OFFSHORE RENTAL COMPANY INC v. CONTINENTAL OIL COMPANY (1977)

This is an appeal by plaintiffs, Offshore Rental Company, Inc., and assignees, James Murray, David Thompson and Howard C. Kaylor (hereinafter Offshore) from a judgment in favor of defendant, Continental Oil Company, Inc., (hereinafter Continental). The trial court held that Louisiana law should be applied, and that Louisiana law precluded recovery by plaintiffs, Offshore, for injuries sustained by Mr. Kaylor, Offshore's employee. The trial court gave judgment to Continental, and Offshore filed a timely appeal.

Mr. Kaylor, a vice-president of Offshore, was injured in an accident in Venice, Louisiana. Offshore was a California corporation with its principal palace of business in California. Offshore was in the business of leasing sub-sea drilling equipment to oil companies.

Prior to the time of the accident, Offshore was composed of three shareholders, Mr. Murray, Mr. Thompson, and Mr. Kaylor. Offshore began renting equipment in the Gulf Coast area and Offshore opened an office in Houston, texas.

Mr. Kaylor moved with his family to Houston, Texas, and, at the time of the accident, he resided in Texas, and had no plans to live elsewhere. He did not intend to become a permanent resident of Texas, and he planned to move wherever the drilling was.

In June of 1968, 75% of Offshore's revenues were generated out of Louisiana, and 60 or 65% of Offshore's equipment was in Louisiana. Offshore owned most of the equipment it leased to Continental and other customers. The equipment was manufactured by Cameron Iron and then kept in a yard in Louisiana. The equipment was selected in Louisiana or Texas. When Offshore's lessees returned their equipment, it was taken to Cameron's yard in Louisiana to be cleaned and serviced.

Prior to the time of the accident, Continental was a Delaware corporation, headquartered in New York, and doing business in Louisiana and California and other places.

Mr. Kaylor, while living in Houston, Texas, contacted Continental and a lease was arranged to deliver Offshore's equipment to Continental in Louisiana.

The lease proposal was worked out in Texas, the proposal was sent to Offshore in California, and Mr. Kaylor then consummated the deal with Continental in Louisiana. The lease proposal was signed by Continental in the Gulf area and sent back to Offshore's California office.

On the day of the accident, Mr. Kaylor flew from Houston to Louisiana to meet with Continental representatives on the offshore drilling site. While waiting to go to the drilling site, Mr. Kaylor was injured on Continental's premises in Louisiana. Mr. Kaylor has already been compensated for his injuries to himself.

I

Louisiana law precludes a corporation from maintaining a cause of action for damages caused by loss of an employee. California law permits a corporation to recover for damages to the corporation occasioned by loss of an employee.

The issue before the court is whether the trial court erred in applying Louisiana law thereby precluding Offshore from receiving damages caused by the loss of its employee.

California has determined that, in a tort case before a California forum involving multi-state contacts, the law of the place of the wrong is not necessarily applied, and the forum will instead analyze the governmental interests of each state to determine choice-of-law questions. (Reich v. Purcell (1967) 67 Cal.2d 551, 63 Cal.Rptr. 31, 432 P.2d 727; Hurtado v. Superior Court (1974) 11 Cal.3d 574, 114 Cal.Rptr. 106, 522 P.2d 666.) The forum will consider all the foreign and domestic elements and interests in determining the applicable rule. (Reich v. Purcell, supra.) If the Law of one state can be applied without violating the policy of the other state, there, is a false conflict (Hurtado v. Superior Court, supra), and the false conflict will be resolved by applying the rule of the only state with an interest. If both states have an interest in having their respective laws applied, there is a true conflict, and the law to be applied is the law of the state whose interest would be more impaired if its laws were not applied. (Bernhard v. Harrah's Club (1976) 16 Cal.3d 313, 128 Cal.Rptr. 215, 546 P.2d 719.)

A state interest is present where application of the state rule to a dispute implements the underlying policy the state has adopted to promote the welfare of its residents. A state interest is lacking and therefore a state's rule should not be applied by the forum where the purpose of the rule would not be implemented by its application. Viewed another way, it can be said that a state rule should not be applied if its application protects a person not in the class of persons the rule was designed to protect. (Ratner, Choice of Law: Interest Analysis and Cost Contribution (1974) 47 SCLAR 819, 820, 824.) (See Hurtado v. Superior Court, supra, 11 Cal.3d 574, 580, 581, 114 Cal.Rptr. 106, 522 P.2d 666.)

