Consequently, the instructions imposed "reasonable constraints" on the jury's discretion, satisfying the requirements of procedural due process. Id. at 20, 111 S.Ct. 1032.

Second, the Court examined the Alabama procedures for post-verdict review by the trial court. Id. at 20, 111 S.Ct. 1032. In Alabama, the trial courts are required "to reflect in the record the reasons for interfering with a jury verdict, or refusing to do so, on grounds of excessiveness of the damages." Id. (citation and internal quotation marks omitted). Factors relevant to that determination included (1) the defendant's culpability; (2) the need to discourage others from similar conduct; (3) the effect on the parties; and (4) other factors, including the effect on third parties. Id. The Court concluded that Alabama's system for review provided a "meaningful and adequate" check on the jury's discretion. Id.

Third, the Court found that the Alabama Supreme Court's review of awards of punitive damages "provide[d] an additional check on the jury's or trial court's discretion." Id. at 20-21, 111 S.Ct. 1032. The Alabama Supreme Court uses a two-step process to review an award of punitive damages. First, it engages in a comparative analysis of the award. It then applies the "detailed substantive standards it has developed for evaluating punitive awards."^[98] Id. at 21, 111 S.Ct. 1032. The [1025] Court held that the Alabama Supreme Court's method of review supplied a "sufficiently definite and meaningful constraint on the discretion of Alabama factfinders in awarding punitive damages." Id. at 22, 111 S.Ct. 1032.

In short, Haslip stands for the proposition that procedural due process is satisfied with respect to an award of punitive damages if procedures that provide a "definite and meaningful constraint" on the factfinder's discretion are in place to ensure that the amount of any award is reasonably related to the state's legitimate goals of punishment and deterrence. Haslip also makes clear that jury instructions need not limit the jury's discretion, beyond clarifying that punitive damages are discretionary and explaining their purpose, provided that postverdict review procedures are available to ensure that an award is not excessive.

In Honda Motor Co. v. Oberg, 512 U.S. 415, 114 S.Ct. 2331, 129 L.Ed.2d 336 (1994), the Court confirmed that post-verdict review of punitive damages awards, rather than jury instructions, provides the most constitutionally significant constraint on a jury's discretion. There, the Court held that Oregon's system for awarding punitive damages violated procedural due process because it did not permit meaningful post-verdict review of punitive damages awards. Id. at 434-35, 114 S.Ct. 2331. In so holding, the court rejected the argument that the detailed jury instructions required by Oregon law adequately constrained the jury's discretion. Id. at 433, 114 S.Ct. 2331; see also id. at 440-43, 114 S.Ct. 2331 (Ginsburg, J., dissenting) (discussing the jury instructions required by Oregon law).

Respondent's final safeguard, proper jury instruction, is a well-established and, of course, important check against excessive awards. The problem that concerns us, however, is the possibility that a jury will not follow those instructions and may return a lawless, biased, or arbitrary verdict.

Id. at 433, 114 S.Ct. 2331.

Read together, Haslip and Honda teach that, while due process imposes some requirements on how a jury must be instructed on punitive damages, those requirements are minimal and general. Instead, it is the availability of post-verdict review of punitive damages awards that provides the most substantial procedural check on punitive damages.

Although the Supreme Court approved the general jury instructions in Haslip in the context of reviewing a state court's award of punitive damages, there is no principled reason why jury instructions in a diversity case in federal court have to be more detailed. That is because the Supreme Court has established that punitive damages awards in federal court are subject to post-verdict scrutiny for compliance with both state law and the federal constitution.

In Cooper Industries, Inc. v. Leatherman Tool Group, Inc., 532 U.S. 424, 121 [1026] S.Ct. 1678, 149 L.Ed.2d 674 (2001), the Court outlined the proper procedures for federal post-verdict review. When a jury awards punitive damages based on state law,

the role of the trial judge is "to determine whether the jury's verdict is within the confines set by state law, and to determine, by reference to federal standards developed under Rule 59, whether a new trial or remittitur should be ordered." If no constitutional issue is raised, the role of the appellate court, at least in the federal system, is merely to review the trial court's "determination under an abuse-of-discretion standard."

Id. at 433, 121 S.Ct. 1678 (quoting Browning-Ferris Indus., 492 U.S. at 279, 109 S.Ct. 2909).

However, a federal appellate court must review de novo the trial court's determination of the constitutionality of a punitive damages award. Id. at 436, 121 S.Ct. 1678. Because "the jury's award of punitive damages does not constitute a finding of `fact,'" this higher standard of review does not implicate the Seventh Amendment. Id. at 437, 121 S.Ct. 1678. The Supreme Court has directed federal appellate courts to review the constitutionality of punitive damages awards under the criteria established in BMW of North America v. Gore, 517 U.S. 559, 116 S.Ct. 1589, 134 L.Ed.2d 809 (1996):

(1) the degree or reprehensibility of the defendant's misconduct, (2) the disparity between the harm (or potential harm) suffered by the plaintiff and the punitive damages award, and (3) the difference between the punitive damages awarded by the jury and the civil penalties authorized or imposed in comparable cases.

Cooper, 532 U.S. at 440, 121 S.Ct. 1678.

Those post-verdict review procedures provide at least the same level of protection as the procedures approved by the Court in Haslip. A punitive damages award is subject to review by both the district court and the appellate court for compliance with state law, and the amount of the award is subject to de novo review to ensure that it falls within the bounds of substantive due process. Because those post-verdict procedures are at least as protective of defendants as those approved in Haslip, it follows that the jury instructions on punitive damages in a diversity case in federal court need to meet only the standard articulated in Haslip to comply with procedural due process.

Thus, in general, the instructional requirements are modest. Indeed, this fact has frustrated Justice O'Connor. See TXO Prod. Corp. v. Alliance Res. Corp., 509 U.S. 443, 474-75, 113 S.Ct. 2711, 125 L.Ed.2d 366 (1993) (O'Connor, J., dissenting) (noting that, while it is not necessarily unconstitutional for a jury to "receive only vague and amorphous guidance" on punitive damages, "it cannot be denied that the lack of clear guidance heightens the risk that arbitrariness, passion, or bias will replace dispassionate deliberation as the basis for the jury's verdict"); Haslip, 499 U.S. at 43, 111 S.Ct. 1032 (O'Connor, J., dissenting) (arguing that the jury instructions approved by the majority were unconstitutionally vague).

The Nevada instructions meet the standards articulated by Haslip: they informed the jury that punitive damages were discretionary, that their purpose is to punish and to set an example, and that the amount must bear some relation to the blameworthiness of the defendant's conduct. Consequently, the jury instructions met the requirements of procedural due process.

E. The Role of Out-of-State Conduct

In Gore, the Court again considered the due process limitations on awards of punitive [1027] damages. According to the Court, substantive due process requires that the amount of a punitive damages award be reasonably related to the state's legitimate interests in punishment and deterrence. 517 U.S. at 568, 116 S.Ct. 1589.

The first step in analyzing whether a given award is reasonably related to the state's legitimate interests is determining the scope of those interests. Id. In the context of defining Alabama's legitimate interests, the Court discussed the role of a defendant's out-of-state conduct in the punitive damages calculus. Id. at 568-74, 116 S.Ct. 1589. The Court concluded "from ... principles of state sovereignty and comity that a State may not impose economic sanctions on violators of its law with the intent of changing the tortfeasors' lawful conduct in other States." Id. at 572, 116 S.Ct. 1589. Instead, an award of punitive damages "must be supported by the State's interest in protecting its own consumers and its own economy." Id. That does not mean, however, that a jury may not consider at all the out-of-state conduct of a defendant when setting a punitive damages award. To the contrary, the Court stated explicitly that a defendant's out-of-state conduct can inform the jury's evaluation of the degree of reprehensibility of a defendant's conduct. Id. at 574 n. 21, 576-77, 116 S.Ct. 1589.

In view of the Court's discussion in Gore of the proper role of out-of-state conduct, the "non-extraterritoriality" instruction requested by Defendant is wrong as a matter of law. Gore simply does not require that the jury "consider only Defendant's wrongful conduct that had an impact on the citizens of Nevada" (emphasis added), as the Defendant's instruction proposed.

Additionally, the Nevada pattern instructions did not invite the jury to consider Defendant's out-of-state conduct in an inappropriate manner. Rather, the instructions directed the jury to consider factors such as Defendant's reprehensibility and financial position — factors that may be informed by Defendant's out-of-state conduct, but that are nonetheless proper for the jury to consider when setting a punitive damages award.

Finally, Plaintiffs' comment during closing arguments that Defendant had failed to warn 884,000 people in North America about the roll-away risk posed by its vehicles did not require the court to instruct the jury to ignore Defendant's out-of-state conduct. Defendant's counsel did not object to that aspect of Plaintiffs' closing arguments^[99] and, as the Court held in Gore, that information was relevant to the jury's assessment of the reprehensibility of Defendant's conduct in failing to warn of the product defect.

The question remains, however, whether Gore required the court to give some form of non-extraterritoriality instruction, even in the absence of a properly formulated request. I believe that the answer is "no."

In Gore, the Court accepted the Alabama Supreme Court's interpretation of the jury's verdict as reflecting a computation based largely on activities in other states. 517 U.S. at 573, 116 S.Ct. 1589. Yet, in some of those states, the defendant's conduct was lawful. Id. at 569-71, 116 S.Ct. 1589. Alabama could not punish the defendant in accordance with its policy when its policy was not the same as other states' policies. As the majority opinion correctly observes, that is the same situation [1028] we face here. (Majority Opinion at 36-37.) Consequently, the majority's speculation about whether Gore's discussion of the scope of a state's interest in punishing and deterring extraterritorial conduct would apply when the conduct is unlawful everywhere is purely dictum, playing no role in the outcome of this case.^[100] See Gore, 517 U.S. at 574 n. 20, 116 S.Ct. 1589 ("Given that the verdict was based in part on out-of-state conduct that was lawful where it occurred, we need not consider whether one State may properly attempt to change a tortfeasor's unlawful conduct in another State.").

After examining the legality of the defendant's conduct in some states, the Supreme Court considered what "guideposts" are required so as to ensure that a defendant receives fair notice of both the conduct resulting in punishment and the potential severity of the penalty. The three "guideposts" are the degree of reprehensibility of the nondisclosure, the disparity between the harm or potential harm suffered and the award, and the difference between the award and the civil penalties authorized or imposed in comparable cases. Id. at 574-85, 116 S.Ct. 1589. Significantly, however, the Court (1) discussed those factors as bearing on the excessiveness of the actual amount of the award, not as bearing on the procedures that had been followed in the Alabama trial, and (2) did not require a new trial even though it appears that the jury was either encouraged or allowed simply to multiply Dr. Gore's actual damages by the number of cars sold nationwide. Id. at 585-86, 116 S.Ct. 1589. Instead, the Court held "that the grossly excessive award imposed in this case transcends the constitutional limit" and that "the appropriate remedy" might be "an independent determination by the Alabama Supreme Court of the award necessary to vindicate the economic interests of Alabama consumers." Id. In other words, the entire discussion was merely part of the analysis of excessiveness, and the Court took pains not to require either a new trial or the giving of particular instructions. See id. at 602-04, 116 S.Ct. 1589 (Scalia, J., dissenting) (recognizing that the logic of the majority opinion could suggest "that due process would require the assessing jury to be instructed" on the scope of a state's legitimate interests in imposing punitive damages relative to extraterritorial conduct, but concluding that the suggestion of a new instructional burden was a "false alarm").

Cooper further confirms that due process does not require that a court order a new trial on punitive damages simply because the jury may have awarded punitive damages for an inappropriate reason due to misleading instructions. In Cooper, the punitive damages award may have been unconstitutionally excessive because it was based in part on an improper predicate due to erroneous jury instructions. 532 U.S. at 441, 121 S.Ct. 1678. The Court remanded the case to us to apply a de novo standard of review in an excessiveness analysis under Gore. Id. at 443, 121 S.Ct. 1678. Notably, despite its recognition that an improper purpose may have informed the jury's decision, the Court did not hold that the defendant was entitled to a new trial on the issue of punitive damages. That result suggests that, even when a jury awards punitive damages for an improper [1029] purpose, the remedy is not a new trial, but instead is a reduction in the award so that it reflects only the state's legitimate interests.

Because there was no instructional error, and because Defendant received procedural due process, I turn next to an excessiveness review.

F. Whether the Award is Excessive

The jury did award some punitive damages explicitly for out-of-state conduct. The jury's original award was $150 million plus $884,000. The $884,000 apparently represented "one dollar for each Ford vehicle of this type sold in North America." However, the district court reduced the award to $69,163,037.10. It computed that reduced amount by multiplying the compensatory damages by 30, on the theory that the largest punitive damages award approved by the Nevada courts had been 30 times the compensatory damages. The district court's computation thereby cured the jury's erroneous "bonus" for extraterritorial conduct.

Although the reduced award contains no extraterritoriality component, our work is not over. Cooper requires us to review de novo whether the reduced award is grossly excessive, applying the Gore factors: the degree of reprehensibility of the defendant's conduct, the disparity between the harm suffered by the plaintiff and the punitive damages award, and the difference between the award and the civil penalties authorized or imposed in comparable cases. Cooper, 532 U.S. at 440, 121 S.Ct. 1678. The first factor is the most significant. Gore, 517 U.S. at 575, 116 S.Ct. 1589. It also "presents the most difficult question for an appellate court." Leatherman, 285 F.3d at 1150.

In Gore, the Court identified the hallmarks of particularly reprehensible conduct. Nonviolent offenses are less blameworthy than those that involve violence or the threat of violence. Gore, 517 U.S. at 576, 116 S.Ct. 1589. "Similarly, 'trickery and deceit' are more reprehensible than negligence." Id. (citation omitted). Conduct that causes economic harm alone is less reprehensible than conduct that injures (or risks injuring) the health and safety of others. Id. "[R]epeated misconduct is more reprehensible than an individual instance of malfeasance." Id. at 577, 116 S.Ct. 1589.

The conduct for which Defendant is liable here is a failure to warn. (Majority Opinion at 10-13.) Defendant knew of a potentially very dangerous defect. The defect risked injuring people, as well as causing economic harm. Yet, in part for reasons of economy, Defendant neither recalled its trucks for a 15 cent fix nor warned consumers. Defendant's conduct in failing to warn consumers of a known danger was intentional. It must be remembered that the jury found against Defendant on Plaintiffs' claim for intentional misrepresentation, so we must take it as a given that (as the district court recognized) Defendant's suppression of information amounted to an implied misrepresentation of fact as to the truck's safety. Moreover, Defendant's misconduct was not a single act of malfeasance, but was part of an ongoing pattern of failing to warn. The first factor thus weighs heavily in favor of a significant award of punitive damages.

"The second and perhaps most commonly cited indicium of an unreasonable or excessive punitive damages award is its ratio to the actual harm inflicted on the plaintiff." Gore, 517 U.S. at 580, 116 S.Ct. 1589. If the harm to the plaintiff was fully realized, a court analyzes this factor by looking at the ratio of punitive damages to compensatory damages. Id. at 581, 116 S.Ct. 1589. Alternatively, if greater harm was likely to befall the plaintiff as a result [1030] of the defendant's conduct, the court examines "`"whether there is a reasonable relationship between the punitive damages award and the harm likely to result from the defendant's conduct as well as the harm that actually has occurred."'" Id. (quoting TXO, 509 U.S. at 460, 113 S.Ct. 2711, quoting Haslip, 499 U.S. at 21, 111 S.Ct. 1032). In Haslip, the Court approved an award that was four times the amount of compensatory damages. Id. In TXO, the Court compared the award of punitive damages with "the harm to the victim that would have ensued if the tortious plan had succeeded. That difference suggested that the relevant ratio was not more than 10 to 1." Id.

Nevertheless, the Court has

consistently rejected the notion that the constitutional line is marked by a simple mathematical formula, even one that compares actual and potential damages to the punitive award. Indeed, low awards of compensatory damages may properly support a higher ratio than high compensatory awards, if, for example, a particularly egregious act has resulted in only a small amount of economic damages. A higher ratio may also be justified in cases in which the injury is hard to detect or the monetary value of the noneconomic harm might have been difficult to determine.

Id. at 582, 116 S.Ct. 1589 (citation omitted). That being said, the Court in Gore characterized the ratio at issue — 500 to 1 — as "breathtaking," and sufficient to arouse judicial suspicion. Id. at 583, 116 S.Ct. 1589.

Here, the ratio of the remitted award of punitive damages to the compensatory damages is 30 to 1. Although that ratio is not as "breathtaking" as the 500 to 1 ratio in Gore, it is substantially larger than the ratios approved by the Court in Haslip and TXO. Moreover, this is not a case in which a higher ratio is justified because Defendant's egregious conduct resulted in a low award of compensatory damages. Although it is difficult to conceive of a loss more terrible than the death of a child — and it is hard to value a child's life — the jury awarded Plaintiffs a substantial amount in compensatory damages: $2,305,434.57. Thus, this is not a case in which compensatory damages fail meaningfully to address a defendant's egregious conduct; nor is it a case in which it was exceptionally difficult for the jury to compute non-economic damages. Finally, because the harm to Plaintiffs has been fully realized, we need not take into account potential but unrealized harm when examining the ratio between punitive and compensatory damages.

The first two factors counsel that the Constitution requires a lower ratio of punitive damages to compensatory damages than the ratio that the district court applied. The factors justifying a higher ratio are not present. Under the circumstances, I believe that the ratio approved by the Court in TXO — 10 to 1 — would be appropriate here.

The third factor — sanctions for comparable misconduct — also weighs somewhat in favor of Defendant. As amicus points out, under the National Motor Vehicle Safety Act of 1966, the maximum civil penalty for selling defective motor vehicles is $800,000. 49 U.S.C. § 30165(a). Of course, Defendant is liable in this case not for the statutory wrong of selling a defective motor vehicle but, instead, for the tort of failing to warn of the potentially devastating consequences of the particular defect. Nevertheless this statute has some bearing on comparability. Of more import are other similar tort cases. In Ford Motor Co. v. Ammerman, 705 N.E.2d 539, 564 (Ind.Ct.App.1999), the court held that a jury's $58 million punitive damages award against [1031] this same defendant in a products liability action was constitutionally excessive, but that the remitted punitive damages award of $13.8 million was constitutional. The compensatory damages in that case amounted to about $4.4 million, making the ratio of punitive to compensatory damages about 3 to 1; the unremitted, excessive ratio was about 13 to 1. But see Romo v. Ford Motor Corp., 99 Cal.App.4th 1115, 122 Cal.Rptr.2d 139, 165-67 (Ct.App.2002) (upholding as constitutional a punitive damages award of $290 million where the compensatory damages were about $6.2 million, a ratio of about 45 to 1). A search of recent jury awards reveals a $120 million punitive damages award against Ford Motor Company, based on a holding that its 1988 Ford Ranger pick-up truck was defective and unreasonably dangerous; the compensatory damages amounted to just under $25 million, for a ratio of about 5 to 1. 13 Nat'l Jury Verdict Rev. & Analysis 8, Robinson v. Ford Motor Co. (West 2002) (1998 WL 2020336).

Applying all these factors — a concededly unscientific exercise — I conclude that a punitive damages award of $23,054,350 (10 times the compensatory damages) is the constitutional maximum here. The degree of reprehensibility of Defendant's conduct is high — Defendant intentionally failed to warn consumers of a defect that foreseeably could result in the death of a person. That failure to warn did, according to the jury's finding, result in the death of Walter White. However, the ratio of punitive damages to compensatory damages is high when compared to the ratios approved by the Supreme Court; its cases suggest that a 10 to 1 ratio is appropriate here.

Finally, the magnitude of the award when compared to awards in similar cases and analogous statutory sanctions is large, suggesting that a smaller award is appropriate. An award of $23,054,350.00 is in line with the awards in similar cases and provides a constitutionally acceptable relationship between punitive and compensatory damages.

G. Conclusion

The jury instructions on punitive damages were sufficient under Nevada law. The instructions also were sufficient to meet the requirements of procedural due process, in the context of the available procedures for review. Substantive due process does not necessarily require an instruction on nonextraterritoriality; rather, that is a factor to consider in excessiveness review. The punitive damages award in this case was excessive as a matter of substantive due process. In my view, the constitutional maximum is $23,054,350.

For the foregoing reasons, the majority's analysis of punitive damages is wanting, and it reaches an incorrect result. Accordingly, I dissent from Part 4 and from the order remanding the case for further proceedings.

[1] The Honorable Harlington Wood, Senior Judge for the Seventh Circuit, sitting by designation.

[2] This decision had to await the Supreme Court's decision in Cooper Industries, Inc. v. Leatherman Tool Group, Inc., 532 U.S. 424, 121 S.Ct. 1678, 149 L.Ed.2d 674 (2001) and our decision in Baker v. Exxon Corp (In re Exxon Valdez), 270 F.3d 1215 (9th Cir.2001).

[3] See, e.g., United States v. Hicks, 217 F.3d 1038 (9th Cir.), cert. denied, 531 U.S. 1037, 121 S.Ct. 627, 148 L.Ed.2d 536 (2000).

[4] Brief for Appellant at 20, White v. Ford Motor Co., 2002 WL 31687641 (emphasis in original).

[5] 825 F.2d 1351 (9th Cir.1987).

[6] 43 F.3d 1322 (9th Cir.1995).

[7] 929 F.2d 1390 (9th Cir.1991).

[8] Floyd, 929 F.2d at 1396.

[9] Los Angeles Nut House, 825 F.2d at 1354.

[10] See General Electric Co. v. Joiner, 522 U.S. 136, 118 S.Ct. 512, 139 L.Ed.2d 508 (1997); Old Chief v. United States, 519 U.S. 172, 174 n. 1, 117 S.Ct. 644, 136 L.Ed.2d 574 (1997); Metabolife International, Inc. v. Wornick, 264 F.3d 832 (9th Cir.2001).

[11] United States v. Ramirez, 176 F.3d 1179, 1182 (9th Cir.1999).

[12] 509 U.S. 579, 113 S.Ct. 2786, 125 L.Ed.2d. 469 (1993).

[13] 122 F.3d 803 (9th Cir.1997).

[14] McKendall, 122 F.3d at 806.

[15] 526 U.S. 137, 119 S.Ct. 1167, 143 L.Ed.2d 238 (1999).

[16] Kumho Tire, 526 U.S. at 147, 119 S.Ct. 1167.

[17] 203 F.3d 1160 (9th Cir.2000).

[18] Hankey, 203 F.3d at 1169 n. 7.

[19] Kumho Tire, 526 U.S. at 147, 119 S.Ct. 1167; cf. Jinro America Inc. v. Secure Investments, Inc., 266 F.3d 993 (9th Cir.2001).

[20] Kumho Tire, 526 U.S. at 150, 119 S.Ct. 1167 (quoting Daubert, 509 U.S. at 594, 113 S.Ct. 2786).

[21] Id. (citation and internal quotation marks omitted).

[22] Id. at 152, 119 S.Ct. 1167; see also Hankey, 203 F.3d at 1166-67.

[23] See, e.g., Cabrera v. Cordis Corp., 134 F.3d 1418, 1421 (9th Cir.1998).

[24] E.g. United States v. Cordoba, 194 F.3d 1053, 1056 (9th Cir.1999).

[25] Cf. Metabolife International, Inc. v. Wornick, 264 F.3d 832, 841 (9th Cir.2001).

[26] While we were considering this decision and dissent, Mukhtar v. California State University ___ F.3d ___ (9th Cir.1992), came down. Because we reverse on other grounds, we do not reach the question whether Mukhtar would affect our analysis of the expert testimony issues.

[27] Cooper v. Firestone Tire & Rubber Co., 945 F.2d 1103, 1105 (9th Cir.1991).

[28] Western Recreational Vehicles, Inc. v. Swift Adhesives, Inc., 23 F.3d 1547, 1555 (9th Cir.1994).

[29] Id.

[30] See, e.g., United States v. Fuchs, 218 F.3d 957, 965 (9th Cir.2000).

[31] United States v. Miller, 771 F.2d 1219, 1238 (9th Cir.1985).

[32] See Johnson v. Paradise Valley Unified School Dist., 251 F.3d 1222, 1226 (9th Cir.), cert. denied, 535 U.S. 1055, 122 S.Ct. 645, 151 L.Ed.2d 563 (2001).

[33] See Forrett v. Richardson, 112 F.3d 416, 419 (9th Cir.1997) (citing Bank of the West v. Valley National Bank of Ariz., 41 F.3d 471, 477 (9th Cir.1994)).

[34] 114 Nev. 1, 953 P.2d 24 (1998) (per curiam).

[35] Id. at 26-27 (citation omitted).

[36] 116 Nev. 598, 5 P.3d 1043 (2000).

[37] Evans, 5 P.3d at 1052.

[38] Am. Heritage Dictionary 759 (2d College Ed. 1985).

[39] Nev.Rev.Stat. § 42.001(3) (1996).

[40] Nev.Rev.Stat. 42.001(1) (1996).

[41] 107 Nev. 651, 817 P.2d 711 (1991).

[42] Granite Construction, 817 P.2d at 713 (citation and internal quotation mark omitted).

[43] 112 F.3d 1052 (9th Cir.1997).

[44] Coughlin, 112 F.3d at 1054.

[45] Id. at 1055-56.

[46] Id. at 1056.

[47] 114 Nev. 1468, 970 P.2d 98 (1998) (holding disfavored on other grounds in GES, Inc. v. Corbitt, 117 Nev. 265, 21 P.3d 11 (2001)).

[48] Mahlum, 970 P.2d at 113.

[49] Coughlin, 112 F.3d at 1056.

[50] 5 P.3d at 1052.

[51] Thus we do not disagree with our dissenting colleague's position that the judgment and jury instructions conformed to Nevada law.

[52] See Neibel v. Trans World, 108 F.3d 1123, 1129 (9th Cir.1997) (citing Fikes v. Cleghorn, 47 F.3d 1011, 1013 (9th Cir.1995)).

[53] See Chuman v. Wright, 76 F.3d 292, 294 (9th Cir.1996).

[54] Swinton v. Potomac Corp., 270 F.3d 794, 802 (9th Cir.2001) (quoting Chang v. Johns-Manville Sales Corp. (In re Asbestos Cases), 847 F.2d 523, 524 (9th Cir.1988), cert. denied, 122 S.Ct. 1609 (2002)).

[55] 517 U.S. 559, 116 S.Ct. 1589, 134 L.Ed.2d 809 (1996).

[56] BMW, 517 U.S. at 568, 116 S.Ct. 1589. Because the Court said the inquiry "begins" with this federalism inquiry, this is where we begin. We reject the dissent's assumption that we ought to begin elsewhere, with the three criteria for excessiveness that the Court sets out subsequently in its opinion.

[57] Id. at 569, 116 S.Ct. 1589.

[58] Id. at 570 n. 14, 116 S.Ct. 1589.

[59] Id. at 571-72, 116 S.Ct. 1589.

[60] Id. at 572-73, 116 S.Ct. 1589.

[61] Id. at 574 n. 21, 116 S.Ct. 1589; see also Smith v. Ingersoll-Rand Co., 214 F.3d 1235, 1253 (10th Cir.2000).

[62] BMW holds that "no single State could [enact a tort law policy for the entire Nation], or even impose its own policy choice on neighboring States .... [O]ne State's power to impose burdens on the interstate market for automobiles is not only subordinate to the federal power over interstate commerce, but is also constrained by the need to respect the interests of other States." 517 U.S. at 571, 116 S.Ct. 1589 (internal citations omitted). The Court held squarely that "[t]he award must be analyzed in the light of [conduct that occurred within Alabama], with consideration given only to the interests of Alabama consumers, rather than those of the entire Nation." Id. at 574, 116 S.Ct. 1589. We are not free to ignore this holding, nor to decline to follow the reasoning by which the Court reached this result. While Pacific Mutual Life Ins. Co. v. Haslip, 499 U.S. 1, 111 S.Ct. 1032, 113 L.Ed.2d 1 (1991) (intentional fraud in Alabama insurance company) and Browning-Ferris Indus. v. Kelco Disposal, Inc., 492 U.S. 257, 109 S.Ct. 2909, 106 L.Ed.2d 219 (1989) (interference with contractual relations in limited Vermont market), the cases upon which the dissent relies, dealt with purely in-state conduct engaged in by a limited number of in-state actors, BMW addresses exactly the situation in the case we have before us: tortious conduct on the part of a nationwide manufacturer, that reflected a nationwide policy, and that caused the same harm in all states. BMW tells us that we may not, as a matter of federal law, permit one state to punish such nationwide manufacturers for their conduct — actual or hypothetical — in other states.

[63] BMW, 517 U.S. at 573 n. 20, 116 S.Ct. 1589.

[64] 108 F.3d 1123 (9th Cir.1997).

[65] Neibel, 108 F.3d at 1131 (internal quotation marks and citation omitted) (first alteration in original); cf. Johansen v. Combustion Engineering, Inc., 170 F.3d 1320, 1333 (11th Cir.1999) (embarking on BMW excessiveness analysis only after holding that the conduct being punished, acidic seepage into waterways, "occur[red] in a single state and that [the state's statutes] expressed a strong interest in deterring environmental pollution"); Deters v. Equifax Credit Info. Servs., 981 F.Supp. 1381, 1389-90 (D.Kan.1997) (noting that in action under federal statute, federalism concerns, which must otherwise be addressed, are not implicated in assessing constitutionality of punitive damages award).

[66] Emphasis added.

[67] Cf. Ingersoll-Rand, 214 F.3d at 1253.

[68] BMW, 517 U.S. at 563, 116 S.Ct. 1589.

[69] The error was not one of formulation of jury instructions, but of substance. The plaintiff has produced extensive evidence of extraterritorial conduct, and in argument urged the jury to punish Ford for the extraterritorial conduct, not just the Nevada conduct. The substantive error was not one of Nevada law, but of federal constitutional law. The pre-Gore cases discussed by the dissent do not touch upon extraterritoriality, because the issue was not before the court in those cases. Goredoes, in section II of the Court's opinion, which is prior to and separate from section III, which lays out the three criteria for excessiveness, reprehensibility, ratio, and sanctions for comparable misconduct. An award is unconstitutional if it violates the principles laid out in either section. The dissent concludes that the award violates the section III standards. We do not reach section III, because we conclude that it violates the section II standards.

In some cases, such as Neibel, no extraterritoriality instruction is needed, because it was "clear that only California interests are involved." 108 F.3d at 1131. Ford's proposed instruction was less than complete as it stood, because, as we have explained, the jury may consider extraterritoriality insofar as it bears on reprehensibility of the conduct. "[S]uch evidence may be relevant to the determination of the degree of reprehensibility of the defendant's conduct." BMW, 517 U.S. at 574, n. 21, 116 S.Ct. 1589. Where we differ with the dissent is that there is no getting around the proposition that, one way or another, whether by the nature of the evidence that comes in, the arguments of counsel made to the jury, the instructions, or otherwise, under section II of BMW, a state cannot impose punitive sanctions for conduct that affected other states but had no impact on the plaintiff's state or its residents. "Alabama does not have the power, however, to punish BMW for conduct that was lawful where it occurred and that had no impact on Alabama or its residents." Id. at 572-73, 116 S.Ct. 1589. In some cases the distinction between using the evidence as it bears on reprehensibility but not as a measure of damages might be so gossamer as to be difficult for a jury to apply, but in others the significance of the distinction will be quite clear. For example, where the jury wants to punish a national manufacturer for something it did nationally, it might well be tempted to multiply the appropriate amount of punitive damages for one plaintiff by the number of hypothetical plaintiffs the jury thinks likely to be harmed. That can't be done, under BMW, where the award would thereby include amounts based on out-of-state victims.

[70] Id. at 573 n. 20, 116 S.Ct. 1589.

[71] Continental Trend Res., Inc. v. OXY USA Inc., 101 F.3d 634, 636-37 (10th Cir.1996); but see Owens-Corning Fiberglas Corp. v. Ballard, 739 So.2d 603, 606 (Fla.App. 4th Dist. 1998) (disagreeing with Continental Trend's interpretation of BMW on grounds that "where the defendant's conduct is considered tortious in all 50 states ... the same due process concerns implicated in BMW do not arise").

[72] Continental Trend, 101 F.3d at 637.

[73] BMW, 517 U.S. at 570 n. 14, 116 S.Ct. 1589.

[74] Nev.Rev.Stat. § 42.005(2) (1996).

[75] Alaska Stat. § 09.17.020(g) (Lexis 2000).

[76] Alaska Stat. § 09.17.020(j) (Lexis 2000).

[77] BMW, 517 U.S. at 585, 116 S.Ct. 1589.

[78] See, e.g., Baker v. Exxon Corp. (In re Exxon Valdez), 270 F.3d 1215, 1244 (9th Cir.2001).

[79] See, e.g., BMW, 517 U.S. at 593, 116 S.Ct. 1589 (Breyer, J. concurring); In re Exxon Valdez, 270 F.3d at 1244.

[80] BMW, 517 U.S. at 572, 116 S.Ct. 1589 (elision is of word "lawful").

[81] See Continental Trend, 101 F.3d at 637.

[82] See, e.g., Ace v. Aetna Life Ins. Co., 40 F.Supp.2d 1125, 1133 (D.Alaska 1999) (reading "BMW case broadly enough to suggest that Alaska must leave some room within which the other states can exercise their own interests in defining the precise extent of and in deterring wrongful conduct"); Hampton v. Dillard Dep't Stores, Inc., 18 F.Supp.2d 1256, 1276 (D.Kan.1998) ("the punitive damage award must relate to conduct occurring within the state"); Geressy v. Digital Equip. Corp., 950 F.Supp. 519, 521-22 (E.D.N.Y.1997) (noting that punitive damage awards are limited by "principle of our federal system that state legislation, state policy, and judicial development of state law can only be directed at activity within the state."); Ford Motor Co. v. Ammerman, 705 N.E.2d 539, 561 (1999) (assuming no jurisdiction condones sale of defective products, "[n]onetheless it is up to each jurisdiction to make that determination for itself.... Thus any punitive damages award should be limited to protecting this State's consumers.").

[83] Geressy, 950 F.Supp. at 521.

[84] Id. at 524.

[85] Boatmen's Trust Co. v. St. Paul Fire & Marine Ins. Co., 995 F.Supp. 956, 962 (E.D.Ark.1998).

[86] Birchler v. Gehl Co., 88 F.3d 518, 521 (7th Cir.1996).

[87] Anderson v. Nissan Motor Co., 139 F.3d 599, 602 (8th Cir.1998).

[88] McLennan v. Am. Eurocopter Corp., 245 F.3d 403, 430 (5th Cir.2001).

[89] DeSantis v. Frick Co., 745 A.2d 624, 627-32 (2000) (defect must have existed when product left manufacturer's hands); Sullivan v. Modern Group Ltd., 46 Pa. D. & C.4th 524, 530-31 (2000).

[90] Hiner v. Deere & Co., 161 F.Supp.2d 1279, 1290 (D.Kan.2001).

[91] 517 U.S. at 573 n. 19, 116 S.Ct. 1589 (citation and internal quotation marks omitted).

