Fu v. Fu

• Decision Date: 26 July 1999
• Citation: 733 A.2d 1133,160 N.J. 108
• Parties: Li FU and Xiao Kang Su, wife & husband, Plaintiffs-Appellants, and Daniel Su, an Infant, by his parents and natural guardians, Li Fu and Xiao Kang Su, and Li Fu and Xiao Kang Su, Individually and Kuide Chen and Michelle Chen, an Infant, by her father and natural guardian, Kuide Chen and Kuide Chen, Individually, Plaintiffs, v. Hong FU, Defendant, and Freedom River Inc., d/b/a Budget Rent-a-car of Philadelphia, its agents, servants and/or employees, Defendant-Respondent.
• Court: New Jersey Supreme Court

733 A.2d 1133

160 N.J. 108

Li FU and Xiao Kang Su, wife & husband, Plaintiffs-Appellants, and Daniel Su, an Infant, by his parents and natural guardians, Li Fu and Xiao Kang Su, and Li Fu and Xiao Kang Su, Individually and Kuide Chen and Michelle Chen, an Infant, by her father and natural guardian, Kuide Chen and Kuide Chen, Individually, Plaintiffs, v. Hong FU, Defendant, and Freedom River Inc., d/b/a Budget Rent-a-car of Philadelphia, its agents, servants and/or employees, Defendant-Respondent.

Supreme Court of New Jersey.

Argued January 4, 1999.

Decided July 26, 1999.

Benjamin N. Cittadino, Trenton, for plaintiffs-appellants (Devlin, Cittadino & Shaw, attorneys; Mr. Cittadino and John G. Devlin, on the brief).

John M. Palm, Cherry Hill, for defendant-respondent (Garrigle, Palm and Thomasson, attorneys). The opinion of the Court was delivered by STEIN, J.

The world is composed of territorial states having separate and differing systems of law. Events and transactions occur, and issues arise, that may have a significant relationship to more than one state, making necessary a special body of rules and methods for their ordering and resolution.

[Restatement (Second) of Conflict of Laws § 1 (1971).]

The choice-of-law issue before the Court requires us to decide which of the two involved states, New York or New Jersey, has the most significant relationship to the underlying occurrence, an automobile accident in New York involving only New Jersey residents. The narrow question presented is whether to invoke New Jersey's common law rule that shields an automobile owner from vicarious liability in the absence of an agency or employment relationship, or Section 388 New York Vehicle and Traffic Law, which imposes vicarious liability on automobile owners for the negligence of permissive users.

In resolving that question, we must consider whether a foreign state's interest in compensating a New Jersey plaintiff, combined with its interest in deterring irresponsible lending of automobiles, may outweigh New Jersey's interest in shielding a resident defendant from liability for events occurring in the foreign state and for which that state would hold the defendant liable.

I

The facts of this case are virtually undisputed. On July 18, 1993, plaintiffs Xiao Kang Su and Kuide Chen rented a car in Lawrenceville, New Jersey from defendant Freedom River, Inc. of Philadelphia, doing business as Budget Rent-A-Car (Freedom River). Plaintiffs rented the car for a family trip to Cornell University in Ithaca, New York, to attend an academic seminar, after which they intended to go on, perhaps as far as Wisconsin, for further sightseeing. Su and his wife Li Fu, their child Daniel Su, and Chen and his wife defendant Hong Fu, and their child Michelle Chen, wanted to travel in one car. Although Su and Chen each owned a vehicle, neither car was large enough to comfortably accommodate six people on a long drive.

The rental contract identified Su and Chen as the individuals who would be driving the vehicle; however, the Freedom River agent assured the men that their wives were also permitted to drive the car. Chen, in particular, was concerned and sought the agent's assurance that the wives could drive because his friend Su was a poor driver who had been involved in three previous accidents. The rental agent assured Su and Chen that there was "no problem" and that the wives could drive. The agent offered Su and Chen extra property damage insurance, which they declined. The contract called for the car to be returned to Lawrenceville on July 27, 1993.

On July 19, 1993, having concluded an overnight visit to Cornell and while in transit to the Midwest, the group was involved in a one-car accident while passing through Hamburg, New York. Chen's wife, Hong Fu, was driving. According to the accident report, Hong Fu's view became distorted when it began to rain and Hong Fu, due to her unfamiliarity with the vehicle, could not locate the windshield wiper. As Hong Fu felt the vehicle beginning to leave the pavement and veer onto the left shoulder, she over-corrected to the right, crossed both lanes of traffic, rolled over once and struck an earthen embankment. All five passengers were severely injured and all were conveyed to area hospitals in the Hamburg vicinity. Chen and his daughter Michelle were released after receiving emergency room treatment. The other passengers were admitted for varying lengths of time in New York hospitals: Su remained hospitalized for eight days; Su's son Daniel for three days; and Su's wife Li Fu, who suffered the most serious injuries, remained in a New York hospital for thirty days.

