Hairu Chen v. L.A. Truck Ctrs., LLC

• Citation: 7 Cal.App.5th 757,213 Cal.Rptr.3d 142
• Decision Date: 18 January 2017
• Docket Number: B265304
• Court: California Court of Appeals
• Parties: Hairu CHEN et al., Plaintiffs and Appellants, v. L.A. TRUCK CENTERS, LLC, Defendant and Respondent.

7 Cal.App.5th 757

213 Cal.Rptr.3d 142

Hairu CHEN et al., Plaintiffs and Appellants,

v.L.A. TRUCK CENTERS, LLC, Defendant and Respondent.

B265304

Court of Appeal, Second District, Division 8, California.

Filed January 18, 2017

Law Offices of Martin N. Buchanan; Girardi & Keese and David R. Lira, Los Angeles, for Plaintiffs and Appellants.

Shook, Hardy & Bacon, Frank C. Rothrock and Douglas W. Robinson, Irvine, for Defendant and Respondent.

RUBIN, ACTING P.J.

Plaintiffs, Chinese nationals, brought suit against a California tour bus distributor, seeking to recover in strict products liability for injuries and deaths suffered in a bus rollover accident occurring in Arizona. The trial court applied Indiana law, which is substantially less favorable to plaintiffs than is California law, because the tour bus had been manufactured in Indiana, by an Indiana manufacturer who had previously settled out of the case. We conclude the trial court erred in its application of Indiana law, and therefore reverse.

FACTUAL AND PROCEDURAL BACKGROUND

1. The Accident

Plaintiffs are the passengers who were injured, and the survivors of the passengers who were killed, in a tour bus rollover accident which occurred in Arizona as they were travelling from their hotel in Las Vegas to the Grand Canyon for a day trip. There were 10 passengers, all Chinese nationals on holiday in the United States. The tour was provided by TBE International, Inc., a California tour company. The bus was driven by Zhi Lu, a California resident, who had driven the bus from Los Angeles to Las Vegas, in order to pick up the passengers for their Grand Canyon tour.

That driver Lu was responsible for the accident is not disputed. Lu drove the bus around a curve with an advisory speed limit of 35 miles per hour. He instead took the curve at around 55 miles per hour, and lost control of the bus. The bus left the roadway and rolled over twice. The two front seats of the bus, for the driver and tour guide, had three-point seatbelts (lap and shoulder restraints). The driver and tour guide had been wearing their seatbelts and were virtually uninjured in the accident. The passengers, who had no seat belts at all, fared much worse. One passenger was killed when she was impaled on the door mechanism. A second passenger was ejected from the bus and fatally fractured his skull

. Six other passengers were totally ejected from the bus during the roll sequence and sustained injuries. The remaining two passengers, who were not ejected, were nonetheless injured in the rollover.

2. The Bus

Plaintiffs' theory of the case, supported by expert testimony, was that passenger seatbelts would have prevented the deaths and greatly lessened the injuries suffered. Indeed, even the defense expert agreed that the primary factor in reducing the risk of ejection in a rollover accident is a seatbelt.

The bus had been manufactured in Indiana by an entity known as Starcraft.¹ Starcraft did not build tour buses from the ground up; instead, it purchased existing chassis from other manufacturers, and built tour buses on top of them. In this case, a Ford chassis was used.

Starcraft sold its buses nationally, through a network of dealers. L.A. Truck Centers, doing business as Buswest, the respondent in this appeal, was Starcraft's dealer in four western states, including California. Buswest has its principal place of business in California, and describes itself as a California resident. It was the exclusive dealer of Starcraft buses in California. Pursuant to its written agreement with Starcraft, Buswest was obligated to sell at least 72 Starcraft buses per year in California. Buswest also agreed to keep an inventory of at least eight Starcraft buses at all times.

While Buswest could order a custom bus for one of its customers from Starcraft, the tour bus in question had been ordered instead for Buswest's general stock. In September 2005, Buswest ordered a 14–passenger Starcraft bus. Buswest paid Ford for the chassis, and separately paid Starcraft $17,540 for the conversion into a tour bus. When Buswest ordered the bus, it could select among various options. Among its options were seat belts. Buswest could have purchased non-retractable passenger lap belts for the bus for $12 each. It also could have ordered retractable passenger lap and shoulder belts for $45 each. Instead, Buswest chose to order the bus without passenger seat belts at all. The Buswest sales manager in charge testified that, except for buses geared toward the health care industry, all buses he ordered for stock were without seat belts.