[92] 532 U.S. 424, 121 S.Ct. 1678, 149 L.Ed.2d 674 (2001).

[93] Cooper v. Firestone Tire & Rubber Co., 945 F.2d 1103, 1107 (9th Cir.1991); see also Bird v. Glacier Elec. Coop., Inc., 255 F.3d 1136, 1145 & n. 16 (9th Cir.2001) (citing Standard Oil Co. v. Perkins, 347 F.2d 379, 388 (9th Cir.1965)).

[94] The Supreme Court may give additional guidance on the issues presented here when it decides Campbell v. State Farm Mutual Automobile Insurance Co., No. 981564, 2001 WL 1246676 (Utah Oct. 19, 2001), cert. granted, ___ U.S. ___, 122 S.Ct. 2326, 153 L.Ed.2d 158 (2002). Meanwhile, however, I believe that the majority has strayed from the messages sent by the Supreme Court to date.

[95] Special Verdict Question Fifteen provided: "Do you find by clear and convincing evidence that Ford acted with oppression or malice in the conduct upon which you base your finding of liability for the death of Walter White?"

[96] Defendant also contends that it suffered harm from the court's failure to give its requested instruction because, even if the jury award falls within the range allowed by due process, the award might have been lower had the jury been so instructed. The argument that a failure to instruct the jury on the limitations imposed by due process violates due process, even if the resulting award in fact comports with due process, is not persuasive. As will be discussed below, a defendant's procedural due process interest is protected if punitive damages are awarded in a manner that complies with due process. A defendant's substantive due process interest is protected if the size of the award is not excessive. So long as neither of those harms occurs, a defendant has not been harmed, in a constitutionally cognizable way, by the failure to instruct. In other words, a defendant is not constitutionally entitled to a "lower" award within the range of awards that complies with due process. Cf. Leatherman Tool Group, Inc. v. Cooper Indus., Inc., 285 F.3d 1146, 1151 (9th Cir.2002) (stating that usually a new trial is not required when an award of punitive damages exceeds constitutional limits. "That conclusion usually follows from the fact that a plaintiff would not be entitled to any greater award on remand and therefore cannot be aggrieved." The implicit corollary to that conclusion is that a defendant against whom a permissible verdict was entered would not be entitled to any lesser award on remand as a matter of due process, and likewise could not be aggrieved.).

[97]Specifically, the instructions provided:

Now, if you find that fraud was perpetrated then in addition to compensatory damages you may in your discretion, when I use the word discretion, I say you don't even have to find fraud, you wouldn't have to, but you may, the law says you may award an amount of money known as punitive damages.

This amount of money is awarded to the plaintiff but it is not to compensate the plaintiff for any injury. It is to punish the defendant. Punitive means to punish or it is also called exemplary damages, which means to make an example. So, if you feel or not feel, but if you are reasonably satisfied from the evidence that the plaintiff, whatever plaintiff you are talking about, has had a fraud perpetrated upon them and as a direct result they were injured and in addition to compensatory damages you may in your discretion award punitive damages.

Now, the purpose of awarding punitive or exemplary damages is to allow money recovery to the plaintiffs, it does to the plaintiff, by way of punishment to the defendant and for the added purpose of protecting the public by detering [sic] the defendant and others from doing such wrong in the future. Imposition of punitive damages is entirely discretionary with the jury, that means you don't have to award it unless this jury feels that you should do so.

Should you award punitive damages, in fixing the amount, you must take into consideration the character and the degree of the wrong as shown by the evidence and necessity of preventing similar wrong.

Haslip, 499 U.S. at 6 n. 1, 111 S.Ct. 1032.

[98]Those standards are:

(a) whether there is a reasonable relationship between the punitive damages award and the harm likely to result from the defendant's conduct as well as the harm that actually has occurred; (b) the degree of reprehensibility of the defendant's conduct, the duration of that conduct, the defendant's awareness, any concealment, and the existence and frequency of similar past conduct; (c) the profitability to the defendant of the wrongful conduct and the desirability of removing that profit and of having the defendant also sustain a loss; (d) the "financial position" of the defendant; (e) all the costs of litigation; (f) the imposition of criminal sanctions on the defendant for its conduct, these to be taken in mitigation; and (g) the existence of other civil awards against the defendant for the same conduct, these also to be taken in mitigation.

Haslip, 499 U.S. at 21-22, 111 S.Ct. 1032.

[99] Defendant did object to a reference to Plaintiffs' grief and to an argument that Defendant knew that children would be the victims of its failure to warn. On appeal, Defendant continues to contend that those arguments prejudicially appealed to the passion and prejudice of the jury.

[100] I question whether the principles articulated in Gore extend to a situation in which the conduct at issue is unlawful everywhere. In that circumstance, there would be no conflict with the policy goals of any state, and excessiveness review would prevent the unfairness of multiple recovery for the same wrong. As noted in text, however, we have no occasion to decide this issue.

[175] William E. Watson, Esq., Christine Machel, Esq., William E. Watson & Associates, Wellsburg, for Appellees.

James A. Walls, Esq., Spilman Thomas & Battle, Morgantown, for Falcon Transport Company.

MAYNARD, Chief Justice.

Appellant and Defendant below, Falcon Transport Company, appeals the March 28, 2003, order of the Circuit Court of Brooke County that denied Appellant's motion for remittitur or, in the alternative, a new trial, and upheld the jury verdict which found that Appellant committed fraud against the four Appellees and awarded to each of them $75,000.00 in compensatory damages and $250,000.00 in punitive damages. Appellees cross-appeal the April 10, 2003, order of the Circuit Court of Brooke County that denied their request for attorney fees and litigation expenses. For the reasons that follow, we affirm both orders of the circuit court.

I.

FACTS

Falcon Transport Co., Appellant and Defendant below, is an Ohio Corporation in the business of commercial trucking which has a trucking terminal in Weirton, West Virginia. Appellees and Plaintiffs below, John Boyd, Markus Spear, Jason Brown, and Rich Fadse, are all West Virginia residents who applied with Appellant's recruiter in Weirton, Tom Goffoli, to become commercial truck drivers who would operate out of Appellant's Weirton terminal. Because Appellees did not have commercial driver's licenses, Goffoli informed them^[1] that they would have to enroll in a truck driver training program in Sharon, Pennsylvania at a cost of $495.00 each and take a physical exam at a Pennsylvania clinic at a cost of $75.00. Finally, Goffoli explained, Appellees would be required to transfer their West Virginia driver's licenses to Pennsylvania, obtain their Pennsylvania commercial driver's licenses, and then transfer their commercial driver's licenses back to West Virginia. When Appellants inquired whether this license transfer scheme was legal, Goffoli informed them that it was perfectly legal and done all the time.

Appellees subsequently quit their jobs and drove daily to Pennsylvania to attend the truck driver training course. Upon initial arrival at the Pennsylvania course, Appellees were introduced to John Magliocca, a Defendant below, who contracted with Appellant to arrange each driving candidate's physical examination, drug test, and commercial driver's license examination. At trial, Appellant adduced evidence that, under the terms of its contract with Magliocca, a person by the name of Phil Hankey was responsible for actually training the driving candidates. Appellees testified, however, that they never met Hankey.

After paying the $495.00 fees, Appellees were provided by Magliocca with instructional booklets and other materials designed to assist them in obtaining their commercial driver's licenses. Among these materials was a memorandum indicating a Pennsylvania address that Appellees were to use as their residence when they applied to the Pennsylvania Department of Transportation (hereafter "PennDot") for their Pennsylvania commercial driver's permits and licenses. Appellees each obtained their permits by using the Pennsylvania address supplied by Magliocca.

When Appellees subsequently returned to the PennDot Office to take a vision and written examination to obtain their commercial driver's licenses, a PennDot employee inquired why all four Appellees listed the same address as their Pennsylvania residences. Appellees acknowledged that they were West Virginia residents and had been instructed by Magliocca to use the Pennsylvania address on their commercial driver's license applications. The PennDot employee then confiscated Appellees' Pennsylvania driver's licenses and commercial driver's license permits; advised them that they had [176] committed a crime; and placed them in a room for 45 minutes to an hour until the employee received further instruction on what to do with Appellees. Ultimately, Appellees were advised that no criminal charges would be filed and they were allowed to leave. Thereafter, Appellees rejected Appellant's offer to complete their training in West Virginia and Appellees' $495.00 training fees were refunded.

Appellees subsequently filed suit against Appellant, Goffoli,^[2] and Magliocca^[3] in the Circuit Court of Brooke County in which they alleged fraud, tortious conspiracy, and negligence.^[4] After discovery was completed, Appellant and Magliocca offered to pay Appellees $52,500.00 to settle wherein $47,500.00 would be paid by Appellant and $5,000.00 would be paid by Magliocca. Appellees rejected the offer and made a counteroffer of $145,000.00 which was rejected. However, three days before trial, Appellees settled with Magliocca for $4,000.00, which was $1,000.00 less than previously offered by Magliocca, leaving Appellant as the only defendant in the case.^[5]

The jury returned a verdict against Appellant for actual or constructive fraud and determined that Appellant was liable for Magliocca's fraud as a co-conspirator and joint venturer. It awarded $75,000.00 to each Appellee for wages, aggravation, and inconvenience, and $250,000.00 to each Appellee in punitive damages.

II.

DISCUSSION

1. Propriety of Punitive Damages Award

The first assignment of error raised by Appellant is that the circuit court violated fundamental principles of federalism, comity, and due process and committed constitutional error by upholding the jury's punitive damage award on the basis of an out-of-state "scheme" to violate Pennsylvania law.^[6] As a preliminary matter, we note that our review of this issue is de novo. See Phillip Leon M. v. Greenbrier Cty. Bd. of Educ., 199 W.Va. 400, 404, 484 S.E.2d 909, 913 (1996), modified on other grounds by Cathe A. v. Doddridge County Bd. Of Educ., 200 W.Va. 521, 490 S.E.2d 340 (1997) (stating that "[b]ecause interpretations of the West Virginia Constitution, along with interpretations of statutes and rules, are primarily questions of law, we apply a de novo review"). c.f. Cooper Industries, Inc. v. Leatherman Tool Group, Inc., 532 U.S. 424, 436, 121 S.Ct. 1678, 1685-86, 149 L.Ed.2d 674 (2001) (providing that "courts of appeals should apply a de novo standard of review when passing on district [177] courts' determinations of the constitutionality of punitive damages awards" (footnote omitted)).

Appellant now claims that it was improperly punished for a scheme to violate Pennsylvania law in contravention of State Farm Mut. Auto. Ins. Co. v. Campbell, 538 U.S. 408, 123 S.Ct. 1513, 155 L.Ed.2d 585 (2003). In support of this argument, Appellant points to comments made at trial by Appellees' counsel. For example, in her opening statement, counsel for Appellees mentioned that "[t]his case is about fraud, it's about conspiracy to violate the law in Pennsylvania[.]" In her summation, Appellees' counsel again mentioned punishing Appellant for not following the law. Appellant also asserts that the circuit court upheld the award based on the out-of-state scheme. Specifically, Appellant claims that the circuit court upheld the punitive damages award based on out-of-state conduct directed at non-West Virginians. To support this claim, Appellant avers that "there is no evidence in the record below that any other West Virginia residents attended [Appellant's] training center or were harmed by the scheme."

After close examination of the Supreme Court's pronouncements in Campbell, we find that the punitive damages award at issue does not violate that case. In Campbell, the insureds brought an action against their insurer, State Farm, to recover for bad-faith failure to settle within the policy limits and damages for fraud and intentional infliction of emotional distress. A jury awarded the insureds $2.6 million in compensatory damages and $145 million in punitive damages, which the trial court reduced to $1 million and $25 million respectively. On appeal, the Utah Supreme Court reinstated the $145 million punitive damages award. The United States Supreme Court subsequently reversed the punitive damages award because it found it to be "neither reasonable nor proportionate to the wrong committed," and "an irrational and arbitrary deprivation of the property of the defendant" in violation of the Fourteenth Amendment. Campbell, 538 U.S. at 429, 123 S.Ct. at 1526. In reaching this conclusion, the Supreme Court discussed the type of evidence that may be admitted in proving the appropriateness of punitive damages.

The insureds in Campbell sought to show the reprehensible conduct of State Farm by introducing evidence of State Farm's business practices for over 20 years in numerous states. The Court found this evidence to be improper. First, the Court said that "[a] State cannot punish a defendant for conduct that may have been lawful where it occurred." 538 U.S. at 421, 123 S.Ct. at 1522 (citations omitted). The Court explained, however, that

Lawful out-of-state conduct may be probative when it demonstrates the deliberateness and culpability of the defendant's action in the State where it is tortious, but that conduct must have a nexus to the specific harm suffered by the plaintiff. A jury must be instructed, furthermore, that it may not use evidence of out-of-state conduct to punish a defendant for action that was lawful in the jurisdiction where it occurred.

538 U.S. at 422, 123 S.Ct. at 1522-23 (citation omitted). Second, the Court expounded that, as a general rule, a State has no legitimate concern "in imposing punitive damages to punish a defendant for unlawful acts committed outside of the State's jurisdiction. Any proper adjudication of conduct that occurred outside Utah to other persons would require their inclusion, and, to those parties, the Utah courts, in the usual case, would need to apply the laws of their relevant jurisdiction." 538 U.S. at 421-22, 123 S.Ct. at 1522 (citation omitted).

The Court's conclusion that improper evidence was admitted in Campbell was based on its finding that,

The courts awarded punitive damages to punish and deter conduct that bore no relation to the [insureds'] harm. A defendant's dissimilar acts, independent from the acts upon which liability was premised, may not serve as the basis for punitive damages. A defendant should be punished for the conduct that harmed the plaintiff, not for being an unsavory individual or business.

538 U.S. at 422-23, 123 S.Ct. at 1523. The Court further explained:

[178] The [insureds] have identified scant evidence of repeated misconduct of the sort that injured them. Nor does our review of the Utah courts' decisions convince us that State Farm was only punished for its actions toward the [insureds]. Although evidence of other acts need not be identical to have relevance in the calculation of punitive damages, the Utah court erred here because evidence pertaining to claims that had nothing to do with a third-party lawsuit was introduced at length. Other evidence concerning reprehensibility was even more tangential. For example, the Utah Supreme Court criticized State Farm's investigation into the personal life of one of its employees and, in a broader approach, the manner in which State Farm's policies corrupted its employees. The [insureds'] attempt to justify the courts' reliance upon this unrelated testimony on the theory that each dollar of profit made by underpaying a third-party claimant is the same as a dollar made by underpaying a first-party one. For the reasons already stated, this argument is unconvincing. The reprehensibility guidepost does not permit courts to expand the scope of the case so that a defendant may be punished for any malfeasance, which in this case extended for a 20-year period. In this case, because the [insureds] have shown no conduct by State Farm similar to that which harmed them, the conduct that harmed them is the only conduct relevant to the reprehensibility analysis.

538 U.S. at 423-24, 123 S.Ct. at 1523-24 (citations omitted).

First, we note that the facts of Campbell are clearly distinguishable from those in the instant case. The punitive damage award in Campbell was based on dissimilar lawful out-of-state conduct. In contrast, the instant case involves evidence of unlawful out-of-state conduct that actually injured Appellees. In other words, unlike in Campbell, the bulk of Appellees' evidence consisted of Appellees' testimony concerning Magliocca's conduct toward them which resulted in the damages of which they complained. Also, in the instant case, unlike in Campbell, no evidence was introduced of wrongdoing that was dissimilar to the kind of wrongdoing that harmed Appellees.

Further, this Court does not believe that the Campbell Court's broadly worded dictum that a state does not have a legitimate concern imposing punitive damages to punish a defendant's unlawful out-of-state conduct applies to the instant case. Significantly, in support of its declaration on the inappropriateness of using out-of-state conduct to punish a defendant, the Supreme Court cited Phillips Petroleum Co. v. Shutts, 472 U.S. 797, 105 S.Ct. 2965, 86 L.Ed.2d 628 (1985), which concerned a nationwide class action. In Shutts, Petitioner was a Delaware corporation which had its principal place of business in Oklahoma. During the 1970's it produced or purchased natural gas from leased land located in 11 different states, and sold most of the gas in interstate commerce. Respondents were 28,000 of the royalty owners possessing rights to the leases from which petitioner produced gas. They resided in all 50 states, the District of Columbia, and several foreign countries. Respondents brought a class action against petitioner in a Kansas state court seeking to recover interest on royalty payments which had been delayed by petitioner. The Kansas court applied Kansas contract and equity law to every claim, despite the fact that over 99% of the gas leases and 97% of the plaintiffs in the case had no apparent connection to the State of Kansas except for the lawsuit, and found petitioner liable for interest on the suspended royalties. Petitioner contended that total application of Kansas substantive law violated the constitutional limitations on choice of law mandated by the Full Faith and Credit Clause of the Federal Constitution, Article IV, § 1.

The Supreme Court explained that "[w]e must first determine whether Kansas law conflicts in any material way with any other law which could apply. There can be no injury in applying Kansas law if it is not in conflict with that of any other jurisdiction connected to this suit." Shutts, 472 U.S. at 816, 105 S.Ct. at 2976. After determining that there were actual conflicts between Kansas law and the laws of the other states, the Court reasoned:

[179] Kansas must have a "significant contact or significant aggregation of contacts" to the claims asserted by each member of the plaintiff class, contacts "creating state interests," in order to ensure that the choice of Kansas law is not arbitrary or unfair. Allstate [Ins. Co. v. Hague], 449 U.S.[302], at 312-313, [101 S.Ct. 633, 640, 66 L.Ed.2d 521 (1981)]. Given Kansas' lack of "interest" in claims unrelated to that State, and the substantive conflict with jurisdictions such as Texas, we conclude that application of Kansas law to every claim in this case is sufficiently arbitrary and unfair as to exceed constitutional limits.

When considering fairness in this context, an important element is the expectation of the parties. See Allstate, supra, at 333, [101 S.Ct. at 651] (opinion POWELL, J.). There is no indication that when the leases involving land and royalty owners outside of Kansas were executed, the parties had any idea that Kansas law would control. Neither the Due Process Clause nor the Full Faith and Credit Clause requires Kansas "to substitute for its own [laws], applicable to persons and events within it, the conflicting statute of another state," Pacific Employers Ins. Co. v. Industrial Accident Comm'n, 306 U.S. 493, 502[,] [59 S.Ct. 629, 633, 83 L.Ed. 940 (1939)], but Kansas "may not abrogate the rights of parties beyond its borders having no relation to anything done or to be done within them." Home Ins. Co. v. Dick, supra, [281 U.S. 397] at 410 [50 S.Ct., 338, 342, 74 L.Ed. 926 (1930)].

Shutts, 472 U.S. at 821-822, 105 S.Ct. at 2979-2980.

Reading the Supreme Court's pronouncements in Campbell and Shutts together, this Court now holds that a State has a legitimate interest in imposing damages to punish a defendant for unlawful acts committed outside of the State's jurisdiction where the State has a significant contact or significant aggregation of contacts to the plaintiffs' claims which arise from the unlawful out-of-state conduct. We now apply this rule to the instant facts.

First, we note that the facts in Shutts are quite different from those below. In Shutts, Kansas law was applied to all of the claims despite the fact that the vast majority of those claims had no connection to Kansas. In contrast, Appellees were all West Virginia residents who were initially informed of the Pennsylvania scheme, and wrongly assured that it was legal by Appellant's agent who was a resident of West Virginia. Further, Appellees' economic losses occurred in West Virginia. Therefore, West Virginia has a significant contact with the claims asserted by Appellees. As a result, the fact that a portion of Appellant's misconduct occurred in Pennsylvania is legally insignificant. Certainly, a West Virginia court has an interest in protecting its citizens from tortious conduct and is not precluded from doing so simply because some of the tortious conduct occurred in another state.

Appellant emphasizes, however, that it is not complaining of the use of the Pennsylvania wrongdoing to harm Appellees but rather that Appellant was wrongly punished for subjecting non-West Virginians to this misconduct. In other words, says Appellant, evidence that Magliocca's illegal conduct in Pennsylvania formed a pattern of behavior necessarily implies that there were other victims of this conduct. However, no evidence was presented that any other West Virginia residents attended the Pennsylvania training center. Appellant asserts that one must conclude from this that Appellant was punished for illegal conduct perpetrated by Magliocca against non-West Virginia victims. We reject this line of reasoning. The fact is that in this case, unlike Campbell, there was no evidence presented regarding specific unlawful acts against others perpetrated by Appellant. Rather, the evidence consisted merely of a generalized statement made by an agent of Appellant to the Appellees indicating that Appellant's licensing scheme was a regular operating practice. In light of this, it is obvious to this Court that Appellant was punished for its conduct toward Appellees and not for unlawful conduct against any other persons.

In addition, in regards to the matter of fairness to Appellant, when Appellant, through its agent Magliocca, involved Appellees in an illegal scheme to obtain a commercial [180] driver's license, it knew that Appellees were West Virginia residents whose initial contact with Appellant was through Goffoli, its agent in West Virginia. As a result, the fact that Appellant may be held accountable in West Virginia for its wrongful conduct which injured West Virginia citizens and which occurred in both West Virginia and Pennsylvania should not have been beyond Appellant's expectations.

Finally, we believe application of Campbell to the facts of this case as urged by Appellant would produce absurd results which certainly could not have been intended by the Campbell Court. As noted by Appellees, if Appellant's arguments concerning out-of-state conduct were accepted, a defendant could always escape liability for illegal conduct against citizens of one state if part of the illegal conduct occurred in another state. For example, it appears that Appellant would have us conclude that in a bad faith insurance claim, filed in West Virginia, wherein a West Virginia resident alleges that his or her claim was wrongly denied, the defendant insurance company cannot be punished in a West Virginia court for its wrongful denial of the claim solely because the wrongful denial actually occurred at the insurance company's home office in another state as a result of a company policy that violates the other state's insurance law and that likely also injured non-West Virginia insurance consumers. We simply reject such an unreasonable reading of Campbell. Accordingly, for the reasons stated above, we conclude that, under the specific facts of this case, the introduction of Appellant's illegal Pennsylvania conduct in the West Virginia trial was not sufficiently arbitrary or unfair as to exceed constitutional limits.

2. Amount of Punitive Damages Award

Next, Appellant challenges the total punitive damages award on the ground it is excessive under BMW of North America v. Gore, 517 U.S. 559, 116 S.Ct. 1589, 134 L.Ed.2d 809 (1996). In making this argument, Appellant avers that the excessiveness inquiry must omit the Appellant's out-of-state conduct. For the reasons provided above, we reject this argument and will proceed to determine whether the punitive damages award is excessive in light of Appellant's wrongful conduct in both West Virginia and Pennsylvania.

In Syllabus Point 6, in part, of Alkire v. First Nat. Bank of Parsons, 197 W.Va. 122, 475 S.E.2d 122 (1996), this Court held, in part:

Every post-trial analysis as to the amount of the punitive damage award should be conducted by the trial court exclusively within the boundaries of Syllabus Points 3 and 4 of Garnes v. Fleming Landfill, Inc., 186 W.Va. 656, 413 S.E.2d 897 (1991), and Syllabus Point 15 of TXO Production Corp. v. Alliance Resources Corp., 187 W.Va. 457, 419 S.E.2d 870 (1992).

Further, in Syllabus Point 5 of Garnes, supra, we explained that,

Upon petition, this Court will review all punitive damages awards. In our review of the petition, we will consider the same factors that we require the jury and trial judge to consider, and all petitions must address each and every factor set forth in Syllabus Points 3 and 4 of this case with particularity, summarizing the evidence presented to the jury on the subject or to the trial court at the post-judgment review stage. Assignments of error related to a factor not specifically addressed in the petition will be deemed waived as a matter of state law.

According to Syllabus Point 3 and Syllabus Point 4, in part, of Garnes,

3. When the trial court instructs the jury on punitive damages, the court should, at a minimum, carefully explain the factors to be considered in awarding punitive damages. These factors are as follows:

(1) Punitive damages should bear a reasonable relationship to the harm that is likely to occur from the defendant's conduct as well as to the harm that actually has occurred. If the defendant's actions caused or would likely cause in a similar situation only slight harm, the damages should be relatively small. If the harm is grievous, the damages should be greater.

[181] (2) The jury may consider (although the court need not specifically instruct on each element if doing so would be unfairly prejudicial to the defendant), the reprehensibility of the defendant's conduct. The jury should take into account how long the defendant continued in his actions, whether he was aware his actions were causing or were likely to cause harm, whether he attempted to conceal or cover up his actions or the harm caused by them, whether/how often the defendant engaged in similar conduct in the past, and whether the defendant made reasonable efforts to make amends by offering a fair and prompt settlement for the actual harm caused once his liability became clear to him.

(3) If the defendant profited from his wrongful conduct, the punitive damages should remove the profit and should be in excess of the profit, so that the award discourages future bad acts by the defendant.

(4) As a matter of fundamental fairness, punitive damages should bear a reasonable relationship to compensatory damages.

(5) The financial position of the defendant is relevant.

4. When the trial court reviews an award of punitive damages, the court should, at a minimum, consider the factors given to the jury as well as the following additional factors:

(1) The costs of the litigation;

(2) Any criminal sanctions imposed on the defendant for his conduct;

(3) Any other civil actions against the same defendant, based on the same conduct; and

(4) The appropriateness of punitive damages to encourage fair and reasonable settlements when a clear wrong has been committed. A factor that may justify punitive damages is the cost of litigation to the plaintiff.

Finally, according to Syllabus Point 15 of TXO, supra,

The outer limit of the ratio of punitive damages to compensatory damages in cases in which the defendant has acted with extreme negligence or wanton disregard but with no actual intention to cause harm and in which compensatory damages are neither negligible nor very large is roughly 5 to 1. However, when the defendant has acted with actual evil intention, much higher ratios are not per se unconstitutional.

In its brief to this Court, Appellant argues that the punitive damages award herein is improper under the three "guideposts" delineated by the Supreme Court in Gore which are the degree of reprehensibility, the ratio of the punitive damage award to the actual harm inflicted on the plaintiff, and the comparison of the punitive damages award and the civil or criminal penalties that could be imposed for comparable misconduct. The reprehensibility guideposts were recently summarized by the Supreme Court in Campbell as follows:

"[T]he most important indicium of the reasonableness of a punitive damages award is the degree of reprehensibility of the defendant's conduct." Gore, supra, at 575, 517 U.S. 559, 116 S.Ct. 1589, 134 L.Ed.2d 809. We have instructed courts to determine the reprehensibility of a defendant by considering whether: the harm caused was physical as opposed to economic; the tortious conduct evinced an indifference to or a reckless disregard of the health or safety of others; the target of the conduct had financial vulnerability; the conduct involved repeated actions or was an isolated incident; and the harm was the result of intentional malice, trickery, or deceit, or mere accident. 517 U.S., at 576-577, 116 S.Ct. 1589, 134 L.Ed.2d 809. The existence of any one of these factors weighing in favor of a plaintiff may not be sufficient to sustain a punitive damages award; and the absence of all of them renders any award suspect. It should be presumed a plaintiff has been made whole for his injuries by compensatory damages, so punitive damages should only be awarded if the defendant's culpability, after having paid compensatory damages, is so reprehensible as to warrant the imposition of [182] further sanctions to achieve punishment or deterrence. Id., at 575, 517 U.S. 559, 116 S.Ct. 1589, 134 L.Ed.2d 809.

Campbell, 538 U.S. at 419, 123 S.Ct. at 1521.

In regards to the Gore guideposts, Appellant first asserts that the circuit court failed to properly analyze Appellant's conduct under the reprehensibility guidepost. Specifically, avers Appellant, the circuit court focused solely on the out-of-state scheme to violate Pennsylvania law, and failed to consider that the harm caused to Appellees was economic rather than physical; Appellant's conduct was not specifically designed to harm Appellees; there was no evidence of repeated West Virginia conduct; and Appellant's conduct did not indicate indifference or a reckless disregard of the health and safety of others.

We find no merit to this argument. First, for the reasons stated above, we conclude that the circuit court did not err in considering Appellant's out-of-state conduct in its reprehensibility analysis. Also, although the circuit court's order does not specifically address the Gore guideposts, it does address the factors set forth in Syllabus Point 3 of Garnes. This Court has explained that the Gore guideposts "are merely reiterations of factors previously-adopted by both this Court and the United States Supreme Court [,][and]... does not depart from existing law regarding punitive damages." Vandevender v. Sheetz, 200 W.Va. 591, 605, 490 S.E.2d 678, 692 (1997). We concluded in Vandevender that "there is simply no basis for ... [the] suggestion that [Gore] demands that punitive damages awards be reviewed differently from the fashion in which they are currently being reviewed under Garnes and its progeny." 200 W.Va. at 606, 490 S.E.2d at 693.

The circuit court found in its reprehensibility analysis under Syllabus Point 3 of Garnes that "[t]he Defendant's actions were illegal and illegal conduct is reprehensible. The Defendant was aware of proper licensing procedures but disregarded that procedure to circumvent the law for economic gain. The unrefuted testimony was that this process was used `all the time' until Plaintiffs were nearly arrested[.]" We do not believe that the circuit court's finding of reprehensibility is in error. Further, considering the factors mentioned by the Supreme Court in Gore, the targets of Appellant's fraudulent conduct were financially vulnerable in that three of the four Appellees quit decent jobs^[7] to become commercial truck drivers based on Appellant's representations. Also, because the jury found that Appellant committed fraud, the harm suffered by Appellees was the result of intentional conduct and not mere negligence. Finally, Appellant's scheme to illegally obtain commercial driver's licenses for Appellees was not an isolated incident but rather repeated conduct.

Second, Appellant avers that the ratio of actual or potential harm suffered by Appellees and the punitive damage award is excessively disparate. Appellant explains that although the ratio of the $1 million in punitive damages to the $300,000.00 in compensatory damages, which is 3.3:1, does not appear on its face to be constitutionally infirm, the fact is that the compensatory award is made up in large part of a component that is duplicative of the punitive damages award and must therefore receive heightened scrutiny. As noted by Appellant, the stipulated economic losses of Appellees Brown, Boyd, Fadse, and Spear were $1,000.00, $14,000.00, $30,054.00, and $46,938.00 respectively which amounts to a total of $118,992.00 in stipulated economic losses. When this amount is subtracted from the total of $300,000.00 in compensatory awards, one is left with the sum of $208,008.00 as the non-economic component of the total compensatory award. Appellant [183] concludes that when one reasonably assumes that the non-economic component of the compensatory award contains, in whole or in part, elements of punitive damages, and the punitive damages award is then compared to Appellees' economic damages, the ratio is 8.4:1, which, asserts Appellant, is unconstitutional. In support of its reasoning on this issue, Appellant points to language in Campbell where the plaintiff suffered only minor economic injuries, yet the jury awarded $1 million in compensatory damages. According to the Supreme Court in Campbell,

[t]he compensatory damages for the injury suffered here, moreover, likely were based on a component which was duplicated in the punitive award. Much of the distress was caused by the outrage and humiliation the Campbells suffered at the actions of [State Farm]; and it is a major role of punitive damages to condemn such conduct. Compensatory damages, however, already contain this punitive element. See Restatement (Second) of Torts § 908, Comment c, p. 466 (1977) ("In many cases in which compensatory damages include an amount for emotional distress, such as humiliation or indignation aroused by the defendant's act, there is no clear line of demarcation between punishment and compensation and a verdict for a specific amount frequently includes elements of both").

538 U.S. at 426, 123 S.Ct. at 1525.

In addressing this issue in its order upholding the punitive damages award, the circuit court found as follows:

The Defendant argues that the compensatory damages awarded to the Plaintiffs over and above the evidence of their economic loss should be construed to be "emotional distress" damages. Defendant further argues that West Virginia law does not permit an award of punitive damages if emotional distress damages are awarded. The final charge to the jury did not mention emotional distress. There was substantial uncontradicted evidence from all Plaintiffs that they experienced annoyance, aggravation and inconvenience as a result of their recruitment by Defendant's employee Goffoli and all that followed. West Virginia law does not support Defendant's contention that punitive damages cannot be awarded if damages for emotional distress, annoyance, aggravation or inconvenience are also awarded. Tudor v. Charleston Area Medical Center, 203 W.Va. 111, 506 S.E.2d 554 (1997); Vandevender v. Sheetz, Inc., 200 W.Va. 591, 490 S.E.2d 678 (1997). The Supreme Court specifically limited Tudor and held in Sheetz v. Bowles, Rice, McDavid, Graff & Love, 209 W.Va. 318, 547 S.E.2d 256 (W.Va.2001), that only when the torts of the intentional or reckless infliction of emotional distress are involved will damages for emotional distress and punitive damages be considered double recovery. In view of the specific rejection by the Supreme Court of the Defendant's argument in this case and the fact that this was a fraud case, it cannot be said that the Plaintiffs received a double recovery.

We agree with the circuit court's analysis and its characterization of this Court's holding in Sheetz. We explained in Sheetz"that in the case of an intentional or reckless infliction of emotional distress claim, if there is not substantial and concrete evidence of a plaintiff's physical, emotional or psychiatric injury, some or all of an emotional distress damages award may actually be punitive damages." 209 W.Va. 318, 337, 547 S.E.2d 256, 275. We further said, however, that such a concern does not arise in a case in which the emotional distress and punitive damages award were based on claims of termination and retaliation in violation of our human rights and workers' compensation statutes. Therefore, in the instant case, the circuit court properly found that, because the instant case does not involve claims for intentional or reckless infliction of emotional distress, there is no reason to conclude that the punitive damages award is duplicative of the compensatory damages award.

In addition, even if we were to consider a portion of the compensatory damages in this case to be punitive damages so as to result in a ratio of 8.4:1, such a ratio is by no means necessarily unconstitutional. As the Supreme Court noted in Campbell, while single-digit multipliers (meaning a ratio of up to [184] 9 to 1) are more likely to comport with due process "there are no rigid benchmarks that a punitive damages award may not surpass [.]" 538 U.S. at 425, 123 S.Ct. at 1524. In sum, there is nothing in our jurisprudence or that of the United States Supreme Court that renders the ratio of the punitive damages award to the compensatory damages award in this case improper.

Appellant's final argument on the issue of the punitive damages award is that the award is excessive under the third Gore guidepost which focuses on the difference between the punitive damages award and the civil penalties imposed in comparable cases. Specifically, Appellant explains that Appellees each paid Magliocca a $495.00 consulting fee. Appellant further asserts that the maximum penalty under West Virginia law for fraud or conspiracy to commit fraud involving money, goods or other property valued at less than $1,000.00 is $2,500.00, citing W.Va.Code § 61-3-24(a)(3) (1994), a sum that is dwarfed by the $250,000.00 punitive damage award for each Appellee. Again, we disagree.

In Campbell, supra, the Supreme Court compared the $145 million punitive damages award with "the most relevant civil sanction under Utah state law which was a $10,000.00 fine for an act of fraud" and found the disparity to be too great. However, the Court subsequently found that "[a]n application of the Gore guideposts to the facts of this case, especially in light of the substantial compensatory damages awarded (a portion of which contained a punitive element), likely would justify a punitive damages award at or near the amount of compensatory damages" which was $1 million. 538 U.S. at 429, 123 S.Ct. at 1526. Apparent from this statement is the fact that the Supreme Court did not believe that a punitive damages award one hundred times greater than the civil penalty that could be imposed for such conduct was excessive. Likewise, in the instant case, we do not believe that the third Gore guidepost compels the conclusion that the punitive damages award herein is excessive.

