Brinkley & West, Inc. v. Foremost Insurance Company

• Decision Date: 26 August 1974
• Docket Number: No. 71-3110.,71-3110.
• Parties: BRINKLEY & WEST, INC., Plaintiff-Appellant, v. FOREMOST INSURANCE COMPANY, Defendant-Appellee.
• Court: U.S. Court of Appeals — Fifth Circuit

499 F.2d 928 (1974)

BRINKLEY & WEST, INC., Plaintiff-Appellant, v. FOREMOST INSURANCE COMPANY, Defendant-Appellee.

No. 71-3110.

United States Court of Appeals, Fifth Circuit.

August 26, 1974.

Clarence F. Favret, Jr., New Orleans, La., for plaintiff-appellant.

Donald R. Mintz, Carl J. Schumacher, Jr., New Orleans, La., for defendant-appellee.

Before BROWN, Chief Judge, and RIVES and CLARK, Circuit Judges.

ON PETITION FOR REHEARING

JOHN R. BROWN, Chief Judge:

The history of this case exemplifies the precarious path that the federal courts must tread when they follow the shifting tracks of the Erie Railroad.¹ In our original opinion² in this case the clearly defined and recently reaffirmed conflicts principles of Louisiana³ led us to conclude that the District Court below had erred in rendering a summary judgment for defendants. Accordingly, we reversed and remanded it for a trial on the merits. However, just prior to the publication of our opinion the Louisiana Supreme Court in Jagers v. Royal Indemnity Co.⁴ abruptly rejected the long-settled doctrine of lex loci delecti, the place of the injury rule, and the rule followed by our opinion. Thus, we must retreat and regroup in an effort to again do our Erie-Klaxon Electric⁵ duty—but this time with less predictable guidance as to how the Louisiana courts would decide a complex multi-state tort case such as ours. However, despite the change in the law, we are convinced that plaintiff's claim would be heard on the merits by Louisiana courts, for under the application of modern principles of conflicts law, the interests of her sister states would be found to predominate over the transaction that gave rise to plaintiff's claim. Therefore we again reverse and remand for decision on the merits.⁶

The Transaction

Brinkley & West (Agent), a Louisiana corporation, claims to have had an exclusive agency agreement with Foremost Insurance Company (Principal), a Michigan Corporation, authorized to do business in Louisiana, whereby the Agent would be responsible for marketing certain kinds of insurance coverage offered by Principal in 18 midwestern, southern, and southwestern states.⁷ Pursuant to the contract, Agent entered into subagency agreements with licensed insurance agents in these states to enlist them to solicit insurance proposals. These subagency contracts were presumably executed by the subagents in their respective states. The subagents lacked the power to bind Principal or Agent and were authorized merely to forward the proposals to Agent for acceptance. Monies due under the contract were similarly sent directly to Agent at its office in New Orleans.

These subagency contracts are the substance of this suit. Specifically, Agent complains that prior to the end of the primary contract, Principal, by directly contacting them, began pirating the subagents to do business directly with Principal. Through its field adjusters Principal induced the subs to breach their contracts with Agent in order to be available to write its insurance coverage directly.

Alleging that these acts constituted tortious interference with its subagency contracts, Agent brought this diversity suit in the United States District Court for the Eastern District of Louisiana where, under the Erie-Klaxon rules,⁸ the District Court is bound to follow the Louisiana principles of conflicts of law.

Responding to Principal's motion for a summary judgment, Agent conceded that the substantive law of Louisiana recognized no cause of action for intentional interference with or procurement of the breach of contractual relations and that the lex loci delicti standard was the Louisiana rule. Concluding that Louisiana was the situs of Agent's damages, the District Judge dismissed the claim.⁹ Because we disagreed with the initial conclusion that Agent had suffered no damages in those states where Principal had allegedly induced breaches of the subcontracts, we held that reversal was in order.

Now post-Jagers v. Royal Indemnity Co.¹⁰ the problems posed for the Court are two-fold and difficult — since Jagers has unquestionably changed the law, i to what has it been changed and ii with what results for the case before us?

