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From Products Liability Law Daily, July 25, 2013

Tennessee’s ten-year repose period bars Michigan action against Ford Motor Company

By Pamela C. Maloney, J.D.

Under Michigan’s choice of law rules, a products liability claim filed against a motor vehicle manufacturer in a Michigan federal district court was governed by Tennessee’s ten-year state of repose, and, therefore, the claim was time-barred, the U.S. Court of Appeals for the Sixth Circuit held, upholding the district court’s determination (Standard Fire Insurance Co. v. Ford Motor Co., July 24, 2013, McKeague, D.). According to the appeals court, under the interest-weighing approach applied by Michigan courts to choice of law issues, Tennessee had the more substantial interest in having its law applied in this case.

Background. The cause of action arose out of a fire caused by a defect in the cruise control system of a used Lincoln Town Car manufactured by Ford Motor Company. The fire, which occurred in Tennessee, caused damage to the vehicle and to the vehicle owner’s residence and personal property. The owner’s automobile and homeowner’s insurance companies reimbursed the vehicle owner for his losses and brought an action against the vehicle’s manufacturer in Michigan, where the manufacturer’s principal place of business is located and where the vehicle had been manufactured in part and its final assembly had been completed. The manufacturer filed a summary judgment motion on the ground that Tennessee’s statute of repose applied and that the insurers’ claims, which had been filed more than ten years after the vehicle’s final assembly date, barred the claims. The district court agreed and granted the motion. The insurers appealed, contending that the district court misapplied Michigan choice of law rules and that Michigan’s lex fori presumption would apply. Michigan had no statute of repose, and, therefore, the insurers argued, the action was not time-barred. The Sixth Circuit recognized the appeal as an opportunity to resolve an apparent split of authority between the Sixth Circuit and the Michigan Court of Appeals as to how the Michigan choice of law rules are to be applied.

Conflict of laws analysis. Michigan’s choice of law framework recognizes a presumption in favor of lex fori and applies Michigan law unless a rational reason to do otherwise existed. Michigan courts have applied a two-step test to determine whether a rational reason existed. First, the court must determine if any foreign state has an interest in having its law applied. If no state has such an interest, the presumption that Michigan law will apply could not be overcome. Second, if a foreign state does have an interest in having its law applied, the court must then determine if Michigan’s interests mandate that Michigan law be applied, despite the foreign interests. In examining the Michigan decisions that established the choice of law framework, the Sixth Circuit determined that previous decisions had never reached the second step of the analysis, the interest-weighing step, because in each case the court had found that no foreign state had an interest in having its law applied. Thus, the lex fori presumption was left undisturbed. However, the court noted that the facts presented in this case were materially distinguishable from those presented in the cited cases. In this case, the interest-weighing analysis was required because a foreign state–Tennessee–had an interest in having its law applied to the action.

The insurers argued that a decision by the Sixth Circuit, in which the law of the foreign state was not applied even though the plaintiff had been a resident of that state and the accident occurred there, controlled in this instance to support the lex fori presumption that the law of Michigan applied. However, the Sixth Circuit explained that in its prior determination, it had concluded that the foreign state had no interest in having its law applied and, therefore, the presumption in favor of lex fori remained intact. Thus, the prior decision supported the insurers’ position only if Tennessee had no interest in having its law applied.

However, the facts supported a finding that Tennessee had a substantial interest in having its law applied. The vehicle owner was a Tennessee resident who sustained property damage in Tennessee allegedly caused by a defect in a vehicle registered and insured in Tennessee. In addition, there was undisputed evidence that the motor vehicle manufacturer generated substantial commerce in Tennessee and employed numerous Tennessee residents. Thus, Tennessee had an obvious and substantial interest in applying its statute of repose to shield manufacturers like the auto maker from open-ended liability claims. Because Tennessee had a substantial interest in having its law applied, the court was required to perform an interest-weighing analysis. The Sixth Circuit found that the district court had compared the interests of the two states involved and correctly determined that Tennessee’s substantial interest outweighed Michigan’s minimal interest. Michigan was deemed to have no interest in affording greater rights of recovery to a Tennessee resident than would Tennessee law.

The court also rejected the insurers’ argument that the place of the wrong was not in Tennessee but was in Michigan where the vehicle had been designed and manufactured and where the manufacturer’s failure to warn occurred. However, Michigan recognizes the place where the injury occurred as the place of the wrong and the insurers cited no authority to the contrary. The Sixth Circuit also rejected the insurers’ argument that the district court failed to consider the expectations of the parties and the predictability of the results associated with choice of law determinations and the district court did not adequately consider the substantiality of the auto maker’s connection with Michigan. The Sixth Circuit found that expectations and predictability played little if any role in modern choice of law analysis, and that even though Michigan’s interest may have been understated, the district court’s conclusion was consistent with the law and facts presented and their prior Michigan decisions. Therefore, the district court’s opinion was affirmed

The case number is: 12-1583.

Attorneys: William Ransom Pipes (Hannah, Colvin & Pipes LLP) for Standard Fire Insurance Company and Travelers Personal Security Insurance Company. Clay A. Guise (Dykema Gossett PLLC) for Ford Motor Company.

Companies: Ford Motor Company; The Standard Fire Insurance Company; Travelers Personal Security Insurance Company.

MainStory: TopStory SofLReposeNews MotorVehiclesNews KentuckyNews MichiganNews OhioNews TennesseeNews

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