Challoner v. Day & Zimmermann, Inc.

Decision Date24 April 1975
Docket NumberNo. 74-1555,74-1555
Citation512 F.2d 77
PartiesHawley K. CHALLONER et al., etc., Plaintiffs-Appellees, v. DAY AND ZIMMERMANN, INC., et al., Defendants-Appellants.
CourtU.S. Court of Appeals — Fifth Circuit

Norman C. Russell, Texarkana, Tex., for defendants-appellants.

Cahill Hitt, Texarkana, Tex., for plaintiffs-appellees.

Appeal from the United States District Court for the Eastern District of Texas.

Before BROWN, Chief Judge, and COLEMAN and DYER, Circuit Judges.

COLEMAN, Circuit Judge.

The premature explosion of an 105 mm. howitzer round in Cambodia, May 22, 1970, while the Armed Forces of the United States were engaged in combat with the North Vietnamese, prompted this diversity suit. Hawley K. Challoner, of Wisconsin, was seriously injured by the explosion. Daniel E. Nelms, of Tennessee, was killed. Suit was grounded upon strict liability principles enunciated by Texas law. There was a jury verdict of $200,000 for Challoner, and a $40,000 award for Nelms' administrator against Day and Zimmermann. The defendant had manufactured the artillery round in Texas. The difficulties of the case are quickly recognized, but we affirm the judgment of the District Court.

Day and Zimmermann is incorporated in Maryland and has its principal place of business in Pennsylvania.

Under Texas law the plaintiffs had the burden of establishing by a preponderance of the credible evidence that a defect in the ammunition was the cause of the premature explosion.

Plaintiffs produced a number of witnesses. The direct evidence was supplied by James Schrader, for twenty-eight years an ammunition control specialist for the Army. Schrader testified that the most likely cause of the premature explosion was the existence of cavitation in the explosive material Composition B poured into the artillery round by Day and Zimmermann. This cavitation, said Schrader, resulted in explosion inducing collapse of the Composition B before it had reached the end of the gun tube.

Schrader's testimony was buttressed by the testimony of an Army Major who investigated the accident. The Major's opinion was that the explosion was the result of an ammunition malfunction.

Various gun crew members testified that all safety procedures had been followed, which tended to eliminate causes other than ammunition defects, thus corroborating Schrader.

Finally, plaintiffs introduced United States Government reports of tests of ammunition taken from the same lot as the round which had exploded. These reports showed that some of the tested rounds had cavities in the explosive material.

Defendants countered with expert testimony that the defects turned up by the government tests were insufficient to cause a premature explosion. An agent of Day and Zimmermann testified that defendants made the ammunition precisely in accordance with government design; it had fully followed the government approved inspection system designed to uncover any defects. An agent of the United States testified that government inspectors rigidly monitored Day and Zimmermann to assure that the government approved designs and specifications were followed.

The District Judge held that the strict liability principles of Texas law governed and submitted the case to a jury.

The assigned errors may be topically considered as follows:

I

Was the District Court Correct in Applying Texas Substantive Law?

Defendants argue that the District Court erred in applying the substantive law of Texas. It says that under the decisions in Erie v. Tompkins, 304 U.S. 64, 58 S.Ct. 817, 82 L.Ed. 1188 (1938), and Klaxon v. Stentor Electric Manufacturing Company, Inc., 313 U.S. 487, 61 S.Ct. 1020, 85 L.Ed. 1477 (1941), the conflict of law rules of the Texas forum must be applied, and that under Texas conflict of law rules, the law of Cambodia, the place of the injury, governs.

It is not to be denied that the much discussed decision 1 in Klaxon, supra, held, as a general rule, that the conflict of laws rules of the forum applies in a diversity case. The Klaxon Court was "of opinion that the prohibition declared in Erie R. Co. v. Tompkins, 304 U.S. 64, 58 S.Ct. 817, 82 L.Ed. 1188, against such independent determinations by the federal courts extends to the field of conflict of laws. The conflict of laws rules to be applied by the federal court . . . must conform to those prevailing in . . . state courts. Otherwise the accident of diversity of citizenship would constantly disturb equal administration of justice in coordinate state and federal courts sitting side by side". 313 U.S. at 496, 61 S.Ct. at 1021.