In sum, we conclude, for the foregoing reasons, that the punitive damages award below does not constitute an impermissible punishment of Appellant for out-of-state conduct in violation of Campbell and Shutts. Also, we find that the punitive damages award is not excessive under this Court's holding in Garnes and the United States Supreme Court case of BMW v. Gore.

3. Propriety of Magliocca's Settlement with Appellees

In its second assignment of error, Appellant seeks a new trial on the basis that Appellees' $4,000.00 settlement with Magliocca on the eve of trial after rejecting the previous settlement offer of $52,500.00 by Appellant and Magliocca was not made in good faith and it substantially impaired Appellant's ability to receive a fair trial.

First, we note that, upon learning of Magliocca's settlement with Appellees, Appellant sought a continuance of the trial, and the circuit court denied its request. This Court has held,

The granting of a continuance is a matter within the sound discretion of the trial court, although subject to review, and the refusal thereof is not ground for reversal unless it is made to appear that the court abused its discretion, and that its refusal has worked injury and prejudice to the rights of the party in whose behalf the motion was made.

Syllabus Point 1, State v. Jones, 84 W.Va. 85, 99 S.E. 271 (1919). In its letter to the circuit court in which it requested a continuance, Appellant stated, "In light of this last minute settlement it will be extremely difficult if not impossible for Falcon to subpoena the presence of Mr. Magliocca and/or Ms. Gaglianni [Magliocca's employee]." The circuit court explained its reason for denying the continuance as follows:

Falcon was not prejudiced by the absence of Co-Defendant Magliocca. Though John Magliocca resided outside the State of West Virginia, all parties had the opportunity to preserve his testimony at his deposition. Defendant Falcon Transport Company chose not to cross-examine John Magliocca. It was Defense Counsel's responsibility to preserve testimony through a deposition should it be necessary to use that deposition at trial [185] because the person is outside of the Court's jurisdiction. Having failed to cross-examine John Magliocca at the deposition to preserve his testimony and having failed to anticipate the possibility that John Magliocca may or may not appear at trial and having failed to anticipate that a settlement could occur between the Plaintiffs and John Magliocca, the Defendant, Falcon Transport Company, waived its right to claim that John Magliocca's absence at trial was in error.

The circuit court also found that Appellant advised the court prior to trial that it would not pursue its cross-claim against Magliocca and declined the court's offer to hold a hearing on that settlement.

This Court's review of the record below reveals that a transcript of the deposition testimony of Ms. Gaglianni, who was an employee of Magliocca, was available at trial and was read by counsel for the Appellees. Also, portions of Magliocca's deposition testimony was read by counsel for both Appellees and Appellant. Further, as noted by the circuit court, Appellant had the opportunity to preserve Magliocca's testimony at deposition but chose not to cross-examine Magliocca. Therefore, Appellant cannot later complain of Magliocca's unavailability. In addition, it appears that Appellant has waived its alleged error of denying a continuance by declining the circuit court's offer to hold a hearing on the settlement. Finally, according to Rule 7(b) of the West Virginia Rules of Civil Procedure, when a party applies to the court for an order, he or she shall "state with particularity the grounds therefor." Appellant's request for a continuance however, was supported solely by a blanket assertion that it will be extremely difficult if not impossible to compel the presence of Magliocca and Ms. Gaglianni at trial which is insufficient under Rule 7(b). Accordingly, we find that the circuit court did not abuse its discretion in denying Appellant's request for a continuance.

On appeal to this Court, Appellant specifically argues that it should be granted a new trial because the settlement between Magliocca and Appellees was designed by Appellees to prejudice Appellant at trial. We note as a preliminary matter that the standard applied when reviewing a lower court's denial of a new trial is set forth in Tennant v. Marion Health Care Foundation, Inc., 194 W.Va. 97, 104, 459 S.E.2d 374, 381 (1995), wherein we stated that we review the rulings of the circuit court under an abuse of discretion standard, and we review the circuit court's underlying factual findings under a clearly erroneous standard. Questions of law are subject to a de novo review.

Essentially, Appellant avers that the amount and timing of Magliocca's settlement indicates a corrupt intent to deprive Appellant of a fair trial. Further, Appellant says that it was deprived of a fair trial because most, if not all of the tortious conduct was committed by Magliocca. If Magliocca had been required to testify at trial, explains Appellant, the jury would have had the opportunity to weigh his conduct and demeanor against that of Appellant's witnesses. However, by settling on the eve of trial, with no notice to Appellant, Appellees assured themselves that Magliocca, an out-of-state resident, would not be present at trial.

Appellant bears a heavy burden in seeking to prove that the settlement between Magliocca and Appellees was not made in good faith.

Settlements are presumptively made in good faith. A defendant seeking to establish that a settlement made by a plaintiff and a joint tortfeasor lacks good faith has the burden of doing so by clear and convincing evidence. Because the primary consideration is whether the settlement arrangement substantially impairs the ability of remaining defendants to receive a fair trial, a settlement lacks good faith only upon a showing of corrupt intent by the settling plaintiff and joint tortfeasor, in that the settlement involved collusion, dishonesty, fraud or other tortious conduct.

Syllabus Point 5, Smith v. Monongahela Power Co., 189 W.Va. 237, 429 S.E.2d 643 (1993). In addition,

The determination of whether a settlement has been made in good faith rests in the sound discretion of the trial court. The focus of the trial court's determination [186] is not whether the settlement fell within a "reasonable range" of the settling tortfeasor's proportional share of comparative liability, but whether the circumstances indicate that the non-settling tortfeasor was substantially deprived of a fair trial because of corrupt behavior on the part of the plaintiff and the settling tortfeasor or tortfeasors. The determination of the trial court may be based on such evidence as it deems appropriate in the circumstances. In many (if not most) cases, a review of discovery documents and affidavits from counsel will be sufficient. The trial court may, in its discretion, conduct a hearing on the issue, but it is not required to do so.

Syllabus Point 7, Smith.

We find that Appellant has failed to show by clear and convincing evidence that the settlement between Magliocca and Appellees lacked good faith. The offer of settlement made jointly by Appellant and Magliocca was $52,500.00 with Appellant to pay $47,500.00 and Magliocca to pay $5,000.00. Thus, the sum originally offered by Magliocca was close to the amount for which Magliocca ultimately settled. Also, Appellees explain in their brief that they were aware that Magliocca had little to offer in that he had no insurance and very limited financial resources. Further, we are unable to conclude that Magliocca's settlement with Appellees substantially impaired Appellant's ability to receive a fair trial. As noted above, both Appellees and Appellants read from the transcript of Magliocca's deposition. Therefore, we conclude that the circuit court did not abuse its discretion in denying Appellant's motion for a new trial based on Magliocca's settlement with Appellees.

4. Appellees Cross-Appeal — Denial of Attorney Fees and Costs

On cross-appeal, Appellees challenge the circuit court's denial of their request for attorney fees and costs. Specifically, Appellees asked for attorney fees of $45,562.50 and costs of $3,621.13. The circuit court denied Appellees' request due to the relatively high punitive damages award.

"As a general rule each litigant bears his or her own attorney's fees absent a contrary rule of court or express statutory or contractual authority for reimbursement." Syllabus Point 2, Sally-Mike Properties v. Yokum, 179 W.Va. 48, 365 S.E.2d 246 (1986). One exception to this general rule is cases involving fraud. In Syllabus Point 4 of Bowling v. Ansted Chrysler-Plymouth-Dodge, 188 W.Va. 468, 425 S.E.2d 144 (1992), we held "[w]here it can be shown by clear and convincing evidence that a defendant has engaged in fraudulent conduct which has injured a plaintiff, recovery of reasonable attorney's fees may be obtained in addition to the damages sustained as a result of the fraudulent conduct." This Court stated in Beto v. Stewart, 213 W.Va. 355, 359, 582 S.E.2d 802, 806 (2003), that "[t]he decision to award or not to award attorney's fees rests in the sound discretion of the circuit court, and the exercise of that discretion will not be disturbed on appeal except in cases of abuse."

After review of the facts below, we are unable to find that the circuit court abused its discretion in denying an award of attorney fees and costs to Appellees. An obvious purpose of awarding attorney fees and costs in a case involving fraud is that intentional conduct such as fraud should be punished and discouraged. As reasoned by the circuit court, however, Appellant has been sufficiently discouraged from future fraudulent conduct by the sizable punitive damages awarded by the jury. As a result, an award of attorney fees and costs is not necessary to perform this function. We agree. Therefore, we find that the circuit court did not abuse its discretion in denying an award of attorney fees and costs to Appellees. Accordingly, we affirm the April 10, 2003, order of the circuit court that denied Appellees' request for attorney fees and costs.

III.

CONCLUSION

For the reasons set forth above, we affirm the March 28, 2003, order of the Circuit Court of Brooke County that denied Appellant's motion for remittitur of the jury award or, in the alternative, a new trial. We also affirm the April 10, 2003, order of the Circuit [187] Court of Brooke County that denied Appellees' request for attorney fees and costs.

Affirmed.

Justice DAVIS concurs and reserves the right to file a concurring opinion.

Justice STARCHER concurs and reserves the right to file a concurring opinion.

DAVIS, J., concurring.

In this well written decision the majority opinion has affirmed a punitive damage award. I concur in the conclusion reached on this issue. I have chosen to write separately to underscore what I perceive to be limitations on the reach of the majority decision as it concerns punitive damages and evidence of unlawful out-of-state conduct by a defendant.

Campbell Revisited

The defendant in the instant case argued that the decision in State Farm Mutual Insurance v. Campbell, 538 U.S. 408, 123 S.Ct. 1513, 155 L.Ed.2d 585 (2003), was violated because the trial court allowed the introduction of evidence of unlawful out-of-state conduct by the defendant against nonlitigants. The majority opinion rejected this argument after finding that "in this case, unlike Campbell, there was no evidence presented regarding specific unlawful acts against others perpetrated by Appellant." Majority slip op. at 13.^[8] Because the jury was never presented with evidence of specific unlawful conduct committed by the defendant against nonlitigants, the majority correctly found that Campbell was not violated.

1. Application of Campbell to out-of-state conduct against nonlitigants.

The decision in Campbell involved a first-party bad faith action brought against an insurer in the state of Utah. During the course of the trial, the plaintiff sought to establish that the insurer had a nationwide policy of engaging in bad faith conduct in settling claims. To prove their theory, the plaintiff introduced evidence of "all types" of lawful out-of-state conduct that was committed by the insurer. The jury eventually returned a verdict awarding the plaintiff $1 million in compensatory damages and $145 million in punitive damages. The Utah Supreme Court affirmed the judgment. Subsequently, the United States Supreme Court granted certiorari. One of the issues addressed by the Supreme Court involved the use of an insurer's "lawful" out-of-state conduct against persons other than the plaintiff for the purpose of assessing punitive damages.

The Supreme Court made two dispositive rulings on the issue of out-of-state conduct perpetrated against nonlitigants as it relates to punitive damages. First, Campbell held that,

A State cannot punish a defendant for conduct that may have been lawful where it occurred. Nor, as a general rule, does a State have a legitimate concern in imposing punitive damages to punish a defendant for unlawful acts committed outside of the State's jurisdiction.

538 U.S. at 421, 123 S.Ct. at 1522, 155 L.Ed.2d at 603 (citations omitted). Second, the decision carved out an exception to the general rule regarding the use of evidence of a defendant's "lawful" out-of-state conduct against nonlitigants:

Lawful out-of-state conduct may be probative when it demonstrates the deliberateness and culpability of the defendant's action in the State where it is tortious, but that conduct must have a nexus to the specific harm suffered by the plaintiff. A jury must be instructed, furthermore, that it may not use evidence of out-of-state [188] conduct to punish a defendant for action that was lawful in the jurisdiction where it occurred.

Campbell, 538 U.S. at 422, 123 S.Ct. at 1522-1523, 155 L.Ed.2d at 604 (citation omitted).

On a previous occasion I have pointed out that "[s]ince the facts in Campbell involved only lawful out-of-state conduct [against nonlitigants], the opinion did not expressly state that its exception applied to unlawful out-of-state conduct [against nonlitigants]." Jackson v. State Farm Mut. Auto. Ins. Co., 215 W.Va. 634, 600 S.E.2d 346, 361 n. 3 (2004) (Davis, J., concurring) (emphasis in original). Accordingly, I believe that the question of whether or to what extent unlawful out-of-state conduct against non-litigants may be used remains unanswered by Campbell.

2. Application of Campbell to unlawful out-of-state conduct against nonlitigants.

The decision in Campbell made clear that, as a general matter, "a plaintiff cannot introduce evidence of ... unlawful out-of-state conduct by a defendant, for the sole purpose of punishing the defendant." Jackson, 600 S.E.2d at 361 (Davis, J., concurring) (emphasis in original). Insofar as Campbell was concerned with "lawful" out-of-state conduct, it did not reach the question of whether an exception exists that would allow the introduction of evidence of "unlawful" out-of-state conduct against nonlitigants.

In the instant case, the defendant argued that the trial court allowed the introduction of evidence of unlawful out-of-state conduct by the defendant against nonlitigants. The defendant further contended that the introduction of such evidence violated Campbell. The majority opinion correctly found that the issue did not have to be reached, because plaintiffs did not introduce evidence of specific unlawful out-of-state conduct by the defendant against nonlitigants. Instead, the opinion correctly addressed the more narrow issue of unlawful out-of-state conduct committed against the plaintiffs.

Campbell clearly does not prohibit or impose limitations on the use of evidence that shows a defendant's tortious conduct against a litigant involved unlawful out-of-state conduct. Indeed, Campbell held that "[a] defendant should be punished for the conduct that harmed the plaintiff[.]" Campbell, 538 U.S. at 423, 123 S.Ct. at 1523, 155 L.Ed.2d at 604. Under Campbell,

Due process does not permit courts, in the calculation of punitive damages, to adjudicate the merits of other [nonparties'] hypothetical claims against a defendant.... Punishment on these bases creates the possibility of multiple punitive damages awards for the same conduct; for in the usual case nonparties are not bound by the judgment some other plaintiff obtains.

538 U.S. at 423, 123 S.Ct. at 1523, 155 L.Ed.2d at 604 (citation omitted).

In the final analysis, the new syllabus point created in the majority opinion stands for the sole proposition that West Virginia "has a legitimate interest in imposing damages to punish a defendant for unlawful acts committed outside th[e] State's jurisdiction where ... the plaintiffs' claims ... arise from the unlawful out-of-state conduct." Nothing in the new syllabus point or the majority opinion should be interpreted to mean that the Court has carved out an exception to Campbell's general prohibition on the use of evidence of unlawful out-of-state conduct by a defendant against nonlitigants. Whether or not an exception exists still remains to be decided.

In view of the foregoing, I concur.

STARCHER, J., concurring.

In this case, the defendants essentially contended that this Court should give an expansive reading to State Farm Mut. Ins. Co. v. Campbell, 538 U.S. 408, 123 S.Ct. 1513, 155 L.Ed.2d 585 (2003). The well-written majority opinion rightly opted to give Campbell a narrow interpretation in deciding to uphold the jury's punitive damage verdict.

I write separately to make clear that, when examined objectively, Campbell was not a significant decision by the U.S. Supreme Court. It did not dramatically alter the punitive damage landscape, and actually did little more than reiterate the standards of [189] review established in prior cases. As one court has noted:

State Farm [v. Campbell] adds no new, free-standing factor to the constitutional analysis of punitive damages.... It is the court's view that State Farm [v. Campbell], while bringing the BMW [of North America, Inc. v. Gore, 517 U.S. 559, 116 S.Ct. 1589, 134 L.Ed.2d 809 (1996)] guideposts into sharper focus, does not change the analysis. In fact, there are aspects of the due process evaluation of punitive damage awards which have not changed at all as a result of State Farm [v. Campbell].

In re the Exxon Valdez, 296 F.Supp.2d 1071, 1076 (D.Alaska 2004).

A.

Out-of-State Conduct is Admissible Under Campbell

The defendants in this case loosely argued that because the plaintiffs were injured by "out-of-state conduct," Campbell prevented the jury from awarding punitive damages. Campbell did no such thing.

The Campbell Court made clear that only two types of out-of-state conduct cannot be constitutionally considered by a judge or jury in making a punitive damage award. First, out-of-state conduct, even unlawful out-of-state conduct, that has no nexus to the conduct at issue in the case is inadmissible. Frankly, I am not sure why this rule rises to a constitutional level because such evidence should usually be excluded as irrelevant under our Rules of Evidence, but there it is. Second, the Campbell Court concluded that out-of-state conduct that is lawful where it occurs would generally not be admissible. However, the Court expressly stated that some lawful out-of-state conduct may still be considered:

Lawful out-of-state conduct may be probative in a civil action when it demonstrates the deliberateness and culpability of the defendant's action in the State where it is tortious, but that conduct must have a nexus to the specific harm suffered by the plaintiff.

Campbell, 538 U.S. at 422, 123 S.Ct. 1513.

The unlawful conduct in the instant case — the defendant's actions in assisting and encouraging the plaintiffs to violate Pennsylvania law — clearly had a nexus to the plaintiffs' injuries. Further, the statement by Tom Goffoli to the plaintiffs that the out-of-state licensing scheme was something the defendants did "all the time" was probative evidence because it demonstrated the deliberateness and culpability of the defendants' actions. There is simply no procedural or constitutional prohibition that would prevent this evidence from being used to support a punitive damage award.

B.

Campbell Allows Punitive Damages to be Related to the Degree of Reprehensibility of the Defendant's Conduct

As the majority opinion notes, the Campbell Court reiterated: "The most important indicium of reasonableness of a punitive damages award is the degree of reprehensibility of the defendant's conduct." 538 U.S. at 418, 123 S.Ct. 1513 (quoting BMW, 517 U.S. at 575, 116 S.Ct. 1589).

The Campbell Court — relying upon its prior opinion in BMW — laid out five sub-factors for determining the degree of a defendant's reprehensibility: (1) whether "the harm caused was physical as opposed to economic"; (2) whether "the tortious conduct evinced an indifference to or a reckless disregard of the health or safety of others"; (3) whether "the target of the conduct had financial vulnerability"; (4) whether "the conduct involved repeated actions or was an isolated incident"; and (5) whether "the harm was the result of intentional malice, trickery, or deceit, or mere accident." Id.

There is absolutely nothing in Campbell to suggest that all or most of these sub-factors must be present to support a punitive damage award. Instead, the threshold for supporting a punitive damage verdict seems to hover at, or just above, the presence of just one of the reprehensibility sub-factors. As the Court suggested, the "existence of any one of these [reprehensibility] factors ... may not be sufficient to sustain a punitive damages award; and the absence of all of them renders any award suspect." Id.

[190] Furthermore, the Court has repeatedly recognized that when the defendant is a repeat offender, strong medicine is needed to get the defendant's attention regardless of the existence of any other factor delineated by the Court.

Certainly, evidence that a defendant has repeatedly engaged in prohibited conduct while knowing or suspecting that it was unlawful would provide relevant support for an argument that strong medicine is required to cure the defendant's disrespect for the law. Our holdings that a recidivist may be punished more severely that a first offender recognize that repeated misconduct is more reprehensible than an individual instance of malfeasance.

BMW, 517 U.S. at 576-77, 116 S.Ct. 1589 (citations omitted, emphasis added). See also TXO Production Corp. v. Alliance Resources Corp., 509 U.S. 443, 462 n. 28, 113 S.Ct. 2711, 125 L.Ed.2d 366 (1993).

In this case, the jury properly assessed the defendants' conduct, and their punitive damage verdict encompassed the reprehensibility of that conduct.

C.

Campbell Did Not Limit Punitive Damages to a Single Digit Ratio

The defendants in this case creatively interpreted the jury's $300,000.00 compensatory damage verdict as consisting of only $118,992.00 in "real" damages. The defendants then argued that the true ratio of compensatory damages to the $1,000,000.00 in punitive damages was not 3.3 to 1, but rather 8.4 to 1, a ratio the defendants asserted was unconstitutional under Campbell.

What the defendants overlooked in their argument is that nowhere in Campbell did the U.S. Supreme Court impose an exact mathematical formula for constitutionally permissible and impermissible punitive damages. There is no constitutionally-created limit upon the ratio between compensatory and punitive damages. The Campbell Court explicitly reaffirmed that there is no "bright-line" rule, stating: "We decline again to impose a bright-line ratio which a punitive damages award cannot exceed." 538 U.S. at 425, 123 S.Ct. 1513.

Instead, the Court noted that "[o]ur jurisprudence" demonstrates that "in practice," "few awards exceeding a single-digit ratio between punitive and compensatory damages, to a significant degree, will satisfy due process." Id. Thus, under Campbell only punitive damages in a "few" cases will permissibly exceed a single-digit ratio to compensatory damages "to a significant degree." Rather than rule that punitive damages can never exceed single digit ratios, the Campbell Court recognized just the opposite. While ratios closer to single digits are more likely to be constitutionally appropriate, there is nothing preventing a higher ratio when the circumstances warrant.

Nowhere does the Court discuss the constitutional basis or meaning of punitive damages that exceed a single digit ratio by "a significant degree," but the Court continues to stand by its prior opinions upholding ratios of punitive damages far in excess of single digits. For instance, in TXO, the U.S. Supreme Court affirmed a West Virginia jury's punitive damage verdict that was 526 times greater than the compensatory damages.^[9] In a concurring opinion to TXO, Justice Kennedy — who later authored Campbell — stated unequivocally that the TXO award would still be permissible under the standards enunciated in Campbell:

The Constitution identifies no particular multiple of compensatory damages as an acceptable limit for punitive awards; it does not concern itself with dollar amounts, ratios, or the quirks of juries in specific jurisdictions ... I do not agree that [the punitive to compensatory ratio [191] relied upon by the majority] provides a constitutionally adequate foundation for concluding that the punitive damage verdict against TXO was rational.

TXO, 509 U.S. at 467-68, 113 S.Ct. 2711. Justice Kennedy went on to state that he found the award in TXO appropriate because of the evidence that the defendant had acted with malice as part of a "pattern and practice of fraud, trickery and deceit" and "unsavory and malicious practices." He also found the award supported by TXO's "vast financial resources," and the fact that "TXO would suffer only as a result of a large judgment." 509 U.S. at 469, 113 S.Ct. 2711.

The only conclusion to take away is that the defendants' argument in this case was balderdash. Campbell did not prescribe a mathematical, bright-line rule of ratios between punitive and compensatory damages. The jury in the instant case properly exercised its judgment and discretion, and related its punitive damage verdict to the reprehensibility of the defendants' conduct, and there was no constitutional requirement that they limit their assessment of the defendants' reprehensibility by some mathematical ratio.

I therefore respectfully concur with the majority's opinion.

[1] Three of the four Appellees actually spoke with Goffoli.

[2] According to Appellant, Goffoli was not timely served with a summons and complaint and was therefore dismissed from the action prior to trial pursuant to Rule 4(k) of the West Virginia Rules of Civil Procedure.

[3] Also, Appellant filed a cross-claim against Magliocca for indemnity and contribution.

[4] According to Appellant, Appellees abandoned their negligence claims at trial and proceeded only on their claims for fraud and tortious conspiracy.

[5] After Magliocca's settlement with Appellees, Appellant faxed a letter to the circuit court informing the court that it intended to maintain its cross-claim for indemnity and contribution against Magliocca and requesting a continuance of the January 6, 2003, trial date which the circuit court denied. In its order denying Appellant post-trial relief, the circuit court found that Appellant advised the court at a pre-trial hearing that it would not pursue its cross-claim against Magliocca and declined the circuit court's offer to hold a hearing on the settlement.

[6] Appellees assert that Appellant waived its challenge to the punitive damages award by filing no motions in limine, making no objections at trial concerning damages, failing to move for a directed verdict either at the end of Appellees' case or at the close of evidence, agreeing to the punitive damages instruction, and failing to raise out-of-state conduct as an issue in its post-trial motion. Appellant responds that it did not waive its right to challenge the constitutionality of the punitive damages award because it moved for summary judgment on the punitive damages claim, it challenged the constitutionality of the award in its post-trial motions and brief, and there was a change in the law relating to the constitutionality of punitive awards designed to punish extra-territorial conduct after the trial. Because we have chosen to address the merits of the constitutional challenge to the punitive damages award, and our disposition of the issue is favorable to Appellees, we decline to address Appellees' waiver claim.

[7] For example, Appellees Fadse, Boyd, and Spear testified that they were all employed at the same place prior to quitting in order to become truck drivers. Fadse testified that he had been employed there for almost 18 years; he made $23,000.00 a year; was a member of the union; and had benefits and a pension plan. He further testified that Goffoli told him that he should make between $28,000.00 and $32,000.00 his first year as a truck driver. Appellee Boyd testified that in his former job he was a member of the union; made $12.09 an hour; and had a pension plan. Finally, Spear testified that he made around $12.00 an hour. According to Fadse's testimony, when he attempted to be rehired at his former place of employment, he was told that it had recently laid off 18 people, and it was not currently hiring.

[8] To be clear, the sole evidence concerning other out-of-state illegal conduct by the defendant was presented in the context of a statement made to the plaintiffs by Mr. Goffoli that the proposed licensing scheme was something the defendants did "all the time." This evidence was admissible as a party admission notwithstanding Campbell. See Board of Educ. of McDowell County v. Zando, Martin & Milstead, Inc., 182 W.Va. 597, 614, 390 S.E.2d 796, 813 (1990) ("Both Rule 801(d)(2)(D) of the West Virginia Rules of Evidence and our prior law recognize that statements made by an agent or employee within the scope of his agency or employment and during the existence of the agency or employment relationship are not hearsay and are admissible against a principal or employer who is a party to the litigation.").

[9] In TXO, a West Virginia jury determined that the defendant TXO, a large oil company, intentionally sought to cloud the plaintiff's title to oil and gas rights which TXO desired to purchase. TXO's actions were found to be malicious and part of a broad practice of fraud. The jury awarded the plaintiff $19,000.00 in compensatory damages to clear the title to the oil and gas rights, and $10,000,000 in punitive damages. See TXO Production Corp. v. Alliance Resources Corp., 187 W.Va. 457, 419 S.E.2d 870 (1992), aff'd 509 U.S. 443, 113 S.Ct. 2711, 125 L.Ed.2d 366 (1993).

Robert L. Howard, of Foulston, Siefkin, Powers & Eberhardt, of Wichita, argued the cause, and Stephen M. Kerwick, of the same firm, and William J. McSherry, Jr., of Bryan, Cave, McPheters & McRoberts, of New York, New York, were with him on the briefs for appellant.

Philip L. Bowman, of Adams, Jones, Robinson and Malone, Chartered, of Wichita, argued the cause, and Laura L. Ice, of the same firm, and Thomas P. Kane, Edward M. Laine, Bethany K. Culp, and Jonathon C. Bloomberg, of Oppenheimer Wolff & Donnelly, of Saint Paul, Minnesota, were with him on the brief for appellee.

The opinion of the court was delivered by

SIX, J.:

Defendants, International Playtex, Inc., and its successor in interest, Playtex Family Products, Inc., (referred to jointly as Playtex) appeal the trial court's holding that the public policy of the State of Kansas, as a matter of law, precludes Playtex from recovering $10,000,000 from its excess insurers, the plaintiffs herein. The judgment of $10,000,000 represents the amount of punitive damages assessed, in a products liability case, against International Playtex, Inc. O'Gilvie v. Intern. Playtex, Inc., 609 F. Supp. 817 (D. Kan. 1985), aff'd in part, rev'd in part 821 F.2d 1438 (10th Cir.1987), cert. denied 486 U.S. 1032 (1988).

[260] This declaratory judgment action involves horizontal federalism. We are required to review the relationship of Kansas to her sister states in the areas of personal jurisdiction and choice of law. The Due Process Clause of the Fourteenth Amendment and the Full Faith and Credit Clause of Article IV, section 1, of the United States Constitution allocate power among the states to exercise personal jurisdiction and to apply state law.

The procedural vehicles of (1) partial summary judgment (K.S.A. 1988 Supp. 60-256) and (2) final judgment certification (K.S.A. 1988 Supp. 60-254[b]), exercised by the trial court in tandem, carry the appeal to this court. We find no error and affirm.

The specific issues for our review are: (1) Whether Playtex is subject to personal jurisdiction in Kansas; and (2) whether the trial court erred in (a) applying Kansas law to deny insurance coverage of the punitive damages award; (b) granting partial summary judgment; and (c) certifying the partial summary judgment as a final judgment pursuant to K.S.A. 1988 Supp. 60-254(b).

FACTS

Betty O'Gilvie died on April 2, 1983, of toxic shock syndrome. Her husband, Kelly O'Gilvie, brought an action against Playtex in the United States District Court for the District of Kansas. He alleged that the use of Playtex super-deodorant tampons caused her death and, therefore, Playtex was liable under the Kansas law of strict liability in tort. The jury attributed 80 percent of the total fault to Playtex and 20 percent to Betty O'Gilvie's physician, who was not a party to the lawsuit. Actual damages of $1.525 million and $10 million in punitive damages were awarded. Judgment was entered against Playtex for 80 percent of the total amount of the actual damages. The federal district judge granted a remittitur reducing the punitive damage award to $1.35 million based upon Playtex's agreement to remove certain types of the product from the market and to enhance the product's warning. 609 F. Supp. at 819.

Both parties appealed. The Court of Appeals for the Tenth Circuit affirmed the jury verdict against Playtex, but reversed the punitive damage remittitur. 821 F.2d at 1450. Playtex's petition for certiorari was denied.

[261] The punitive award of $10,000,000 and interest of approximately $3,500,000 has been paid by Playtex.

Playtex's excess insurers sought a declaration from the trial court that: (1) they are not obligated to indemnify Playtex for the punitive damages in the O'Gilvie action, and (2) they are obligated to pay only the costs of the federal court appeal attributable to the compensatory damage award.

Shortly after two of the insurers filed this action in Kansas, Playtex brought a similar action against the insurers in Delaware. Playtex Family Products, Inc. v. St. Paul Surplus Lines Insurance Company, case No. 88C-FE-166, Superior Court of Delaware, New Castle County. Subsequently, the pleadings in this action were amended to include the same parties. Playtex contends that the law of Delaware should apply because Delaware is the state where the tampons were manufactured and Delaware is Playtex's principal place of business. The insurers moved for a stay of the Delaware proceedings pending the outcome of the Kansas action. The insurers anticipated that Playtex would contest Kansas jurisdiction and, consequently, also filed suit in Minnesota, where the policy of the lead carrier was issued. The Minnesota action has been voluntarily stayed in deference to this case.

The trial court ruled that it had both subject matter and personal jurisdiction over Playtex and that Kansas law should be applied to determine the outcome of the controversy. The trial court held that, because public policy of the State of Kansas prohibits a wrongdoer from passing on the payment of punitive damage awards to insurance carriers, the plaintiff insurers are not obligated to indemnify Playtex for the punitive damage award assessed against Playtex in the O'Gilvie action. The trial court certified the partial summary judgment in favor of the insurers as a final judgment pursuant to K.S.A. 1988 Supp. 60-254.

On April 12, 1989, while this appeal was pending, the Superior Court of Delaware, New Castle County, Chandler, J., issued an opinion in case No. 88C-FE-166. The Delaware court addressed a motion by the insurers to dismiss based on res judicata, lack of ripeness, and failure to join indispensible parties. The Delaware court found that the question of the res judicata effect of the decision by the Kansas district court should be stayed pending [262] our decision. The Delaware court dismissed the portion of Playtex's complaint seeking a declaration concerning the insurability of punitive damages and the application of Delaware law which might arise in cases other than O'Gilvie. We granted Playtex's Motion to Include Judge Chandler's Opinion in the Record on Appeal in this action.

The Insurance Policies Involved

A summary of the insurance policies involved will provide background understanding for our analysis of the issues.

The policies do not contain any choice of law provision stating that the law of a specific state controls the resolution of coverage disputes.

International Playtex, Inc., and its successor in interest, Playtex Family Products, Inc., are subsidiaries of Esmark, Inc., the named insured on the policies at issue in this litigation. Esmark, Inc., contracted with the plaintiff insurance companies for excess comprehensive liability coverage for Esmark and its subsidiaries for the 1982 to 1983 policy year. Mission National Insurance Company (Mission), which is not a party to this action, provided the first layer of excess coverage. Plaintiffs St. Paul Surplus Lines Insurance Company (St. Paul) and National Union Fire Insurance Company (National Union) provided the second layer of excess coverage on a pro rata basis.

The St. Paul policy was negotiated in California, issued in Minnesota, and delivered in Illinois. The National Union policy was issued in New York and delivered in Illinois, as was the plaintiff Granite State Insurance Company's (Granite State) policy.

National Union, Granite State, plaintiff International Insurance Company (International) and plaintiff AIU Insurance Company (AIU) shared the third layer of excess coverage on a pro rata basis. The International policy was negotiated and issued in California and delivered in Illinois. The AIU policy was negotiated, issued, and delivered in Illinois.

All the excess policies followed the terms of the Mission policy, which incorporated the terms of the underlying primary policy issued by Northwestern National Insurance Company.

When the verdict in the O'Gilvie action was rendered, Mission denied coverage for the punitive damage award and tendered payment for the compensatory award. Playtex rejected the tender [263] and pursued its appeals. The coverage under the Mission policy was subsequently exhausted on other claims and Playtex notified the other excess carriers that it would expect those carriers to pay the punitive damage award and fund the O'Gilvie appeals.

Personal Jurisdiction

The trial court found that it had personal jurisdiction over Playtex pursuant to K.S.A. 1988 Supp. 60-308(b)(1). In Schlatter v. Mo-Comm Futures, Ltd., 233 Kan. 324, 333, 662 P.2d 553 (1983), this court said that a trial court's determination that it had personal jurisdiction will be affirmed if there is personal jurisdiction under any of the provisions of the Kansas long arm statute (K.S.A. 1988 Supp. 60-308[b]). The plaintiffs (in this case, the insurers) carry the burden of proving the existence of personal jurisdiction over the defendant. 233 Kan. at 335.

We said in Volt Delta Resources, Inc. v. Devine, 241 Kan. 775, 777-79, 740 P.2d 1089 (1987):

"The Kansas long arm statute is liberally construed to assert personal jurisdiction over nonresident defendants to the full extent permitted by the due process clause of the Fourteenth Amendment to the U.S. Constitution.

....

"[W]hen considering questions of personal jurisdiction, a two-step analysis is required. First, does the defendant's conduct fall within the scope of the relevant provision of the Kansas long arm statute? Second, does the exercise of personal jurisdiction in the particular case comply with the due process requirements of the Fourteenth Amendment as set out in the decisions of the United States Supreme Court?"

