In re San Juan Dupont Plaza Hotel Fire Litigation, MDL-721.

• Decision Date: 06 August 1990
• Docket Number: No. MDL-721.,MDL-721.
• Citation: 745 F. Supp. 79
• Parties: In re SAN JUAN DUPONT PLAZA HOTEL FIRE LITIGATION.
• Court: U.S. District Court — District of Puerto Rico

745 F. Supp. 79

In re SAN JUAN DUPONT PLAZA HOTEL FIRE LITIGATION.

No. MDL-721.

United States District Court, D. Puerto Rico.

August 6, 1990.

Plaintiffs' Steering Committee, Ana Luisa Navarro, Liaison, Hato Rey, Puerto Rico for plaintiffs.

Carlos Padin, Hato Rey, Puerto Rico, Liaison Counsel, for defendants.

ORDER NO. 254

ACOSTA, District Judge.

IN THE MATTER OF PUNITIVE DAMAGES

In the Motions for Directed Verdict submitted pursuant to Rule 50 F.R.C.P.,¹ defendants reasserted their contention that under pertinent choice of law principles punitive damages are not allowable in these proceedings and incorporated by reference motions previously submitted on this issue.² This Order analyses the grounds for disallowing plaintiffs' demands for punitive damages as stated in Amended Order No. 242 filed on May 11, 1990 docket No. 14575.³

I. THE ISSUE

PUNITIVE DAMAGES: YES OR NO

Plaintiffs claim that under choice of law analysis they are entitled to recover punitive damages in the actions consolidated in these complex multidistrict proceedings which were originally instituted in four (4) different fora.

II. APPLICABLE LAW

Jurisdiction was premised on diversity of citizenship between the parties and courts sitting in diversity are bound to apply the substantive law of the forum where the action is filed, Hanna v. Plumer, 380 U.S. 460, 85 S.Ct. 1136, 14 L.Ed.2d 8 (1965); Erie R.R. Co. v. Tompkins, 304 U.S. 64, 58 S.Ct. 817, 82 L.Ed. 1188 (1938) including its conflicts of law principles. Klaxon v. Stentor Electric Mfg. Co., 313 U.S. 487, 61 S.Ct. 1020, 85 L.Ed. 1477 (1941); Fashion House, Inc. v. K Mart Corp., 892 F.2d 1076 (1st Cir.1989); Quaker State Oil Refining Corp. v. Garrity Oil Co., Inc., 884 F.2d 1510 (1st Cir. 1989). In cases transferred from one federal judicial district to another pursuant to 28 U.S.C. § 1404 (federal change of venue statute) the transferee court shall "apply the law of the transferor court, regardless of who initiates the transfer." Ferens v. John Deere Co., ___ U.S. ___, 110 S.Ct. 1274, 108 L.Ed.2d 443 (1990), see also, Van Dusen v. Barrack, 376 U.S. 612, 84 S.Ct. 805, 11 L.Ed.2d 945 (1964). This same principle has been traditionally followed without much explanation in cases consolidated by the Multidistrict Panel pursuant to the provisions of 28 U.S.C. § 1407. See, In re Air Crash Disaster Near Chicago, Ill. on May 25, 1979, 644 F.2d 594 (7th Cir.1981); In re Air Crash Disaster at Washington, D.C. on January 13, 1982, 559 F.Supp. 333 (D.D.C.1983); Atwood, The Choice-of-Law Dilemma in Mass Tort Litigation, Kicking Around Erie, Klaxon and Van Dusen, 19 Conn.L.Rev. 9, 12 (1986); 19 Wright, Miller and Cooper, Federal Practice and Procedure: Jurisdiction § 4506 (1982).

The simplicity of this general principle is deceptive, to say the least, in "mass tort" cases which involve large numbers of victims and defendants from multiple fora as well as a myriad of claims based on conduct which may have touched upon several states. In this type of litigation, the application of choice of law standards turns into a colossal struggle for the transferee court in attempting to ascertain relevant contacts between the parties and the multiple states and in struggling to understand, evaluate and weigh the particular policies behind the different statutes allowing or disallowing claims and/or remedies. In suits arising from product liability claims against manufacturers or distributors, the problem is further compounded by the very nature of corporations which are not "domiciled" in a particular forum but instead have contacts with numerous jurisdictions since they may be "incorporated in one state, headquartered in another, have their principal place of business in a third, manufacture products in several others, and do business in many more states." Note, Interest Analysis Applied to Corporations: The Unprincipled Use of A Choice of Law Method, 98 Yale L.J. 597, 603 (1989).

Choice of law rules have been designed and developed with the two-party case in mind, where the relevant contacts or interest at stake between the parties and the statutes in conflict are more easily ascertainable and not so difficult in application.

