Esco Fasteners, Co. v. KOREA HINOMOTO CO, CV-95-4818.

• Citation: 928 F. Supp. 252
• Decision Date: 12 June 1996
• Docket Number: No. CV-95-4818.,CV-95-4818.
• Parties: ESCO FASTENERS, CO., INC. and Calley and Currier Co., Inc., Plaintiffs, v. KOREA HINOMOTO CO., LTD., Defendant.
• Court: U.S. District Court — Eastern District of New York

928 F. Supp. 252

ESCO FASTENERS, CO., INC. and Calley and Currier Co., Inc., Plaintiffs, v. KOREA HINOMOTO CO., LTD., Defendant.

No. CV-95-4818.

United States District Court, E.D. New York.

June 12, 1996.

Steven T. Lane, Ready & Pontisakos, Garden City, New York, for plaintiffs.

Joseph L. Clasen, Robinson & Cole, New York City, for defendant.

MEMORANDUM AND ORDER

GLASSER, District Judge:

BACKGROUND

This case stems from an incident which occurred on June 3, 1992, when a bolt snapped on a crutch being used by Matthew J. Noon, thereby causing his fall and resulting injuries. See Defendant's 3(g) Statement ¶ 4;¹ Defendant's Ex. B (Noon Substitute Complaint). On January 3, 1993, Noon, a Connecticut resident, filed suit in Connecticut Superior Court against Calley & Currier Co., manufacturer of the crutches, and Esco Fasteners Co., Inc., supplier of the allegedly defective bolt. On August 26, 1994, Esco Fasteners moved to implead Korea Hinomoto, a Korean company, alleging that Korea Hinomoto sold the subject bolt to Esco Fasteners. Calley & Currier then filed a third party complaint against Korea Hinomoto.

On November 28, 1994, Korea Hinomoto moved to dismiss the complaints against it on the grounds that it was not subject to personal jurisdiction in Connecticut. Judge Norko of the Connecticut Superior Court granted that motion on March 9, 1995, holding that to subject Korea Hinomoto to personal jurisdiction in Connecticut would violate its due process rights. See Defendant's Ex. C.

Calley & Currier and Esco Fasteners settled the action brought against them by Noon on July 13, 1995. Noon received $80,000 as full and final settlement of all claims arising from his fall. Defendant's 3(g) Statement ¶ 7.

The present action was brought in this Court by Esco Fasteners and Calley & Currier seeking indemnification and contribution from Korea Hinomoto. Plaintiffs sue under Connecticut common law, the Connecticut Product Liability Act, Conn.G.S. § 52-572(m) et seq., and under New York law for breaches of implied and express warranties and the covenant of good faith and fair dealing. Currently before the Court is Korea Hinomoto's motion for summary judgment on the grounds that Connecticut law cannot apply in this action and that plaintiffs' claims are barred under New York law.

DISCUSSION

This Court has jurisdiction over this case under 28 U.S.C. § 1332 based on diversity of citizenship. Plaintiff Esco Fasteners is a New York corporation, plaintiff Calley & Currier is a New Hampshire corporation, and defendant Korea Hinomoto is a Korean corporation. It is not disputed that Korea Hinomoto does business in New York and is subject to jurisdiction here. In cases where federal jurisdiction is based upon diversity of citizenship, the district court must apply the law of the state in which it sits. Erie v. Tompkins, 304 U.S. 64, 58 S.Ct. 817, 82 L.Ed. 1188 (1938). Application of the forum state's law includes application of its choice of law rules. See Klaxon Co. v. Stentor Elec. Mfg. Co., 313 U.S. 487, 61 S.Ct. 1020, 85 L.Ed. 1477 (1941); Banker v. Nighswander, Martin & Mitchell, 37 F.3d 866, 871 (2d Cir.1994). Thus, in determining whether the law of New York or Connecticut applies here, the choice of law rules of New York are controlling.

As a preliminary matter, however, "a court may not apply the local law of another state to determine a particular issue unless application of this law would be reasonable in the light of the relationship of this state and of other states to the person, thing or occurrence involved as to the particular issue." Restatement Conflict of Laws § 9 Comment g. If application of Connecticut law to Korea Hinomoto would violate constitutional principles of due process, Connecticut law could not control this case, regardless of the result mandated by New York choice of law rules. See Allstate Insur. Co. v. Hague, 449 U.S. 302, 312-13, 101 S.Ct. 633, 639-40, 66 L.Ed.2d 521 (1981) ("for a State's substantive law to be selected in a constitutionally permissible manner, that State must have a significant contact or significant aggregation of contacts, creating state interests such that choice of its law is neither arbitrary nor fundamentally unfair.").

