Standard Fire Ins. Co. v. Ford Motor Co.

• Decision Date: 24 July 2013
• Docket Number: No. 12–1583.,12–1583.
• Citation: 723 F.3d 690
• Parties: THE STANDARD FIRE INSURANCE COMPANY and Travelers Personal Security Insurance Company, as subrogees of John Lombard, Plaintiffs–Appellants, v. FORD MOTOR COMPANY, Defendant–Appellee.
• Court: U.S. Court of Appeals — Sixth Circuit

723 F.3d 690

THE STANDARD FIRE INSURANCE COMPANY and Travelers Personal Security Insurance Company, as subrogees of John Lombard, Plaintiffs–Appellants,

v.FORD MOTOR COMPANY, Defendant–Appellee.

No. 12–1583.

United States Court of Appeals,Sixth Circuit.

Argued: June 12, 2013.

Decided and Filed: July 24, 2013.

ARGUED:W. Ransom Pipes, Hannah, Colvin & Pipes, LLP, Baton Rouge, Louisiana, for Appellants. Clay A. Guise, Dykema Gossett PLLC, Bloomfield Hills, Michigan, for Appellee. ON BRIEF:W. Ransom Pipes, Hannah, Colvin & Pipes, LLP, Baton Rouge, Louisiana, for Appellants. Clay A. Guise, Matthew Mitchell, Dykema Gossett PLLC, Bloomfield Hills, Michigan, Timothy M. Kuhn, Dykema Gossett PLLC, Detroit, Michigan, for Appellee.

Before: COLE and McKEAGUE, Circuit Judges; ZOUHARY, District Judge. ^*

OPINION

McKEAGUE, Circuit Judge.

Plaintiff insurance companies filed this products liability action against Ford Motor Company in the Eastern District of Michigan as subrogees of their insured, John Lombard. Lombard is a Tennessee resident whose personal property and Tennessee home were damaged when his 1997 Lincoln Town Car caught fire in his driveway in 2007. The car was licensed, registered, and insured in Tennessee. Ford moved for summary judgment contending that plaintiffs' claims are governed by Tennessee law and that Tennessee's statute of repose for products liability actions bars plaintiffs' claims. The district court granted Ford's motion. On appeal, plaintiffs contend the district court misapplied Michigan's choice of law rules. This case offers the opportunity to resolve an apparent split of authority between the Sixth Circuit and the Michigan Court of Appeals as to how the Michigan choice of law rules are to be applied. For the reasons explained below, we affirm the judgment of the district court.

I. BACKGROUND

Tennessee resident John Lombard owned a 1997 Lincoln Town Car that he acquired in 2004. Lombard's Lincoln was partially manufactured, and its final assembly completed, in November 1996 at Ford Motor Company's Wixom, Michigan plant. The original purchaser bought the car in December 1996.

Plaintiffs, The Standard Fire Insurance Company and Travelers Personal Security Insurance Company, both Connecticut corporations, insured Lombard's Tennessee home and personal property. On March 29, 2007, the Lincoln allegedly caught fire in Lombard's driveway, causing damage to the car, Lombard's residence, and his personal property. Plaintiffs reimbursed Lombard for his losses and, as subrogees under their insurance contracts, commenced this action in March 2010 in the Eastern District of Michigan, asserting products liability, breach of warranty and negligence claims. Plaintiffs allege the fire was due to a defective cruise control system in the Lincoln. The case was subject to an intra-district transfer and made part of a multi-district litigation action involving potentially defective speed control deactivation switches manufactured by Ford. See MDL No. 1718, In re Ford Motor Company Speed Control Deactivation Switch Products Liability Litigation.

Ford filed a motion for summary judgment contending that although the lawsuit was filed in Michigan, Tennessee law applies and bars the insurers' claims.¹ In Tennessee, any action seeking to recover for personal injuries, death or property damage caused by a defective or unreasonably dangerous product “must be brought within ten (10) years from the date on which the product was first purchased for use or consumption....” Tenn.Code § 29–28–103(a); Damron v. Media Gen., Inc., 3 S.W.3d 510, 512 (Tenn.Ct.App.1999).

The Lincoln was first purchased in November 1996. The insurers' complaint, filed in March 2010, was filed more than ten years after the Lincoln was first purchased. If Tennessee law applies, as the district court concluded, the claims are barred by the Tennessee statute of repose and summary judgment for Ford must be upheld. Michigan, on the other hand, does not have a statute of repose that would bar the claims. If Michigan law applies, the summary judgment ruling would be vacated and the case remanded for further proceedings.