This would mean that, applying Texas choice of law rules, certainly as to the wrongful death, Marmon v. Mustang Aviation,Inc., 430 S.W.2d 182 (Tex., 1968), and Click v. Thuron Industries, Inc., 475 S.W.2d 715 (Tex., 1972), and perhaps as to the personal injury, compare Marmon, supra, and Click, supra with Couch v. Mobile Oil Corporation, D.C., 327 F.Supp. 897 (1971), and Continental Oil Company v. Lane Wood & Company, 443 S.W.2d 698 (Tex., 1969), the substantive law of Cambodia would control.

For a number of reasons, however, we hold to the contrary. First, there is our decision in Lester v. Aetna Life Insurance Company, 5 Cir., 1970, 433 F.2d 884, cert. denied 402 U.S. 909, 91 S.Ct. 1382, 28 L.Ed.2d 650. Lester was a diversity action on a life insurance policy. Plaintiff-beneficiary was a Louisiana citizen; defendant insurer was a Connecticut insurance company which did business in Wisconsin and which had issued the policy in Wisconsin. The action was begun in Louisiana state court and removed to federal court.

The insurer's defense was that the policy had been cancelled. Plaintiff claimed the cancellation was ineffective because it was not preceded, as required by Louisiana law, by written notice that premiums were due. Defendant relied on Wisconsin law which required no notice. The issue was whether Louisiana or Wisconsin law governed.

We refused to look to the Louisiana conflict of law rule, deciding that as a matter of federal choice of law, we could not apply the law of a jurisdiction that had no interest in the case, no policy at stake. The Wisconsin law was designed for the protection of Wisconsin insurers. Defendant was not a Wisconsin insurer; thus, Wisconsin had no interest in the case. On the other hand, since a Louisiana citizen was the insured party, the Louisiana policy of protecting insured parties by requiring notice was at stake. As the arbiter of relations between the states, we deemed it wholly inappropriate to apply any law other than the law of the only jurisdiction that had any real interest in the contest.

The Lester principle controls here. Like Wisconsin in Lester, Cambodia has no interest in this dispute between American litigants. The Cambodian requirement that fault be proved is a policy designed to afford a high degree of protection for Cambodian manufacturers; Cambodia is indifferent to the protection of American manufacturers.

On the other hand, it might be said that Wisconsin, Tennessee, Pennsylvania, and Texas all have a substantial interest in this case. Wisconsin, Challoner's domicile, and Tennessee, Nelms' domicile, are strict liability states, Ford Motor Company v. Lonon, 217 Tenn. 400, 398 S.W.2d 240 (1965; Howes v. Hansen, 56 Wis.2d 247, 201 N.W.2d 825 (1972). The policy of these states is to provide maximum protection for their injured citizens. Wisconsin and Tennessee citizens are the injured parties. The Wisconsin and Tennessee policy of affording maximum protection to their injured citizens will be carried out by Texas law since Texas is also a strict liability state, Darryl v. Ford Motor Company, 440 S.W.2d 630 (Tex., 1969).

Pennsylvania, the state where defendant has its principal place of business, like Texas, is a strict liability state, Hoffman v. A. B. Chance Company, 346 F.Supp. 991 (M.D.Pa., 1972). The strict liability policy of both Pennsylvania and Texas is designed in part to require a high standard of care of their manufacturers a policy which would be frustrated by the application of Cambodian law. Thus, application of Texas law will promote the interests of Wisconsin, Tennessee, Pennsylvania, and Texas, while having no effect on the interests of Cambodia which is concerned only with financial protection for Cambodian manufacturers. 2

In short, these facts fit squarely within the Lester principle. This is a case in which the policies of all jurisdictions having an interest in the dispute will be carried out through application of Texas law. No jurisdiction will have any policy frustrated by application of that law. In such a situation, Lester dictates that as a matter of federal choice of law, we apply the law of the jurisdictions having a legitimate interest in the contest, any state conflict of law rule to the contrary notwithstanding. However controlling state law may be in most diversity cases it does not extend so far as to bind a federal court to the law of a wholly disinterested jurisdiction. 3

In addition to the holding in Lester, we find other compelling reasons for not allowing Texas conflict of law rules to dictate a resort to Cambodian law. One such reason is that the rationale for application of the traditional (place of the injury) conflict rule applied by Texas courts is not operative under the present facts. The traditional conflict rule is grounded upon the premise that sovereign powers have the exclusive authority to determine rights and liabilities arising out of transactions occurring within their borders. As explained by Mr. Justice Story:

I. The first and most general maxim or proposition (of conflict of law) is that . . . every nation possesses an exclusive sovereignty and jurisdiction within its own territory. The direct consequence of this rule is that the laws of every state affect, and bind . . . all persons, who are resident within it, whether natural born subjects, or...

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