The Connecticut Superior Court has ruled that to subject Korea Hinomoto to personal jurisdiction in Connecticut would violate principles of due process (see Defendant's Ex. C), and this Court is bound to give that decision full faith and credit. See 28 U.S.C. § 1738; Allen v. McCurry, 449 U.S. 90, 94, 101 S.Ct. 411, 414, 66 L.Ed.2d 308 (1980); Mitchell v. National Broadcasting Co., 553 F.2d 265, 274 (2d Cir.1977) ("The federal court presented with a state court judgment is required to give that judgment the same force and effect as it has in the state in which it was rendered."); United States v. Private Sanitation Industry Ass'n, 899 F.Supp. 974, 980 (E.D.N.Y.1994), aff'd, 47 F.3d 1158 (2d Cir.), cert. denied, ___ U.S. ___, 116 S.Ct. 50, 133 L.Ed.2d 15 (1995).² Defendant argues that because it is not subject to personal jurisdiction in Connecticut, to subject it to Connecticut law would violate the principles of due process, and that therefore the only possible law that may be applied in this case is New York law.

Defendant's argument is based primarily on a footnote in Justice Stevens' concurring opinion in Allstate Insur. Co. v. Hague, 449 U.S. 302, 320 n. 3, 101 S.Ct. 633, 644 n. 3, 66 L.Ed.2d 521 (1980). In that footnote, Justice Stevens explained that "the two questions presented by the choice-of-law issue arise only after it is assumed or established that the defendant's contacts with the forum State are sufficient to support personal jurisdiction." Id. (emphasis added). However, defendant misconstrues Justice Stevens' statement and its applicability to this case. It is true that the choice of law issue can only arise after the defendant's contact with the forum state are deemed sufficient to support personal jurisdiction. However, the forum state in this action is the state of New York, not the state of Connecticut. Because New York's jurisdiction over the defendant in this case is not disputed, there is nothing in Justice Stevens' concurring opinion to suggest that Connecticut's lack of jurisdiction over Korea Hinomoto bars this Court, sitting in the Eastern District of New York, from applying Connecticut law. Indeed, overlooked by the defendant is the recognition by Justice Stevens in the same footnote that "the Court has made it clear over the years that the personal jurisdiction and choice of law inquiries are not the same." Id.

In Cooney v. Osgood Mach., Inc., 81 N.Y.2d 66, 595 N.Y.S.2d 919, 612 N.E.2d 277 (1993), the New York Court of Appeals applied the law of Missouri against the third party plaintiff, a New York domiciliary over whom jurisdiction would not exist in Missouri. The defendant misreads Cooney when in footnote 3 on page 6 of its Reply Memorandum it writes: "apparently because the argument was not raised, the court did not also decide whether it could constitutionally apply the laws of Missouri to the New York claimant." Quite clearly, the Court of Appeals addressed the issue of jurisdiction over the New York domiciliary (Osgood Machinery) in Missouri by implication if not explicitly. At page 70, the court noted "(Missouri apparently would not have had personal jurisdiction over Osgood)." More pointedly, however, is the court's discussion at page 77, as follows:

In this case, there is some validity to Osgood's argument that it did nothing to affiliate itself with Missouri. Indeed, a decade after Osgood's last contact with the bending roll, the machine wound up in Missouri through no effort, or even knowledge, of Osgood. Moreover, the record establishes that Osgood was not in the business of distributing goods nationwide, but limited its activities to New York and parts of Pennsylvania, and thus Osgood may not have reasonably anticipated becoming embroiled in litigation with a Missouri employer.

The suggestion in defendant's brief that the New York Court of Appeals was unaware of the constitutional implications of applying Missouri law to a New York domiciliary not subject to the jurisdiction of Missouri is belied by its references to Allstate Insur. Co. v. Hague, 449 U.S. 302, 101 S.Ct. 633, 66 L.Ed.2d 521 (1980), and Phillips Petroleum Co. v. Shutts, 472 U.S. 797, 105 S.Ct. 2965, 86 L.Ed.2d 628 (1985).

Because invocation of either the law of New York or the law of Connecticut would be proper, the next question is whether New York's choice of law rules require that its law or the law of Connecticut apply to this case. Cooney provides the answer to that question.

The traditional choice of law principle that the law of the place where the tort occurred governed all substantive issues in the case was significantly modified by Babcock v. Jackson, 12 N.Y.2d 473, 240 N.Y.S.2d 743, 191 N.E.2d 279 (1963), which proclaimed that the better rule would be to determine which jurisdiction had the greatest interest in resolving the issue. That approach, known as the "interest analysis approach," has since been refined to distinguish between the law that regulates the conduct giving rise to the cause of action (e.g., duty and standard of care) and the law that regulates the allocation of loss after liability has been determined (e.g., vicarious liability, contribution and indemnity). With regard to conduct regulating rules, if the laws of competing jurisdictions are in conflict, "the law of the jurisdiction where the tort occurred will generally apply because that jurisdiction has the greatest interest in regulating behavior within its borders. But if competing post-event remedial rules are at stake other factors are taken into consideration, chiefly the parties' domiciles." Cooney at 72, 595 N.Y.S.2d 919, 612 N.E.2d 277 (citations omitted). See also Comer v. Titan Tool, Inc., 888 F.Supp. 605, 608 (S.D.N.Y.1995).

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