Shorewood Packaging Corp. v. Commercial Union Ins., Civ. A. No. 1:93-cv-1317-FMH.

• Decision Date: 30 September 1994
• Docket Number: Civ. A. No. 1:93-cv-1317-FMH.
• Citation: 865 F. Supp. 1577
• Parties: SHOREWOOD PACKAGING CORPORATION, Plaintiff, v. COMMERCIAL UNION INSURANCE COMPANY and The Hartford Fire Insurance Company, Defendants.
• Court: U.S. District Court — Northern District of Georgia

865 F. Supp. 1577

SHOREWOOD PACKAGING CORPORATION, Plaintiff, v. COMMERCIAL UNION INSURANCE COMPANY and The Hartford Fire Insurance Company, Defendants.

Civ. A. No. 1:93-cv-1317-FMH.

United States District Court, N.D. Georgia, Atlanta Division.

September 30, 1994.

R. Wayne Thorpe, Jeffrey M. Brown, Atlanta, GA, for plaintiff.

Frank C. Bedinger, III, Wayne David Taylor, Atlanta, GA, Ignatius John Melito, New York City, for defendants.

ORDER

HULL, District Judge.

This action is before the Court on (1) Defendants' Joint Motion for Partial Summary Judgment 26-1 and (2) Plaintiff's Motion for Partial Summary Judgment 30-1.

I. FACTUAL BACKGROUND

This action involves a dispute over insurance coverage. Shorewood operates off-set lithograph gravure printing operations at facilities located in Farmingdale, New York and LaGrange, Georgia. Shorewood installed underground storage tanks ("USTs") to hold spent solvents and other materials at each of the sites. A leak or leaks developed in the USTs at both the Farmingdale, New York and LaGrange, Georgia facilities.

On or about March 1, 1978, and continuing at least through January 25, 1984, Commercial Union Insurance Company ("Commercial Union") issued certain insurance policies to Shorewood specifically covering both the Farmingdale, New York and the LaGrange, Georgia facilities. On or about January 25, 1984, and continuing at least through January 25, 1989, Hartford Accident and Indemnity Company ("Hartford") issued certain policies to Shorewood specifically covering both the Farmingdale, New York and the LaGrange, Georgia facilities.

Shorewood has demanded coverage for the property damage at both sites under the above-referenced policies. Both Commercial Union and Hartford have refused to provide coverage to date.

Commercial Union has been authorized to do business in the state of Georgia since April of 1960. Commercial Union has often availed itself of the courts of this state as a plaintiff in litigation. Hartford has been authorized to do business in the state of Georgia since August of 1913. Hartford has often availed itself of the courts of this state as a plaintiff in litigation.

The parties have stipulated (1) that the insurance policies at issue were delivered to Shorewood in New York, and (2) that no New York statute exists which would govern the interpretation of the insurance policies in issue. See Joint Stipulation of Material Facts, Exhibit A to Plaintiff's Motion for Partial Summary Judgment.

II. DISCUSSION

A. Forum State Governs Choice of Law

Both Plaintiff and Defendants have moved for partial summary judgment on the choice of law issue. In a diversity action, a federal district court must apply the choice of law rules of the forum state. Klaxon Co. v. Stentor Elec. Mfg. Co., 313 U.S. 487, 497, 61 S.Ct. 1020, 1022, 85 L.Ed. 1477 (1941); Wammock v. Celotex Corp., 835 F.2d 818, 829 (11th Cir.1988); Harris v. City of Chattanooga, 507 F.Supp. 374, 376 (N.D.Ga.1981). Since Georgia is the forum state, Georgia's choice of law rules govern this diversity action. American Family Life Assur. Co. v. United States Fire Co., 885 F.2d 826, 830, reh'g denied, 892 F.2d 89 (11th Cir.1989).

Plaintiff Shorewood contends that Georgia law applies; whereas, Defendants assert that Georgia's choice of law rules require the application of New York law here.

B. Georgia's Lex Loci Contractus

Georgia's choice of law rules follow the doctrine of lex loci contractus: the law of the place where the contract is made. Under Georgia's choice of law rules, the place where the contract is made is the place where the "last act essential to the completion of the contract was done." Salsbury Laboratories v. Merieux Laboratories, 735 F.Supp. 1545, 1549 (M.D.Ga.1988); General Telephone Co. of the Southeast v. Trimm, 252 Ga. 95, 95, 311 S.E.2d 460 (1984). For insurance contracts, the act of delivery is the last act essential for completion of the insurance contract, and thus the place of delivery is where the insurance contract is made. Johnson v. Occidental Fire & Cas. of North Carolina, 954 F.2d 1581, 1584 (11th Cir.1992). In this case, it is undisputed that the insurance contracts were delivered in New York. Therefore, applying the doctrine of lex loci contractus, it would seem that the substantive law of New York would control this action.