Playtex admitted in its answer to the amended petition for declaratory judgment that:

"defendant IPI was a Delaware corporation until it was dissolved in December, 1986, that the parent corporation of IPI from October 1, 1982 to October 1, 1983 was Esmark, Inc. (`Esmark') which was at that time also a Delaware corporation and further ... that at that time IPI and Esmark had their executive headquarters located in Stamford, Connecticut and Chicago, Illinois, respectively."

Playtex also admitted that, prior to its dissolution, IPI manufactured Playtex super deodorant tampons, which were sold and distributed throughout the United States, including the State of Kansas.

K.S.A. 1988 Supp. 60-308(b) provides, in part:

"Any person, whether or not a citizen or resident of this state, who in person or through an agent or instrumentality does any of the acts hereinafter enumerated, thereby submits the person and, if an individual, the individual's personal [264] representative, to the jurisdiction of the courts of this state as to any cause of action arising from the doing of any of these acts:

"(1) Transaction of any business within this state."

K.S.A. 1988 Supp. 60-308(b)(1) was interpreted by this court in White v. Goldthwaite, 204 Kan. 83, 88, 460 P.2d 578 (1969):

"From the foregoing cases it appears there are three basic factors which must coincide if jurisdiction is to be entertained over a nonresident on the basis of transaction of business within the state. These are (1) the nonresident must purposefully do some act or consummate some transaction in the forum state; (2) the claim for relief must arise from, or be connected with, such act or transaction; and (3) the assumption of jurisdiction by the forum state must not offend traditional notions of fair play and substantial justice, consideration being given to the quality, nature and extent of the activity in the forum state, the relative convenience of the parties, the benefits and protection of the laws of the forum state afforded the respective parties, and the basic equities of the situation...."

The trial court relied on United Services Auto. Ass'n v. Cregor, 617 F. Supp. 1053 (N.D. Ill. 1985), which has also been cited by both parties. The Cregors had contracted with a Texas insurance company to insure their Illinois home. The Cregors moved to Hawaii. They also insured their Hawaii residence with the Texas company. They were subsequently sued for fraud and breach of contract by the couple (the McNallys) who had purchased the Illinois residence. The Cregors tendered the defense of that lawsuit to the Texas insurer, who brought a declaratory judgment action to remove its responsibility to defend and to indemnify the Cregors. The Cregors argued that the Illinois court did not have personal jurisdiction over them in the declaratory judgment action because they were no longer Illinois residents. The Cregors contended that their Illinois contacts arose out of the fraud lawsuit and, therefore, were not sufficient to establish personal jurisdiction in the declaratory judgment case. The court did not agree.

"This declaratory judgment action requires the Court to determine whether coverage exists to protect the Cregors in the McNally's underlying suit. If such coverage exists, it will flow from the policy which insured the Cregors' Wilmette, Illinois home. Consequently, if coverage exists under the policy, it will arise out of actions taken by the Cregors in relation to their Wilmette, Illinois home and the sale of it." 617 F. Supp. at 1055.

Playtex advances an argument similar to that of the Cregors. Playtex contends that, although the federal court in Kansas had jurisdiction over the original O'Gilvie action pursuant to K.S.A. 1988 Supp. 60-308(b)(7)(B) (product liability), jurisdiction cannot [265] extend to a declaratory contract action where there was no connection with Kansas in the creation of the contract. The Cregors had been Illinois residents at the time the insurance contract was signed and the policy specifically insured Illinois property. The federal district court found that the Cregors had transacted business in Illinois. In the case at bar, none of the parties are Kansas residents and no business with regard to the negotiation of the insurance contracts was conducted in Kansas. Betty O'Gilvie, the insured risk, however, was located in Kansas.

Playtex argues that the current claim does not arise out of the use of its products sold in this state, but rather out of an insurance contract between nonresident corporations which have no connection to the State of Kansas.

K.S.A. 1988 Supp. 60-308(b) is to be liberally construed. It was not error for the trial court to find that the declaratory judgment action was sufficiently connected to the sale of Playtex products in Kansas to warrant personal jurisdiction over Playtex. The declaratory judgment action requires us to determine whether coverage for punitive damages exists to protect Playtex in the underlying O'Gilvie damage action. The question of coverage arises from the actions taken by Playtex in selling its product in Kansas, which subsequently caused the death of a Kansas resident. The plaintiff insurers' claim for an insurance coverage determination lies in the wake of the commercial activities of Playtex in Kansas. As the Tenth Circuit observed in O'Gilvie:

"Punitive damages are imposed under Kansas law for `a willful and wanton invasion of the injured party's rights, the purpose being to restrain and deter others from the commission of like wrongs.' Wooderson [v. Ortho Pharmaceutical Corp., 235 Kan. 387,] 681 P.2d [1038,] at 1061 [, cert. denied 469 U.S. 965 (1984)] (quoting Cantrell v. Amarillo Hardware Co., 226 Kan. 681, 686, 602 P.2d 1326, 1331 (1979))." O'Gilvie v. International Playtex, Inc., 821 F.2d 1438, 1446 (10th Cir.1987).

The punitive damage award resulted from the application of Kansas law.

Although no activity took place in Kansas with regard to the formation of the insurance contracts, the parties anticipated that claims under the policies might arise in the State of Kansas. The automobile liability portion of the insurance policies includes endorsements to comply with the requirements of the Kansas Automobile Injury Reparations Act (K.S.A. 40-3101 et seq.) and the Kansas Financial Security Act (K.S.A. 1988 Supp. 40-3104[a]). [266] The policies contain a number of provisions designed to comply with various insurance laws and regulations of many different states.

Playtex knew that its tampons were distributed in Kansas. There was a product liability risk under the insurance policies arising from the sale of Playtex tampons in Kansas.

Playtex cites Land Manufacturing, Inc. v. Highland Park State Bank, 205 Kan. 526, 470 P.2d 782 (1970), in support of its argument that there is not a sufficient connection between the business activities of Playtex in Kansas and the insurers' declaratory judgment claim. In Land Manufacturing, the plaintiff had recovered a default judgment against the defendant, Highland Park State Bank. A year later, the plaintiff instituted garnishment proceedings against Chase Manhattan Bank based on the default judgment. Chase Manhattan argued that the district court lacked personal jurisdiction over it. Although Chase was transacting business in Kansas, its business activities in Kansas were unrelated to the underlying dispute between Land Manufacturing and Highland Park State Bank. In the instant action, if it were not for the sale of Playtex products in Kansas, resulting in the death of a Kansas resident, there would be no dispute between Playtex and its insurers.

Playtex asserts that in Helicopteros Nacionales de Colombia v. Hall, 466 U.S. 408, 80 L.Ed.2d 404, 104 S.Ct. 1868 (1984), the United States Supreme Court held that contractual activities in a state that would be sufficient to create jurisdiction in a contract action are insufficient to create jurisdiction in an unrelated tort action. Helicopteros was a wrongful death action which arose out of a helicopter crash in Peru. Four United States citizens who were employees of a Houston-based company working on a pipeline project in Peru were killed in the crash. The representatives of the decedents brought suit in Texas against the company owning the helicopter.

Playtex's reliance on Helicopteros is misplaced.

The Court in Helicopteros did not find that the contractual activities of Helicol would be sufficient to subject Helicol to jurisdiction in a contract action. The Court noted that some negotiations on the contract were conducted in Houston, but that the contract was signed in Peru, was written in Spanish, and stated that any controversies arisyng out of the contract would be [267] submitted to the jurisdiction of the Peruvian court. All the parties in the case conceded that their claims against Helicol did not arise out of, or were they related to, Helicol's activities in Texas.

"Even when the cause of action does not arise out of or relate to the foreign corporation's activities in the forum State, due process is not offended by a State's subjecting the corporation to its in personam jurisdiction when there are sufficient contacts between the State and the foreign corporation." 466 U.S. at 414.

Playtex also cites Asahi Metal Industry Co. v. Superior Court, 480 U.S. 102, 94 L.Ed.2d 92, 107 S.Ct. 1026 (1987). In Asahi, a California resident brought a product liability action in California against the manufacturer of a tire tube. The plaintiff had been severely injured and his wife killed in a motorcycle accident. He alleged the accident occurred because of a sudden loss of air and explosion in the rear tire of the motorcycle brought on by a defective tire, tube, and sealant. Cheng Shin Rubber Industrial Co., Ltd., the Taiwanese tube manufacturer, filed a cross-complaint against Asahi, the Japanese manufacturer of the tube's valve assembly. The plaintiff ultimately settled with Cheng Shin, leaving only the issue of indemnification between Cheng Shin and Asahi. Asahi's sales of tire valve assemblies to Cheng Shin took place in Taiwan.

The United States Supreme Court found that the mere act of placing a product into the stream of commerce was not sufficient to support a finding that Asahi had purposefully directed its actions toward the State of California. The court addressed the issue of California's interest in the contract indemnification claim:

"The Supreme Court of California argued that the State had an interest in `protecting its consumers by ensuring that foreign manufacturers comply with the state's safety standards.' [Citation omitted.] The State Supreme Court's definition of California's interest, however, was overly broad. The dispute between Cheng Shin and Asahi is primarily about indemnification rather than safety standards. Moreover, it is not at all clear at this point that California law should govern the question whether a Japanese corporation should indemnify a Taiwanese corporation on the basis of a sale made in Taiwan and a shipment of goods from Japan to Taiwan." 480 U.S. at 114-15.

The facts in Asahi and the language of the opinion characterize it as an international case involving a choice of an inconvenient forum by Cheng Shin in which to assert its indemnification claim against Asahi.

In the present case, not only does Playtex have the requisite [268] minimum contacts with the State of Kansas, but the State of Kansas has a significant policy interest justifying its assertion of personal jurisdiction over Playtex.

At the time this case arose, the public policy of Kansas did not permit insurance coverage of punitive damages. Koch v. Merchants Mutual Bonding Co., 211 Kan. 397, 507 P.2d 189 (1973); Guarantee Abstract & Title Co. v. Interstate Fire & Cas. Co., 228 Kan. 532, 618 P.2d 1195 (1980). See K.S.A. 40-2,115, effective April 26, 1984. There was no such overriding California public policy concern in the indemnification claim between Asahi and Cheng Shin. Where an award of punitive damages is made in Kansas, pursuant to the laws of Kansas, Kansas public policy should control the determination of who will pay those damages.

Playtex purposefully advertised and sold its tampons in Kansas. Playtex initiated the interstate activity giving rise to the insurers' declaratory judgment claim. Playtex profited from its activity in Kansas. Playtex had fair warning that it might be subject to suit in Kansas. In fact, Playtex has already defended itself in a lawsuit arising from these facts in Kansas.

"Where a forum seeks to assert specific jurisdiction over an out-of-state defendant who has not consented to suit there, this `fair warning' requirement is satisfied if the defendant has `purposefully directed' his activities at residents of the forum [citation omitted], and the litigation results from alleged injuries that `arise out of or relate to' those activities [citation omitted]." Burger King Corp. v. Rudzewicz, 471 U.S. 462, 472, 85 L.Ed.2d 528, 105 S.Ct. 2174 (1985).

Playtex possessed certain minimum contacts with Kansas, so that it was "`reasonable and just, according to our traditional conception of fair play and substantial justice,'" for Kansas to exercise personal jurisdiction. Phillips Petroleum Co. v. Shutts, 472 U.S. 797, 807, 86 L.Ed.2d 628, 105 S.Ct. 2965 (1985).

The trial court had personal jurisdiction over Playtex in this action.

2. Choice of Law

Playtex advances Simms v. Metropolitan Life Ins. Co., 9 Kan. App.2d 640, 685 P.2d 321 (1984), to support its argument that the trial court erred in applying Kansas law to an extraterritorial insurance contract. In Simms, the plaintiff, a Kansas resident, received group health insurance through her employer, headquartered in Tennessee. The group policy had been delivered to the employer in Tennessee, The employer distributed certificates of coverage to its employees. A dispute arose between the [269] plaintiff and the insurer over coverage for alcohol rehabilitation of her dependent son. The policy provided for limited coverage for such care. The applicable Kansas statute mandated broader coverage.

The Court of Appeals said, "Although the statute does not state its intended geographic reach, we cannot conceive that the legislature intended to attempt to regulate insurance contracts made outside this state." 9 Kan. App.2d at 642. The court discussed Kansas choice of law principles for the construction of contracts and determined that the law of the state where the contract is made controls construction. Simms also stated that a contract is made when the last act necessary for its formation is completed. The law of the state where the master policy is delivered governs where a group insurance policy is involved. 9 Kan. App.2d at 644.

The insurers in the instant case argue that Simms is distinguishable because it involved a legislative enactment, not a general public policy prohibition. Even if Simms were applicable to the facts in this case, Playtex's choice of law position is not strengthened. Playtex seeks to have Delaware law govern the instant insurance contracts because Delaware allows insurance for punitive damages. Whalen v. On-Deck, Inc., 514 A.2d 1072 (Del. 1986). If, however, Simms controls the choice of law issue, Illinois law would govern the interpretation of the insurance contracts. Not only were the policies delivered to Playtex's parent corporation, Esmark, in Illinois, but also other substantial activity in the formation of the contracts occurred there. Illinois public policy prohibits insurance against liability for punitive damages arising out of the insured's misconduct. Beaver v. Country Mutual Insurance Co., 95 Ill. App.3d 1122, 1125, 420 N.E.2d 1058 (1981).

In Phillips Petroleum Co. v. Shutts, 472 U.S. at 816, the United States Supreme Court stated: "There can be no injury in applying Kansas law if it is not in conflict with that of any other jurisdiction connected to this suit."

The plaintiff in Barbour v. Campbell, 101 Kan. 616, 168 Pac. 879 (1917), sued for breach of an oral promise. The contract had been made in Idaho, where it was enforceable under the statute of frauds. The contract, however, was not enforceable under the Kansas statute of frauds. The court said:

[270] "Ordinarily a contract which is valid where made is valid everywhere, but there is a well-known exception to that rule. Briefly stated, the exception is that where the contract contravenes the settled public policy of the state whose tribunal is invoked to enforce the contract, an action on that contract will not be entertained." 101 Kan. at 617.

See Dow Chemical Corp. v. Weevil-Cide Co., Inc., 630 F. Supp. 125 (D. Kan. 1986); Dickson v. Hoffman, 305 F. Supp. 1040 (D. Kan. 1969).

Certain states have now abandoned the lex loci rule in favor of the "most significant relationship" test set forth in the Restatement (Second) of Conflict of Laws § 188 (1969). See, e.g. Amer. Home Assur. v. Safway Steel Prod., 743 S.W.2d 693 (Tex. App. 1987); Crown Center v. Occidental Fire & Cas. Co., 716 S.W.2d 348 (Mo. App. 1986).

We reserve consideration of the Restatement's "most significant relationship" test for a later day. Our choice of Kansas law rests on Kansas public policy. The interest of Kansas exceeds Delaware's interest in the resolution of the instant controversy.

Playtex relies upon opinions of the United States Supreme Court in support of its argument that the interests of other states outweigh the interests of Kansas in this litigation. Our review of the controlling choice of law cases supports the application of Kansas law in the instant case.

Home Ins. Co. v. Dick, 281 U.S. 397, 74 L.Ed. 926, 50 S.Ct. 338 (1930), held that Texas law could not apply to an insurance policy between a Texas citizen and a Mexican insurer. However, the court specifically found that at all relevant times the insured was living in Mexico, and the boat which was insured was in Mexican waters at all times, including the time of the accident. No acts relating to the negotiation or performance of the insurance policy occurred in Texas. The Court said, "Doubtless, a State may prohibit the enjoyment by persons within its borders of rights acquired elsewhere which violate its laws or public policy; and under some circumstances, it may refuse to aid in the enforcement of such rights." 281 U.S. at 410.

Allstate Ins. Co. v. Hague, 449 U.S. 302, 66 L.Ed.2d 521, 101 S.Ct. 633 (1981), involved a Wisconsin auto accident between two Wisconsin residents. The accident occurred in Pierce County, Wisconsin, which is close to the border of Minnesota. The insured/decedent lived in Wisconsin, but worked in Minnesota. He was not traveling to work at the time of the accident. [271] His wife, as personal representative of his estate, brought an action in Minnesota against his insurer. Shortly after the accident, the wife had moved to Minnesota. Minnesota law permitted stacking of uninsured motorist benefits; Wisconsin law did not. The Court found that the choice of Minnesota law by the Minnesota court did not violate the Due Process Clause or the Full Faith and Credit Clause. 449 U.S. at 320.

Allstate endorses the choice of Kansas law in the current dispute.

Playtex argues that the application of Kansas law to the insurance policies in question would frustrate the intent of the parties. The clause of the insurance contract which is at issue states the following:

"IT IS THE INTENTION OF THE COMANY [sic] AND THE NAMED INSURED THAT PUNITIVE AND EXEMPLARY DAMAGES BE FULLY INSURED TO THE MAXIMUM EXTENT PERMITTED BY LAW SUBJECT TO THE LIMITS OF LIABILITY AS SET FORTH UNDER SECTION III OF THIS POLICY." (Mission National Insurance Co. general condition "S.")

The wording of the Playtex policy is not ambiguous. The clause regarding punitive damages states that such damages will be covered to the extent permitted by law. One of the trial court's findings of fact was:

"39. The second layer excess carriers have denied coverage for punitive damages only in those situations where the bodily injury or death occurred in a state where punitive damages are uninsurable as a matter of public policy."

The Playtex coverage was designed to insure a number of possible risks throughout the United States, including those in the State of Kansas. The provisions of the policies which are designed to comply with the various automobile insurance requirements of different states, including Kansas, indicate that the parties intended the policies to have effect wherever liability might arise. "Whether an ambiguity exists in a written instrument is a question of law to be decided by the court." Kennedy & Mitchell, Inc. v. Anadarko Prod. Co., 243 Kan. 130, 133, 754 P.2d 803 (1988).

Where a contract is found to be unambiguous, the written agreement determines the rights of the parties. Kennedy, 243 Kan. at 135. The insurance policies involved were not ambiguous. It was not necessary for the trial court to consider additional evidence in construing the meaning of the contract.

[272] In its reply brief, Playtex emphasizes the fact that the present case is an action for a declaratory judgment, not a direct action to enforce an insurance contract. Playtex argues that it has paid the punitive award as a result of the O'Gilvie judgment and does not seek to enforce the insurance contract in Kansas. Playtex reasons that, because it has already paid the punitive damages, the insurers are now obligated to indemnify Playtex in its state of incorporation, Delaware. The punitive damages, however, were awarded by a federal court in Kansas, pursuant to Kansas law, to a Kansas citizen, to punish conduct that occurred in Kansas.

In Crown Center v. Occidental Fire & Cas. Co., 716 S.W.2d 348, the insurers brought a declaratory judgment action to determine which of the insurers had the duty to defend Hyatt Corporation for claims arising out of the collapse of the skywalks at the Hyatt Regency Crown Center. Two of the insurers argued that Illinois law should apply because both the insurance companies and Hyatt Corporation were Illinois corporations and the insurance contracts were made in Illinois. The Missouri Supreme Court held that the law of the state in which the insured risk was located should control. 716 S.W.2d at 359.

In the Playtex companion Delaware action, the Delaware court refused to make a finding that Delaware law, not the law of the state where Playtex's activities caused injury, would control in determining who should pay punitive damages. The Delaware court also noted that Delaware has adopted the choice of law approach of the Restatement (Second) of Conflict of Laws § 188.

If we were to refuse to apply Kansas law on the issue of punitive damages, we would thwart the purposes for which the policy was adopted.

"Where exemplary damages are awarded for purposes of punishment and deterrence, as is true in this state, public policy should require that payment rest ultimately as well as nominally on the party who committed the wrong; otherwise they would often serve no useful purpose. The objective to be attained in imposing punitive damages is to make the culprit feel the pecuniary punch, not his guiltless guarantor." Koch v. Merchants Mutual Bonding Co., 211 Kan. at 405.

The objective of the policy is to prevent wrongful acts against citizens of the State of Kansas. Here, a Kansas citizen died as a result of the misconduct of Playtex. The jury in the O'Gilvie case made the following specific findings:

"8. Did International Playtex know, or should it have known, of the increased [273] risk of developing toxic shock syndrome when using Playtex super deodorant tampons at the time of the death of Betty O'Gilvie?

"Yes X No ___

"9. Was the failure of International Playtex to adequately warn about the increased risk of toxic shock syndrome with the usage of Playtex super deodorant tampons a reckless disregard by International Playtex of the consequences of its acts?

"Yes X No ___" 609 F. Supp. at 818.

A finding that Kansas public policy does not apply to the punitive damages in the O'Gilvie action would effectively excuse Playtex from the consequences of its reckless behavior within this state. Failure to apply Kansas law would establish an undesirable precedent for other tort and product liability actions. In any product liability action which involves an out-of-state manufacturer, the manufacturer could avoid the application of Kansas public policy where the manufacturer had contracted outside the State of Kansas for insurance of punitive damages. This would result in the uneven application of the public policy. Kansas tortfeasors would be required to feel the "pecuniary punch" while out-of-state tortfeasors could require their "guiltless" insurance companies to pay such damages. Out-of-state tortfeasors who contracted with out-of-state carriers would, therefore, not be subject to deterrence for committing reckless acts in Kansas.

We affirm the trial court's choice of Kansas law.

Partial Summary Judgment

The trial court sustained the plaintiff insurers' motion for partial summary judgment. A prologue to any analysis of a summary judgment issue is the recitation and acknowledgment of the movant's burden and of our scope of appellate review.

"The burden on the party seeking summary judgment is a strict one. The trial court is required to resolve all facts and inferences which may reasonably be drawn from the evidence in favor of the party against whom the ruling is sought. On appeal we apply the same rule, and where we find reasonable minds could differ as to the conclusions drawn from the evidence, summary judgment must be denied. [Citation omitted]. The party opposing summary judgment, however, has the affirmative duty to come forward with facts to support its claim, although it is not required to prove its case. [Citations omitted]. If factual issues do exist, they must be material to the case to preclude summary judgment." Bacon v. Mercy Hosp. of Ft. Scott, 243 Kan. 303, 306-07, 756 P.2d 416 (1988).

Playtex points to "numerous controverted facts" connecting [274] the parties to the State of Delaware. The trial court found that Playtex's Delaware assertions were not material to its decision. Personal jurisdiction is a question of law to be determined by the trial court. Our analysis of the personal jurisdiction issue indicates that the record established a sufficient nexus between the State of Kansas and Playtex to permit the assertion of personal jurisdiction over Playtex. Whatever ties Playtex has to Delaware are noted, analyzed, and characterized as secondary to the issue of the personal jurisdiction of Playtex in the Kansas courts.

Playtex contends that summary judgment was improper because factual issues regarding the intentions of the parties as to the meaning of the punitive damage clause of the insurance policies were in dispute. A reading of Playtex's answer to the motion for partial summary judgment indicates that most of the insurers' contentions of fact were uncontroverted by Playtex. The trial court specifically found that the contraventions of fact made by Playtex were not material to the issues to be determined in the partial summary judgment. A review of the record supports the trial court's ruling.

The insurance contracts in issue stated that punitive damages would be insured to the maximum extent allowed by law. Kansas law prohibits the insurance of punitive damages; therefore, under the express terms of the contract, punitive damages arising out of Kansas litigation would not be covered.

In its journal entry of partial summary judgment, the trial court said:

"This controversy arises out of injuries in Kansas suffered by a Kansas resident resulting in her wrongful death. Providing for the award of punitive damages in civil actions is a significant method by which this state protects its citizens. This state's interest in protecting its citizens and its duty to protect its citizens is of the highest order. This interest would be undermined if Kansas law were not applied to the question presented in this action."

The analysis of the choice of law issue also indicates that the trial court had sufficient facts to determine that Kansas law should apply to the litigation. Playtex indicates that, had it been able to complete its discovery, it could have shown that the choice of Delaware law was the proper choice in this litigation.

This court has held that, ordinarily, a motion for summary judgment should not be sustained so long as discovery is incomplete. Beck v. Kansas Adult Authority, 241 Kan. 13, 26-27, 735 P.2d 222 (1987).

[275] Our public policy analysis indicates that additional facts, yet to be discovered, which may suggest that Delaware law should be applied to this action are not relevant. Kansas will not apply the law of another state on the instant issue of insurance and punitive damages in contravention of Kansas public policy. "If a disputed fact, however resolved, could not affect the judgment it is not a material fact so as to preclude summary judgment." In re Estate of Messenger, 208 Kan. 763, Syl. ¶ 4, 494 P.2d 1107 (1972).

A Final Judgment Subject to Appeal

K.S.A. 1988 Supp. 60-254(b) states:

"When more than one claim for relief is presented in an action, whether as a claim, counterclaim, cross-claim or third-party claim or, when multiple parties are involved, the court may direct the entry of a final judgment as to one or more but fewer than all of the claims or parties only upon an express determination that there is no just reason for delay and upon an express direction for the entry of judgment."

The trial court specifically found that the issues relating to the liability for punitive damages were unrelated to the remaining issues in this litigation and certified the ruling on the motion for partial summary judgment as a final judgment under K.S.A. 1988 Supp. 60-254.

The plaintiff insurers' second claim for relief, which has not yet been adjudicated, seeks a declaration that the insurers are liable for the expenses of the appeal of the O'Gilvie action only to the extent that they challenged the award of compensatory damages.

A certification pursuant to K.S.A. 1988 Supp. 60-254(b) must contain an express determination that there is no just reason for delay and an express determination that the entry of judgment is a final judgment. City of Salina v. Star B, Inc., 241 Kan. 692, 695, 739 P.2d 933 (1987). The trial court's entry of judgment met these two requirements. Because Fed. R. Civ. Proc. 54(b) is identical to K.S.A. 1988 Supp. 60-254(b), Kansas has followed the federal cases interpreting 54(b) certifications. 241 Kan. at 695.

Playtex contends the claim that remains below is between the same parties and predicated on the same insurance contracts; consequently, the trial court erred in certifying the partial summary judgment as a final judgment. Playtex cites Liberty Mutual Ins. Co. v. Wetzel, 424 U.S. 737, 47 L.Ed.2d 435, 96 S.Ct. 1202 (1976), in support of its contentions. In Liberty, the United [276] States Supreme Court held that a 54(b) certification was improper where the plaintiff's complaint advanced a single legal theory which was applied to only one set of facts. 424 U.S. at 743.

In Henderson v. Hassur, 1 Kan. App.2d 103, 562 P.2d 108 (1977), a number of claims, counterclaims, and cross-claims were asserted out of a contract for the building and operation of Pizza Hut franchises in Mexico. The trial court granted partial summary judgment on some of the claims, but reserved the issues of punitive damages and cross-claims between the two plaintiffs. The Court of Appeals found that the trial court had not issued a 54(b) certificate as required by the statute. The court held that, even had the trial court issued the certificate, the remaining counterclaim was so closely related to the claims disposed of in the partial summary judgment that disposition of both was required for a final decision. 1 Kan. App.2d at 111.

The issue of whether the insurers were liable for punitive damages is intertwined with the issue of whether the insurers would be required to fund the appeal from those punitive damages. The insurers argue, "The resolution of this issue and certification of the appeal has served to expedite the conclusion of this dispute and precluded the Defendants from relitigating this issue and undermining the public policy of this state in the Delaware action." We agree.

The insurers cite Curtiss-Wright Corp. v. General Electric Co., 446 U.S. 1, 64 L.Ed.2d 1, 100 S.Ct. 1460 (1980). In Curtiss-Wright the Supreme Court granted certiorari in order to examine the use of 54(b) as a procedural device:

"The court of appeals must, of course, scrutinize the district court's evaluation of such factors as the interrelationship of the claims so as to prevent piecemeal appeals in cases which should be reviewed only as single units. But once such judicial concerns have been met, the discretionary judgment of the district court should be given substantial deference, for that court is `the one most likely to be familiar with the case and with any justifiable reasons for delay.' [Citation omitted.] The reviewing court should disturb the trial court's assessment of the equities only if it can say that the judge's conclusion was clearly unreasonable." 446 U.S. at 10.

The Court in Curtiss-Wright endorsed its observation made in Sears, Roebuck & Co. v. Mackey, 351 U.S. 427, 435, 100 L.Ed. 1297, 76 S.Ct. 895 (1956), that the function of the district court under the Rule is to act as "dispatcher." The district court is to determine the "appropriate time" when each final decision in a [277] multiple claims action is ready for appeal. The district court's discretion is to be exercised "`in the interest of sound judicial administration.'" Curtiss-Wright, 446 U.S. at 8.

We adopt the Curtiss-Wright rationale as the correct one to invoke for a K.S.A. 1988 Supp. 60-254(b) determination.

Litigation on the same matters was pending in the state courts of Delaware and Minnesota at the time partial summary judgment was entered in this case. The concept of efficient judicial administration would be served by allowing this court to determine the personal jurisdiction and choice of law issues before the case advanced further. The Delaware court has indicated that it is waiting for this court's determination of the personal jurisdiction issue. The Minnesota action is stayed, pending this decision. Our adjudication of the issue of plaintiff insurers' nonliability for punitive damages will effectively dispose of the issue of the insurers' liability for the expenses of the federal court appeal of punitive damages.

Certification will not result in unnecessary appellate review.

The claims of jurysdiction and choice of law will not be mooted by any future developments in the case. This court will not have to decide these two issues more than once.

We agree with the observation of the insurers that any issues relating to the allocation of costs of the federal appeal are fact specific.

The Playtex Counterclaim - The Insurers' Motion

The insurers have advanced the argument that, because Playtex filed a counterclaim, characterized by Playtex as contingent, it waived jurisdiction.

The trial court specifically declined to decide or make any conclusions of law with respect to whether the counterclaim is "a compulsory counterclaim, contingent counterclaim or whether it is a counterclaim at all."

The insurers have filed a motion to strike Appendix A of the Playtex brief and portions of the record on appeal, including arguments based thereon.

In view of our disposition of the appeal it is not necessary to consider either the "counterclaim question" or the insurers' motion.

Affirmed.

[694] Steven M. Tipton, Flahive, Ogden & Latson, Austin, for appellants.

Dean M. Kilgore, Diana K. Borden, McGinnis, Lochridge & Kilgore, Austin, for appellees.

Before POWERS, GAMMAGE and CARROLL, JJ.

[695] CARROLL, Justice.

Appellants, American Home Assurance and National Union Fire Insurance, appeal from a declaratory judgment in favor of appellees, Rawlings Sporting Goods and Safway Steel Products, concerning insurance coverage of punitive damage awards. The litigation follows two separate product liability actions in which Texas juries had assessed punitive damages.

The issues in this appeal fall broadly into three principal categories: (1) conflicts of law; (2) construction of the language of the insurance agreements in question; and (3) the insurability of punitive damage awards as a matter of public policy.

We have concluded that any conflict of law question must be resolved in favor of applying Texas law, that the plain language of the policies does not exclude punitive damages, and that insuring against possible punitive damages is not contrary to Texas public policy. Accordingly, we affirm the trial court's judgment.

I. BACKGROUND

A. Rawlings Case: In 1973, Rawlings Sporting Goods Company, Inc., purchased an Umbrella Liability Policy from American Home Assurance. While the policy was in effect, Mark Daniels sustained injuries while playing football and wearing a Rawlings football helmet. Mark sued, and the jury found Rawlings grossly negligent in failing to warn its customers of the limitations of the helmet, and awarded $750,000 in punitive damages. Rawlings Sporting Goods Co., Inc. v. Daniels, 619 S.W.2d 435 (Tex.Civ.App.1981, writ ref'd n.r.e.).

American Home paid the claim but reserved for future resolution the issue of whether it was legally obligated to pay the punitive damage portion of the judgment. The policy provides in part:

Insuring Agreements

Coverage—To pay on behalf of the insured the ultimate net loss in excess of the retained limit herein defined, which the insured shall become legally obligated to pay as damages by reason of the liability imposed upon the insured by law, or assumed by the insured under contract because of—

(a) Personal injury, including death at any time resulting therefrom, as defined herein and caused by or arising out of an occurrence.

* * * * * *

Definitions

* * * * * *

Occurrence—With respect to Personal Injury ... the term "occurrence" means an event ... which result(s) in Personal Injury ... neither expected nor intended from the standpoint of the insured ... Ultimate Net Loss— ... the term "Ultimate Net Loss" shall mean the total sum which the insured or any company as its insurer, or both become obligated to pay by reason of personal injury ...

B. Safway Case: In 1977, National Union Fire Insurance Company, Inc. issued an Excess Third Party Liability Policy to Safway Steel Products Company, Inc. During the policy period, Leo Ventris successfully sued Safway for injuries caused by a defective scaffold. Ventris charged gross negligence in design, testing, marketing, warning or failure to warn of the dangers of the scaffolding system, and recovered $1,000,000 in punitive damages.

The case settled while under submission on appeal and National Union Fire paid its portion of the settlement, but reserved for future resolution the issue of whether it was obligated to pay that part of the settlement attributable to punitive damages. The pertinent provisions of the Safway policy are as follows:

Insuring Agreement

In consideration of the payment of premium stated in the Declarations, the Company agrees to indemnify the insured in accordance with the applicable insuring agreements of the Primary Insurance, against loss subject to the limits stated in Item 6, Section I of the Declarations and as fully and to all intents and purposes [696] as though the Primary Insurance had been issued forth in Item 6 ...

* * * * * *

Conditions

1. It is agreed that this policy, except as herein stated, is subject to all conditions, agreements and limitations of and shall follow the Primary Insurance in all respects...

Safway's primary insurance carrier at the time was United National Insurance Company, and the pertinent contractual provisions are as follows:

Coverage—Bodily Injury Liability

The Company will pay on behalf of the insured all sums which the insured shall become legally obligated to pay as damages because of ... bodily injury ... to which this insurance applies, caused by an occurrence ...

* * * * * *

Definitions

"Occurrence" means an accident, including continuous or repeated exposure to conditions, which results in bodily injury or property damage neither expected nor intended from the standpoint of the insured.

Since both the Rawlings and Safway cases involve similar questions, they were consolidated into a single declaratory judgment action.

II. CONFLICTS OF LAW

As a preliminary matter, appellants contend that the district court erred in applying Texas law both to the construction of the insuring agreements, and to the issue of whether public policy prohibits the insurability of punitive damage awards. Appellants suggest that New York or Missouri law should have been applied in the Rawlings case and New York or Wisconsin law applied in the Safway case. This argument is primarily based upon § 188 of the Restatement (Second) of Conflict of Laws which addresses the evaluation of the significance of a state's relationship to a particular question.^[1]

Applying the § 188 analysis to the record of this appeal, we find the following contacts:

A. The Rawlings Case: American Home is a New York Corporation with its principal place of business in New York; Rawlings' principal place of business is Missouri; the umbrella liability policy was negotiated by phone with Rawlings' office in Missouri; the policy was issued in New York and countersigned in Missouri; the premiums are payable in New York through Rawlings' agent in Ohio; and the last act of affirmance by the insurer occurred in New York.

B. The Safway Case: National Union Fire's state of incorporation is Pennsylvania; National Union Fire's home office and principal place of business is New York; Safway's principal place of business is Wisconsin; the policy premiums are payable in New York; and the last act of affirmance by the insurer occurred in New York.