Starcraft manufactured the bus as ordered, and Buswest picked it up in Indiana and had it driven to California. The bus sat on Buswest's lot unsold for two years. Ultimately, Buswest sold the bus to TBE International, Inc., the tour company involved in this litigation. TBE had purchased several buses from Buswest over the years. Although both Buswest and TBE were located in California, they arranged for delivery of the bus in Las Vegas, so that TBE could obtain apportioned license plates, which enabled the bus to be used interstate.² When the bus was first registered, TBE obtained approval to operate the bus in California, Arizona, and Nevada. At the time of the accident, in 2010, the bus had a California apportioned license plate.

3. The Lawsuit

Plaintiffs filed suit against Starcraft, Buswest, TBE and Lu, seeking damages for wrongful death and personal injuries. The operative pleading is the second amended complaint, which alleged causes of action for wrongful death, negligence, strict products liability, loss of consortium, and negligent infliction of emotional distress.³

In December 2012, TBE and Lu settled with plaintiffs for a payment of $5 million, in exchange for a full release of all claims against them.

4. The First Choice of Law Ruling

One year after TBE and Lu had settled out of the case, Starcraft and Buswest filed a joint motion to apply the substantive law of Indiana to the case. Neither party ultimately argued for Arizona (the site of the accident) law to apply, and on appeal, no party argues for application of Chinese (the residence of the plaintiffs) law. The appeal thus squarely presents the question: Should Indiana or California law govern?⁴

Starcraft and Buswest pointed out seven material ways in which Indiana law differs from California law, including the law of product defects, apportionment of damages among culpable defendants, and limitations on wrongful death damages for the loss of the decedent's love and companionship. Acknowledging that California applies the governmental interest test in choice of law situations, Starcraft and Buswest argued that Indiana had a greater interest in the application of its law to this case than California had in the application of its law. Specifically, Starcraft and Buswest argued that Indiana's products liability laws reflected its "strong interest in regulating manufacturing occurring with[in] its borders and protecting its residents from excessive financial burdens." While this interest clearly applied to Starcraft, Buswest also argued that, because it had conducted business in Indiana, Indiana's interest in protecting businesses should extend to Buswest as well. In contrast to the Indiana interest, Starcraft and Buswest argued that California had no interest in applying its more plaintiff-friendly laws, as the plaintiffs here were not California residents and the accident had not occurred in California.

In opposition, plaintiffs acknowledged that California and Indiana law differed in the ways identified in the motion. But plaintiffs argued that California had an interest in the application of its laws because Buswest—a California dealer—had placed the bus in the stream of commerce in California. They argued that California had interests in discouraging its instate dealerships from selling defective vehicles in California, preventing future harm to California residents, and providing compensation to foreign tourists who are injured in defective vehicles operated by California touring companies. Plaintiffs also argued that Indiana could not possibly have an interest in the application of its law, because, due to Indiana's use of lex loci delicti rules of choice of law, Indiana courts would apply Arizona law to this case.

In reply, Starcraft and Buswest argued that California's "lone interest in this case is its resident defendant, [Buswest], who would be harmed by the application of its laws." As Indiana had a strong interest in protecting its manufacturer (Starcraft), and California had no interest at all, Starcraft and Buswest argued Indiana law must govern.

On January 13, 2014, the trial court granted the motion, largely adopting the argument offered by Starcraft and Buswest. The court began by agreeing that Indiana and California law differ, with Indiana law being more protective of defendants. Turning to governmental interest analysis, the court identified three interests which could potentially be at stake: (1) a state's interest in compensating its injured residents; (2) a state's interest in deterring wrongful conduct within its borders; and (3) a state's interest in protecting its resident defendants from excessive damages. As between Indiana and California, the first interest did not apply, as plaintiffs were Chinese nationals. The second interest did not apply either, as the accident occurred in Arizona. The court concluded the third interest favored only Indiana, in that Indiana has an interest in applying its law to protect its resident defendant (Starcraft) and California's interest is aligned, in that the application of Indiana law would also protect the California defendant (Buswest).

After the trial court's ruling, the case proceeded under Indiana law.⁵ Twice, in passing (in opposition to Buswest's motion for summary judgment and in their trial brief), plaintiffs requested the court to reconsider its choice of law ruling. The court did not do so.

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