Choice of Law: Hairu Chen v. L.A. Truck Centers, LLC Clears The Air On The Doctrine of Dépeçage


Hairu Chen v. L.A. Truck Centers, LLC (Cal. Ct. App. Jan. 18, 2017) 2017 WL 192724 involved an action by several foreigners for wrongful death, negligence, strict products liability, and loss of consortium. Plaintiffs were 10 Chinese national tourists who rode a tour bus from Los Angeles, California to Las Vegas, Nevada. The plaintiffs were injured when their tour bus became involved in a rollover accident as it was traveling through Arizona on a day trip to the Grand Canyon.

As a result of their injuries, the plaintiffs sued the tour company, the tour bus driver, the tour bus manufacturer, and the tour bus dealer. After the tour company and bus driver settled with the plaintiffs, the manufacturer, Starcraft, and its dealer, L.A. Truck Centers dba Buswest, filed a joint motion to apply the substantive law of Indiana to the case venued in Los Angeles County.

Starcraft argued that Indiana law should apply to the products liability claim because the tour bus was manufactured in Indiana and Indiana’s products liability laws reflect a strong interest in regulating manufacturing occurring within its borders and protecting its residents from excessive financial burdens. Although Buswest had its principal place of business in California, described itself as a California resident, and was the exclusive dealer of Starcraft buses in California, it argued that because it had conducted business in Indiana, its laws should extend to Buswest based on Indiana’s interest in protecting its businesses. Starcraft and Buswest also argued that California had no interest in applying its more favorable products liability laws in this case because the plaintiffs were not California residents and the accident did not occur in California. The trial court agreed with Starcraft and Buswest and granted the motion.

Approximately eight months prior to trial, Starcraft settled with the plaintiffs leaving Buswest as the sole defendant. The plaintiffs subsequently sought reconsideration of the trial court’s prior ruling on the choice of law. At the hearing, the court denied the motion on the grounds that it was an improper motion for reconsideration. It also held that the applicable law should not change at the eleventh hour just because Starcraft settled. In other words, the parties should be able to rely on the trial court’s prior ruling in preparing for trial.

The parties went to trial and based on the products liability law of Indiana, the jury concluded that the bus was not in a “defective condition” at the time of the accident. The plaintiffs appealed.

On appeal, the Appellate court held that California, not Indiana, had an interest in applying its laws to the case. Consequently, the trial court erred in applying Indiana law and the error was prejudicial to plaintiffs. In particular, the Court of Appeal explained that California’s governmental interest test of conflicts of law involves a three-step process. First, a court must determine whether the relevant law of each of the potentially affected jurisdictions with regard to the specific issue in question conflict. Second, if there is a conflict, the court should examine each jurisdiction’s interest in the application of its own laws under the facts of the case to determine whether a true conflict exists. Lastly, if a true conflict exists, the court must evaluate and compare the nature and strength of each state’s interest to determine which would be more impaired. The state with the more impaired interests should have its laws applied to the case.

But even more, California follows the doctrine of dépeçage wherein different states’ laws can be applied to different issues in the case. Thus, each issue must be evaluated separately under the governmental interest test.

In reversing the trial court’s decision, the Court of Appeal first held that reconsideration of the choice of law was required and was not subject to the constraints of California Code of Civil Procedure section 1008. Because a motion to determine choice of law is equivalent to a motion in limine, the trial court’s initial ruling was not binding. Rather, the ruling, like motions in limine, was subject to reconsideration upon full consideration of the facts and evidence available at trial.

In light of Starcraft’s settlement (the only Indiana resident in the case) the status of the relevant state interests had changed, warranting reconsideration of the trial court’s initial ruling on choice of law.

Applying the government interest test to the plaintiffs and Buswest, the Court of Appeal found that California’s interest in imposing its products liability rules was strong where “a California dealership ordered an allegedly defective product, imported it into the state, and sold it to a California tour company, for use on California roads.” Indiana’s interests were inferior to California because Buswest did not sell any products in Indiana, did not provide goods or services there, and did not employ any Indiana residents. Buswest simply bought a product in Indiana and distributed it to its home state of California.

The Court of Appeal further clarified that even though applying Indiana law would protect Buswest, a California resident, California had no interest in such protection: “[A] state does not have an interest in protecting its resident defendants from damages in all circumstances. Instead, in applying the governmental interest test, a court must look at the law at issue and the interests each state has chosen to advance by its substantive law.” The law at issue being that of strict products liability, California had a strong interest in imposing its more plaintiff-friendly laws on a California defendant allegedly importing defective products for sale in California.

Hairu Chen v. L.A. Truck Centers, LLC emphasizes the importance of dépeçage and its application under the ever-changing circumstances of a case. More specifically, while a party’s residence may be fixed at the time of an accident or alleged wrongdoing, the relevant state interests are not so fixed and may be altered as parties are dismissed from an action. Additionally, depending on the specific issues at hand, whether it be liability for a particular wrong or the recoverable damages for a certain claim, the choice of law may differ.

This document is intended to provide you with information about product liability law related developments. The contents of this document are not intended to provide specific legal advice. This communication may be considered advertising in some jurisdictions.

March 3, 2017