offshore Rental Co. v. Continental Oil Co.

• Decision Date: 18 September 1978
• Citation: 148 Cal.Rptr. 867,22 Cal.3d 157,583 P.2d 721
• Parties: , 583 P.2d 721 OFFSHORE RENTAL COMPANY, INC., et al., Plaintiffs and Appellants, v. CONTINENTAL OIL COMPANY, Defendant and Respondent. L.A. 30820.
• Court: California Supreme Court

Page 867

148 Cal.Rptr. 867

22 Cal.3d 157, 583 P.2d 721

OFFSHORE RENTAL COMPANY, INC., et al., Plaintiffs and Appellants, v. CONTINENTAL OIL COMPANY, Defendant and Respondent.

L.A. 30820.

Supreme Court of California, In Bank.

Sept. 18, 1978.

Ruston, Nance & DiCaro, Donald A. Ruston and Stephen I. Cohen, Tustin, for plaintiffs and appellants.

Shield & Smith, Theodore P. Shield and Gary Robert Gibeaut, Los Angeles, for defendant and respondent.

TOBRINER, Justice.

This case presents a problem of conflict of laws. Plaintiff, a California corporation, sues for the loss of services of a "key" employee, whom defendant negligently injured on defendant's premises in Louisiana. The trial court, applying Louisiana law, concluded that plaintiff could not maintain a cause of action against defendant, and accordingly dismissed the complaint. Plaintiff appeals from the judgment, contending that under California law an employer has a cause of action for negligent injury to a key employee and that the trial court should therefore have applied California law. As we explain, we have concluded that the trial court correctly applied Louisiana law in this case, and thus we affirm the judgment.

Plaintiff Offshore Rental Company, a California corporation, maintains its principal place of business in California, but derives its revenues in large part from leasing oil drilling equipment in Louisiana's Gulf Coast area. Headquartered in New York, defendant Continental Oil Company, a Delaware corporation, does business in California, Louisiana, and other states.

In November 1967, plaintiff opened an office in Houston, Texas, for the purpose of establishing a base closer to the Gulf Coast. In June 1968 plaintiff's vice-president, Howard C. Kaylor, went from that office to Louisiana to confer with defendant's representatives. During the course of that trip defendant negligently caused injury to Kaylor on defendant's premises in Louisiana.

At the time of his injury, Kaylor was responsible for obtaining contracts for plaintiff's increased business in Louisiana. Although defendant compensated Kaylor for his injuries, plaintiff subsequently filed the underlying action in California to recover $5 million in damages occasioned by the loss of Kaylor's services. ¹

In a bifurcated trial on the issue of choice of law, the trial court found that "(a)ll significant contacts operative in this case (were) in the State of Louisiana with the exception of the fact that plaintiff corporation was a resident of California," and concluded as a matter of law that "(t)he question of whether or not a corporation may maintain an action for damages arising out of personal injuries to (its) employee must be determined by application of the laws of the state of Louisiana which is the state in which all significant operative contacts existed." Because the court found that Louisiana law did not permit the maintenance of such an action, the court granted judgment for defendant.

Questions of choice of law are determined in California, as plaintiff correctly contends, by the "governmental interest analysis" rather than by the trial court's "most significant contacts theory." As we announced in Reich v. Purcell (1967) 67 Cal.2d 551, 553, 63 Cal.Rptr. 31, 33, 432 P.2d 727, 729, under the governmental interest analysis approach, the forum in a conflicts situation "must search to find the proper law to apply based upon the interests of the litigants and the involved states." As we shall explain, however, we have concluded that despite its analytic error, the trial court correctly dismissed plaintiff's cause of action.

The matter presently before us involves two states: California, the forum, a place of business for defendant, as well as plaintiff's state of incorporation and principal place of business; and Louisiana, the locus of the business of both plaintiff and defendant out of which the injury arose, and the place of the injury. ² As we pointed out in our decision in Hurtado v. Superior Court (1974) 11 Cal.3d 574, 114 Cal.Rptr. 106, 522 P.2d 666, however, the fact that two states are involved does not in itself indicate that there is a "conflict of laws" or "choice of laws" problem. As we stated in Hurtado, "(t)here is obviously no problem where the laws of the two states are identical." (11 Cal.3d at p. 580, 114 Cal.Rptr. at p. 109, 522 P.2d at p. 669.)