We therefore examine the rule of both Louisiana and California to determine whether each state's rule, if it were to be applied by the forum, would implement that state's underlying policy to promote the welfare of its citizens, or whether the rule was designed to protect a different class of persons than the respective litigants who would be protected by its implementation. If each state's rule implements the underlying policy of that state, that state has a governmental interest in having its law applied.

It is clear that the Louisiana rule herein was designed to protect Louisiana defendants from excessive financial burdens by limiting the parameters of a Louisiana defendant's potential liability. Louisiana's rule prohibiting a cause of action by a business for injury to its employees can be viewed as analogous in purpose to one of the rules discussed in the Hurtado case. In Hurtado, one state limited damages for wrongful death in order to protect defendants from excessive financial burdens. The Louisiana rule in the case at bar protecting the resident defendant from liability to a business which has been damaged by injury to an employee, implements Louisiana's policy that its resident defendant's financial security not be too greatly impaired. The benefits to the State of Louisiana from such a protective rule as the one herein are apparent. The rule reflects more than a patriarchal concern for resident defendant tortfeasors. The financial well-being and solvency of resident defendants ultimately affects the economic well-being of Louisiana, more than peripherally. Therefore, in the case at bar, Louisiana has a true interest in seeing its policies implemented by the forum, and the Louisiana rule is designed to protect the class of persons of which defendant corporation herein is a member.

California, on the other hand, also has a true interest in having its rule in the case at bar implemented by its courts. The California rule permitting recovery for injury to employees was designed to protect California businesses from the detrimental effects of losing the services of its employees. This policy is no less important to California, whether the California business is doing business in state or out-of-state at the time of the injury. The money earned by California businesses permeates the economy of the state and eventually affects California in more than tangential ways. And, clearly, plaintiff Offshore is among the class of persons that this California rule was designed to protect. This case is not a case like Reich v. Purcell, supra (1967) 67 Cal.2d 551, 63 Cal.Rptr. 31, 432 P.2d 727, where the rule of one of the states, even if enforced, would not aid the class of persons designed to be benefited by the state rule.

Our analysis of the respective states' interests reveals that we have before this court a case where there is a true conflict of policies and social purposes of the respective states. In such a case the law properly to be applied is the law of the state whose interest would be more impaired if its laws were not applied. (Bernhard v. Harrah's Clud (1976) 16 Cal.3d 313, 128 Cal.Rptr. 215, 546 P.2d 719.)

In the Harrah's Club case, a case involving a true conflict, the forum decided to apply its own rule based on ‘[its] important and abiding interest in applying its rule,’ and based on the recognition that the policy of California ‘would be more significantly impaired if such rule were not applied . . ..’ In the Harrah case the plaintiff, a California resident, was injured in California by intoxicated drivers, who had been served the intoxicating beverages in Nevada by the defendant after they were already intoxicated. Defendant was a Nevada resident tavern keeper. In making its decision to apply California law, and impose civil liability on defendant, the California court noted that, although Nevada does not impose civil liability for injuries caused by drunk drivers on its tavern keepers for serving intoxicated persons, as does California, Nevada does subject tavern keepers to criminal liability for giving liquor to a drunk person.

The California court also noted that the Nevada establishment advertises in California and solicits California business, and by its chosen commercial practice, the Nevada business puts itself in the heart of California's regulatory interest. Thus, the California court held the Nevada tavern keeper civilly liable for damages caused by the drunk driver who had been served intoxicating beverages by the Nevada tavern keeper.

When we examine the facts of the case at bar to see which state's policy would be more impaired if its laws were not applied, we find no similarity to the Harrah's Club case. There is no showing that the Louisiana business induced plaintiff Offshore to enter Louisiana by advertising. On the other hand, there is also no showing that plaintiff Offshore knew of the Louisiana policy not to compensate businesses for injuries to these employees. However, the plaintiff Offshore, as a voluntary visitor to Louisiana, has ‘superior ability to anticipate and adjust for the application of adverse foreign rules.’ Offshore, not the stay-at-home Continental, ‘expects foreign contact, prepares for the trip and plans for the attended activities. He is therefore the better risk avoider.’ (Ratner, supra, 47 SCLR at 817, 827.) Thus, as between the plaintiff visitor Offshore and stay-at-home Continental, plaintiff is in the best position to expect the risks and in the better position to avoid the risks.