In Duncan v. Cessna Aircraft Co., 665 S.W.2d 414 (Tex.1984), the Supreme Court abandoned the traditional lex loci rule for [697] resolving choice of law questions and adopted the "most significant relationship" approach set forth in § 6 of the Restatement (Second) of Conflict of Laws.^[2] The guidelines in § 6 direct courts to identify the relative interest of each state in having its law applied, and then to balance the interests of the affected states with the factors listed in the Restatement (Second). However, a court should only resort to the § 6 guidelines in the absence of either a valid contractual agreement between the parties regarding the applicable law, or a local statutory provision controlling the disposition of the choice of law question.

Comment (a) of § 6 states "A court, subject to constitutional limitation, must follow the directions of its legislature." See also Reese, Conflict of Laws and the Restatement Second, 28 Law & Contemp.Prob. 679 (1973). Such is our case. Texas Ins. Code Ann. art. 21.42 (1981) provides:

Art. 21.42. Texas Laws Govern Policies

Any contract of insurance payable to any citizen or inhabitant of this State by any insurance company or corporation doing business within this State shall be held to be a contract made and entered into under and by virtue of the laws of this State relating to insurance, and governed thereby, notwithstanding such policy or contract of insurance may provide that the contract was executed and the premiums and policy (in case it becomes a demand) should be payable without this State, or at the home office of the company or corporation issuing the same.

Here both American Home and National Union Fire were at all times "doing business" in Texas. Moreover, at the moment the Texas juries in both the underlying personal injury actions returned a verdict legally obligating Rawlings and Safway to pay the respective plaintiffs certain sums for both compensatory and punitive damages, both insurance policies became "payable" under their own terms.

Article 21.42 has been previously upheld as constitutional. Austin Bldg. Co. v. National Union Fire Ins. Co., 432 S.W.2d 697 (Tex.1968). The only limitation is that art. 21.42 may not be given an extraterritorial effect. Aetna Life Ins. Co. v. Dunken, 266 U.S. 389, 45 S.Ct. 129, 69 L.Ed. 342 (1924). In other words, the statute may not be used in a way which regulates business outside the State of Texas.

We have little difficulty in concluding that art. 21.42 requires us to apply Texas law to the issues in this appeal. In reaching this conclusion, we have considered and rejected the argument that application of Texas law would in essence regulate business outside of our State. Further, we cannot agree with the necessarily attendant proposition that New York, Missouri, and Wisconsin have any interest in determining which parties are financially responsible for paying a Texas jury verdict.

The fact that the respective insurance policies were negotiated, executed and premiums paid elsewhere in no way alters the tenor placed on the litigation when the instigating events arose in Texas. Our analysis of the choice of law issues in this appeal has led us to conclude that Texas has adequate contacts to sustain the choice of forum law under art. 21.42. See Allstate Insurance Co. v. Hague, 449 U.S. 302, 101 S.Ct. 633, 66 L.Ed.2d 521 (1981); see also, Leflar, The Nature of Conflicts Law, 81 Colum.L.Rev. 1080 (1981). Nevertheless, we have also analyzed each state's particular interests in having its law applied and that state's contact with the particular issues in this appeal.

[698] As we indicated earlier, following Duncan v. Cessna, supra, the substantive law of the state most significantly related to the disputed issue will apply to future choice of law cases, unless the parties expressly contract otherwise. However, the Duncan Court did not adopt the Restatement (Second) as a whole. See Comment, Texas Contract Choice of Law Rules After Duncan v. Cessna Aircraft Company, 36 Baylor L.Rev. 491, 496 (1984). Nonetheless, for purposes of this opinion, we will adopt appellants' argument that our decision should be based on the more specific choice of law rules governing contracts.

Section 188 of the Restatement (Second) of Conflict of Laws provides that "with respect to an issue in contract" the relevant contacts to be taken into account in applying the principles of § 6 include such matters as the place of contracting, place of negotiation, and place of performance of the contract. However, as comment (e) of § 188 indicates, these factors merely indicate which states are most likely to be "interested" within the meaning of § 6. Hence, at best, the § 188 factors only pertain to one part of a larger analytical scheme that determines whose local law will be applied to resolve the issue at hand.

As appellants' application of the § 188 factors indicates, the potentially-interested jurisdictions, other than Texas, include New York, Missouri, and Wisconsin. In accordance with comment (d), we have analyzed each of the two principal issues in this appeal separately in order to determine whether either would be resolved differently under the local law of two or more of the potentially-interested states.

1. Construction of the Coverage Provisions of the Policies: The choice of law question here is not whether Missouri, New York, Wisconsin or Texas would interpret the policy as providing liability coverage for punitive damages, but rather whether the rules of interpretation employed in construing the insurance policies differ.

In general, Texas courts will enforce an insurance policy as written if the language used is free from any ambiguity. Glover v. National Insurance Underwriters, 545 S.W.2d 755 (Tex.1977). However, if the language is subject to two or more reasonable interpretations, the construction which affords coverage will be adopted. Blaylock v. American Guarantee Bank Liability Insurance Co., 632 S.W.2d 719 (Tex. 1982). This policy of construction against the insurer and in favor of the insured is especially strong when the court is dealing with exceptions and words of limitation. Id. at 721.

We do not address the specific rules of construction under New York law, since New York refuses on public policy grounds to enforce insurance contracts which insure against liability for punitive damages. See Hartford Accident and Indemnity Company v. Village of Hempstead, 48 N.Y.2d 218, 422 N.Y.S.2d 47, 397 N.E.2d 737 (1979); Padavan v. Clemente, 43 A.D.2d 729, 350 N.Y.S.2d 694 (1973); see also, Hafner v. Guerlain, Inc., 34 A.D.2d 162, 310 N.Y.S.2d 141 (1970). Hence, a false conflict exists regarding the policy construction issue—because of public policy consideration, a New York court would never employ its rules of construction to resolve our particular issue. Accord, Beaver v. County Mutual Insurance Co., 95 Ill.App. 3d 1122, 51 Ill.Dec. 500, 420 N.E.2d 1058 (1981).

A Missouri court has recently been called upon to interpret policy provisions virtually identical to the policies issued by appellants, and concluded that the phrase "all sums which the insured shall become obligated to pay as damages because of bodily injury" does not include awards for punitive damages. Schnuck Markets, Inc. v. Transamerica Insurance Co., 652 S.W. 2d 206, at 211 (Mo.App.1983). Following Missouri rules of contract construction, the court did not indulge in any particular presumption in favor of the insured, and concluded that the policy language unambiguously excluded coverage for punitive damages.

In contrast, under Wisconsin principles of law, the test is not what the insurer [699] intended the words to mean, but rather what a reasonable person in the position of the insured would have understood them to mean. Kremers-Urban Co. v. American Employers Insurance, 119 Wis.2d 722, 351 N.W.2d 156 (1984). Words or phrases will be considered ambiguous when they are fairly susceptible to more than one construction. Brown v. Maxey, 124 Wis.2d 426, 369 N.W.2d 677 (1985). Where no ambiguity exists, Wisconsin courts will merely apply the policy terms. Id. 369 N.W.2d at 686. Additionally, any provision tending to limit the liability of the insurance company is construed most strongly against the insurance company if ambiguous. Wisconsin Builders, Inc. v. General Insurance Company, 65 Wis.2d 91, 221 N.W.2d 832 (1974).^[3]

Hence, there is no conflict between the applicable Wisconsin and Texas rules of contract construction. In fact, given the factual circumstances in Brown v. Maxey, supra, we believe Wisconsin would interpret the policies issued by appellants in the same manner and reach the same conclusions as a Texas court applying Texas law.

Since we have identified a conflict in the pertinent local law of Texas and Missouri, § 188 directs us to identify the interests of each state in having its rule of law applied to this appeal. We then assess the relative strength of those interests based primarily upon the specific contacts set forth in § 188, as they relate to the issue of policy construction.

The factual contacts Missouri has with our specific policy interpretation questions are: (1) the American Home insurance policy was countersigned in Missouri; (2) American Home was doing business in Missouri at the time the policy was issued; and (3) Rawlings' principal place of business is in Missouri. None of these contacts are, however, especially important to a determination of whether Missouri law should be applied in resolving whether American Home's policy with Rawlings excludes punitive damages awarded by a Texas jury. Hence, any interest Missouri may have in having its rule of law applied is relatively minor.

By comparison, the Texas interests are relatively strong. For instance, Texas has a policy of regulating insurance contracts payable to inhabitants of Texas. Tex.Ins. Code Ann. art. 21.42 (1981). Article 21.42 represents an identifiable statement by the Texas legislature regarding Texas public policy. In addition, the applicable Texas rules of construction favor interpreting ambiguous policies in favor of the insured, which indicates a state interest in protecting the policyholder.

Appellants argued before this Court that since the Texas personal injury plaintiffs have been paid on their judgments against Rawlings and Safway, all Texas contacts and interests in construing the insurance contracts have somehow evaporated. We disagree. Although the compensation of Texas residents is no longer a concern, the fact remains that the instigating event—imposition of punitive damages —occurred in Texas.

If we allowed appellants to dissociate themselves completely from the jurisdiction which imposed those damages, we would necessarily condone forum-shopping. Appellants could, after paying the primary personal injury action under the reservation of rights, seek a declaratory judgment in a state in which they were doing business and whose public policy precludes insuring against punitive damages. If the needs of the interstate system are to be served as § 6 of the Restatement (Second) on Conflicts of Law suggests, then the appropriate local law to be applied in resolving both the policy construction issues and public policy issues is the law of the state that imposed the punitive damages in the first place—Texas.

[700] In summary, we conclude that given the relevant state interests involved and the contacts of the states to the question of policy coverage, the trial court properly applied Texas law. Appellants' first point of error is overruled.

2. Public Policy Considerations:

Of the various jurisdictions identified by appellants, only New York expressly refuses, based upon public policy grounds, to enforce insurance policies covering punitive damages. See Hartford Accident and Indemnity Company, supra; see also Parker v. Agricultural Insurance Co., 109 Misc.2d 678, 440 N.Y.S.2d 964 (1981). Although the issue of insurability of punitive damages has not been as thoroughly discussed in Texas as it has elsewhere,^[4] Texas law has nonetheless been interpreted to permit such coverage. See Dairyland County Mutual Insurance Co. v. Wallgren, 477 S.W.2d 341 (Tex.Civ.App.1972, writ ref'd n.r.e.); Home Indemnity Company v. Tyler, 522 S.W.2d 594 (Tex.Civ. App.1975, writ ref'd n.r.e.). The law in Missouri appears unsettled,^[5] and Wisconsin allows coverage. See Colson v. Lloyd's of London, 435 S.W.2d 42 (Mo.App.1968); Crull v. Gleb, 382 S.W.2d 17 (Mo.App. 1964); Brown v. Maxey, supra. Hence, if a conflict exists, it exists only between New York and Texas law.^[6]

Although New York's interest in not enforcing this type of policy is no doubt important, the New York § 188 contacts are at best tangentially related to the issue of insurability itself. Our conclusion that Texas law should be applied to this issue is also supported by other considerations. For instance, when the law of one state [701] would invalidate the contract, but the law of another would uphold it, the Restatement (Second) favors applying the law of the state which would uphold the validity of the contract.

In addition, the policies underlying a particular state's law regarding punitive damages will in many cases reflect whether that state will allow a company or individual to obtain insurance against liability for possible punitive damage awards. Thus, the public policy issue is intertwined with the basic purposes sought to be achieved by the law which imposed the damages. If uniformity and predictability are to be achieved on resolving such issues, the local law which provides for the punitive damage award should also be used to resolve the insurability issue.

In summary, even if we were to adopt appellants' decisional framework on the choice-of-law question, we conclude that the district court correctly applied Texas law to the public policy issue. Appellants' second point of error is overruled.

III. COVERAGE UNDER POLICY LANGUAGE

The threshold inquiry on this issue is whether the language used in the insurance policies covers punitive damages. The Rawlings policy requires American Home Assurance to pay the "total sum" for which the insured becomes obligated to pay by reason of personal injury caused by or arising out of an "occurrence." The policy issued to Safway requires National Union Fire to pay on behalf of Safway "all sums" for which Safway shall become legally obligated to pay as damages because of bodily injury caused by an "occurrence." Both policies then define "occurrence" as an event that results in personal or bodily injury "neither expected nor intended from the standpoint of the insured."

Appellants maintain that appellees' conduct that gave rise to an award of punitive damages is by definition excluded from coverage under the term "occurrence." They contend that injuries resulting from grossly negligent conduct are either intended or expected from the insured's standpoint and therefore not covered under the policy.^[7] In response, appellees contend that a reasonable person reading the terms "total sum" or "all sums" would expect those terms to include not only compensatory damages, but also punitive damages. Finally, appellees argue that, at best, the contract is ambiguous and should be interpreted in favor of coverage.

There is no language whatsoever in either the insuring agreement or the definitional sections which expressly excludes coverage for punitive damages. One can only reach an interpretation of exclusion through a technical analysis on whether the insured's gross negligence, which resulted in the injury causing event, constitutes conduct neither expected nor intended from the standpoint of the insured. On this point, reasonable arguments may be made on both sides. If we needed to reach this issue, we would conclude that punitive damages arising out of the insured's gross negligence are not by definition excluded from coverage based upon the intentional injury exclusion provision of the policy.^[8] However, we conclude that a much more obvious reason supports coverage.

The insuring agreements begin with virtually identical language obligating the insured to pay "all sums" or the "total sums" which the insured becomes legally obligated to pay as "damages". In this [702] regard, it is important to observe that the insurance contracts here have nationwide effect and contain standard contractual provisions. As a result, we are not the first court to be called upon to interpret these particular terms.

The majority of courts that have addressed this question and found coverage have generally done so based on the following arguments: (1) the average insured, in the absence of an express policy exclusion from liability from punitive damages, would assume that the term "damages" would include punitive damages, since they would become by judgment a "sum" that the insured would be legally obligated to pay; (2) because the insurer drafted the policy and could have made clear its intention to exclude coverage for punitive damages, the rules of construction require it to bear the burden of ambiguity, and (3) punitive damages are covered because they always "arise" out of the underlying action for injury.^[9]

The Texas courts that have interpreted the "all sums" phrase have held that the term encompasses punitive damages. See Dairyland County Mutual Ins. Co. v. Wallgren, supra; Home Indemnity Company v. Taylor, supra. In fact, the majority of courts in other jurisdictions that have addressed this construction issue have concluded that the term covers punitive damages. Annot., 20 A.L.R.3d 320 (1980). We mention this fact solely to show that past interpretations would lead the average policy holder reading this language to expect protection against all claims that are not the result of an intentional tort. When problems of contractual clauses are involved, precedent is necessarily a highly important factor, and contracting parties generally select a judicially-construed clause with the intention of adopting the meaning that the courts have approved. Hardware Dealers Mutual Insurance Co. v. Berglund, 393 S.W.2d 309 (Tex.1965).

According to the principles of Texas law previously articulated, policy terms are to be given the normal and usual meanings ascribed to them by an ordinary person. We conclude that both policies, at best, may be termed "ambiguous" and should therefore be interpreted in favor of coverage. See Blaylock v. American Guarantee Bank Liability Insurance, supra. Moreover, upon reading the policy provisions, and in the absence of any express exclusion of liability for punitive damages, we conclude a person insured by such a policy would have reason to believe that his premiums protect him against liability for "all sums" that the insured might become "obligated to pay", and that the term "damages" would include both compensatory and punitive damages which become, by judgment, a "sum" that he is legally obligated to pay.

The language used in both the Rawlings and Safway policies makes no distinctions as to the type of "damages" that are covered up to the policy limits. For purposes of excluding categories of damages, distinctions drawn upon the nature of the insured's acts are not enough. Almost every conscious or voluntary act may be considered "intended" or "expected." There is nothing in the policy itself which would otherwise forewarn an insured that the intent of the parties was to exclude punitive damages based upon the insured's gross negligence. Appellant insurance companies could have easily removed any ambiguity by including an express exclusion from liability for punitive damages.

Questions of policy coverage are, of course, questions of law. Since we have concluded that both policies cover punitive damages, we do not need to address appellants' individual points of error regarding the sufficiency of the evidence to support the district court's findings that the underlying personal injury actions arose out of an "occurrence" or that the punitive damages were not assessed "because of personal (or bodily) injury." Points of error three, four, five, six, eight and nine are overruled.

[703] IV. PUBLIC POLICY

The last issue we must address is whether Texas public policy prohibits the enforcement of an insurance contract covering punitive damages. In Dairyland County Mutual Ins. Co. v. Wallgren, supra, the Court of Appeals defined public policy with reference to the law of Texas as embodied in its constitution, statutes, decisions of its courts, and the administrative practices of its state's officers. Since the automobile liability policy issued by Dairyland was written in accordance with the terms and conditions of insurance policies set out by the Insurance Commission, the court concluded that the policy could not contravene public policy. This line of reasoning is not, however, without its critics. See Comment, Insurability Against Punitive Damages: A Call For Reform, S.Tex. L.J. 443, 451 (1982).

The earliest reported Texas cases concerning punitive damages adopted the view that such damages were intended primarily to serve as "punishment":

Where either of the elements of fraud, gross negligence, or oppression mingle in the controversy, the law, instead of adhering to the system or even the language of compensation, adopts a wholly different rule. It permits the jury to give what it terms punitory, vindictive, or exemplary damages, in other words, blends together the interests of society and the aggrieved individual, and gives damages not only to recompense the sufferer, but to punish the offender.

Graham v. Roder, 5 Tex. 141 (1849).

Although recovery of punitive damages is available in a variety of cases, most awards have been founded on willful or malicious conduct of the defendant. See generally Demarest, The History of Punitive Damages in Texas, 28 S.Tex.L.Rev. 535 (1987). However, with the decision in Burk Royalty Co. v. Walls, 616 S.W.2d 911 (Tex.1981), awards of punitive damages based upon the defendant's gross negligence have become more common, especially in the products liability area. See, e.g., International Armament Corp. v. King, 686 S.W.2d 595 (Tex.1985); Ford Motor Co. v. Nowak, 638 S.W.2d 582 (Tex. App.1982, writ ref'd n.r.e.); Rawlings Sporting Goods Co. v. Daniels, supra.

Appellants argue that allowing appellees to insure themselves against an award of punitive damages thwarts the principal purposes behind punitive damages—punishment and deterrence. The often-cited legal authority for this position is Northwestern National Casualty Company v. McNulty, 307 F.2d 432, 440-01 (5th Cir.1962), wherein Judge Wisdom stated:

Where a person is able to insure himself against punishment he gains a freedom of misconduct inconsistent with the establishment of sanctions against such misconduct. It is not disputed that insurance against criminal fines or penalties would be void as violative of public policy. The same public policy should invalidate any contract of insurance against the civil punishment that punitive damages represent.

The policy considerations in a state where, as in Florida and Virginia, punitive damages are awarded for punishment and deterrence, would seem to require that the damages rest ultimately as well [as] nominally on the party actually responsible for the wrong. If that person were permitted to shift the burden to an insurance company, punitive damages would serve no useful purpose. Such damages do not compensate the plaintiff for his injury, since compensatory damages already have made the plaintiff whole. And there is no point in punishing the insurance company; it has done no wrong. In actual fact, of course, and considering the extent to which the public is insured, the burden would ultimately come to rest not on the insurance companies but on the public, since the added liability to the insurance companies would be passed along to the premium payers. Society would then be punishing itself for the wrong committed by the insured.

Despite having recognized identical purposes behind punitive damages, other courts addressing the issue have reached the opposite conclusion. See, e.g., Lazenby [704] v. Universal Underwriters Ins. Co., 214 Tenn. 639, 383 S.W.2d 1 (1964); Harrell v. Travelers Indemnity Co., 279 Or. 199, 567 P.2d 1013 (1977); see generally Ghiardi & Kircher, Punitive Damages: Law and Practice, supra at § 712; Annot., 16 A.L. R.4th 11 (1982).

Rather than grappling with this entire question, we have narrowed our analysis strictly to the facts at hand. Thus, the question we address is this—Is it consistent with Texas public policy for a corporation to insure itself against the gross conduct of its agents? After Burk Royalty Co. v. Walls, the ability of a plaintiff to allege and obtain a punitive damage award has undoubtedly been enhanced. As a consequence, business and professional persons, firms and corporations constantly face the risk that where gross negligence is alleged, a verdict for punitive damages might well follow.

Against this background of increased availability of punitive damages, we address the issue of whether insuring against punitive damage awards is consistent with the dual purposes of punitive damages: punishment and deterrence.

Opponents of coverage argue that by allowing a corporation to insure itself against its own wrongs, the corporation is able to "shift the burden" of the punitive damage judgment to the insurance company. In the end, the only persons actually "punished" are the innocent members of society who purchase insurance. See Northwestern National Casualty Company v. McNulty, supra at 440-41. We believe this argument is overly simplistic.

An insurance company that deliberately enters into a contract to provide coverage against liability for punitive damages is free to charge additional premiums for such coverage, so as to provide a separate fund for the express purpose of paying such judgments without "punishing" either the insurance company or society. The insurance company is also free to deny coverage of punitive damages altogether. In the case of an established corporation, it is important to note that its inability to obtain such coverage will inevitably be passed on to the consumers of its products—who are also innocent.

The question of how to "punish" a corporation is a difficult one. At best, some pressure may be exerted on the directors through the corporate shareholders to remove agents of the corporation whose actions or omissions led to the particular conduct being punished. More realistically, the cost of paying the judgment will be borne not by the culpable corporate agents, but by the corporation's customers. Moreover, in the normal course of business, corporate officials will punish the offending agents themselves. The threat of increased premiums and the possibility of damages exceeding policy limits appear sufficient to preserve this pressure to discharge the agents whose conduct is deemed improper.

In cases where the corporation is less well-established or affluent, its inability to insure against such liability may well cause a permanent financial collapse. Not only may the size of the business prevent it from shifting the burden, but the effect of the financial collapse will be permanent, since such a judgment is not dischargeable in bankruptcy. Yet the instigating event may arise from only a single incident of gross negligence on the part of an agent. A fine line separates conduct that justifies imposition of punitive damages from conduct that does not.

It is doubtful whether the denial of insurance coverage for liability against punitive damages actually deters culpable actors. Price v. Hartford Accident and Indemnity Company, 108 Ariz. 485, 502 P.2d 522 (1972). In Texas, juries are not allowed to consider the defendant's wealth, resources, or insurance coverage when assessing compensatory or punitive damages. Whatever deterrence value punitive damages have under Texas law, we see no hindrances to the practical achievement of those objectives under a policy of law that allows for insuring against liability for punitive damages.

CONCLUSION

We find no public policy against allowing insurance coverage against punitive damages. [705] As long as insurance companies are willing, for a price, to provide protection against liability for punitive damages to corporations they deem "good risks," and as long as punitive damage liability continues to extend to "gross negligence," we see no reason why these contracts should not be enforced:

It is one thing for an insurance company to write a policy with provisions which exclude liability for punitive damages and to ask that this court construe and apply such policy provisions. It is quite another thing, however, for an insurance company which has written and issued an insurance policy in terms which include coverage for punitive damages—presumably at a premium which the insurance company believed to be sufficient as consideration for such coverage—to ask this court to relieve it from such liability under its own insurance contract by a judicial declaration that the contract is void for reasons of public policy.

Harrell v. Travelers Indemnity Co., supra 567 P.2d at 1021-22.

We conclude that public policy would be best served by requiring the insurance company to honor its obligation. Accordingly, we hold that under Texas law it was not contrary to public policy for Rawlings and Safway to shift the punitive damages awards to their liability insurance carriers, and that, under the terms of the insurance contracts between the parties, punitive damages were within the scope of coverage. Point of error ten is overruled.

Since we conclude that the district court properly rendered judgment in favor of appellees, we also find no abuse of discretion in its award of attorney's fees to appellees.^[10] Appellants' point of error eleven is also overruled.

The appellees have brought two crosspoints claiming error by the district court in its findings of fact. However, we find nothing in the record to indicate that appellees brought the claimed errors to the attention of the district court; accordingly, they were waived. See, e.g., West Texas Utilities Co. v. Irvin, 161 Tex. 5, 336 S.W. 2d 609 (1960); State Bar of Texas, Appellate Procedure in Texas, § 15.16 (2d ed. 1979).

The judgment of the trial court is affirmed.

[1]§ 188. Law Governing in Absence of Effective Choice by the Parties

(1) The rights and duties of the parties with respect to an issue in contract are determined by the local law of the state which, with respect to that issue, has the most significant relationship to the transaction and the parties under the principles stated in § 6.

(2) In the absence of an effective choice of law by the parties (see § 187), the contacts to be taken into account in applying the principles of § 6 to determine the law applicable to an issue include:

(a) the place of contracting,

(b) the place of negotiation of the contract,

(c) the place of performance,

(d) the location of the subject matter of the contract, and

(e) the domicile, residence, nationality, place of incorporation and place of business of the parties.

These contacts are to be evaluated according to their relative importance with respect to the particular issue.

(3) If the place of negotiating the contract and the place of performance are in the same state, the local law of this state will usually be applied, except as otherwise provided in §§ 189-199 and 203.

[2]§ 6. Choice-of-Law Principles

(1) A court, subject to constitutional restrictions, will follow a statutory directive of its own state on choice of law.

(2) When there is no such directive, 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.

[3] These rules of interpretation virtually mirror those in Texas. See, e.g., Freeman v. Crown Life Insurance Co., 580 S.W.2d 897 (Tex.Civ.App. 1979, writ ref'd n.r.e.) (insurance policy terms are to be given normal and usual meaning ascribed to them by ordinary persons); Providence Washington Insurance Co. v. Proffitt, 150 Tex. 207, 239 S.W.2d 379 (1951) (insurance policies that are susceptible to double construction or uncertain import are to be interpreted and construed liberally in favor of the insured and strictly against the insuror.)

[4] See, e.g., Universal Indemnity Ins. Co. v. Tenery, 96 Colo. 10, 39 P.2d 776 (1934); Nicholson v. American Fire & Casualty Ins. Co., 177 So.2d 52 (Fla.App.1965); Greenwood Cemetery Inc. v. Travelers Indemnity Co., 238 Ga. 313, 232 S.E.2d 910 (1977); Skyline Harvestore Systems, Inc. v. Centennial Ins. Co., 331 N.W.2d 106 (Iowa 1983); First Nat. Bank of St. Mary's v. Fidelity & Deposit Co., 283 Md. 228, 389 A.2d 359 (1978); LoRocco v. New Jersey Mfgrs. Indemnity Ins. Co., 82 N.J.Super. 323, 197 A.2d 591 (1964); Lazenby v. Universal Underwriters Ins. Co., 214 Tenn. 639, 383 S.W.2d 1 (1964); Cieslewicz v. Mutual Serv. Cas. Ins. Co., 84 Wis.2d 91, 267 N.W.2d 595 (1978).

[5] In Colson v. Lloyd's of London, supra, the Missouri Appeals Court held that allowing law enforcement officers to insure themselves against willful and intentional acts is not against Missouri public policy. In contrast, four years earlier, another Missouri Appeals court held, in dictum, that to allow a motorist to insure himself against punitive damages would be contrary to public policy. See Crull v. Gleb, supra. The court in Schnuck Markets, Inc. v. Transamerica Insurance Co., supra, never reached the public policy question.

[6] It is not entirely clear that a "true conflict" exists between New York and Texas law. New York law allows an award for punitive damages only when the offending party's conduct amounts to a conscious disregard of the rights of others or for conduct so reckless as to amount to such disregard. Hartford Accident and Indemnity Company v. Village of Hempstead, supra; see also Hafner v. Guerlain, Inc.,34 A.D.2d 162, 310 N.Y.S.2d 141 (1970). In contrast, both Rawlings and Safway were assessed punitive damages based simply on their gross negligence. Although the argument may be made that gross negligence as defined under Texas law, encompasses the New York standard, the reverse proposition is not true. By not imposing punitive damages simply based on gross negligence. New York has purposely limited the availability of punitive damages to select factual circumstances.

The entire public policy argument behind not enforcing policies which insure against punitive damages changes from state to state. See generally City Products Corp. v. Globe Indemnity Company, 88 Cal.App.3d 31, 151 Cal.Rptr. 494 (1979). Insurance coverage is valid in those jurisdictions where punitive damages are allowed in respect to gross negligence or reckless or wanton conduct. In comparison, jurisdictions where punitive damages are limited to cases of fraud, oppression or malice have generally invalidated insurance coverage for punitive damages on public policy grounds. New York falls into the latter category.

Had the underlying personal injury actions been tried under New York law, punitive damages would not have been available, since New York does not allow punitive damages for gross negligence in products liability actions. Hafner v. Guerlain, supra. Since there are several public policy reasons supporting punitive damages, the public policy reasons for not allowing insurance of punitive damages are likewise different. Hence, it may not be said that New York has an interest in applying its rule of law to prevent an insurance company from paying a "punitive damage award" against its insured that would have never been assessed under New York law. The policies of an interested state are important only if an application of that state's laws would further these policies.

[7] Appellants' argument regarding the definition of "occurrence" is an attempt to lump the entire category of punitive damages within the broader policy exclusion of all damages resulting from the intentional conduct of the insured. See generally Annot., 31 A.L.R.4th 957 (1984) (the "neither expected nor intended from the standpoint of the insured" language is most commonly referred to as "an intentional injury clause").

[8] The term "occurrence" by definition is limited to acts where the conduct is intended to bring about a result to this extent the terms "intended" and "expected" are construed together. We refuse to extend the "intentional injury exclusion" to include conduct amounting to gross negligence. See e.g., Continental Insurance Companies v. Hancock, 507 S.W.2d 146 (Ct.App.Ky. 1973); Hensley v. Erie Ins. Co., 168 W.Va. 172, 283 S.E.2d 227 (1981).

[9] See generally Burrell & Young, Insurability of Punitive Damages, 62 Marg.L.Rev. 1, 12 (1978); Ghiardi & Kircher, Punitive Damages: Law and Practice, § 705 (1984); Schumaier & McKinsey, The Insurability of Punitive Damages, 72 Am.B.J. 68 (March 1, 1986).

[10] Tex.Prac. & Rem. Code Ann. § 37.009 (1986) empowers the trial court to award both costs and reasonable and necessary attorney's fees as are equitable and just in a declaratory judgment action taken under chapter 37. That award will not be set aside absent a showing that the trial court abused its discretion in making the award that it did. Zaruba v. Zaruba, 498 S.W.2d 695 (Tex.Civ.App.1973, writ dism'd).

[810] Phillips & Webster, K.C. Webster, Woodinville, counsel for petitioner.

Danielson, Harrigan & Tollefson, G. Val Tollefson, Matthew Ryan Kenney, Randall Thor Thomsen, Seattle, counsel for respondent.

Linda Blohm Clapham, Robert Leon Israel, Pamela A. Okano, Seattle, amicus curiae on behalf of certain underwriters at Lloyds London, et al.

Craig Hinton Bennion, Thomas Martin Jones, Seattle, amicus curiae on behalf of American International Companies, et al.

Debra Stephens, Bryan P. Harnetiaux, Spokane, amicus curiae on behalf of Washington State Trial Lawyers Ass'n.

Charles Cooper Gordon, James Richard Murray, Jeffrey Iver Tilden, Christie Lynn Snyder, Seattle, amicus curiae on behalf of Costco Wholesale Corp., et al.

Forsberg & Umlauf, John Patrick Hayes, Seattle, counsel for defendant Talon Instruments Inc.

OWENS, J.

The Hartford Accident and Indemnity Company (Hartford) challenges the decision of the Court of Appeals that, under the terms of the Commercial General Liability (CGL) policy that Hartford sold to Fluke Corporation (Fluke), Hartford was obligated to pay both the compensatory and punitive damages that a California jury awarded against Fluke in a malicious prosecution action. In this declaratory judgment action, the trial court and the Court of Appeals concluded that public policy in Washington did not negate the CGL policy's unambiguous grant of liability coverage for malicious prosecution. See Fluke Corp. v. Hartford Accident & Indem. [811] Co., 102 Wash.App. 237, 7 P.3d 825 (2000). However, contrary to the trial court's conclusion, the Court of Appeals held that the policy covered awards of punitive damages against Fluke, and it further determined that coverage for punitive damages did not contravene a clear public policy in this state regarding such insurance. Because California law precludes coverage both for intentional acts (including malicious prosecution) and for punitive damages,^[1] Hartford invoked California law, but the Court of Appeals agreed with the trial court that Washington law, not California law, governed this declaratory judgment action.

We affirm the Court of Appeals on all issues.

FACTS

Fluke, a manufacturer of electrical equipment, is a Washington corporation having its principal place of business in Snohomish County, Washington. From 1954 to April 30, 1994, Fluke contracted for insurance coverage with Hartford, a foreign corporation with offices in Washington. Relevant to the present case is Fluke's insurance contract with Hartford for primary and umbrella coverage for the period April 1, 1988, to April 1, 1989. Under that contract (hereinafter "the policy"),^[2] Hartford provided primary CGL coverage with limits of $1 million per occurrence and $2 million aggregate. In addition to Coverage A for "Bodily Injury and Property Damage Liability," the CGL policy included Coverage B for "Personal and Advertising Injury Liability." Clerk's Papers (CP) at 589, 591. That coverage obligated Hartford to "pay those sums that the insured becomes legally obligated to pay as damages because of `personal injury' ... to which this insurance applies." CP at 591. The policy defined "personal injury" as "injury, other than `bodily injury,' arising out of ... [m]alicious prosecution."^[3] Additionally, Hartford sold Fluke an umbrella personal liability policy with essentially identical coverage but with policy limits of $9 million.

In May 1988, Fluke filed a patent infringement suit in federal district court in California against Talon Instruments (Talon), a California corporation. Fluke amended its complaint in April 1989 to include Robert Corby (Corby), the president, director, and principal shareholder of Talon. Following a jury trial in May 1992, judgment was entered for the defendants.

In November 1993, Talon and Corby filed a malicious prosecution suit against Fluke in Los Angeles County Superior Court. Fluke tendered defense of the suit to Hartford, and in January 1994, Hartford advised Fluke that the policy covered malicious prosecution. However, in February 1996, Hartford sent Fluke a letter disavowing coverage. Consequently, Fluke brought a declaratory judgment action against Hartford in Snohomish County Superior Court in July 1996, seeking a determination of coverage. In December 1996, Fluke and Hartford agreed to stay the declaratory judgment action until a final judgment had been entered in the California malicious prosecution action. In January 1997, the malicious prosecution action went to trial, and in March 1997, the jury returned verdicts for Talon and Corby, awarding a total of $2 million in compensatory damages and $4 million in punitive damages.

In June 1997, with the stay still pending in the declaratory judgment action in Snohomish County, Hartford filed a declaratory judgment action in California against Fluke, Talon, and Corby. In June 1998, the California court stayed Hartford's suit in light of the declaratory judgment action in Snohomish County.

[812] Hartford and Fluke moved for summary judgment in the present declaratory judgment action. Applying Washington law, the trial court concluded that the policy's coverage for malicious prosecution did not contravene public policy but that the policy provided coverage for compensatory damages only, not for punitive damages.