However, Plaintiff contends that, under Georgia's interpretation of lex loci contractus, Georgia courts limit the application of non-forum law, such as New York, to statutes and caselaw interpreting those statutes. If there are no New York statutes on point, and thus the New York common law would apply, then Georgia courts apply Georgia's common law and not New York's interpretation of common law. Plaintiff's position is essentially that Georgia's application of lex loci contractus permits the use of a non-forum's statutes and interpretive caselaw, and in the absence of an applicable non-forum statute, then the action is controlled by Georgia's common law. Georgia's preference for its own common law over that of a foreign forum is commonly referred to as the "presumption of identity" rule. Essentially, where there is not a specific statute in another state which applies, then Georgia courts presume that Georgia's development of common law is identical to the foreign forum's common law and therefore apply the law of the forum—Georgia. Since all parties to this case stipulate that there are no New York statutes which apply to this dispute, Plaintiff contends that Georgia's common law applies.

Defendants argue that Georgia's interpretation of lex loci contractus is based upon an outdated Georgia procedural practice which has been overruled expressly by statute and implicitly overruled by the Georgia courts. Specifically, Defendants contend that Georgia's practice of applying its own common law and not the common law of a non-forum, arose from the prohibition against Georgia courts taking judicial notice of a non-forum's laws. Since Georgia no longer requires that a party plead and prove a non-forum's law, Defendants argue that Georgia's previous prohibition against using a non-forum's common law has outlived its usefulness. See O.C.G.A. § 9-11-43(c).

To support their position, Defendants contend that the Georgia Supreme Court in General Telephone Company of the Southeast v. Trimm, 252 Ga. 95, 311 S.E.2d 460 (1984), and Menendez v. Perishable Distributors, Inc., 254 Ga. 300, 329 S.E.2d 149 (1985), implicitly overruled Georgia's rule that where lex loci contractus points towards another state, then the Court may apply only that other state's statutes and caselaw interpreting those statutes. Defendants ask this Court to find explicitly what, Defendants argue, the Georgia Supreme Court only implicitly recognized in General Telephone and Menendez; namely, that Georgia courts construe lex loci contractus purely, thus permitting the application of a non-forum's common law.

In General Telephone, upon questions certified by the Eleventh Circuit, the Georgia Supreme Court affirmed "our traditional approach" to lex loci contractus. In reaching its conclusion, the Georgia Supreme Court stated that "Trustees of Jesse Parker Williams Hosp. v. Nisbet, 189 Ga. 807, 7 S.E.2d 737 (1940) is the leading Georgia case explanatory of the law of lex loci contractus." General Telephone, 252 Ga. at 96, 311 S.E.2d 460. In Trustees of Williams Hospital v. Nisbet, 189 Ga. 807, 7 S.E.2d 737 (1940), the Georgia Supreme Court explained that where a contract is made in another state and that state is one of the original thirteen colonial states, then in the absence of an applicable statute, the common law as interpreted by Georgia will control, as follows:

A contract of a foreign State which constituted one of the thirteen original colonies, or which was derived from territory included in one of such colonies, will be construed and governed by the common law, in the absence of any pleading to the contrary. And in such a case the construction of the common law given by the courts of this State will control, in preference to the construction given by the court of the State of the contract.

Trustees of Williams Hosp. v. Nisbet, 189 Ga. 807, 811, 7 S.E.2d 737 (1940).

The Georgia Supreme Court, in General Telephone, explicitly referenced its prior decision in Trustees of Williams Hospital as the controlling explanation of Georgia's lex loci contractus rule. Had the Georgia Supreme Court wanted to dismiss as outdated Georgia's prohibition against applying another state's common law, it could have stated a revised rule, but the Court did not. Instead, the Georgia Supreme Court expressly affirmed Georgia's traditional approach to lex loci contractus and referenced Trustees of Williams Hospital as the "leading Georgia case explanatory of the law of lex loci contractus." General Telephone, 252 Ga. at 96, 311 S.E.2d 460. This Court should not read a change into the Georgia Supreme Court's interpretation of Georgia law where no change is suggested by that Supreme Court.¹

In addition, in Menendez v. Perishable Distributors, Inc., 254 Ga. 300, 329 S.E.2d 149 (1985), the Georgia Supreme Court was faced again with certified questions from the Eleventh Circuit on Georgia's choice of law rules. In answering the certified question, the Georgia Supreme Court stated that lex loci contractus mandated that as between Georgia and Florida, Florida substantive law controlled since the contract was made in Florida. Menendez, 254 Ga. 300, 302, 329 S.E.2d 149 (1985). However, of even more importance than the Menendez court's result, was that Florida had a statute on point to the issue before the Eleventh Circuit, and by certification the Georgia Supreme Court. Menendez, 254 Ga. at 301, 329 S.E.2d 149 ("Florida has, by statute, abolished the common law rule.... F.S.A. § 768.041."). Therefore, as in General Telephone, the Georgia Supreme Court's ruling in Menendez was consistent with Georgia's...