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Collins v. American Automobile Insurance Co.

decided: February 14, 1956.


Author: Clark

Before CLARK, Chief Judge, and MEDINA and WATERMAN, Circuit Judges.

CLARK, Chief Judge.

This is an action by the plaintiff, Collins, as a committee for Travious Riddle Collins, an incompetent, to recover damages for personal injuries sustained by his ward when struck on a street in New Orleans, La., by an automobile owned and operated by one Edward Duffy. The complaint further alleges that at the time of the accident Duffy was insured by a policy of liability insurance issued by the defendant and that this direct action against the insurer (to which Duffy is not a party) is based upon La.Rev.Stat. 22:655 (1950).*fn1

This action was instituted in the court below on June 9, 1954. On October 4, 1954, the plaintiff brought suit against both Duffy and the insurer on the same claim in the United States District Court for the Eastern District of Louisiana, New Orleans, La., Division, for the purpose, as he now asserts, of preserving the claim against the bar of the statute of limitations in case of dismissal of the action in New York. This suit is still pending.

Both the incompetent and his committee are citizens of Virginia. Defendant is a citizen of Missouri, but is doing@ business in New York as well as Louisiana. The insurance policy was delivered to Duffy in Louisiana, of which state he is a resident and apparently a citizen.

Defendant insurer pleaded a number of affirmative defenses and later moved for dismissal on the grounds that the complaint failed to state a claim on which relief could be granted and that there was no jurisdiction of the subject matter. Hearings on the motions were adjourned pending decisions of the United States Supreme Court in Lumbermen's Mutual Casualty Co. v. Elbert, 348 U.S. 48, 75 S. Ct. 151, 99 L. Ed. 59, and Watson v. Employers Liability Assur. Corp., 348 U.S. 66, 75 S. Ct. 166, 99 L. Ed. 74, both of which cases involved important questions of application of the Louisiana direct action statute. After these decisions were rendered defendant filed a supplemental affidavit dealing principally with the second action brought by plaintiff in Louisiana.

Judge Palmieri subsequently dismissed the complaint on grounds of forum non conveniens, buttressing his decision with the conclusions that the forum was remote from the place of the accident and from the witnesses and that the local trial calendar was crowded, and with several other considerations of policy based on Gulf Oil Corp. v. Gilbert, 330 U.S. 501, 67 S. Ct. 839, 91 L. Ed. 1055. He further stressed that plaintiff could not be injured by the dismissal because he was still able to pursue his remedy in Louisiana. D.C.S.D.N.Y., 128 F.Supp. 228.

The application of the doctrine of forum non conveniens by Judge Palmieri to dismiss the case was erroneous. The field of that doctrine is entirely occupied by 28 U.S.C. ยง 1404(a), enacted in 1948 subsequent to the decision of Gulf Oil Corp. v. Gilbert, supra, 330 U.S. 501, 67 S. Ct. 839 - the case relied upon by the judge. See Norwood v. Kirkpatrick, 349 U.S. 29, 32, 75 S. Ct. 544, 99 L. Ed. 789 (a case decided after the decision herein); Ex parte Collett, 337 U.S. 55, 69 S. Ct. 944, 959, 93 L. Ed. 1207, 10 A.L.R.2d 921. If the forum is found to be inconvenient, the remedy now is transfer, not dismissal as formerly. The validity of this conclusion is, in effect, admitted by defendant, who now seeks to have us regard the action of the district court not as a dismissal, but as in substantive effect a transfer to Louisiana, where the second similar action is pending. We cannot, however, so view the order below. We think a litigant is entitled to have his duly brought case remain alive, avoiding new problems of jurisdiction, limitations, laches, and the like, whatever vicissitudes of transfer or consolidation thereafter with other actions may occur. Moreover, he should be confronted with a direct presentation of the statutory issue and the supporting material, rather than be faced with conjecture and supposition. On a remand this issue may be faced thus directly upon defendant's properly supported motion. We express no opinion on the merits of such an issue, if arising hereafter, except to note that we have often questioned reliance upon the fact of locally congested dockets as a proper ground for an order of transfer. Court congestion is not local, and conditions below may be no worse than elsewhere, particularly in the light of the recent heroic and highly successful efforts of our district judges to meet their calendar problems. But beyond all this, we think it dangerous to suggest that a judge may deny entrance to his court to a litigant on the ground of his serious burdens; his understandable complaints should be directed elsewhere, as to executive and legislature.