Fluke appealed. The Court of Appeals affirmed the award of compensatory damages and reversed the trial court's denial of coverage for punitive damages. Fluke, 102 Wash.App. 237, 7 P.3d 825. This court granted Hartford's petition for review.

ISSUES

(1) Is providing insurance coverage for the intentional tort of malicious prosecution contrary to public policy in Washington?

(2) a. Does the policy at issue cover punitive damages?

b. If so, is such coverage contrary to public policy in Washington?

(3) If insurance coverage for malicious prosecution and punitive damages is not contrary to public policy in Washington (as it is, by statute, in California), should Washington law or California law apply to this declaratory judgment action?

ANALYSIS

Standard of Review. Hartford contends (1) that public policy requires invalidation of the liability insurance that it sold Fluke for malicious prosecution, (2) that the insurance policy did not cover punitive damages but that, even if it did, public policy would require invalidation of such coverage, and (3) that, if Washington law conflicts with California law, the latter should govern the coverage dispute. Review of these purely legal issues is de novo. Island County v. State, 135 Wash.2d 141, 160, 955 P.2d 377 (1998).

Insurance Coverage for Malicious Prosecution in Washington. The policy expressly insures Fluke against liability for malicious prosecution: "We will pay those sums that the insured becomes legally obligated to pay as damages because of ... injury ... arising out of ... [m]alicious prosecution." CP at 591, 597. Hartford contends that this explicit promise must be negated because Washington public policy forbids insuring against an intentional harm.

As this court has previously observed, "Washington courts rarely invoke public policy to override express terms of an insurance policy."^[4] We have not previously invalidated on public policy grounds any affirmative grant of coverage made by an insurer. Public policy has, however, been invoked to expand coverage by nullifying policy exclusions in two areas: "[o]ne relates to underinsured motorist insurance (UIM) coverage authorized under RCW 48.22.030; the other involves the Financial Responsibility Act, RCW 46.29." Am. Home Assurance Co. v. Cohen, 124 Wash.2d 865, 874, 881 P.2d 1001 (1994) (citing Mut. of Enumclaw Ins. Co. v. Wiscomb, 97 Wash.2d 203, 643 P.2d 441 (1982); Brown v. Snohomish County Physicians Corp., 120 Wash.2d 747, 756-57, 845 P.2d 334 (1993); Schab v. State Farm Mut. Auto. Ins. Co., 41 Wash.App. 418, 423, 704 P.2d 621 (1985)). But as the Cohen court noted, this court thereafter refused to extend the holding in the UIM and financial responsibility cases "to hold that a family exclusion clause in a homeowner's liability policy was void on public policy grounds." Id. (citing State Farm Gen. Ins. Co. v. Emerson, 102 Wash.2d 477, 687 P.2d 1139 (1984)). In Emerson, the court concluded that, "`[a]bsent prior expression of public policy from either the Legislature or prior court decisions, our inquiry as to whether the family exclusion clause clearly offends the public good must be answered in the negative.'" Id. at 875, 687 P.2d 1139 (quoting Emerson, 102 Wash.2d at 483, 687 P.2d 1139).

[813] In those Washington cases in which public policy has served to enhance coverage by overriding policy exclusions, the courts have relied on a public policy "convincingly expressed" in state statutes. Cohen, 124 Wash.2d at 874, 881 P.2d 1001. But, here, Hartford can point to no statute or judicial decision suggesting that this state discountenances the selling of CGL insurance for the "offenses" listed in Coverage B—that is, for a number of intentional torts, including not only malicious prosecution but also false arrest, wrongful entry or eviction, and libel or slander. The first form for such coverage was introduced in 1976 as an endorsement to the CGL Coverage Form, but "[b]eginning with the 1986 ISO [Insurance Services Office] Commercial General Liability Coverage Form (the `1986 Form'), coverage for personal injury and advertising injury liability was inserted into the policy itself, rather than being added as a supplement to the policy." Peter J. Kalis, Thomas M. Reiter & James R. Segerdahl, Policyholder's Guide to the Law of Insurance Coverage § 8.01 (Supp. 2001). The policy at issue in the present case is the 1986 Form. Given that this coverage has been plainly marketed and sold for at least 25 years, commentators typically note, when remarking on the possible public policy prohibitions against coverage for intentional torts, that "coverage is provided for intentional torts such as `malicious prosecution.'" Id. § 6.02. The coverage enables businesses to protect themselves—for example, by detaining shoplifters or preserving intellectual property rights—without fear of lawsuits by offenders. As one commentator has observed, because "[i]n the typical cases in which these offenses are alleged, coverage is clearly available," the disputes that arise generally turn on whether the coverage extends to a closely related tort. Id. § 8.02. Just such a dispute is exemplified in a Washington case, R.A. Hanson Co. v. Aetna Insurance Co., 26 Wash.App. 290, 612 P.2d 456 (1980). There, the Court of Appeals did not question the availability of the coverage for malicious prosecution en route to its decision that "[i]nsurance against malicious prosecution does not cover abuse of process." Id. at 295, 612 P.2d 456.

In sum, Hartford can identify no public policy clearly expressed in Washington statutes or case law that would justify overriding the policy's explicit coverage for malicious prosecution. Lacking that kind of support, Hartford relies on decisions that cite public policy to uphold coverage provisions. However, those decisions interpreted other types of insurance policies and, because they concerned policy limitations and exclusions, did not reduce the explicit coverage that the insured had purchased. See Cohen, 124 Wash.2d at 881, 881 P.2d 1001 ("hold[ing] that [in professional liability policy] the coverage limits placed on claims involving sexual misconduct on the part of an insured psychologist do not violate the public policy of this state"); Detweiler v. J.C. Penney Cas. Ins. Co., 110 Wash.2d 99, 105, 751 P.2d 282 (1988) (recognizing that limitation of coverage in automobile liability policy to "`accident[s]'" was "founded on the elemental proposition that injuries will not be deemed caused by accident where the injuries are intentionally inflicted, this generally being considered a risk which it would be against public policy to insure"); Unigard Mut. Ins. Co. v. Spokane Sch. Dist. No. 81, 20 Wash.App. 261, 265, 579 P.2d 1015 (1978) (applying intentional acts exclusion in homeowner's policy to child who deliberately set fire to school, recognizing "that public policy prevents an insured from benefitting from his wrongful acts").

Nor do this court's general observations about public policy and intentional torts support Hartford's position that the coverage for malicious prosecution should be invalidated on public policy grounds.^[5] The Court of Appeals persuasively distinguished those cases from the present case. In Unigard and Detweiler, "[t]he courts were called upon to decide only whether the cause of a particular type of damage was best described as an accident or as an intentional act." Fluke, 102 Wash.App. at 247, 7 P.3d 825. However, [814] Hartford's coverage "is not accident-based and ... it explicitly covers `offenses' involving intentional acts." Id. And in Cohen, although the court made the general statement that "`it is against public policy to insure against liability arising from the intentional infliction of injury on the person of another,'" that statement was dicta, given that the court had decided the case on the grounds that "lesser coverage for sexual misconduct than for non-sexual misconduct ... did not violate public policy." Id. (quoting Cohen, 124 Wash.2d at 871, 881 P.2d 1001).

We conclude that coverage for malicious prosecution does not violate public policy in Washington. The insurance provision is clear and the type of coverage well established, and the only Washington case that has considered such coverage accepted its validity. The general statements in earlier cases about public policy and intentional torts simply do not provide strong precedent for finding that the marketing of this type of coverage should now be nullified as contrary to public policy. The paramount public policy here is the commitment to upholding the plain language of contracts. Notably, while the Hartford policy includes an exclusion under Coverage A for "`[b]odily injury' or `property damage' expected or intended from the standpoint of the insured," it contains no language limiting Coverage B's explicit coverage for malicious prosecution. CP at 589.

Insurance Coverage for Punitive Damages. The threshold question is whether the Hartford policy provides coverage for the punitive damages assessed against Fluke. Again, we look at the insuring agreement: "We will pay those sums that the insured becomes legally obligated to pay as damages because of ... injury ... arising out of ... [m]alicious prosecution." CP at 591, 597. Because the policy uses the general term "damages," makes no distinction between compensatory and punitive damages, and contains no exclusion for the payment of punitive damages, the insuring agreement appears to be a straightforward promise to indemnify Fluke for all damages, compensatory or punitive, that Fluke becomes legally bound to pay.

Given the clarity of that promise, the trial court focused on the qualifying phrase "because of ... injury ... arising out of ... [m]alicious prosecution" and concluded that the "because of phrase narrowed the insuring grant to cover only compensatory damages:

The trial court's memorandum opinion reasons that punitive damages are awarded not to compensate but rather to deter and punish, without regard to the extent to which the wronged party was damaged, and therefore they are not damages flowing from the tort.

Fluke, 102 Wash.App. at 243, 7 P.3d 825. As the Court of Appeals observed, the trial court "impute[d] a legalistic meaning to the phrase `because of' rather than reading it as it is commonly understood, in context with the rest of the insuring clause." Id. at 244, 7 P.3d 825. While the punitive damages were not awarded to compensate Talon and Corby for the injury (but to deter and punish Fluke), the punitive damages were nevertheless awarded "because of" the "injury" to Talon and Corby "arising out of" Fluke's malicious prosecution of the patent infringement suit. We agree with the Court of Appeals that Hartford's policy plainly covers all damages awarded against Fluke in the malicious prosecution action.

Hartford contends that, even if the policy were interpreted as covering punitive damages, the coverage would have to be negated because Washington public policy forbids shielding the insured from the burden of punitive damages. But this state has articulated no such public policy, either by statute or judicial decision. Rather, Washington courts regard such damages as inappropriate in civil cases because they encroach upon criminal sanctions. See Dailey v. N. Coast Life Ins. Co., 129 Wash.2d 572, 574, 919 P.2d 589 (1996). Amici argue on behalf of Hartford that this state's disapproval of punitive damages should result in a finding that coverage for punitive damages contravenes public policy. A more convincing inference from this state's disapproval of punitive damages, however, is that a losing party in a civil suit should not be assessed such penalties. We decline to conclude that insuring [815] oneself against a disfavored penalty runs counter to public policy.

We thus affirm the conclusion of the Court of Appeals that punitive damages coverage does not violate public policy in this state.

Applicability of Washington or California Law. In light of California's statutory preclusion of insurance coverage for malicious prosecution and punitive damages, Hartford has invoked California law. Our determination that such coverage does not violate public policy in this state creates a clear conflict between California and Washington law. Because the CGL policy contains no choice of law provision, we must determine whether California or Washington has the "most significant relationship" to this coverage dispute. Restatement (Second) Conflict of Laws § 188(1) (1971); Potlatch No. 1 Fed. Credit Union v. Kennedy, 76 Wash.2d 806, 809, 459 P.2d 32 (1969).

Section 188(2) of the Restatement sets forth five contacts that are to be considered in determining the applicable law:

(a) the place of contracting,

(b) the place of negotiation of the contract,

(c) the place of performance,

(d) the location of the subject matter of the contract, and

(e) the domicil, residence, nationality, place of incorporation and place of business of the parties.

The five "contacts are to be evaluated according to their relative importance with respect to the particular issue," Restatement § 188(2), and in accord with the general underlying principles set out in section 6(2) of the Restatement:

(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.

Applying this framework, the Court of Appeals concluded that the section 188(2) factors "overwhelmingly favor the application of Washington law." Fluke, 102 Wash.App. at 252, 7 P.3d 825. The court noted that factors (a), (b), and (c)—the place of execution, negotiation, and performance of the insurance contract—all pointed to Washington, and that, as to factor (e), not only does Hartford have offices in Washington, but Fluke was incorporated and headquartered in this state. Id. Regarding the section 6 factors, Hartford has argued that factor (b) weighs in favor of California because it has expressed by statute its policies concerning the insurability of intentional acts and punitive damages. But as the Court of Appeals reasoned, "[t]he absence of a statutory public policy in Washington disapproving coverage for willful acts justifies parties to a contract governed by Washington law in expecting they will get the coverage they paid for, without exclusions for willful acts implied from the public policy of other states." Id. at 254, 7 P.3d 825. In sum, the factors in sections 6 and 188 weigh more heavily in favor of applying Washington law to this insurance contract between Hartford and Fluke.

Hartford makes the additional argument that section 193 of the Restatement should govern this court's determination of which state has the most significant relationship to the insurance contract. Section 193 provides as follows:

The validity of a contract of fire, surety or casualty insurance and the rights created thereby are determined by the local law of the state which the parties understood was to be the principal location of the insured risk during the term of the policy, unless with respect to the particular issue, some other state has a more significant relationship under the principles stated in § 6 to the transaction and the parties, in which event the local law of the other state will be applied.

(Emphasis added.) Hartford contends that, because California was "the principal location of the insured risk" (that is, the place where [816] Fluke, by filing the patent infringement suit, risked a reciprocal suit for malicious prosecution), then section 193 requires application of California law. Hartford invokes comment f to section 193, which suggests that, where a contract insures multiple risks (for example, several different properties in different states), a court could construe the contract as a series of agreements, each governed by the law in which the particular risk is located. Comment f is not applicable here, however, because it presumes that, at the time of contracting, the risks could be localized in particular states. As the Court of Appeals emphasized, the location of the patent infringement and malicious prosecution suits could not have been "understood" by the parties at the time of contracting, as section 193 requires; rather, at the time of contracting, the locations of Fluke's vulnerability to a malicious prosecution were "unidentifiable and infinite." Fluke, 102 Wash. App. at 252, 7 P.3d 825. There is thus no reason to apply section 193 to this choice of law dispute.

We affirm the Court of Appeals decision to apply Washington law in this declaratory judgment action.

CONCLUSION

The Court of Appeals resolved all issues in this case in favor of enforcing the plain language of the CGL policy that Hartford sold to Fluke. We likewise hold that the CGL policy requires Hartford to indemnify Fluke for all damages arising from the adverse judgment in Talon's malicious prosecution suit. The policy plainly covered Fluke's liability for malicious prosecution, and just as plainly, it promised indemnification for "damages" without limiting payment to compensatory damages or expressly excluding punitive damages. In the absence of any prior statutory or judicial expressions of public policy regarding the insurability of a business against liability for malicious prosecution, we cannot permit Hartford to raise public policy as a sword to sever the bargain between insurer and insured. Further, as did the trial court and Court of Appeals before us, we conclude that Washington has the most significant relationship to the insurance contract and that, consequently, Washington law, not California law, must apply to the coverage dispute. Finally, we affirm the award of attorney fees to Fluke at trial and on appeal, and under Olympic Steamship Co. v. Centennial Insurance Co., 117 Wash.2d 37, 811 P.2d 673 (1991), we grant Fluke's additional request for fees incurred before this court.

ALEXANDER, C.J., and SMITH, JOHNSON, MADSEN, SANDERS, IRELAND, CHAMBERS and BRIDGE, JJ., Concur.

[1] See Fluke, 102 Wash.App. at 245, 7 P.3d 825 (citing Cal. Ins.Code § 533; City Prods. Corp. v. Globe Indem. Co., 88 Cal.App.3d 31, 151 Cal. Rptr. 494 (1979); Downey Venture v. LMI Ins. Co., 66 Cal.App.4th 478, 78 Cal.Rptr.2d 142 (1998)).

[2] For the 1988-89 period, Fluke paid Hartford "total premiums in excess of $1 million dollars [sic] for this insurance coverage," with "the liability portion exceed[ing] $360,000." Clerk's Papers (CP) at 556.

[3] CP at 597. Other covered "offenses" include "[f]alse arrest, detention or imprisonment," "[w]rongful entry into, or eviction of a person from, a room, dwelling or premises that the person occupies," and "[o]ral or written publication of material that slanders or libels a person or organization." CP at 597.

[4] Am. Home Assurance Co. v. Cohen, 124 Wash.2d 865, 873, 881 P.2d 1001 (1994) (emphasis added). Our legislature has defined "[t]he business of insurance" as "one affected by the public interest," RCW 48.01.030, and has described casualty insurance as coverage for harms "properly the subject of insurance," provided that "such insurance is not contrary to law or public policy." RCW 48.11.070(10). The legislature has not otherwise defined the scope of "public policy" in this area.

[5] "[I]t should be noted that there is no public policy that acts as a blanket prohibition against [insurance coverage for] all so-called intentional torts." Peter J. Kalis, Thomas M. Reiter & James R. Segerdahl, Policyholder's Guide to the Law of Insurance Coverage § 6.02 (Supp.2001) (emphasis added).

[52] Before Judges KING, LONG and R.S. COHEN.

Zulima V. Farber argued the cause for appellant (Lowenstein, Sandler, Kohl, Fisher & Boylan, attorneys, Zulima V. Farber of counsel and Zulima V. Farber and Marc B. Kramer on the brief).

John Zen Jackson argued the cause for respondent Pennsylvania Manufacturers' Association Insurance Company (Jackson & Vaurio, attorneys, John Zen Jackson and Ann Marie Vaurio on the brief).

Thomas P. Farnoly argued the cause for respondents American Casualty Company and Continental Casualty Company (Gruccio, Pepper, Giovinazzi & DeSanto, and Bromley, [53] Brown & Walsh, attorneys, Thomas P. Farnoly of counsel and Thomas P. Farnoly and James W. Greene on the brief).

James B. Burns argued the cause for respondent Federal Insurance Company (Clark, Ladner, Fortenbaugh & Young, attorneys, Jeffrey A. Smith of counsel and James B. Burns on the brief).

The opinion of the court was delivered by R.S. COHEN, J.A.D.

Johnson Matthey, Inc. (JMI), is a Pennsylvania corporation. It has headquarters and does business primarily in Pennsylvania. It is authorized to do business in New Jersey, and has operated a manufacturing plant in Winslow, New Jersey, for some time. In this case, JMI sued a number of its liability insurers for declarations that their policies cover liabilities and costs arising out of litigation in which charges were made against JMI that waste from its Winslow plant went to four different disposal sites, all in New Jersey.

In one case, involving the cleanup of Price's Landfill, there was a settlement with the Federal Government to which JMI contributed some $2.5 million. There were also toxic tort claims relating to Price's Landfill, to the settlement of which JMI contributed some $200,000, and claims relating to the KinBuck Landfill, to the settlement of which JMI contributed some $6,000. There are also yet-unquantified remediation cost claims relating to three landfills, to which JMI may have to contribute.

The defendant insurers all provided JMI with general liability coverage, at various times, either as primary, excess or umbrella insurers. In this litigation, they raised a number of issues, all still unresolved,^[1] in opposition to JMI's complaint for coverage. In late 1989, JMI made an in limine motion for a ruling [54] as to what state's body of substantive law governed the issues to be decided in the case. The motion judge ruled that Pennsylvania law controlled. JMI was granted leave to appeal, and we reverse.

The primary insurance coverage issue is whether leakage of pollutants onto the land is a "sudden and accidental" occurrence. This is a concept appearing in the policies; Pennsylvania and New Jersey courts have reached different interpretations of the phrase. Both states say that coverage is afforded to sudden and accidental discharges of pollutants. Pennsylvania rules, however, that a pollution discharge occurring gradually over time is not sudden and accidental. Lower Paxton Tp. v. United States Fidelity and Guar. Co., 383 Pa.Super. 558, 557 A.2d 393 (1989). New Jersey holds to the contrary that sudden and accidental discharges include a gradual release of pollutants. Broadwell Realty Serv., Inc. v. Fidelity & Cas. Co., 218 N.J. Super. 516, 528 A.2d 76 (App.Div. 1987). The resolution of this particular coverage issue is apparently of great significance to the parties.

Although the "sudden and accidental" coverage issue is the one that is now foremost in the litigants' minds, the in limine ruling made by the Law Division Judge apparently related to every substantive issue that might arise in the litigation between JMI and its insurers. The March 30, 1990 order recites that plaintiff JMI asked for an in limine ruling "on which law should apply to determinations of law and fact in the disposition of this case," and then orders "that Pennsylvania law shall be applied in this case."

Our choice-of-law approach is governed by State Farm Mut. Auto. Ins. Co. v. Simmons' Estate, 84 N.J. 28, 417 A.2d 488 (1980). There, the Supreme Court concluded

that the proper approach in resolving conflict-of-law issues in liability insurance contract controversies... calls for recognition of the rule that the law of the place of the contract ordinarily governs the choice of law because this rule will generally comport with the reasonable expectations of the parties concerning the principal situs of the insured risk during the term of the policy and will furnish needed certainty and consistency in the selection of the applicable law. [55] At the same time, this choice-of-law rule should not be given controlling or dispositive effect. It should not be applied without a full comparison of the significant relationship of each state with the parties and the transaction. That assessment should encompass an evaluation of important state contacts as well as a consideration of state policies affected by, and governmental interest in, the outcome of the controversy. [Id. at 37, 417 A.2d 488 (citations omitted)].

The Simmons Court discussed with approval the "most significant relationship" standard of the Restatement (Second) of Conflict of Laws Sec. 188 (1971),^[2] and the specific treatment of casualty insurance policies in Restatement Sec. 193:

The validity of a contract of fire, surety or casualty insurance and the rights created thereby are determined by the local law of the state which the parties understood was to be the principal location of the insured risk during the term of the policy, unless with respect to the particular issue, some other state has a more significant relationship under the principles stated in Sec. 6 to the transaction and parties, in which event the local law of the other state will be applied.

Restatement Sec. 6, to which the Sec. 193 refers, lists the factors relevant to every choice of law in the absence of a statutory directive.^[3] See generally Appleman, Insurance Law and Practice § 7076 (1981).

[56] A complication presented by this case is that it seems to proceed simultaneously on two levels, treating two different matters as one. The first is the proper choice of law on which to decide the question of the meaning of the "sudden and accidental" policy language. The second is the proper disposition of the global conflicts question of what state's law "shall be applied in this case." The trial judge treated the two matters as one, and the parties have followed suit. We will first deal with the issue of which state's law determines the meaning of "sudden and accidental," and then with the proper disposition of the global conflicts question.

I.

The Law Division Judge ruled for the application of Pennsylvania law, noting that JMI is a Pennsylvania corporation, the insurance agent was a Pennsylvania corporation, and all of the significant aspects of the execution of the policies took place in Pennsylvania, including payment of premiums, correspondence between the parties, and the domicile and business locations of the parties. The Judge went on to quote an unpublished New Jersey trial court opinion to the effect that the existence of a landfill problem in New Jersey and the insured's relationship to property there do not give New Jersey an interest in the insurance dispute between the parties, and further that the nature of the tort is not a legitimate factor to consider in determining what law to apply; that would destroy any consistency, "which is repugnant to the nature of the bargaining process." The Judge in the present case went on to [57] say that New Jersey has no significant interest in the financial aspects of cleaning toxic waste sites with insurance proceeds rather than the funds of JMI. Finally, he said, the interpretation of a contract should not rest on the law of each state in which a toxic tort claim or an environmental claim has been made. Instead, the goal should be a single, consistent and final resolution of the choice of law question, and that requires application of Pennsylvania law.

We disagree. The existence or absence of insurance proceeds can very well determine whether or not a waste site is remediated or a toxic tort victim is compensated. Not every polluter or other person responsible for an environmental wrong is financially sound, or is anxious to make personal assets available to satisfy adjudicated liabilities. New Jersey's paramount interest in the remediation of toxic waste sites, and in the fair compensation of victims of pollution, extends to assuring that casualty insurance companies fairly recognize the legal liabilities of their insureds. In Continental Ins. Cos. v. Northeastern Pharmaceutical & Chem. Co., 842 F.2d 977, 985 (8th Cir.), cert. denied, 488 U.S. 821, 109 S.Ct. 66, 102 L.Ed.2d 43 (1988), the Court of Appeals characterized the availability of comprehensive liability insurance coverage for the costs of cleaning up hazardous waste sites as a question of substantial importance to the public. See also Leksi, Inc. v. Federal Ins. Co., 736 F. Supp. 1331 (D.N.J. 1990); Sandvik, Inc. v. Contintental Ins. Co., 724 F. Supp. 303 (D.N.J. 1989).

New Jersey's urgent concern is for the health and safety of its citizens. It is demonstrated by the enactment of the Spill Compensation and Control Act, N.J.S.A. 58:10-23.11 et seq.; the Solid Waste Management Act, N.J.S.A. 13:1E-1 et seq.; the Sanitary Landfill Facility Closure and Contingency Fund Act, N.J.S.A. 13:1E-100 et seq.; the Environmental Cleanup Responsibility Act, N.J.S.A. 13:1K-6 et seq.; and the Water Pollution Control Act, N.J.S.A. 58:10A-1 et seq.; see also N.J.S.A. 23:5-28 et seq. The gravity of the problem is out of doubt; the [58] necessity of finding solutions is manifest. In the effort to find solutions, financial resources matter.

Pennsylvania's interest is relatively remote. As the locale of much of the creation of the insurance contracts, Pennsylvania has an interest in some of their aspects. It has no legitimate interest, however, in preventing the fair and predictable application of foreign law to Pennsylvania insurance contracts which are written to cover insureds' liabilities in other states. It may assert an interest, contrary to JMI's position, in the uniform interpretation of Pennsylvania insurance contracts in other states. We are satisfied, however, that such a goal is illusory and must give way to New Jersey's paramount interest in the health and safety of its people.

The insurance companies issued policies which expressly or by necessary implication cover "sudden and accidental" discharges of pollutants at JMI's New Jersey plant.^[4] They also cover "sudden and accidental" discharges in other jurisdictions. If JMI had plants in 50 states, and its insurer was qualified to do business in all of them, its policy would cover "sudden and accidental" discharges and other liabilities in 50 states. In that case, the insurer would cover JMI under 50 different bodies of law. If injured trespassers are well protected by the tort law of one state, the nationwide insurance policy covers the risk. If they have few rights in another state, the policy covers a smaller risk. The point is that the hypothetical Pennsylvania insurance policy, despite uniform policy language, expands and contracts to afford adequate coverage to its insured under the substantive law of each state.

Policy language interpretation is another matter. It may seem counterintuitive to ascribe to the same policy language one meaning on the east bank of the Delaware and another on [59] the west bank. That is not, however, a consideration, unless uniform interpretation has sufficient value to overcome the significant governmental interest of the various jurisdictions where the insured risks are located, or where the insured entity predictably is going to incur legal liabilities. In our view, it does not.

Both uniformity and predictability of interpretation are at stake. Predictability can be achieved just as easily with reference to 50 bodies of law as one. It is just that 50 are harder to keep track of. Predictability appears to be a minor virtue in view of the willingness of insurers to issue multi-site policies that will be subject to the unpredictable substantive law of many states fixing the liabilities of their insureds.

The value of uniformity is that it permits persons with knowledge of only one state's law to predict how policy language will be interpreted in 50 jurisdictions. However, the same nationwide policy language may mean different things to different states of contracting. True uniformity is possible only if one body of law governs all insurance contracts, no matter where they are made. The insurers themselves have acted as though they do not value uniformity very highly. They have not taken the simple and obvious step toward uniformity of inserting choice-of-law provisions in their policies. Such clauses may not always prevail, see Restatement (Second) of Conflicts Sec. 187 (1971), but they surely will in many situations.

If uniform interpretation weighed heavy, and we were therefore driven to decide what single state's law controlled the language of a single policy, we would find it hard to choose Pennsylvania's law to govern the meaning of "sudden and accidental." First, there are the significant relationships and the paramount interest of the states where the insured risks are located. Second, there is the dearth of significant ties to Pennsylvania. A phone call, a signature, the typing and mailing of a preprinted insurance policy, the issuance and deposit of [60] a premium check do not add up to significant Pennsylvania roots.

In these days of multistate insurers, multistate insureds, and instantaneous interstate transmission of voice and document, it is not easy to identify a state of contracting. A Delaware company, for example, secures a casualty insurance policy for a New Jersey site, among others, through a Philadelphia agent from an insurer with a Hartford home office that retains final underwriting approval on large policies. The handshake deal for the insurance is made over lunch in Manhattan. Choosing a locus contractu in such a case would be a difficult and perhaps pointless exercise. Pointless, because there is nothing about the choice that tells very much about the insurance transaction involved.

The insurers in this case knew they were issuing policies to cover New Jersey risks whose scope was measured by New Jersey law. Restatement Sec. 193 says that rights under a casualty policy should ordinarily be decided under the substantive law of the state which the parties understood was to be the principal location of the insured risk. Here, that is clearly New Jersey, where the JMI plant was located, and where JMI waste predictably found its way into landfills.

There is another reason why uniform interpretation according to the state of contract is an elusive goal. It is that there are two opposing axes of possible uniformity, and it is impossible to line up along both of them at the same time. One axis is uniform nationwide interpretation of a single policy's language. It may well serve some interests to have a single reading of coverage and exclusion language that will bind in every state. Of course, with some reservations, the parties can achieve that result by means of a contractual choice of law.^[5]

[61] The opposing axis is uniform interpretation that is site-specific. JMI is one of dozens if not hundreds of parties charged with liabilities for pollution in the proceedings that occasioned this insurance coverage struggle. Like JMI, many of the others are multi-state insureds with national insurers. Their insurance policies were contracted in many states, cover many geographically scattered risks and contain standard language of coverage and exclusion.

The disposition of suits or administrative proceedings in these cases would be facilitated by a site-specific uniformity of interpretation. If each nationwide insurer comes to court with its own nationwide policy interpretation derived from a different state of contracting, the likelihood of conflict and confusion is clear.

The reason to choose the law of the state of contracting, in the absence of significant relationships and interests elsewhere, was explained in Simmons:

... because this rule will generally comport with the reasonable expectations of the parties concerning the principal situs of the insured risk ... and will furnish needed certainty and consistency in the selection of the applicable law. [84 N.J. at 37, 417 A.2d 488].

Where the subject matter is a single policy insuring a single vehicle that travels in various states, as in Simmons, the explanation is convincing. Where the policy covers many scattered risks, however, the reasonable expectations of the parties contracting for insurance for a particular risk can be satisfied if they know that policy language interpretation will follow the law at the site of the risk. Certainty and consistency are equally well satisfied.

We hold that a casualty insurance policy, wherever written, which is purchased to cover a New Jersey risk, alone or along with risks in other states, is subject to interpretation of its coverage and exclusion language according to New Jersey local law. Although this rule is peculiarly suitable to environmental litigation, in which large numbers of casualty insurance policies are involved, it is not limited to that setting.

[62] For the purpose of our holding, covering a New Jersey risk means at least covering a property or operation owned, occupied or conducted in New Jersey. It may mean more, but we need not look further today. But see Leksi, Inc. v. Federal Ins. Co., 736 F. Supp. 1331 (D.N.J. 1990).

We are aware that our holding is not in harmony with Westinghouse Elec. Corp. v. Liberty Mut. Ins. Co., 233 N.J. Super. 463, 559 A.2d 435 (App.Div. 1989). There, Westinghouse brought suit against 144 insurers for declarations of nationwide coverage of toxic tort claims and site remediation liabilities wherever located. The Law Division severed and dismissed all coverage claims arising out of events occurring outside of New Jersey. This court reversed, holding that Westinghouse was entitled to pursue its nationwide insurance coverage claims here in a single suit.

Although no choice-of-law issues were then ripe for decision, the Law Division judge expressed concern that the omnibus lawsuit would require application of the substantive law of a great number of states. In discussing that matter, Judge Pressler said:

While not intending to deprecate the legitimacy of local concern for and control over its own environmental contamination, we nevertheless cannot conceive that the operative contract language in a single set of insurance policies issued by a group of insurers for the purpose of providing integrated comprehensive coverage for nationwide risks could mean something different in every state of the union.... [W]hen comprehensive nationwide coverage is purchased, it is surely the expectation of both insured and insurer that what the insured has bought and the insurer has sold is a single protection from liability irrespective of the particular state law under which that liability is determined so long as the risk, whether or not ultimately resulting in liability, is within the policy coverage. [Id. at 476, 559 A.2d 435].

In Westinghouse, the court chose the uniformity axis of one policy-one interpretation over the opposing uniformity axis of one risk-one interpretation. Judge Brotman made the other choice in Leksi, Inc. v. Federal Ins. Co., 736 F. Supp. 1331 (D.N.J. 1990). The insured was a Pennsylvania corporation that operated in Pennsylvania and bought insurance there, and sent waste products to New Jersey for disposal. It sought the same [63] kind of declaration of coverage against several insurers sought by JMI here.

Judge Brotman ruled for New Jersey law on many of the same theses as persuade us. He summed up:

The rule adopted today provides a simple method for choosing post facto what state's law applies: in the absence of a choice of law provision, the state where the toxic waste comes to rest is the state whose law will apply, provided that it was reasonably foreseeable that the waste would come to rest there. With the exception of situations in which the adjoining states dispute their boundary, this rule is elegant in its simplicity and properly recognizes that the host state's interest in its environment is superior to that of the law of the place of the contract. Although this rule may not provide unerring clarity to the parties at the time of negotiating, this difficulty may be cured by the simple insertion of a choice of law provision. [Id. at 1336].

We need not go so far today, since our case concerns policies written for a New Jersey operation that predictably sent waste products to New Jersey disposal sites. It is plainly an easier case.

Bell v. Merchants and Businessmen's Mut. Ins. Co., 241 N.J. Super. 557, 575 A.2d 878 (App.Div.), certif. denied, 122 N.J. 395, 585 A.2d 395 (1990), supports our view. There, a Pennsylvania insurer issued a "special multi-peril" policy of insurance to Pennsylvania residents covering eight Pennsylvania properties and two New Jersey properties. One of the New Jersey properties sustained fire damage. The policy required the insured to institute suit on the policy within twelve months "after inception of the loss." Pennsylvania courts interpret that to mean within twelve months of the casualty itself. New Jersey courts do not run the twelve months until the insurer formally denies liability. Plaintiffs' policy suit was timely under our interpretation of the policy language but untimely under Pennsylvania's. Citing New Jersey's significant governmental interest in the matter and Section 193 of the Restatement, we held for application of New Jersey law. See also Bernick v. Frost, 210 N.J. Super. 397, 510 A.2d 56 (App.Div.), certif. denied, 105 N.J. 511, 523 A.2d 158 (1986); Rutgers Cas. Ins. Co. v. State Farm Mut. Ins. Co., 234 N.J. Super. 202, 560 A.2d 722 (App.Div. 1989).

[64] Another recognition of the paramount interest of the state where the insured risk is located is Sandvik, Inc. v. Continental Ins. Co., 724 F. Supp. 303 (D.N.J. 1989). There, a New Jersey operation had a Pennsylvania plant whose waste went to a Pennsylvania disposal site. Remediation liabilities and toxic tort claims were made against Sandvik, and it sought a declaration in the United States District Court for New Jersey that its comprehensive general liability insurers covered the liabilities and claims.

The insurers moved to transfer the case to the Eastern District of Pennsylvania, the location of the disposal site, for the convenience of the parties and witnesses. The District Court ordered the transfer. Although the bases for that decision differ in many respects from ours, the discussion of Pennsylvania's significant interests in the subject matter supports our view on that subject and Judge Brotman's in Leksi. We also note the evaluations of Westinghouse in Sandvik, id. at 312; Union Carbide Corp. v. Aetna Cas. & Sur. Co., 212 Conn. 311, 320, 562 A.2d 15, 20 (1989); Travelers Indem. Co. v. Allied-Signal, Inc., 718 F. Supp. 1252, 1257-1258 (D.Md. 1989); San Filippo v. Bongiovanni, 743 F. Supp. 327 (D.N.J. 1990).

