Harlan Feeders, Inc. v. Grand Laboratories, Inc.
| Citation | 881 F. Supp. 1400 |
| Decision Date | 31 March 1995 |
| Docket Number | No. C 93-4100.,C 93-4100. |
| Court | U.S. District Court — Northern District of West Virginia |
| Parties | HARLAN FEEDERS, INC., A Nebraska corporation, Plaintiff, v. GRAND LABORATORIES, INC., a corporation, Duane Pankratz, individually, and Duane Pankratz, Trustee of the Duane Pankratz Trust, Defendants. |
E. Dean Hascall of Hascall, Junger, Garvey & Delaney, Bellevue, NE, for plaintiff Harlan Feeders, Inc.
George T. Qualley of Qualley & Associates, Souix City, IA, for defendants.
TABLE OF CONTENTS
I. INTRODUCTION AND FACTUAL BACKGROUND ........................................ 1402
II. LEGAL ANALYSIS ............................................................. 1403
A. Conflict of Laws ......................................................... 1403
1. Characterization Of The Causes Of Action .............................. 1404
2. A True Conflict Of Laws ............................................... 1404
B. Iowa's Conflict-of-laws Rules ............................................ 1405
1. The Iowa Conflict-of-laws Rules For Tort Cases ........................ 1405
a. Iowa's substantive-procedural or right-remedy dichotomy ............ 1405
b. Content of the test in a tort case ................................. 1409
2. The Iowa Conflict-of-laws Rules For Contract Cases .................... 1410
a. Choice or absence of choice of law in the contract ................. 1410
b. Consideration of factors for choice of law as to contract claims ... 1412
III. CONCLUSION ................................................................. 1413
This litigation was brought by a Nebraska livestock producer against the South Dakota maker of a livestock vaccine which is produced in the maker's Iowa plant. The livestock producer alleges that the vaccine caused illnesses and deaths among over two thousand head of cattle treated with it. The matter is presently before the court on defendants' motion to dismiss punitive damages claims on the ground that Nebraska law is applicable and does not allow such claims, whereas Iowa law allows punitive damages. The court must resolve the conflict-of-laws question of what state's substantive law applies to this controversy. The court must also determine whether punitive damages involve substantive law, and are therefore governed by the law of the state selected by application of Iowa's conflict-of-laws rules, or a question of procedural law, which is governed by the law of the forum.
Plaintiff Harlan Feeders, Inc., a Nebraska corporation with its principal place of business in Harlan County, Nebraska, filed its complaint in this matter on November 10, 1993. Harlan Feeders is engaged in the business of feeding calves on its premises to finish weight and condition, and selling them for profit on the cattle slaughter market. Some of the cattle involved in this lawsuit are alleged to have belonged to others and to have been placed with Harlan Feeders for feeding to finish weight and subsequent sale. The owners of these cattle have assigned to Harlan Feeders their rights to pursue on their behalf their claims against defendants in this lawsuit. Defendants are Grand Laboratories, Inc., a South Dakota corporation that does business in Iowa and Nebraska, and has a production facility in Lyons County, Iowa, where it produced the product at the center of this litigation, and Duane Pankratz, sued both individually and as trustee of the Duane Pankratz Trust, which is alleged to be the owner of a majority of the stock in Grand Labs (collectively herein "Grand Labs").
The gravamen of the complaint, which is in six counts, is that Grand Labs manufactured and sold Harlan Feeders a defective cattle vaccine, called "Vira Shield," which caused illnesses and deaths among over two thousand cattle to which Harlan Feeders administered it. The complaint alleges causes of action that sound in tort, including negligence and strict products liability, as well as contract or quasi-contract causes of action including misrepresentation or breach of warranty.1 The complaint seeks actual and punitive damages.
On April 28, 1994, defendants moved to dismiss Harlan Feeders' punitive damages claims on the ground that Nebraska law applies in this diversity action, because Nebraska is the state with the most significant relationship to the causes of action presented, and Nebraska law does not provide for punitive damages. Harlan Feeders resisted the motion on May 2, 1994, contending, first, that Iowa substantive law should apply, because Iowa bears the most significant relationship to the causes of action presented, but also arguing that even if Nebraska substantive law applies, the law of Iowa applies to procedures and remedies, including punitive damages. On June 23, 1994, shortly before a hearing on Grand Labs' motion before the Hon. Donald E. O'Brien, now Senior Judge of this District, Grand Labs filed a reply brief asserting that Harlan Feeders has misread Iowa cases, which do not consider punitive damages to be remedial or procedural, but instead apply the most significant relationship test to determine the law applicable to punitive damages questions. Judge O'Brien reserved ruling on the motion following a hearing on July 1, 1994.