If we are to examine further the social consequences of applying Louisiana's rule as opposed to California rule, we find that a state's interest in having its own rule implemented does not overtly appear to outweigh the interest of the other states. Similar values and goals are at stake here for each state. California and Louisiana both want to grant economic protection to their residents. California wants to protect its business from financial vicissitudes caused by injury to its employees. Louisiana wants to protect its residents, whether individuals or businesses, from financial vicissitudes caused by excessive legal liability. We find the residents of one state no less worthy of protection than the other state. However, since stay-at-home Louisiana businesses can protect themselves less efficiently against the uncertainties of the laws of possible visitors from 49 other states and since the traveling business, Offshore, entering into Louisiana, is better able to protect itself from possible financial detriment due to the laws of Louisiana, it is less of a burden to apply Louisiana's rules. Further, the California business entered Louisiana volitionally with the hope of making business profits. Although, of course, the Louisiana business, Continental, also sought profit, Continental was the less active in pursuit of their financial goals. In a case where the economic and social consequences to each of the involved states are so balanced and similar it seems reasonable and equitable that the California business that actively and voluntarily entered Louisiana should accept the risks of dealing with the damage limitations of Louisiana law, rather than have Louisiana residents subject themselves to the more extensive liability appropriate under California law. Of course, our holding that the entering business accepts the risks of the law of the visited states is limited only to those cases where there are no facts indicating that the law of the state of the traveling litigant would be the more impaired if it were not applied. In the particular case before this court, the law of the state of the defendant business would be the more impaired if it were not applied. It is, however, entirely possible that, under other facts, the law of the state of the traveling plaintiff would be applied by the forum, where circumstances showed that it was the plaintiff's state policies that would be the more impaired.

II

Appellant argues that the court erred in using the ‘contacts approach’ rather than the governmental analysis approach. It appears that the court did use the Restatement ‘contacts approach.'¹ The governmental interest analysis, which is now the rule, does not rely on a mechanical balancing of contacts (Kasel v. Remington Arms Co. (1972) 24 Cal.App.3d 711, 101 Cal.Rptr. 314) but under the California ‘governmental interest’ approach, relevant contacts are not disregarded but are examined in the context of the involved state's interest in the issue. (Kasel v. Remington, supra.) In the case at bar our analysis of governmental interests leads us to reach the same conclusion as that of the trial court, even though it does appear that the trial court's findings and conclusions did relate to governmental contacts and not governmental interests.

III

Appellant argues that the policy behind the Louisiana rule is non-recognition of a property right existing between a Louisiana employer and employee and is not designed to protect a Louisiana defendant. We do not agree. Appellants' argument that there is no true conflict because the early policy of Louisiana was not to protect a defendant, but was related to a master and indentured servant (Bonfanti Industries, Inc. v. Teke, Inc. (1969) La.App., 224 So.2d 15) is not well taken. Identification of underlying policies focuses not on intentions of legislators who enacted the statute or judges who developed the common law rule, but on community purposes or goals as disclosed by the problems that evoked the rule, its function in a network of existing community arrangements, and beneficial consequences to the community in its implementation. (Ratner, supra, 47 SCLR 819.) Thus, we are here concerned with existing community arrangements and present beneficial consequences, not with archaic policies no longer valid. The present purpose of the Louisiana rule is to protect a Louisiana² defendant from excessive liability.

IV

Respondent argues renvoi is no longer the law. Although in light of the cases above cited, that is a correct statement, appellant does not appear to rely on renvoi as a theory.

The judgment is affirmed.

FOOTNOTES

1.  The court made the following findings:‘All significant contacts operative in this case are in the State of Louisiana with the exception of the fact that plaintiff corporation was a resident of California.’‘The question of whether or not a corporation may maintain an action for damages arising out of personal injuries to it's [sic] employee must be determined by application of the laws of the state of Louisiana which is the state in which all significant operative contacts existed.’

2.  Appellant argues that respondent has not cited as evidence that the policy behind Louisiana law is to protect defendant from excessive financial burden. In most conflict cases dealing with an examination of the policies behind each state's rules, the reviewing court appears to have made its own determination as to those policies, without evidence on the matter.

KINGSLEY, Acting Presiding Justice.

DUNN and JEFFERSON, JJ., concur.