Here, however, the laws of Louisiana and California are not identical. In the leading case interpreting Louisiana law, Bonfanti Industries, Inc. v. Teke, Inc. (La.Ct.App.1969) 224 So.2d 15 (affd. (La.1969) 226 So.2d 770), a Louisiana corporation, relying on Louisiana Civil Code article 174, brought suit for the loss of services of one of its key officers occasioned by the Louisiana defendant's negligence. Although article 174 provides that "The master may bring an action against any man for beating or maiming his Servant " (emphasis added), the Louisiana court held that the Corporate plaintiff could state no cause of action in modern law for the loss of services of its officer. (See also Baughman Surgical Associates, Ltd. v. Aetna Casualty & Surety Co. (La.Ct.App.1974) 302 So.2d 316; Roberie v. Safeco Ins. Co. (La.Ct.App.1973) 282 So.2d 834.)

On the other hand, expressions in the California cases, although chiefly dicta, support the present plaintiff's assertion that California Civil Code section 49 grants a cause of action against a third party for loss caused by an injury to a key employee due to the negligence of the third party. ³ Section 49 provides that "The rights of personal relations forbid: . . . (P) (c) Any injury to a servant which affects his ability to serve his master . . . ." Plaintiff contends that the master-servant relation protected by section 49 encompasses plaintiff's employment relationship with its injured vice-president, and thus that section 49 grants a cause of action against defendant for damages to plaintiff caused by defendant's negligence. ⁴

If we assume, for purposes of analysis, that section 49 does provide an employer with a cause of action for negligent injury to a key employee, the laws of California and Louisiana are directly in conflict. Nonetheless, "(a) lthough the two potentially concerned states have different laws, there is still no problem in choosing the applicable rule of law where only one of the states has an interest in having its law applied. . . . 'When one of the two states related to a case has a legitimate interest in the application of its law and policy and the other has none, there is no real problem; clearly the law of the interested state should be applied.' (Currie, Selected Essays on The Conflict of Laws (1963) p. 189.) (Fn. omitted.)" (Hurtado v. Superior Court, supra, 11 Cal.3d at p. 580, 114 Cal.Rptr. at p. 110, 522 P.2d at p. 670.)

We must therefore examine the governmental policies underlying the Louisiana and California laws, "preparatory to assessing whether either or both states have an interest in applying their policy to the case." (Kay, Comments on Reich v. Purcell (1968) 15 UCLA L.Rev. 584, 585.) Only if each of the states involved has a "legitimate but conflicting interest in applying its own law" will we be confronted with a "true" conflicts case. (Bernhard v. Harrah's Club (1976) 16 Cal.3d 313, 319, 128 Cal.Rptr. 215, 218, 546 P.2d 719, 722.)

Turning first to Louisiana, ⁵ we note that Louisiana's refusal to permit recovery for loss of a key employee's services is predicated on the view that allowing recovery would lead to "undesirable social and legal consequences." (Bonfanti Industries, Inc. v. Teke, Inc., supra, 224 So.2d at p. 17.) We interpret this conclusion as indicating Louisiana's policy to protect negligent resident tort-feasors acting within Louisiana's borders from the financial hardships caused by the assessment of excessive legal liability or exaggerated claims resulting from the loss of services of a key employee. Clearly the present defendant is a member of the class which Louisiana law seeks to protect, since defendant is a Louisiana "resident" whose negligence on its own premises has caused the injury in question. Thus Louisiana's interest in the application of its law to the present case is evident: negation of plaintiff's cause of action serves Louisiana's policy of avoidance of extended financial hardship to the negligent defendant.

Nevertheless, we recognize as equally clear the fact that application of California law to the present case will further California's interest. California, through section 49, expresses an interest in protecting California employers from economic harm because of negligent injury to a key employee inflicted by a third party. Moreover, California's policy of protection extends beyond such an injury inflicted within California, since California's economy and tax revenues are affected regardless of the situs of physical injury. Thus, California is interested in applying its law in the present case to plaintiff Offshore, a California corporate employer that suffered injury in Louisiana by the loss of the services of its key employee. ⁶

Hence this case involves a true conflict between the law of Louisiana and the law of California. In Bernhard v. Harrah's Club, supra, we described the proper resolution of such a case. We rejected the notion that in a situation of true conflict the law of the forum should always be applied. Instead, as we stated, "Once (a) preliminary analysis has identified a true conflict of the governmental interests involved as applied to the parties under the particular circumstances of the case, the 'comparative impairment' approach to the resolution of such conflict seeks to determine which state's interest would be more impaired if its policy were subordinated to the policy of the other state. This analysis proceeds on the principle that true conflicts should be resolved by applying the law of the state whose interest would be the more impaired...