The submissions of the parties indicate that they are in general agreement as to the following facts concerning the contacts of the parties with each other and with the states of Nebraska, Iowa, and South Dakota. The citizenship and places of business of the parties were discussed above. Harlan Feeders' complaint indicates that it purchased and used the "Vira Shield" vaccine in Nebraska, and that its livestock were injured in Nebraska. Grand Labs asserts further that all communications between the parties took place in Nebraska, and no business has been transacted between the parties outside of Nebraska. Grand Labs therefore argues that all of the events leading to the complaint occurred in Nebraska, so Nebraska substantive law should apply. Harlan Feeders disputes only the fact that all communications took place in Nebraska: Harlan Feeders argues that some of the representations underlying its misrepresentation or breach of warranty claims were made by written statements and audiovisual materials prepared, published, assembled, and/or produced by Grand Labs in either South Dakota or Iowa. Harlan Feeders also stresses that the vaccine was manufactured by Grand Labs at its facility in Iowa, a point Grand Labs does not dispute. Harlan Feeders asserts that the place of injury, Nebraska, is only "fortuitous" or "happenstance" and therefore should have little impact upon the court's conflict-of-laws analysis.
At the request of the parties, this matter lay dormant for several months while other litigation involving Grand Labs worked its way through the Eighth Circuit Court of Appeals. The parties hoped that the other litigation might resolve some of the questions concerning discovery of financial information from Grand Labs and concerning punitive damages. That other litigation has now concluded. In the interim, this matter was reassigned to me.2
By order dated December 20, 1994, the court ordered the parties to file reports on the status of the motion to dismiss punitive damages, whether the parties were seeking or had reached a stipulation that would solve the discovery problems as to punitive damages, and whether they wished to supplement their prior filings in support of or resistance to the motion to dismiss punitive damages in light of the resolution of the other litigation. Both parties, rather belatedly, responded to the court's order by filing their reports, Grand Labs on January 23, 1995, and Harlan Feeders on January 25, 1995. Both parties state that the resolution of the other litigation involving Grand Labs has had no effect upon the present litigation, and both parties stated their desire to stand by their previous briefs on the issue of dismissal of the punitive damages claim. With this background, the court turns to disposition of the motion to dismiss punitive damages.
To resolve the issue of which state's law applies to Harlan Feeders' claim for punitive damages, the court looks to the conflict-of-laws or choice-of-law rules of the state of Iowa, because in an action based upon diversity of citizenship jurisdiction, a federal district court must apply the substantive law of the state in which it sits, including its conflict-of-laws or choice-of-law rules. Klaxon Co. v. Stentor Elec. Mfg. Co., 313 U.S. 487, 496, 61 S.Ct. 1020, 1021-22, 85 L.Ed. 1477 (1941); Drinkall v. Used Car Rentals, Inc., 32 F.3d 329, 331 (8th Cir.1994); Dorman v. Emerson Elec. Co., 23 F.3d 1354, 1358 (8th Cir.1994); Smith v. Gould, Inc., 918 F.2d 1361, 1363 n. 3 (8th Cir.1990) (citing Klaxon); Modern Leasing, Inc., of Iowa v. Falcon Mfg. of Cal., Inc., 888 F.2d 59, 62 (8th Cir.1989) (citing Klaxon); Lourdes High School of Rochester, Inc. v. Sheffield Brick & Tile Co., 870 F.2d 443, 445 (8th Cir.1989) (same); Freeze v. American Home Prod. Corp., 839 F.2d 415 (8th Cir.1988); Pritchard-Keang Nam Corp. v. Jaworski, 751 F.2d 277, 281 n. 4 (8th Cir.1984), cert. denied, 472 U.S. 1022, 105 S.Ct. 3491, 87 L.Ed.2d 625 (1985) (same).
The first step in determining any choice-of-law question is to determine the proper characterization of what kind of case is involved, and the law of the forum controls this question as well. Drinkall, 32 F.3d at 331 (citing O'Neal v. Kennamer, 958 F.2d 1044, 1046 (11th Cir.1992)). The court noted above that although most of Harlan Feeders' claims are best characterized as torts, there is at least a possibility that some may be characterized as sounding in...
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