II. ANALYSIS

We review the district court's grant of summary judgment de novo, “using the same Rule 56(c) standard as the district court.” Bowling Green v. Martin Land Dev. Co., Inc., 561 F.3d 556, 558 (6th Cir.2009). A federal court exercising diversity jurisdiction applies the choice of law rules of the state in which it sits. Klaxon Co. v. Stentor Elec. Mfg. Co., 313 U.S. 487, 496, 61 S.Ct. 1020, 85 L.Ed. 1477 (1941). Further, “a federal court in a diversity action is obligated to apply the law it believes the highest court of the state would apply if it were faced with the issue.” Mahne v. Ford Motor Co., 900 F.2d 83, 86 (6th Cir.1990). The sole issue on appeal is whether the district court erred in its determination, under Michigan's choice of law rules, that Tennessee's interests in having its law applied to plaintiffs' claims against Ford outweighed Michigan's interests.

A. District Court Ruling

The parties agree that Michigan's choice of law framework is established in two Michigan Supreme Court decisions: Olmstead v. Anderson, 428 Mich. 1, 400 N.W.2d 292, 302 (1987), and Sutherland v. Kennington Truck Serv., Ltd., 454 Mich. 274, 562 N.W.2d 466, 471 (1997). In a tort action, Michigan courts recognize a presumption in favor of lex fori and apply Michigan law “unless a ‘rational reason’ to do otherwise exists.” Sutherland, 562 N.W.2d at 471. The two-step test for determining whether such a rational reason exists was distilled in Sutherland from Olmstead as follows:

First, we must determine if any foreign state has an interest in having its law applied. If no state has such an interest, the presumption that Michigan law will apply cannot be overcome. If a foreign state does have an interest in having its law applied, we must then determine if Michigan's interests mandate that Michigan law be applied, despite the foreign interests.

Id.

In ruling that Tennessee law applies in this case, the district court did not cite Sutherland, but did undertake the same interest-weighing analysis, relying on Olmstead and Farrell v. Ford Motor Co., 199 Mich.App. 81, 501 N.W.2d 567 (1993). The court summarized its analysis as follows:

Accordingly, after thorough review, the Court is satisfied that Tennessee has an obvious and substantial interest in shielding Defendant from open-ended products liability claims. In addition to the facts regarding the incident [i.e., involving property damage sustained in Tennessee by a Tennessee resident caused by a vehicle registered and insured in Tennessee], the Court finds it compelling that Defendant generates substantial commerce within Tennessee, and directly employs numerous Tennessee residents.

While Tennessee has a substantial interest in applying its law, Michigan has little or no interest in this Tennessee incident involving a Tennessee resident. Further, “Michigan has no interest in affording greater rights of tort recovery to a [Tennessee] resident than those afforded by [Tennessee]. Michigan is merely the forum state and situs of Defendant's headquarters. Such minimal interests are insufficient to justify the result-oriented forum shopping that has been attempted.”

R. 25, Opinion at 5, page ID # 320 (quoting Farrell, 501 N.W.2d at 572–73 (internal alterations in original)).

The present facts are not materially distinguishable from those addressed in Farrell, where Michigan's presumption in favor of lex fori was deemed overcome and Farrell's claims were held governed by North Carolina law. Although Farrell was decided before Sutherland, it applied the teaching of Olmstead in a manner entirely consistent with the two-step analysis prescribed in Sutherland. The district court found Farrell's application of Michigan's choice of law framework “controlling.”

The Farrell analysis became the template for another post-Sutherland decision of the Michigan Court of Appeals, Hall v. General Motors Corp., 229 Mich.App. 580, 582 N.W.2d 866 (1998). In Hall, too, the court was faced with a products liability action against a Michigan manufacturer by a plaintiff who was a resident of North Carolina when he was injured in North Carolina while working on a vehicle registered, licensed and insured in North Carolina. Hall had moved to Michigan before he filed the action in Michigan, but for purposes of the choice of law analysis, his residence at the time of injury, not at the time of filing, was deemed determinative. Following Farrell's lead, the Hall court held that North Carolina's “substantial interest” in applying its law to the dispute outweighed Michigan's “minimal interest.” Id. at 869. The presumption in favor of lex fori having been overcome, the Hall court applied North Carolina's statute of repose and Hall's claim was held time-barred. See also Mitchell v. McNeilus Truck & Mfg., Inc., No. 304124, 2012 WL 5233630 (Mich.Ct.App. Oct. 23, 2012) (applying Sutherland test in manner consistent with Farrell and Hall ).

Thus, under circumstances similar to those presented here, the Michigan Court of Appeals has consistently applied the Olmstead/Sutherland analysis to hold the lex fori presumption overcome and has instead applied the law of a foreign state (i.e., the state of the plaintiff's residence, where the injury occurred). The district court was convinced that the analysis employed by Michigan's intermediate appellate court is indicative of how Michigan's highest court would rule if faced with the issue. R. 25, Opinion at 3–4, Page ID # 318–19 (citing Monette v. AM–7–7 Baking Co., Ltd., 929 F.2d 276, 280 (6th Cir.1991) (noting that decision of intermediate state appellate court, though not controlling, is not to be disregarded unless other persuasive data demonstrates highest state court would decide otherwise)). Plaintiffs disagree for several reasons.

B. How Would Michigan's Highest Court Rule?

Plaintiffs...