In sum, we see uniform interpretation of policy language as desirable, but not truly achievable. If it is associated with the state of contracting, in these circumstances it is associated with an arbitrary and usually irrelevant choice, one which was downgraded for casualty insurance policies by Restatement § 193. If uniformity is achieved on a site-specific basis, the uniformity will relate to a particular legal proceeding and may aid in its resolution. The cost, however, is that it cannot help but make some multistate insurance policy language mean one thing in one state and something else in another.

II.

We have decided only the conflicts issue relating to the "sudden and accidental" language, not only because it is an [65] obviously significant issue and ready for decision, but also because we are uncertain what other issues exist or will develop in this litigation. Suit is at an early stage. It is already obvious that there are other coverage issues, and experience teaches that there will be more. It is not possible to say in advance what state's substantive law should control them.

Conflicts principles do not dictate that all legal issues presented by a single case should be decided under the laws of a single state. Indeed, the evaluation of significant relationships and governmental interests takes place issue by issue and can lead to the application of different bodies of law. The Restatement recognizes this basic truth and so does at least one reported decision.

Restatement § 188, see page 55, 593 A.2d at 369, supra, refers to the rights and duties of the parties "with respect to an issue in contract" and refers them to the local law of the state "which, with respect to that issue, has the most significant relationship to the transaction...." Later in § 188 appear "the law applicable to an issue" and "relative importance with respect to the particular issue." Restatement § 193, which also appears on page 55, 593 A.2d at 369, supra, refers casualty insurance contract disputes to the law of the state of the principal location of the risk "unless with respect to the particular issue, some other state has a more significant relationship...."

The quoted language makes it plain that different local law may determine different issues in the same coverage suit. A good example is Independent Petrochem. Corp. v. Aetna Cas. & Sur. Co., 674 F. Supp. 354 (D.D.C. 1987). Plaintiff sought coverage from a number of comprehensive general liability insurers for some 60 claims in Missouri state courts resulting from plaintiff's spraying of petroleum products allegedly containing dioxin. The U.S. District Court for the District of Columbia ruled that Missouri law controlled the "trigger of coverage" issue on the thesis that the location of the insured risk was the paramount consideration. The court was then [66] faced with a motion by one of the insurers, INA, for judgment in its favor because plaintiff had failed to disclose, when seeking insurance from INA, the existence of several dioxin-related cases unknown to INA that had been filed in the years before the INA policy. Such nondisclosure, the argument ran, voided the INA policy.

As to that issue, the District Court held that Florida law controlled, because Florida was where negotiation and contract formation occurred. Its interest was paramount, therefore, in seeing its laws applied to the conduct of parties negotiating for insurance in its jurisdiction. The court pointed to a Florida statute fixing consequences of innocent, fraudulent and material misrepresentations by insurance applicants.

The point is that the law of different states can control the decision of different issues that can arise in coverage litigation, depending on the significance of the states' relationships to the facts and consequences bearing on each issue, and on the governmental concern with its outcome. For that reason it is a rare multistate environmental coverage case that lends itself to a threshold choice-of-law determination for every issue that could conceivably arise. This is not one of the rare cases.

Reversed.

[1] For example, Continental Casualty Company and American Casualty Company issued policies in the late 1960's and early 1970's to entities with names similar to JMI. These insurers deny that JMI is even an insured under these policies.

[2]Sec. 188. Law Governing in Absence of Effective Choice by the Parties

(1) The rights and duties of the parties with respect to an issue in contract are determined by the local law of the state which, with respect to that issue, has the most significant relationship to the transaction and the parties under the principles stated in § 6.

(2) In the absence of an effective choice of law by the parties (see § 187), the contacts to be taken into account in applying the principles of § 6 to determine the law applicable to an issue include:

(a) the place of contracting,

(b) the place of negotiation of the contract,

(c) the place of performance,

(d) the location of the subject matter of the contract, and

(e) the domicil, residence, nationality, place of incorporation and place of business of the parties.

These contacts are to be evaluated according to their relative importance with respect to the particular issue.

(3) If the place of negotiating the contract and the place of performance are in the same state, the local law of this state will usually be applied, except as otherwise provided in §§ 189-199 and 203.

[3]The factors are:

(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) case in the determination and application of the law to be applied.

[4] We recognize that there are unresolved factual issues in that regard. We do not intend to foreclose or decide them by stating the assumptions on which the choice-of-law question must be decided.

[5] Another possibility might be to plainly say something like, gradual leakage of pollutants is not sudden and accidental.

[464] Before Judges PRESSLER, O'BRIEN and STERN.

Peter J. Kalis argued the cause for appellants Westinghouse Elec. Corp. and Thermo King Corp. (A-4553-87T1F and A-4554-87T1F) (Kirkpatrick & Lockhart and Lowenstein, Sandler, Kohl, Fisher & Boylan, attorneys; Peter J. Kalis, Donald E. Seymour, Lorraine A. Mansour, Thomas M. Reiter, Robert D. Chesler and Michael L. Rodburg, on the brief).

Timothy C. Russell argued the cause for respondent Lumbermens Mut. Cas. Co. (A-4553-87T1F and A-4554-87T1F) (Drinker Biddle & Reath and Sellar, Richardson, Stuart & Chisholm; Timothy C. Russell, Glenn A. Harris, James M. Sweet, James P. Richardson and Wendy H. Smith, on the brief).

Mitchell L. Lathrop argued the cause for respondent Puritan Ins. Co. (A-4553-87T1F and A-4554-87T1F) (Adams, Dugue & Hazeltine, attorneys; Mitchell L. Lathrop, Kimball Ann Lane, Cathy L. Carver and James E. Fitzgerald, joined in the brief of Lumbermens Mut. Cas. Co. in A-4553-87T1F & A-4554-87T1F).

Joseph G. Manta argued the cause for respondent Liberty Mut. Ins. Co. (A-4553-87T1F & A-4554-87T1F) (Manta and Welge, attorneys; Joseph G. Manta and Dorothy E. Carl, of counsel; John C. Sullivan and Mary E. Rugala, on the brief).

[465] Sheft, Wright & Sweeney, attorneys for respondents AIU Ins. Co.; Granite State Ins. Co.; The Ins. Co. of the State of Pa.; Landmark Ins. Co.; Lexington Ins. Co.; Nat. Union Fire Ins. Co. of Pittsburgh, Pa.; American Centennial Ins. Co.; Allianz Ins. Co.; Allianz Underwriters Ins. Co.; American Home Assurance Co. (A-4553-87T1F & A-4554-87T1F), join in the brief of Lumbermens Mut. Cas. Co. in A-4553-87T1F & A-4554-87T1F (Peter I. Sheft and Robin L. Yeager, on the brief).

The opinion of the court was delivered by PRESSLER, P.J.A.D.

Plaintiff Westinghouse Electric Corporation appeals, on leave granted, from an order of the Law Division severing a substantial portion of its comprehensive declaratory judgment actions against its liability and property damage insurers and dismissing, on forum non conveniens grounds, all claims for coverage made by it arising out of events which occurred outside of the State of New Jersey. We reverse.

Plaintiff Westinghouse Electric Corporation,^[1] a multi-dimensional industrial giant doing business both throughout the United States and abroad, brought two declaratory judgment actions in the Superior Court, Law Division, against the 144 insurers, both American and Foreign, who participated between 1948 and 1982 in providing it, through some 300 policies issued by primary and excess carriers, with an integrated, comprehensive liability and property-damage insurance program covering the risks of its business operations, wherever conducted. Some two hundred million dollars of coverage is involved. There is [466] no question of the court's in personam jurisdiction over all parties.

In Westinghouse v. Aetna Casualty & Surety Co., et al., the so-called toxic tort case, plaintiff seeks a declaration of coverage under its comprehensive general liability policies for some 3,000 claims made against it by persons asserting that they have sustained injury as a result of exposure to asbestos, welding fumes, polychlorinated biphenyls (PCBs), and other substances for which Westinghouse is alleged to be responsible. Of these claims, 128 have been filed in New Jersey. In Westinghouse v. Liberty Mutual Insurance Company, et al., the so-called environmental-claims case, plaintiff seeks coverage both from its liability carriers and its property damage carriers for losses it has sustained or may sustain arising out of industrial activities which are alleged by federal and state environmental control agencies and by private entities to have resulted in both on- and off-site environmental contamination. These claims encompass 81 sites located in 23 states. Of these sites, 56 are non-owned and generally involve disposal thereon of waste generated by plaintiff's industrial activities conducted on the remaining sites. Nine of the 81 sites, including two owned sites and seven non-owned sites, are located in New Jersey. All 144 defendant insurers have disclaimed.

The actions are still in their most preliminary stage, and insofar as we can determine from this record, no substantive rulings have yet been made. The focus of the litigation is still on its scope, and that is the issue which now engages us. In sum, the issue is whether there will be a single comprehensive trial of the coverage question or whether Westinghouse will be forced to litigate the coverage question repeatedly in every state of the union in which a toxic tort claim or an environmental claim has been made against it.

Westinghouse and a group of 89 defendants, identified as the [467] Liberty Mutual Group,^[2] take the position that a single comprehensive coverage action is mandated in the circumstances here. The threshold dispute between plaintiff and these defendants involves only the question of the forum in which this comprehensive litigation should be conducted, whether the Superior Court of New Jersey or the Federal District Court for the Western District of Pennsylvania, an alternative we will address in greater detail hereafter. The so-called Lumbermens group, consisting of about 14 insurers,^[3] takes the position that the coverage question must be separately litigated in each state in which a claim against Westinghouse is made, and Lumbermens, to demonstrate its point, instituted, after the filing of these actions, reactive actions in South Carolina, North Carolina, Ohio, California, Louisiana and Virginia seeking a no-coverage declaration against Westinghouse. These have since been stayed. As we understand the record, the remaining defendants take no scope position.

The trial judge consolidated the two cases for purposes of the scope determination and, in an opinion reported at 227 N.J. Super. 504 (Law Div. 1988), concluded that the doctrine of forum non conveniens requires the limitation of the coverage action to the claims made by Westinghouse against its insurers which arise out of New Jersey sites and New Jersey toxic torts suits.

[468] We note preliminarily that although we disagree with the trial judge's view of the matter and although we conclude that the forum non conveniens doctrine is inapposite, at least at this early stage of the litigation, we nevertheless recognize that the litigation as presently postured is inordinately complex and that its conduct will pose formidable procedural problems which will surely challenge the outer limits of judicial case management as presently practiced. We are nevertheless convinced that the trial courts of this state have available to them both the basic techniques and the judicial skill in implementing them which are necessary for successfully and expeditiously managing a case of these proportions consistently with the administration of justice both for the litigants and for the judicial system as a whole. Our fundamental perception is that the trial judge resorted to the forum non conveniens theory as a case management technique. We believe, however, that cases, even cases as difficult and cumbersome as this one, cannot be "managed" by the simple expedient of dismissing them or parts of them. We must, as a judicial system, devote our efforts to determining how best to adjudicate controversies on their merits, not how to avoid adjudication. Westinghouse, it is true, is not a New Jersey corporation. It is incorporated and has its principal office in Pittsburgh, Pennsylvania. Nevertheless, as the trial judge pointed out, its

presence in New Jersey is significant. It employs over 1,000 people in this State and paid more than $1.5 million in taxes to state and local governments in 1986. Westinghouse owns over 250 acres of property in this State, including its elevator division in Morristown and its apparatus service center in Hillside. [227 N.J. Super. at 507]

There can be no doubt that the economic prosperity we enjoy in this State is in large measure attributable to major national corporations which, like Westinghouse, are incorporated elsewhere but engage in substantial business activity here, employ our residents, and contribute to our tax base. There is no question that they are entitled, as are all our citizens, to as full an access to our court system as is consistent with fundamental principles of acquiring and exercising jurisdiction.

[469] It is with this essential proposition in mind that we consider the scope issues before us. First, with respect to forum non conveniens, we note initially that it is an equitable doctrine of long standing predicated upon the basic notion that if more than one forum is available for the conduct of particular litigation, the court of the forum of plaintiff's choice has the discretion to require the litigation to be conducted in the other forum if the plaintiff's chosen forum is demonstrably inappropriate, that is, if a "clear showing of real hardship or * * * compelling reason" is made. Civic Southern Factors v. Bonat, 65 N.J. 329, 333 (1974). The determination of whether the objector to plaintiff's choice of forum has succeeded in meeting this demanding standard ordinarily requires the weighing of both private interest factors, that is, the considerations affecting the parties themselves in the litigation context, and public interest factors, that is, the considerations affecting the administration of the court system. These include such matters as location of witnesses, accessibility of proofs, the relative state of calendar congestion, and the strength of the local-interest nexus as mandating or not the undertaking of the litigation burden. See generally D'Agostino v. Johnson & Johnson, Inc., 225 N.J. Super. 250 (App.Div. 1988), certif. granted 113 N.J. 369 (1988). In customary forum non conveniens terms then, the inquiry focuses upon the comparative appropriateness of several forums and the ultimate determination is the manifest inappropriateness, or not, of plaintiff's choice among them.

That, of course, is not the context in which the forum non conveniens doctrine was applied here. The issue was not dealt with in terms of whether there was an alternate and manifestly more appropriate forum for this litigation as plaintiff framed it. Rather, the court undertook to decide, in the name of forum non conveniens, whether plaintiff should be allowed, at least in this jurisdiction, to conduct a comprehensive action in order to obtain a single, comprehensive, definitive adjudication of its rights under a comprehensive and definitive set of insurance contracts, or whether it would be consigned to multiple adjudication [470] of the same issue throughout the country. In our view, resort to forum non conveniens in these circumstances is plainly anomalous. The parties are already here, assembling their proofs and witnesses from wherever they may be, and the court system is already burdened. Whether the entire action is tried comprehensively here or elsewhere or whether only a portion of this action is tried here, witnesses will have to travel and documentary proofs will have to be transported. That is inevitable when broad-based controversies between national and international corporations have to be litigated. Nor are the logistical problems insurmountable. As the court noted in Travelers Indem. Co. v. Monsanto Co., 692 F. Supp. 90, 92 (D.Conn. 1988), this is "an age where air travel, express mail, electronic data transmission, and videotaped depositions are part of the normal course of business for companies such as these." The question is not how difficult it will be to try the coverage question but rather how many times Westinghouse is going to have to repeat the process from jurisdiction to jurisdiction.

As we see the issue, forum non conveniens is simply the wrong doctrine in these circumstances. The immediately pertinent question is whether, under all the relevant circumstances and upon a balancing of all the competing public and private interests implicated, the benefits of fractionalizing this litigation, not only into multiple separate parts but also into separate parts sharing a significantly duplicative overlay, so outweigh the private and public burdens which fractionalization inevitably imposes as to justify the involuntary contraction and truncation of this litigation on any theory. We think it does not. We conclude further that the one component of the overall circumstantial complex which is the most critical concern here was insufficiently considered in the trial court's analysis, and that is the factor of piecemeal litigation. This kind of fractionalization is a most potent weapon in the arsenal of the litigant whose primary and subversive aim is to impose both upon the judicial system and the adversary by endlessly [471] delaying the day upon which the entire controversy will finally come to an end and the respective rights of the litigants resolved — clearly, consistently, and finally. It is only the single comprehensive action, designed to adjudicate the entire controversy between litigants, which can protect both the court and the parties from that calculated imposition. See, e.g., Wm. Blanchard Co. v. Beach Concrete Co., Inc., 150 N.J. Super. 277 (App.Div. 1977), certif. den. 75 N.J. 528 (1977).

We find a close and instructive analogy in the application, in complex coverage cases involving toxic torts and environmental claims, of the so-called Colorado River rule, which requires that in the absence of exceptional circumstances, the federal courts are obliged to exercise their invoked jurisdiction, notwithstanding the pendency of parallel state court litigation. Colorado River Water Conservation District v. United States, 424 U.S. 800, 96 S.Ct. 1236, 47 L.Ed.2d 483 (1976); Moses H. Cone Memorial Hospital v. Mercury Construction Corp., 460 U.S. 1, 103 S.Ct. 927, 74 L.Ed.2d 765 (1983).

There are four significant recent federal decisions supporting a single comprehensive coverage action. In the first, Liberty Mut. Ins. Co. v. Foremost-McKesson, Inc., 751 F.2d 475 (1st Cir.1985), the court affirmed the stay ordered by the Massachusetts District Court of a diversity declaratory judgment action by which Liberty Mutual sought a declaration that it had no coverage obligations on liability policies it had issued until 1970 to Foremost-McKesson in respect of McKesson's manufacture and distribution of diethylstilbestrol (DES). Prior to the commencement of that action, Continental National Assurance Co., which had insured McKesson from 1970 to 1977, had already brought a declaratory action in the state court of California against it and McKesson's other insurers, including Liberty Mutual, to determine respective responsibility, if any, for McKesson's defense and indemnity. By cross-claim, counter-claim and other procedural techniques, the California action ultimately encompassed all McKesson's insurers and all its toxic substances to the end that there was brought "before the [472] California Court all of McKesson's insurers so as to resolve comprehensively McKesson's coverage for claims arising out of exposure to any products it may have manufactured, sold or distributed." 751 F.2d at 476. In affirming the District Court's stay of Liberty Mutual's fractionalized piece of the pending California action as within the exceptional-circumstances exception to the Colorado River doctrine, the First Circuit explained that

Here, as in Colorado River, piecemeal litigation could severely prejudice the rights of one of the parties. Colorado River, supra, [424 U.S.] at 818-19 [96 S.Ct. at 1246-47]. If the federal and state actions were to proceed concurrently, there is the real possibility that the two courts might interpret the same standard policy language differently, with the result that McKesson would find itself without sufficient liability insurance coverage from the insurers after years of paying premiums. Compare Eagle-Picher Industries, Inc. v. Liberty Mutual Insurance Co., 682 F.2d 12, 19 (1st Cir.1982) (asbestosis "results" when it is manifested), cert. denied, 460 U.S. 1028 [103 S.Ct. 1279, 75 L.Ed.2d 500] (1983) with Keene Corp. v. Insurance Co. of North America, 667 F.2d 1034, 1046 (D.C. Cir.1981) (asbestos causes "injury" at time of exposure), cert. denied, 455 U.S. 1007 [102 S.Ct. 1644, 71 L.Ed.2d 875] (1982).

The California action, which was commenced first, is the more comprehensive of the two. It involves all of McKesson's insurers and all of the products for which McKesson faces potential liability. California therefore is the logical forum for the determination of the respective rights and obligations of the parties and serves to further the interest of judicial economy. It is significant that no federal issues are raised in the instant declaratory judgment action and that no federal interest would be served by retaining jurisdiction over the case. [Id. at 477]

A similar result was reached in Lumbermens Mut. Cas. v. Connecticut Bank & Trust, 806 F.2d 411 (2d Cir.1986), in which the Circuit Court affirmed a stay entered by the Connecticut District Court of a declaratory judgment action brought by Lumbermens by which it sought to avoid coverage, as a second layer excess carrier, of asbestos-related claims against its insured, Raymark. It had filed this federal action although it was already a party to a comprehensive coverage suit pending in Illinois to which Raymark and all its various primary and excess carriers were joined and which dealt with coverage questions involving some 30,000 asbestos-related bodily injury [473] claims arising all over the United States since 1941. Adopting the McKesson rationale, the court held that

The critical factor to us, however, is the desirability of avoiding piecemeal litigation and the possibility of two interpretations of the same policy language in different courts, leaving the insured possibly with insufficient coverage from the insurers after years of paying premiums. See Liberty Mutual Insurance Co., 751 F.2d at 477. As the First Circuit said in Fuller Co. v. Ramon I. Gil., Inc., 782 F.2d 306, 309-10 (1st Cir.1986), citing Moses H. Cone, the avoidance of piecemeal litigation should be given great weight in the context of declaratory judgment actions because such litigation would complicate and fragment the trial of cases and cause friction between state and federal courts. [Id. at 414]

Further noting that "Raymark's coverage dispute with any particular insurer necessarily impacts upon the timing of the obligations of the other insurers," the court pertinently held that "Lumbermens' policies must be considered as part of an inclusive controversy most appropriately decided in a single forum." Id. at 414. It thus concluded that, "In an insurance coverage dispute such as is here involved, the interest of an insured in binding as many of its insurers as possible to a single adjudication is a factor strongly weighing in favor of maintenance of an inclusive action." Id. at 415.

Two years later, in General Reinsurance Corp. v. Ciba-Geigy Corp., 853 F.2d 78 (2d Cir.1988), the Second Circuit applied its reasoning in Lumbermens to a multi-state environmental-claim coverage action, the second category of coverage claims here involved. There, Ciba-Geigy had an annually revised insurance program involving both primary and layered excess carriers, which is, as we have come to understand, the customary insuring practice of corporations of this size. In November 1987, two of the excess insurers brought a declaratory judgment action against Ciba-Geigy in the District Court for the Southern District of New York seeking a non-coverage adjudication. Ciba-Geigy, in December 1987, filed an action in the New Jersey Superior Court against its two primary carriers, later amending to join its third primary carrier and its 135 excess carriers, including the federal district court plaintiffs. Claims arising out of 70 sites, including about 12 in New Jersey, were involved in the state action. In affirming the stay [474] of the federal court action, the Second Circuit again emphasized the need for a single comprehensive action and the necessity for avoidance of piecemeal litigation.^[4]

In the last of the four cases, Travelers Indem. Co. v. Monsanto Co., supra, 692 F. Supp. 90, plaintiff sought a declaration of non-coverage "in connection with multi-million dollar environmental cleanup claims pending against Monsanto around the country." Ibid. Almost simultaneously with the institution of the federal action, Monsanto filed two suits in the Delaware state court against all 37 of its insurers seeking coverage for these cleanup claims. The district court granted Monsanto's stay motion, deferring, in effect, to the Delaware litigation and holding that:

The purpose of the Delaware action is to determine the respective liabilities of all of Monsanto's insurers whose coverage is implicated in the environmental cleanup claims being lodged against Monsanto. Those claims involve hundreds of millions of dollars, for activity spanning decades at more than forty sites around the country. It is essential that such large-scale complex litigation be managed comprehensively. Such a consideration clearly rises to the level of an "exceptional circumstance." It is undoubtedly for that reason that the overwhelming majority of courts considering motions to stay declaratory actions regarding relatively narrow insurance coverage issues, have granted them in favor of more comprehensive lawsuits better able to resolve the narrower issues in their broader context. This court has thoroughly reviewed the extensive decisional law and voluminous exhibits that both parties have cited and presented and the court is convinced that a stay of this federal action is warranted.

Furthermore, the court is not unmindful that to the extent that the dispute between Monsanto and its carriers, including Travelers, is fragmented, any effort to resolve the matter through settlement is likely to be frustrated. [Id. [475] at 93; footnote omitted]^[5]

In view both of the strength and breadth of New Jersey's entire controversy policy^[6] and the rationale of these federal cases endorsing the maintenance of a single comprehensive coverage action in circumstances such as these, we are convinced, presumptively at least, that there should be no question as to Westinghouse's right to maintain these actions as it framed them. The question then is whether any of the specific reasons relied on by the trial judge or advanced by the parties for fractionalizing the action overcome that presumption. We conclude that they do not.

We address first the trial judge's choice of law concern. Although the choice of law issue has never been reached, the court was concerned that resolution of the coverage questions before it would be inordinately complicated by what it perceived as the potential necessity to apply not a single body of substantive insurance law to the policy interpretation issues but rather multiple substantive rules. It was the court's suggestion that each state's paramount concern with the cleanup of contaminated sites within its own borders created an overriding governmental interest which would warrant application of its own law not only to the issues arising from the fact of contamination but also to the coverage questions, whose resolution would determine the extent to which, if at all, the cleanup costs would [476] be paid for by the insurer rather than the contaminator. 227 N.J. Super. at 517-518.

While not intending to deprecate the legitimacy of local concern for and control over its own environmental contamination, we nevertheless cannot conceive that the operative contract language in a single set of insurance policies issued by a group of insurers for the purpose of providing integrated comprehensive coverage for nationwide risks could mean something different in every state of the union. Obviously, the liability of the insured as a tortfeasor for the governmental and private claims against it will be determined by state law, whose applicable rules may differ from state to state, and by applicable substantive federal environmental and toxic tort law as well. But when comprehensive nationwide coverage is purchased, it is surely the expectation of both insured and insurer that what the insured has bought and the insurer has sold is a single protection from liability irrespective of the particular state law under which that liability is determined so long as the risk, whether or not ultimately resulting in liability, is within the policy coverage. See, e.g., Werner Industries, Inc. v. First State Ins. Co., 112 N.J. 30 (1988); State Farm, etc., Ins. Co. v. Simmons' Estate, 84 N.J. 28, 37 (1980).

In our view, the notion that the insured's rights under a single policy vary from state to state depending on the state in which the claim invoking the coverage arose contradicts not only the reasonable expectation of the parties but also the common understanding of the commercial community. It also seems to us anomalous, in conflict-of-law terms, to suggest that more than one body of law will apply to a single contract. The theme running through the federal mega-coverage cases is the assumption not only that state law will determine whose insurance law will govern the coverage dispute but also that it will be a single state's law, chosen in accordance with the applicable conflict principles of the forum. Lumbermens Mut. Cas. v. Connecticut Bank & Trust, 806 F.2d 411, 415 (2d Cir.1986). Thus, in Eli Lilly and Co. v. Home Ins. Co., 764 F.2d 876 [477] (D.C. Cir.1985), the court was faced with a coverage action brought by a DES manufacturer against the 242 carriers who covered its products liability risk during the 29 years of its manufacture of that substance. While various choice of law options were presented, no party even suggested, nor did the court consider, the obvious litigation chaos which would have resulted were the coverage to be variantly interpreted in accordance with the law of each state in which the product was sold or in which the claim by an injured person was filed. In the end, the court opted for the law of Indiana, the manufacturer's place of incorporation and principal place of business, to govern all insurance questions raised by the policies wherever negotiated or issued, concluding that Indiana, among all alternative possibilities, had the most significant state interest. See also, e.g., Klaxon Co. v. Stentor Electric Mfg. Co., 313 U.S. 487, 61 S.Ct. 1020, 85 L.Ed. 1477 (1941); Lumbermens Mut. Cas. v. Connecticut Bank & Trust, supra, 806 F.2d at 415; Abex Corp. v. Maryland Cas. Co., 790 F.2d 119 (D.C. Cir.1986).

We are of the further view that Westinghouse is, in any event, entitled to a single, consistent and final resolution of the choice of law question in a single comprehensive action which will bind it and all its insurers. We do not speculate on how the choice of law question should be ultimately resolved — it was neither briefed nor argued in the trial court nor in this court. We note only that there are various options within traditional choice of law principles including, among others, the place where the contracts were negotiated, where they were issued, where they are to be performed, where the parties' principal locations are, and what the parties may have intended. See 1 Restatement (Second), Conflict of Laws, § 6 (1971). The trial court will also have to address the question of whether the same law applies to the various layers of coverage which may have been negotiated separately or elsewhere, and presumably inquiry must be made with respect to the parties' intent. We are, however, convinced that proper prosecution of this litigation [478] requires immediate threshold resolution of the choice of law issues.

It is apparent to us that a prompt choice of law resolution is the key to effective case management of this litigation. That is to say, there is a limited number of identifiable coverage issues, including such questions as trigger of coverage, the scope of the owned-property exclusion, the scope of the pollution exclusion, the meaning of the operative language "accident" and "expected or intended from the standpoint of the insured," and the definition of damages or loss which invoke coverage. These issues can be addressed on two levels. The first is a declaration of interpretative principle respecting each disputed provision of the policies. This task is obviously manageable if the law of only one state is required to be restated. Illustratively, were New Jersey law to control, the body of law here developed in respect of environmental-claim coverage would permit definitive statements to be made of precisely what the disputed policy provisions mean and how they are to be applied to any given set of facts. See, e.g., Diamond Shamrock v. Aetna Cas., 231 N.J. Super. 1 (App.Div. 1989); CPS Chemical v. Continental Ins., 222 N.J. Super. 175 (App.Div. 1988); Broadwell Realty v. Fidelity & Cas., 218 N.J. Super. 516 (App.Div. 1987).

While we do not predict which state's law would apply, we have no reason to assume that whichever state it is would not have a body of toxic tort and environmental-claim coverage law as clear or as discernible as ours and that the trial court would not be able to articulate it. Once the choice of law issue is resolved, the court could proceed to the next step of entering an order, akin to a partial summary judgment on liability, which would adjudicate the "black letter" law of the case on most, if not all, coverage disputes.^[7] We understand that ultimately the [479] coverage questions may be fact sensitive and that site-specific factual findings may have, eventually, to be made. But while specific application of the adjudicated interpretative principles may be fact sensitive, stating those principles is not. That is a matter of law.

The final stage of the litigation must, of course, in some manner and to some degree apply the interpretative principles to the individual claims for which coverage is sought. There are a variety of available techniques. Some claims or classes of claims may be amenable to summary judgment. Some prototype claims may be chosen for trial, a device which might also permit further clarification of the meaning of policy language, if necessary. It may also be that the court, in respect of some claims, will decide that its binding interpretative principle must be applied to a specific claim by litigation elsewhere and may accordingly frame its declaratory judgment as to those claims appropriately to reach that end. Our point is that by careful staging, by limitation of jury use to the narrow factual issues as to which there is a constitutional right to jury, by using a series of juries, and by otherwise employing the complex litigation techniques developed here and elsewhere,^[8] maximum justice with minimum administrative burden can be rendered. We must at least endeavor to do so.

Having concluded that the forum non conveniens dismissal of portions of these actions must be reversed, we now consider what we regard as the significant but still undecided forum non conveniens issue. As we have noted, there is presently [480] pending in the Federal District Court for the Western District of Pennsylvania a coverage action brought by Liberty Mutual against Westinghouse and all other insurers. It appears to be precisely congruent with this action in terms of the parties and issues joined. Jurisdiction is based not on ordinary diversity but on the Foreign Sovereign Immunities Act (FSIA), 28 U.S.C.A. § 1330, because of the singular circumstance that the Republic of Ireland owns one of the insurers, the Insurance Corporation of Ireland, Ltd. In Liberty Mutual Insurance Company v. Insurance Corporation of Ireland, Ltd., et al., 693 F. Supp. 340, 349 (W.D.Pa. 1988), the district court denied Westinghouse's motion to dismiss that federal action on jurisdictional grounds, relying on the FSIA and noting as well, as we believe, that "this complicated action ought to be litigated in its entirety in one courtroom."

Hence, there is now an alternate forum for the adjudication of the entire controversy, and we note that following oral argument before us and consistent with the position it then took, Liberty Mutual moved the trial court for an order dismissing the entire action and deferring to the federal court's jurisdiction.^[9] Insofar as we are able to determine, that motion is still pending, and we do not intend to suggest how it should be decided. We do, however, point out that in addition to considering the traditional forum non conveniens factors, the trial court should address, as one of the considerations, the question of whether a federal district court, because of the nature of the federal system and its procedural jurisprudence, is better able to handle this case logistically and mechanically. Interdistrict techniques may be available to it which are as yet unavailable on an interstate cooperative effort and which may simplify multi-state proof problems. See, e.g., 28 U.S.C.A. § 1407 (multi-district litigation). See also the Manual for Complex Litigation [481] Second, supra. And see, generally, American Law Institute, Complex Litigation Project, Council Draft No. 1 (1988).

The order appealed from is reversed, and we remand for further proceedings consistent herewith.

[1] Thermo King Corporation, a wholly owned subsidiary of Westinghouse, is a co-plaintiff in one of the two actions, the so-called environmental claim action described infra. For convenience, we do not separately refer to it, although it should be understood to be included in our references to "Westinghouse" and "plaintiff."

[2] This group includes not only Liberty Mutual but 86 "London" companies as well as Allstate Insurance Company and First State Insurance Company.

[3] This group includes, in addition to Lumbermens, Puritan Insurance Company ("Puritan"), Appalachian Insurance Company of Providence, Northwestern National Insurance Company of Milwaukee, Old Republic Insurance Company, Zurich Insurance Company, AIU Insurance Company, Allianz Insurance Company, Allianz Underwriters, Inc., American Centennial Insurance Company, American Home Assurance Company, Atlanta International Insurance Company, Granite State Insurance Company, The Insurance Company of the State of Pennsylvania, Landmark Insurance Company, Lexington Insurance Company, National Continental Insurance Company and National Union Fire Insurance Company of Pittsburgh, Pa.

[4] In an interesting note, the Second Circuit rejected the insurers' argument that by reason of the trial court's decision in this case and the companion case of SCM Corporation v. Lumbermens Mutual, which we decide this day, "New Jersey courts increasingly refuse to entertain claims in insurance-related judgment actions which involve hazardous waste sites outside New Jersey." 853 F.2d at 82. The court simply concluded, without analyzing the insurers' characterization of New Jersey law, that Ciba-Geigy was, in any event, distinguishable on its facts as having a closer New Jersey nexus in this context.

[5] Following the stay of the Federal District Court action, the defendant insurers moved the Delaware court for a forum non conveniens dismissal order based on the site-specific approach argued here. The motion was denied following a written opinion by Judge Martin in which he concluded that the burdens of piecemeal litigation far outweighed the burdens of a single comprehensive Delaware litigation. See Monsanto Company v. Aetna Casualty and Surety Company, et al., Superior Court of Delaware, Docket No. 88C-JA-118 (decided October 21, 1988).

[6] See, e.g., Crispin v. Volkswagenwerk, A.G., 96 N.J. 336 (1984); Thornton v. Potamkin Chevrolet, 94 N.J. 1 (1983); Aetna Ins. Co. v. Gilchrist Brothers, Inc., 85 N.J. 550 (1981); Falcone v. Middlesex County Med. Soc., 47 N.J. 92 (1966); Foley Machinery Co. v. Amland Contractors, 209 N.J. Super. 70 (App.Div. 1986); Mori v. Hartz Mountain Development Corp., 193 N.J. Super. 47 (App.Div. 1983).

[7] For example, it could surely be determined as a matter of policy construction whether the policy provides that the risk accrues on exposure or manifestation of injury, or whether cleanup and other remedial efforts on owned property are covered if the work is undertaken to remedy or avoid damage on other property, or whether an insured's response to a governmental cleanup demand is within covered damages. It does not appear that there is any disputed coverage question that is not subject to interpretative declaration of principle.

[8] See Manual for Complex Litigation Second, 1A-Pt2 Moore's Federal Practice.

[9] Indeed, on motion made to us, we expressly remanded to the trial court in order to enable it to consider that motion pending this appeal. See R. 2:9-1.