Cases arising from the San Juan Dupont Plaza Hotel fire were instituted in district courts located in Puerto Rico, California, Connecticut and New York. Pursuant to the aforementioned rules, we must look at the choice of law principles from each one of those jurisdictions to determine whether or not provisions pertaining to punitive damages exist there which are in conflict with each other. Should we find at the conclusion of our inquiry that, indeed, a statute allowing punitive damages is the applicable one, we must then take our analysis one step further and determine whether or not all plaintiffs will benefit from this provision and which defendants will be liable for them.⁴

A. CHOICE OF LAW TESTS (1) Puerto Rico

The Supreme Court of Puerto Rico has adopted the "dominant or significant contacts" test for both actions sounding in tort or contract. In Widow of Fornaris v. American Surety Co. of N.Y., 98 P.R.R. 28 (1966) the Supreme Court, after extensively criticizing the lex loci delicti, explicitly rejected its application in this forum and ruled that instead the laws of the jurisdiction with the most significant contacts with respect to the disputed issue should apply.

Fornaris involved a private airplane that disappeared on its way back to Puerto Rico from the nearby island of St. Thomas. In deciding that Puerto Rico's unlimited compensation would apply rather than the cap provided by the Virgin Islands law, the court found that Puerto Rico had the most dominant contacts since the corporation which owned the plane as well as the passengers were from Puerto Rico. It further reasoned that since the place of the accident had been "fortuitous", application of Puerto Rico's law would be more realistic and fair. The court also took into account policy considerations in its decision. It found that the passengers were entitled to the protection of Puerto Rico's laws and to benefit from its public policy. Lastly, it reasoned that even though considerations of foreseeability and fairness were paramount, these had to allow sufficient flexibility to respond to changing times and circumstances.

Green Giant Co. v. Superior Court, 104 D.P.R. 489 (1975) applied this same standard in a contract suit and added that it was not the number of the contacts but their quality with respect to the issue in controversy that was relevant. It mentioned that the principles stated in the Restatement (Second) Conflict of Laws, §§ 6 and 188 (1971) could be used "in the absence of appropriate legislative rules ... to guide the exercise of judicial discretion in each case." 4 Official Translations of the Opinions of the Supreme Court of Puerto Rico, 682, 696; see also, Federal Insurance Company v. Dresser Industries, Inc., 111 D.P.R. 96 (1981) (application of dominant contacts rule to contract litigation).

The federal judicial system in Puerto Rico has also used these standards in actions filed under diversity provisions. In Bonn v. Puerto Rico International Airlines, Inc., 518 F.2d 89 (1st. Cir.1975), a case arising from an airline crash in Puerto Rico where the plaintiffs and decedents were domiciled in the Virgin Islands and the defendant airline was engaged in business in both jurisdictions, the court opted to apply the Puerto Rico law of unlimited recovery. The court noted that both fora had contacts with the parties; the tickets were bought in St. Thomas but the accident and the conduct giving rise to the litigation took place in Puerto Rico "which would seem determinative" Id. at 92. However, it was a balancing of the policy considerations in applying the laws in conflict and the interest at stake for each jurisdiction that finally lead the court to conclude Puerto Rico's laws should apply. The court analyzed the interest in the Virgin Islands in limiting recovery as protecting defendant, i.e., the airline, which was also doing business in Puerto Rico with the deterrent policy embodied in Puerto Rico's statute.

In Jimenez v. American Airlines, Inc., 579 F.Supp. 631 (D.P.R.1983) (airline crash near Chicago, Illinois on May 25, 1979) the court analyzed the dominant contacts involved and then weighed the policies at stake by the statutes in conflict. It concluded that Puerto Rico law should apply since that is where plaintiffs were domiciled and the forum had a greater interest in deterring wrongful conduct as well as ensuring plaintiffs due redress. The court held that the place of the accident had been "fortuitous" and hence, not conclusive. In Fojo v. American Express Co., 554 F.Supp. 1199 (D.P.R.1983), after applying the dominant contacts principles to a breach of contract claim arising from an incident which took place in Hong Kong, the court found Puerto Rico's law applicable. Plaintiffs were all residents of Puerto Rico, the contract was executed there and the defendant was a Delaware and Mexico corporation doing business in Puerto Rico. The court took into account the need for "certainty, predictability, uniformity and ease in the determination of what law is to be applied and of its application." Id. at 1202. In the end, a balancing of policies between the fora involved bolstered protection under Puerto Rico statutes since safeguarding the interests of residents is a paramount concern of this jurisdiction. The opinion, citing Fornaris, stated that courts have a "clear mandate ... in giving, whenever possible, the full protection of Puerto Rican law to its citizens". Id. at 1203.

(2) California

California has adopted a "governmental interest" analysis that is commonly referred to as the "comparative impairment" approach for choice of law rules. Offshore Rental Co. v. Continental Oil Co., 22 Cal.3d 157, 148 Cal.Rptr. 867, 583 P.2d 721 (1978); Bernhard v. Harrah's Club, 16 Cal.3d 313,...