The plaintiffs received personal injury protection through their personal insurance policies, but the amount available was insufficient to provide for all the injured claimants, particularly for Li Fu, the most seriously injured of the passengers. As a result of the accident, Li Fu suffered a severe traumatic brain injury. Li Fu was comatose upon her hospital admission and remained in a coma until August 1993. She continued to receive inpatient medical care through April 1994. She was unable to walk and suffered from impaired memory and cognitive functioning. For instance, despite having worked for ten years as a cardiologist in China, Li Fu could not recall the college she had gone to or the details of her medical training.

Following her discharge from the hospital in April 1994, Li Fu continued a course of outpatient treatment including occupational therapy three to five times a week, treatment with Ritalin to arouse cognitive function, and multiple nerve blocks to correct "a severely spastic gait." A progress report dated June 12, 1995, indicated that Li Fu continued to make slow progress but that "it is unlikely that the patient will ever become independent." Li Fu continues to require constant assistance with daily living and, although she is now able to ambulate with the aid of a cane, for the most part, she remains wheelchair bound.

Due to the severity of her injuries, Li Fu's $250,000 personal injury protection cap has long since been exhausted. She incurred medical expenses in excess of $150,000 in connection with her initial hospitalization alone and her total medical expenses to date are nearly $400,000, and continuing.

Freedom River, a Delaware corporation with its principal place of business in Philadelphia, is a sub-franchisee of Freedom River, Inc., a Delaware corporation with its principal place of business in Lisle, Illinois. Freedom River maintains offices in both Philadelphia, Pennsylvania, and Lawrenceville, New Jersey. The rental vehicle was registered in Pennsylvania. The driver, defendant Hong Fu, and all five passenger-plaintiffs are residents of New Jersey.

In July 1994, all the injured passengers filed a complaint for damages against the driver, Hong Fu, and the owner, Freedom River. In May 1997, all five plaintiffs' claims were arbitrated pursuant to Rule 4:21A-1, at which time Chen was awarded $15,000, Chen's daughter Michelle was awarded $7500, Su was awarded $100,000, Su's son Daniel was awarded $25,000 and Su's wife Li Fu was awarded $3,750,000. The arbitrators, as part of their award, found that Section 388 of the New York Vehicle and Traffic Law (Section 388) was the appropriate choice of law, and held Freedom River vicariously liable for the negligence of the driver, Hong Fu.

Because the award to Li Fu exceeded the individual $100,000 limit of the $100, 000/$300,000 split limit coverage afforded Hong Fu through her personal policy with the Market Transition Facility (MTF), defendant Hong Fu moved for a trial de novo pursuant to Rule 4:21A-6(b)(1). Eventually, all plaintiffs except Li Fu agreed to settle with Hong Fu and their agreements were reduced to judgment. Thus, only Li Fu's claim and Su's derivative claim for loss of consortium remain outstanding. MTF, on behalf of its insured, Hong Fu, has offered its individual policy limit of $100,000 in settlement of Li Fu's claim. That offer has not been accepted. In August 1997, the trial court entered an order allowing MTF to deposit its policy with the court pursuant to Rule 4:57-1.

In April 1997, Freedom River moved for summary judgment on the basis of New Jersey common law, which holds that the owner of a motor vehicle is not liable for the negligence of the vehicle's operator unless the operator is acting as the owner's agent or employee. Plaintiffs opposed the motion, contending that the matter was controlled by Section 388 of the New York Vehicle and Traffic Law. Section 388 imposes vicarious liability on a vehicle's owner for the negligence of the vehicle's operator:

Every owner of a vehicle used or operated in this state shall be liable and responsible for death or injuries to person or property resulting from negligence in the use or operation of such vehicle, in the business of such owner or otherwise, by any person using or operating the same with the permission, expressed or implied, of such owner.

[N.Y.Vehicle and Traffic Law § 388(1) (McKinney 1996).]

The trial court initially granted Freedom River's motion, concluding that all of the significant relationships in this case were with New Jersey and that it was a "happenstance" that the accident occurred in New York. After hearing additional oral arguments on plaintiffs' motion for reconsideration, the trial court reversed its initial ruling, vacated the summary judgment granted in favor of Freedom River, and ordered that the matter proceed in accordance with New York law. The trial court then certified its judgment as final pursuant to Rule 4:42-2, allowing Freedom River to appeal as of right.

The Appellate Division reversed and held that New Jersey law applied. 309 N.J.Super. 435, 442-43, 707 A.2d 473 (App. Div.1998). We granted plaintiffs' motion for leave to appeal.

II

The issue before the Court is whether to apply New Jersey's common-law vicarious liability rule...