[189] Paul R. Koepff, a member of the New York bar, argued the cause for appellants Commercial Union Insurance Company, Insurance Company of North America, Century Indemnity Company as successor to CCI Insurance Company, as successor to INA, Alan Lloyd, on his own behalf and as a representative for Certain Underwriters of Lloyd's, London and Certain London Market Companies, Central National Insurance Company of Omaha with respect to policies issued through Cravens, Dargan & Company, Pacific Coast, as their Managing General Agent, C.E. Heath Compensation & Liability Insurance Company, Highlands Insurance Company with respect to policies issued through Cravens, Dargan & Company, Pacific Coast, as their Managing General Agent (Graham, Curtin & Sheridan, attorneys for Insurance Company of North America, Century Indemnity Company as successor to CCI Insurance Company, as successor to INA, Highlands Insurance Company with respect to policies issued through Cravens, Dargan & Company, Pacific Coast, as their Managing General Agent, Central National Insurance Company of Omaha with respect to policies issued through Cravens, Dargan & Company, Pacific Coast, as their Managing General Agent, Christie, Pabarue, Mortensen and Young attorneys for Commercial Union Insurance Company and C.E. Heath Compensation & Liability Insurance Company and Margolis Edelstein attorneys for Alan Lloyd, on his own behalf and as a representative for Certain Underwriters of Lloyd's, London and Certain London Market Companies; Mr. Koepff, Joseph R. McDonough, James W. Christie, III, Arthur J. Liederman, a member of the New York bar, and Bruce E. Barrett on the brief).

Jerrald J. Hochman submitted a brief on behalf of appellants The Home Insurance Company and The City Insurance Company (Sheft, Golub & Kamlet, attorneys).

Andrew T. Berry argued the cause for respondent (Killian & Salisbury and McCarter & English, attorneys; Eugene Killian, Jr., Jerold Oshinsky, a member of the District of Columbia bar, Edward Tessler and Lynda A. Bennett, on the brief).

The opinion of the Court was delivered by O'HERN, J.

[190] This is a multisite, multistate, environmental insurance coverage case. We granted leave to appeal in this action and in HM Holdings, Inc. v. Aetna Casualty & Surety Co., 154 N.J. 208, 712 A.2d 645 (1998), and Unisys Corp. v. Insurance Co. of North America, 154 N.J. 217, 712 A.2d 649 (1998), also decided today, to consider the choice of law governing the interpretation of the casualty-insurance contracts that provide indemnity against pollution-damage claims.

Choice of law with respect to interpreting insurance contracts develops a life of its own when considered in the context of hazardous waste sites. Because of the public's heightened sensitivity to environmental pollution in the last quarter century and because of the significant costs associated with these coverage disputes, a "virtual avalanche of coverage litigation between carriers and their policyholders has ensued to determine who may be ultimately responsible for the payment of these costs." At the very core of these disputes, which have spawned hundreds of reported cases nationwide, is the interpretation to be accorded certain contractual language contained in comprehensive general liability (CGL) policies.

[In re Combustion, Inc., 960 F. Supp. 1056, 1062 (W.D.La. 1997) (citations omitted).]

The appeals require us to apply the principles of Gilbert Spruance Co. v. Pennsylvania Manufacturers' Ass'n Insurance Co., 134 N.J. 96, 629 A.2d 885 (1993). In Spruance, we held that choice-of-law determinations in interpreting casualty-insurance contracts should be made by looking first to section 193 of the Restatement (Second) of Conflict of Laws (1971) (Restatement). That section provides that the law of the principal location of the insured risk governs unless another state has a more significant relationship to the parties and the transaction under the principles stated in Restatement section 6. The principles are best understood in the context of the specific cases.

I

In this declaratory judgment action, Pfizer seeks coverage for environmental contamination liability claims that have arisen at some ninety separate sites in nineteen states and in Puerto Rico. Twenty-four of the sites are located in New Jersey. (We have not [191] made any factual findings concerning Pfizer's allegations but merely set forth principles of law based on the facts asserted.) Pfizer sought this relief under comprehensive general liability (CGL) policies and environmental impairment liability policies issued by the various defendants. In earlier rulings, the trial court had determined that New Jersey law would govern the litigation pertaining to five New Jersey sites and one Rhode Island site. The trial court had also determined that New Jersey law would apply to certain other legal issues in the case. This appeal presents choice-of-law issues concerning six sites in other states — two in Pennsylvania and one each in Massachusetts, North Carolina, Connecticut and Indiana. None of the sites received any waste generated in New Jersey by Pfizer. The issues before us are (1) what law guides the interpretation of the pollution-exclusion clause in the CGL policies and (2) what law governs the validity of late-notice defenses. The insurance companies contended that with respect to the non-New Jersey sites either New York law, the place of Pfizer's headquarters, or the law of the sites — that is, the law of the state in which each site was located — should control. Pfizer argued that the law of a single jurisdiction, that of New Jersey, should apply to all the sites. The trial court agreed with Pfizer.

Applying the Spruance principles, the trial court found that when an operation is predictably multistate, as was Pfizer's, the significance of the principal location of the insured risk diminishes. In that instance, the court reasoned that in accordance with section 6 of the Restatement, the governing law should be the law of the state with the dominant significant relationship to the disputed issue. The court found that New Jersey has a commitment to "protecting its insureds through liberal insurance coverage." After contrasting the law of other states with New Jersey's law concerning interpretation of the pollution-exclusion clause and the late-notice defense, the court observed that Pfizer had been authorized to do business in New Jersey since 1900 and employed 2,200 New Jersey residents at six State locations, and that an additional 500 New Jersey residents work at Pfizer's New York [192] headquarters. The company shipped some $375 million worth of products and services from New Jersey in 1993 and expended $31 million for research and development in that year. Four of the insurance companies were either incorporated or had their principal place of business in New Jersey. The court held that New Jersey law should apply, reasoning that "New Jersey has an interest in protecting its businesses through the application of its laws" and that "[f]ailure to apply New Jersey law to the pollution exclusion and the notice issues would frustrate significant New Jersey public policies."

We granted leave to appeal, 150 N.J. 20, 695 A.2d 664 (1997), to consider the arguments of the insurance companies.

II

A.

At an earlier time, choice-of-law rules were relatively simple and easy to apply. Under the doctrines of lex loci contractus and lex loci delicti, the contract laws of the place where a contract was made would govern contract disputes, and the tort laws of the place where an accident happened would control in tort cases. Over time, those rules gave way to more complex analysis.

The several states now have differing choice-of-law rules. Among the rules used are the most-significant-relationship test, People v. Saiken, 49 Ill.2d 504, 275 N.E.2d 381 (1971), cert. denied, 405 U.S. 1066, 92 S.Ct. 1499, 31 L.Ed.2d 796 (1972); the governmental-interest test, Stonewall Surplus Lines Ins. Co. v. Johnson Controls, Inc., 14 Cal. App.4th 637, 17 Cal. Rptr.2d 713 (1993); the law of the forum, Joy Techs., Inc. v. Liberty Mut. Ins. Co., 187 W. Va. 742, 421 S.E.2d 493 (1992); and the place of contracting, American Motorists Ins. Co. v. ARTRA Group, Inc., 338 Md. 560, 659 A.2d 1295 (1995). New Jersey had long rejected "the mechanical and inflexible lex loci contractus rule in resolving conflict-of-law issues in liability-insurance contracts. Instead, our courts have adopted a more flexible approach that focuses on the state [193] that has the most significant connections with the parties and the transaction." Spruance, supra, 134 N.J. at 102, 629 A.2d 885. New Jersey courts seek to apply the law of the state with the greatest interest in resolving the particular issue that is raised. Gantes v. Kason Corp., 145 N.J. 478, 484, 679 A.2d 106 (1996) (citing Veazey v. Doremus, 103 N.J. 244, 247-49, 510 A.2d 1187 (1986); State Farm Mut. Auto. Ins. Co. v. Estate of Simmons, 84 N.J. 28, 36-37, 417 A.2d 488 (1980); and O'Keeffe v. Snyder, 83 N.J. 478, 490, 416 A.2d 862 (1980)).

Prior to this Court's decision in Spruance, the principal analytical choice in multisite environmental coverage cases had been between cases holding that one law governs the insurance contract regardless of the location of the insured risk — the "uniform-contract-interpretation approach" — and cases that emphasize the location of the insured risk and apply the law of that state unless another state has a more significant relationship with regard to the contested issue — "the site-specific approach." See Spruance, supra, 134 N.J. at 103-11, 629 A.2d 885; Symeon C. Symeonides, Choice of Law in the American Courts in 1995: A Year in Review, 44 Am. J. Comp. L. 181, 230 (Spring 1996).

In Westinghouse Electric Corp. v. Liberty Mutual Insurance Co., 233 N.J. Super. 463, 559 A.2d 435 (1989), the Appellate Division adopted the uniform-contract-interpretation approach. In Spruance, supra, the Court adopted a "site-specific" approach that emphasizes the location of the site of the risk. 134 N.J. at 112, 629 A.2d 885. At first, some believed that Morton International, Inc. v. General Accident Insurance Co. of America, 134 N.J. 1, 629 A.2d 831 (1993), cert. denied, 512 U.S. 1245, 114 S.Ct. 2764, 129 L.Ed.2d 878 (1994), might require New Jersey courts to apply New Jersey's law on the pollution-exclusion clause irrespective of the location of specific sites. However,

New Jersey courts have rejected efforts to base the choice of law determination upon New Jersey's perceived interest in broadly applying the regulatory estoppel holding set forth in Morton to environmental coverage disputes or upon a mechanical application of the law where the site is located. Instead of applying either of these automatic rules, the choice of law determination must reflect a careful site-specific [194] determination, made upon a complete record, of the factors set forth in either section 193 (principal location of the insured risk) or section 6 (identification of state with dominant significant relationship) of the Restatement (Second) of Conflict of Laws.

[Michael Misch, et al., Recent Developments in Insurance Coverage Issues, 31 Tort & Ins. L.J. 335, 336 (winter 1996) (hereinafter, Misch).^[1]]

B.

At the risk of repetition, we summarize the Spruance analysis. Although Restatement section 188 sets forth the general rule governing choice of law in contract actions,^[2] Spruance set forth a specific choice-of-law framework for interpreting casualty-insurance contracts. Under this framework, a court looks first to Restatement section 193, which provides that the place that "the parties understood ... to be the principal location of the insured [195] risk governs unless some other state has a more significant relationship under the principles stated in [section] 6 to the transaction and the parties." Spruance, supra, 134 N.J. at 112, 629 A.2d 885 (quoting Restatement § 193). When the policy covers risks located primarily in a single state, "the choice-of-law issue can be straightforward. For example, there is no choice-of-law issue where the policyholder is located in one state, the environmental liability arises out of the same state, and the policies are issued by a state-based insurer for that one site." In re Combustion, supra, 960 F. Supp. at 1062; accord Restatement § 193, comment b. An easy example is that of a CGL policy covering a solid waste treatment plant creating a risk in a single state. "At the other end of the spectrum are cases where a single insured seeks coverage under CGL policies for certain environmental and toxic tort liabilities, including ... [multiple] sites located in ... different states." In re Combustion, supra, 960 F. Supp. at 1062. When such an insured operation or activity is predictably multistate, the significance of the principal location of the insured risk diminishes; in such a case, section 193 directs that "the governing law is that of the state with the dominant significant relationship according to the principles set forth in Restatement section 6" as applied to "the particular issue involved." Spruance, supra, 134 N.J. at 112, 629 A.2d 885.^[3] The site-specific approach of section 193 inevitably means that more than one state's law may govern coverage questions arising under a casualty insurance policy. Restatement section 193, comment f, addresses the problems encountered

when an insurance policy insures multiple risks located in different states which by statute require specific forms of insuring clauses. In such a case, the single policy insuring multiple risks will usually incorporate the statutorily-mandated forms of the states involved, and the courts will, presumably, treat the policy as involving separate policies, each insuring an individual risk.

[196] [The Rouse Co. v. Federal Ins. Co., 991 F. Supp. 460, 463 (D.Md. 1998).]

C.

Spruance used the "site-specific" analysis to determine what law governed the duty to indemnify for hazardous waste produced in Pennsylvania by a Pennsylvania company that came to rest at a New Jersey site. The Spruance Court thus agreed with the Appellate Division that New Jersey courts should interpret a pollution-exclusion clause contained in a CGL policy that was purchased to cover an operation or activity according to New Jersey substantive law, without regard to the place the contract was made or the location at which the toxic wastes that predictably come to rest in New Jersey were generated. In such a case, New Jersey has the dominant and significant relationship with the parties, the transaction, and the outcome of the controversy. Gilbert Spruance Co. v. Pennsylvania Mfrs.' Ass'n Ins. Co., 254 N.J. Super. 43, 603 A.2d 61 (App.Div. 1992), aff'd, 134 N.J. 96, 629 A.2d 885 (1993).

The Spruance Court approved the holding in a factually similar case, Leksi, Inc. v. Federal Insurance Co., 736 F. Supp. 1331 (D.N.J. 1990). The Leksi court had held that "in the absence of a choice of law provision [in the contract], the state where the toxic waste comes to rest is the state whose law will apply, provided that it was reasonably foreseeable that the waste would come to rest there." Id. at 1336. Although Spruance, supra, accepted Leksi's section 6 analysis to determine that when "out-of-state generated waste foreseeably comes to rest in New Jersey, New Jersey has the dominant significant relationship," 134 N.J. at 113, 629 A.2d 885, Spruance expressly declined to state that its holding would apply to the converse situation in which waste generated in New Jersey was predictably disposed of in another state, ibid. (Spruance was essentially a two-state, single-site case.) Noting that the Leksi court had enunciated an unqualified "bright-line" rule calling for the application of law of the state of the waste location and that another court had called for an analysis under [197] section 6, Spruance chose to "express no view on [either] proposition." Id. at 113-14, 629 A.2d 885.

Courts have found it "tempting" to extract from Spruance a "bright-line rule" of applying the law of the state in which the waste disposal site is located as long as it was reasonably foreseeable to the contracting parties that the insured's waste would predictably come to rest in that state. General Ceramics Inc. v. Firemen's Fund Ins. Cos., 66 F.3d 647 (3d Cir.1995) (determining whether New Jersey or Pennsylvania laws should govern interpretation of pollution-exclusion clause when New Jersey company shipped waste to Pennsylvania). Such a bright-line rule would be attractive, not only because of its simplicity but because of its "surface level" appearance of fairness. Id. at 655. However, Ceramics rejected this rule because Spruance had specifically refused to adopt it and because such a rule would defeat New Jersey's policies without furthering the "Pennsylvania policy reasons for giving [the pollution-exclusion clause] its literal meaning." Ibid.; see also J. Josephson, Inc. v. Crum & Forster Ins. Co., 293 N.J. Super. 170, 186, 679 A.2d 1206 (App.Div. 1996) (relying on Spruance and Ceramics to conclude that New Jersey law governed coverage issues when New Jersey insured deposited waste in Pennsylvania).

Although the process is demanding, there is no way to avoid a "careful site-specific determination, made upon a complete record." Misch, supra, 31 Tort & Indus. L.J. at 336. In each of these cases before us, the risks insured, like the risk in Spruance, were "to some degree transient." Spruance, supra, 134 N.J. at 113, 629 A.2d 885 (quoting A. Johnson & Co. v. Aetna Cas. & Sur. Co., 741 F. Supp. 298, 301 (D.Mass. 1990), aff'd, 933 F.2d 66 (1st Cir.1991)). Accordingly, in order to choose the applicable law that governs the disputed issues, Spruance requires that we turn to the section 6 analysis.

D.

In its well-reasoned opinion in Ceramics, supra, the Third Circuit suggested grouping the relevant factors listed in Restatement [198] section 6 under five different categories of interest, which it described as (1) the competing interests of the relevant states, (2) the national interests of commerce among the several states, (3) the interests of the parties, (4) the interests underlying the contract law, and (5) the interests of judicial administration. 66 F.3d at 656. Because contract law is largely private law, we believe that factors (3) and (4) can be combined into one factor. We consider each of the factors separately.

1. The competing interests of the states require courts to consider whether application of a competing state's law under the circumstances of the case "will advance the policies that the law was intended to promote." Ibid. The "law" can be either the decisional or statutory law of a state. The focus of this inquiry should be on "what [policies] the legislature or court intended to protect by having that law apply to wholly domestic concerns, and then, whether those concerns will be furthered by applying that law to the multi-state situation." Ibid. This is another way of saying that "[i]f a state's contacts [with the transaction] are not related to the policies underlying its law, then that state does not possess an interest in having its law apply. Consequently, the qualitative, not the quantitative, nature of a state's contacts ultimately determines whether its law should apply." Veazey, supra, 103 N.J. at 248, 510 A.2d 1187 (citation omitted). Thus, if a state statute regulating the late-notice defense required a showing of prejudice before invocation of the defense, a court should consider when that legislature would have an interest in having its law apply and when its purposes in adopting the late-notice requirement would be served by applying the law to the case.

2. The interests of commerce among the states require courts to consider whether application of a competing state's law would frustrate the policies of other states. Using the example of a late-notice defense, if a competing state's law did not require prejudice, a conflict between the states' interests is created. Can the law of one state be disregarded without offense to its purposes?

[199] 3. The interests of parties require courts to focus on their justified expectations and their needs for predictability of result. These are basic purposes of contract law, especially insurance law. See Meier v. New Jersey Life Ins. Co., 101 N.J. 597, 612-13, 503 A.2d 862 (1986); see also Kievit v. Loyal Protective Life Ins. Co., 34 N.J. 475, 482, 170 A.2d 22 (1961) ("When members of the public purchase policies of insurance they are entitled to the broad measure of protection necessary to fulfill their reasonable expectations."). Restatement section 188 "contacts" with the states, the domicile or residence of the parties, and places of incorporation, business, contracting, and performance, come into play here in assessing what parties might reasonably have expected to be predictable.

4. The interests of judicial administration require a court to consider whether the fair, just and timely disposition of controversies within the available resources of courts will be fostered by the competing law chosen. In other words, what choice of law works best to manage adjudication of the controversy before the court. Environmental insurance coverage cases tend to be extraordinarily complex, with multiple parties and multiple issues. Efficient administration of such cases is an important factor to consider.

III

A.

What law governs interpretation of the pollution-exclusion clause?

We begin with the obvious. "A court has to make a choice of law decision in an actual case only (1) when the case is connected with more than one state, and more importantly, (2) when the laws of the involved states differ on the point in issue." Robert A. Sedler, A Real World Perspective on Choice of Law, 48 Mercer L.Rev. 781, 783 (Winter 1997). This case is plainly connected with more than one state. The "point in issue" is what state's law governs the interpretation of the pollution-exclusion clause. [200] Three states are involved — New Jersey (the law of the forum), New York (the law of the place of making of the contract and the headquarters of Pfizer), and each of the states where the waste has come to rest (the waste sites). In Morton, supra, we were asked to interpret the "sudden and accidental" exceptions to the pollution exclusion clause. 134 N.J. at 28, 629 A.2d 831. That exclusion bars claims arising out of pollution events, unless the discharge of contaminants was both sudden and accidental. Insurers asserted that the term "sudden" could not be stripped of its temporal element. Thus, the insured must show that the pollution occurred abruptly. In contrast, parties seeking coverage contended that "sudden" meant only "unexpected," thereby providing coverage for instances of gradual pollution. Although agreeing with the insurer's position on the plain meaning of the terms in the exclusion, we declined to enforce the exclusion as written. Id. at 29, 629 A.2d 831. We concluded that the insurance industry misled the State insurance department that approved the exclusion. Ibid. The Court held that the exclusion should be interpreted to provide identical coverage to that provided under prior occurrence-based policies, but declined to extend coverage to those cases in which the insured intentionally discharged known contaminants. Id. at 30-31, 629 A.2d 831.

New York has a contrary view. It does not interpret the exception to afford liability coverage for gradual discharges. According to the insurance companies, New York's law on the point in issue was embodied in (1) a New York insurance statute that once mandated the inclusion of a pollution-exclusion clause in insurance policies, N.Y. Ins. Law § 46(13) & (14) (McKinney 1971), (2) New York Insurance Department directives that the statute applied to sites located outside of New York, and (3) other executive pronouncements, including speeches and comments by then Governor Nelson A. Rockefeller. The insurance companies cite decisions of federal and state courts holding that in New York there is no coverage for polluters. See, e.g., New York v. AMRO Realty Corp., 936 F.2d 1420, 1427 (2d Cir.1991); Ogden Corp. v. Travelers Indem. Co., 924 F.2d 39, 42 (2d Cir.1991); Powers [201] Chemco, Inc. v. Federal Ins. Co., 74 N.Y.2d 910, 549 N.Y.S.2d 650, 548 N.E.2d 1301 (1989); Technicon Elecs. Corp. v. American Home Assurance Co., 74 N.Y.2d 66, 544 N.Y.S.2d 531, 542 N.E.2d 1048 (N.Y. 1989); Borg-Warner Corp. v. Insurance Co. of N. Am., 174 A.D.2d 24, 577 N.Y.S.2d 953, 956 (citing to "New York's unique policy-based interest in the pollution exclusion clause"), leave to appeal denied, 80 N.Y.2d 753, 587 N.Y.S.2d 905, 600 N.E.2d 632 (1992).^[4]

Although there are variations on these views, we may assume that the laws of the waste sites will be similar to either New York law of New Jersey law in that the exclusion will either be operative or inoperative. We will therefore initially apply the section 6 factors to New Jersey and New York law.

With respect to the first factor, Spruance, supra, had identified the purposes of New Jersey's law concerning the interpretation of the pollution-exclusion clause as New Jersey's interest in securing financial resources, both to remediate New Jersey toxic waste sites and to compensate victims of pollution in New Jersey. 134 N.J. at 100-01, 629 A.2d 885. Those purposes are not implicated in this aspect of the case concerning out-of-state waste sites. Morton, supra, identified as purposes of its law New Jersey's interest in protecting the "objectively reasonable expectations" of New Jersey policyholders, 134 N.J. at 30, 629 A.2d 831, and in deterring "misrepresentation and non-disclosure [by insurance companies] to state regulatory authorities," id. at 74, 629 A.2d 831. We do not perceive New Jersey's "wholly domestic concerns," Ceramics, supra, 66 F.3d at 656, to be significantly advanced when its "law" concerning interpretation of the pollution-exclusion clause is applied to a dispute involving policyholders from another state and waste sites in yet others. See Waste Management, Inc. v. Admiral Ins. Co., 138 N.J. 106, 129, 649 A.2d 379 (1994) (finding diminished New Jersey interest when claimants "are all nonresidents seeking coverage for environmental damage occurring beyond [202] New Jersey's borders"), cert. denied sub nom. WMX Techs., Inc. v. Canadian Gen. Ins. Co., 513 U.S. 1183, 115 S.Ct. 1175, 130 L.Ed.2d 1128 (1995).

In contrast, the laws of New York or of the waste sites in this case bears a closer relationship to the goals underpinning those laws. New York is the principal place of business of Pfizer. The insurance contracts were negotiated there. Because the purpose of the New York rule was in part to discourage the provision of insurance against pollution, the rule's purpose would be served by its application. In addition, the states in which the waste has come to rest would have their laws rather than New Jersey's more fully advanced if applied to the matter in issue.

Concerning factor two, application of New Jersey's conflicting view of the pollution-exclusion clause would hinder the interests of commerce among the several states if that law were to be applied to determine a dispute with which New Jersey did not have a dominant and significant relationship. We do not find it "offensive or repugnant," State Farm, supra, 84 N.J. at 41, 417 A.2d 488, to New Jersey's public policy that another state, such as Indiana, might, in connection with waste sites and policyholders located there, give a literal meaning to the pollution-exclusion clause. Conversely, if New York law were applied to determine coverage at a waste site in Indiana and that state's law mirrored the law of Spruance and Morton, the interests of Indiana would be hindered.

Concerning factor three, because Spruance rejected both the uniform-contract-interpretation approach and the bright-line approach of choosing the law of either the state of waste generation or waste disposal, courts have concluded that the New Jersey Supreme Court "favors a government-interest sensitive approach over a predictable one." NL Industries, Inc. v. Commercial Union Ins. Cos., 926 F. Supp. 1213, 1232 (D.N.J. 1996). It is not that we favor governmental interests over private interests, but rather that unpredictability lies in the nature of the insurance contracts. "Predictability appears to be a minor virtue in view of the willingness of insurers to issue multi-site policies that will be [203] subject to the unpredictable substantive law of many states fixing the liabilities of their insureds." Johnson Matthey Inc. v. Pennsylvania Mfrs.' Ass'n Ins. Co., 250 N.J. Super. 51, 59, 593 A.2d 367 (App.Div. 1991). It is likely that the parties could have contracted for more predictable results had they inserted choice-of-law provisions in the insurance contracts. Ibid. That the parties did not do so indicates that there would be uncertainty with respect to the interpretation of the CGL clauses in various states where the policies might provide coverage. The absence of choice-of-law clauses in the policies has been described to us as the understandable effect of market forces. If the policies were to contain choice-of-law provisions the policies might not be as readily marketable, in certain states, either because of objections on the part of regulators or consumers. That does not mean that we may or should disregard the fair expectations of the parties in the predictability of a result.

Certainly in this case the interests of fair expectation and predictability of result do not favor application of New Jersey law. Given that the policies were purchased, paid for, and maintained at the principal office of Pfizer in New York, it could hardly have been predictable that New Jersey law would govern the interpretation of coverage issues in Illinois or Pennsylvania. Conversely, in the absence of a choice-of-law provision, a policyholder would expect that it would be indemnified under the law in effect at the place where liability is imposed. The policies contain sweeping declarations of coverage that should be given effect where the risks arise.

Finally, we must consider the concerns of judicial administration. In colloquy in a companion case, the trial court expressed concern that judicial administration would be hampered by requiring a jury to consider, under different standards of law, the application of the facts to the differing law at each of several waste sites. The court, in Unisys, said:

I must tell you in all honesty I am not a great fan of the site specific [approach] because I think that this is a situation where facts in life have outweighed the development of traditional Anglo American common law concepts. We are ill-equipped [204] to deal with these sorts of situations. The idea of impanelling a jury from Middlesex County and suggesting to them that we're going to try six sites and then charge them the law, assuming that I can figure it out ... correctly, of Montana, California, Kentucky, that frankly in a practical sense is just so unworkable that unless I was [forced to] I would never do it.

The trial court's concerns over jury management should be considerably eased by the Court's decision in Ciba-Geigy Corp. v. Liberty Mutual Insurance Co., 144 N.J. 372, 676 A.2d 1089 (1996), which permits, in certain circumstances, non-jury trials in environmental pollution insurance coverage cases.

The mere existence of factual issues does not automatically entitle a party to a jury trial. Here, for example, a central point of dispute in both Ciba-Geigy and GEI is whether the insureds intended the environmental contamination within the meaning of the underlying policies. The right to a jury that otherwise might attach to those claims must yield to the resolution of the dominant equitable issues in a non-jury trial.

[In re Environmental Insurance Declaratory Judgment Actions, 149 N.J. 278, 301, 693 A.2d 844 (1997).]

Although we do not minimize the difficulties encountered by a court that must analyze the pollution-exclusion laws of each of the states involved in multistate environmental coverage cases, we suspect that the laws will fall into categories or groups that the court can apply to the several factual circumstances as they develop. As counsel stated, the clause will normally be found "either unambiguous and operative or ambiguous and not operative."

In addition, as a practical matter, we may expect (and the parties suggest this) that the proofs will be different at each of several waste sites involved. For example, the nature of the operations in Indiana may have been entirely different from the nature of the operations in Pennsylvania or Massachusetts. The question of the extent to which company officials and plant operators would have known that their activities would cause environmental pollution may be expected to be quite different. See Tim O'Brien, Cleanup Coverage Case Costs Carriers $400M, 151 N.J.L.J. 461 (Feb. 2, 1998). Hence, there is little way in which to avoid separate trials at the separate sites. This does not mean, however, that there will be separate trials over each site. The [205] sites at issue here are referred to as "Phase I" or "test" sites. In a companion case, counsel for an insurance company suggested that normally the lead sites are contested first and once the major issues are resolved the rest fall in place. Counsel said, "all of our clients would shoot us if we tried 100 sites." We are told that these cases are "almost always" in mediation. We have said that "[s]uch disputes seem ideally suited for mediation or arbitration under court-annexed programs of alternate dispute resolution or on the parties' own initiative." General Accident Ins. Co. of Am. v. State, Dept. of Envtl. Protection, 143 N.J. 462, 477, 672 A.2d 1154 (1996). The State of New Jersey Office of Dispute Settlement provides just such a useful mediation service. As we did in Owens-Illinois, Inc. v. United Insurance Co., 138 N.J. 437, 478, 650 A.2d 974 (1994), we urge the involved business managers to study the cost effectiveness of stonewalling. Referring to the example of another case, we said: "The settlement was reasonable and the parties saved millions of dollars in litigation expense and thousands of hours of management time." Ibid.

On balance, then, considering the policies to be advanced by the application of each state's law, the interest of commerce among the states, and the interest of predictability and ease of administration all point toward application in a New Jersey forum of the laws of New York or of the specific waste sites concerning pollution exclusion. In the event of a conflict between the law of New York and the law of the waste site, the law of the waste site should be applied because under the site-specific approach it would have the dominant significant relationship to the issue. See NL Industries, supra, 65 F.3d at 321 (observing that "Gilbert Spruance thus establishes that, in environmental cases, the location of the site carries very substantial weight in the `significant relationship' analysis, typically adequate to overcome the contacts of the place of contracting"); Restatement, supra, § 188, comment e (stating that when a contract deals with a "specific physical thing," such as a plant or waste site, "the location of the thing or of the risk is significant").

[206] B.

What law governs the late-notice defense?

Most liability-insurance contracts contain clauses that require policyholders to provide prompt notice of an occurrence that gives rise to coverage under the policy. Under traditional contract-law principles, breach of such a contractual condition would excuse the aggrieved parties' performance only if a party was actually prejudiced by the delay. New York, however, has adopted a limited exception to this general rule that exists for breach of notice provisions in insurance contracts. See Unigard Sec. Ins. Co. v. North River Ins. Co., 79 N.Y.2d 576, 584 N.Y.S.2d 290, 594 N.E.2d 571, 573 (1992). In New York, absent a valid excuse, a failure to satisfy the notice requirement vitiates the policy and the insurer "need not show prejudice before it can assert the defense of non-compliance." Id., 584 N.Y.S.2d 290, 594 N.E.2d at 571. In contrast, New Jersey and many other jurisdictions require a showing of prejudice before a contract of insurance may be avoided. The reason for the New York rule is to protect insurance companies so that they may make prompt investigation of claims. Id., 584 N.Y.S.2d 290, 594 N.E.2d at 573. The reason for the New Jersey rule is to protect the interests of policyholders because insurance contracts are contracts of adhesion and policyholders should not lose the benefits of coverage unless the delay has prejudiced the insurance company. Cooper v. Government Employees Ins. Co., 51 N.J. 86, 94, 237 A.2d 870 (1968). The laws are in conflict. We may safely assume that the laws of the waste sites will follow either of these two rationales. Applying the section 6 analysis, we find that the substantial weight given to the law of the waste site is not overcome. Because the purpose to be served by New Jersey's late-notice rule is the protection of New Jersey policyholders, we do not believe that the fact that Pfizer does business in New Jersey entitles it to the application of New Jersey law at the expense of the laws of the other competing states. To apply New Jersey law would unduly conflict with the interests of commerce among the states. Again, the interests of [207] predictability and fair expectations do not favor the choice of New Jersey law on the late-notice issue. See supra at 198-99, 712 A.2d at 640. Were the waste sites located in New Jersey, our interest in protecting the environment and compensating the victims of environmental pollution would be served and would overcome that concern.

Finally, application of New Jersey's late-notice rule would not materially advance judicial administration. We suspect that the notice issues at the several sites will frequently be different and we cannot see any genuine administrative benefit in the application of New Jersey law. Thus, the law of the waste site should govern if it differs from the law of New York.

C.

To sum up, the governmental interests of a New Jersey forum under the Morton/Spruance analysis are protection of the regulatory process in New Jersey, protection of New Jersey policyholders, protection of the victims of pollution, and protection of the New Jersey environment. Those interests are minimally implicated when the issue concerns indemnity of a New York policyholder for environmental waste liabilities incurred in states other than New Jersey. That Pfizer has had a long-term significant business presence in New Jersey is important, American Home Prods. Corp. v. Adriatic Ins. Co., 286 N.J. Super. 24, 40, 668 A.2d 67 (App.Div. 1995), but must be viewed in perspective. Although Pfizer has had various business operations in New Jersey since 1900 (28% of the remediation costs are here, a large manufacturing facility is in Rutherford, and a product line headquarters is in Parsippany) and it now has approximately 2,200 employees engaged in various activities in New Jersey, those constitute five percent of Pfizer's total of over 40,000 employees. Pfizer has more employees — some 2,500 — at its corporate headquarters in New York. Pfizer's 1993 sales of $375 million from New Jersey are five percent of Pfizer's total sales of $7.5 billion. Pfizer also has fourteen subsidiaries which have their home office in New York [208] and six subsidiaries which were incorporated in New York from at least 1961 to 1985. Pfizer's four principal plants and properties are outside New Jersey.

The interests of the parties and the interests of commerce favor the laws of either New York or the waste sites. As between the two, the law of the waste site would appear to have the more dominant significant relationship to the issues of interpretation of the pollution-exclusion clause and the late-notice defense. New Jersey's interests in judicial administration are important but, with the hindsight of our ruling in Ciba-Geigy, do not outweigh the interests of the other states.

We reverse the order of the Law Division and remand the matter for further proceedings in accordance with this opinion.

For reversal and remandment — Chief Justice PORITZ, and Justices HANDLER, POLLOCK, O'HERN, STEIN and COLEMAN — 6.

Opposed — None.

[1] Among the cases cited by the author were Waste Management, Inc. v. Admiral Insurance Co., 138 N.J. 106, 649 A.2d 379 (1994), cert. denied sub nom. WMX Technologies, Inc. v. Canadian General Insurance Co., 513 U.S. 1183, 115 S.Ct. 1175, 130 L.Ed.2d 1128 (1995), CBS, Inc. v. Crum & Forster, No. AM-712-94T2 (App.Div. Mar. 27, 1995), and Seton Co. v. Birmingham Fire Insurance Co., No. AM-974-94T2 (App.Div. May 18, 1995).

[2] According to Restatement section 188, the general rule in contract actions is that the governing law is that of the state with the most significant relationship to the parties and the transaction under the principles stated in Restatement section 6 governs. State Farm Mut. Auto. Ins. Co. v. Estate of Simmons, 84 N.J. 28, 34, 417 A.2d 488 (1980). Section 188 lists several relevant "contacts," according to their relative importance, to be considered in the section 6 analysis, such as the domicile, residence, nationality, place of incorporation and place of business of the parties, and the places of contracting and performance. Under section 6, the "general considerations germane to a court's conflict-of-law analysis" are:

(a) the needs of the interstate and international system,

(b) the relevant policies of the forum,

(c) the relevant policies of other affected states and the relevant 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 § 6.]

[3] We pause to note our concurrence with the sound observation of Chief Judge Becker in NL Industries, Inc. v. Commercial Union Insurance Co., 65 F.3d 314 (3d Cir.1995), that the Spruance principles may not be readily transferable from environmental-coverage cases to products-liability cases.

[4] In 1982, New York amended its laws to allow coverage of pollution damages.