As for the first, analysis of the case offers ambiguous guidelines. There the Louisiana Supreme Court found that a suit between two Louisiana domiciliaries, mother and son, arising from a Mississippi accident should not be barred by the Mississippi intrafamily immunity doctrine because the Court viewed the case as presenting a false conflict of laws. Despite the temporary residence of the plaintiff in Mississippi, the Court saw no reasonable interest that Mississippi might have in the application of its laws to the case. In overturning its long established "vested rights" doctrine¹¹ the Court explicitly found that:

No reason advanced for perpetuating the doctrine which would apply the law of the place of the tort, particularly in false conflicts cases like Johnson and the instant case, is either convincing or controlling. Johnson v. St. Paul Mercury Insurance Company, supra, is overruled.^11.1

Citing the lack of any constitutional basis for the vested rights theory, the Court reasoned that any theory of conflicts law inevitably resulted in the extraterritorial application of the laws of some state. In addition, applying the law of the forum resulted in no necessary unfairness to defendants.¹²

This clear rejection of lex loci delecti, particularly in cases of false conflicts such as Jagers, left a vacuum in Louisiana conflicts principles unfilled by the remainder of the opinion. Cryptically, the only reference by the Court to substitute guidelines was to say:

That some modern methods for determining whether to apply the law of the forum are faulty in some respects should not deter a court in the application of the law of the forum to its citizens, when not otherwise prohibited.

This statement — followed by a footnote to the choice of law principles in § 6 of the Restatement (Second) of Conflicts¹³ — has been accepted by both Agent and Principal as establishing the interest analysis method as the law of Louisiana where a real conflict of laws exist between the parties. This is no real concession since for our Erie purposes we agree that the Court's note 3 adopts the analysis of the Second Restatement.¹⁴ Therefore, since Jagers is the only weather vane available, the interest analysis principles embodied in the Second Restatement are the applicable conflicts law of Louisiana and our vehicle for deciding this case.

The Variations On A Theme Of Interest Analysis

We start with the initial determination that the case before us presents more than an issue of spurious conflict of laws. This is to say that Louisiana has some interest in seeing that its laws are applied to the case other than the mere concern of a forum that its rules of trial administration be followed. Since we have concluded — as we will elaborate later — that the Louisiana law barring suits for tortious interference with contractual relations is based on a state policy to protect the job mobility of the labor force, there can be no doubt that Louisiana as domiciliary state of some of the subagents as well as of Agent has more than a mere forum's interest in this suit.

Passing the false conflict hurdle, the Second Restatement (Second) of Conflicts adopts a procedure which is generally consistent with the state-interest theory of conflicts law. Section 6 sets out the general principles for focusing on and selecting domestic rules and policies relevant to the particular issue, to the occurrence, and to the parties. These principles themselves vary in importance according to the type of case at issue, e. g. contracts or torts actions. In the torts area, the Restatement commentators suggest that our case would turn on a consideration of factors: (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, (g) ease in the determination and application of the law to be applied.¹⁵ (See note 13, supra).

Section 145 specifically applies these principles to the torts field by denoting "contacts" by which the courts can ascertain whether the state rule is rationally applicable.¹⁶ A particular contact is important for this purpose only insofar as it is relevant to this specific domestic policy at issue. Thus, instead of tallying each activity within the state — as might be done to determine the adequacy of service of process under a long arm statute — courts are to look first to the purpose behind the state rule and then the aspects of the transaction that further it.¹⁷ Ultimately and ideally, the combined "Section Six" principles and the "145" contacts relevant to these principles will point toward the law of one state as paramount because it has the "most significant relationship" to the issue. Therefore, following this method, our enterprise here is to consider the policy behind the Louisiana rule, the rule in the other potentially interested states, and the situs of the relevant contacts.

Interest Analysis Applied — Louisiana Law

The Louisiana rule barring an action for tortious interference with contractual relations has historical derivations with implications for our choice-of-law quest. Early on the Louisiana courts opted to reject this English action in favor of strictly limiting the non-breaching employer to his suit against the employee on the employment contract.

At first the Louisiana Supreme Court approached the issue from the standpoint of strict statutory construction. In the initial case, Kline v. Eubanks,¹⁸ the Court found that a criminal statute sanctioning as a misdemeanor anyone who induced an employee to break his contract and permitting a special recovery of twice the civil damages would not sustain a suit by an injured employer where there was no prior conviction. Since the statute...