But though we hold dismissal on grounds of forum non conveniens to be improper, we must also consider the more complex question whether the dismissal is to be sustained because no suit on the Louisiana direct action statute may be maintained in a federal district court sitting in New York.*fn2 Here our first problem is to determine whether, within the meaning of Erie R. Co. v. Tompkins, 304 U.S. 64, 58 S. Ct. 817, 82 L. Ed. 1188, 114 A.L.R. 1487, and cases following it,*fn3 this in current semantics is a matter of "substance," to which state law applies, or a matter of "procedure," to which federal law is applicable. And decision must rest upon application of the test stated in Guaranty Trust Co. v. York, 326 U.S. 99, 109, 65 S. Ct. 1464, 1470, 89 L. Ed. 2079, 160 A.L.R. 1231: "The question is whether such a statute concerns merely the manner and the means by which a right to recover, as recognized by the State, is enforced, or whether such statutory limitation is a matter of substance in the aspect that alone is relevant to our problem, namely, does it significantly affect the result of a litigation for a federal court to disregard a law of a State that would be controlling in an action upon the same claim by the same parties in a State court?"

We think the problem has been settled by Lumbermen's Mutual Casualty Co. v. Elbert, supra, 348 U.S. 48, 75 S. Ct. 151. In that case the Supreme Court sustained the jurisdiction of a United States District Court sitting in Louisiana in a case brought under the direct action statute here involved. One of the principal objections to jurisdiction raised there was the lack of diversity of citizenship between the plaintiff and the tort-feasor. But the Supreme Court followed the characterization of the Louisiana courts that the statute created a separate and distinct right of action against the insurer, and hence held that lack of diversity between tort-feasor and plaintiff was not material. Apart from the language of the opinion it is implicit in the result that the right created by the statute was regarded as substantial, for, were the matter only procedural, it would have been improper for the federal court to conform its practice thereto. To like effect in Watson v. Employers Liability Assur. Corp., supra, 348 U.S. 66, 75 S. Ct. 166. And see also New Amsterdam Casualty Co. v. Soileau, 5 Cir., 167 F.2d 767, 6 A.L.R.2d 128, certiorari denied 335 U.S. 822, 69 S. Ct. 45, 93 L. Ed. 376; and Bankers Indemnity Ins. Co. v. Green, 5 Cir., 181 F.2d 1.*fn4

But this does not complete our inquiry; for, under prevailing precedents in diversity cases, we are admonished to find and apply the New York view of the foreign law. Klaxon Co. v. Stentor Electric Mfg. Co., 313 U.S. 487, 61 S. Ct. 1020, 85 L. Ed. 1477; Griffin v. McCoach, 313 U.S. 498, 61 S. Ct. 1023, 85 L. Ed. 1481, 134 A.L.R. 1462; Wells v. Simonds Abrasive Co., 345 U.S. 514, 73 S. Ct. 856, 97 L. Ed. 1211. This was not the original principle as exemplified in the Erie case itself; for there, as often pointed out, Justice Brandeis accepted the Pennsylvania law, as there found by the Court, and not the New York view of it, for application in the court below. And this further gloss has presented perhaps the most criticized feature of the developing Erie-Tompkins principle. For not only does it frustrate what those severe critics of the pre-Erie rule, Justices Holmes and Brandeis, thought a crative activity in the federal courts to make a proper choice among competing state laws, but it also leads to just that forum-shopping which was Erie's target and may yield to a litigant whose only merit is suing first the peculiar advantage of so wholly unique a law as was actually applied in the Griffin case.*fn5 Our present situation is illustrative. New York State's interest is obviously minimal. Yet the idea is that New York doctrines aimed to protect its local interests and advance its public policy shall be extended to prevent a court of the United States from according substantive justice as between a Virginia citizen and a Missouri corporation. We are not sure that a developing Erie doctrine, which properly aims to avoid discrimination in New York litigation by the accident of the federal forum, does now require us to deny justice to these suitors according to the prevailing substantive law if by chance it appears that the New York state courts would refuse a remedy.*fn6 So before turning directly to the New York precedents we shall note the fast growing general law of conflicts as to the enforceability of such direct action statutes as the one before us.

This question has, it is true, produced some divergence of judicial view. Thus in Lieberthal v. Glens Falls Indemnity Co. of Glens Falls, New York, 316 Mich. 37, 24 N.W.2d 547, the Supreme Court of Michigan declined to give effect in that state to a Wisconsin direct action statute*fn7 similar to the Louisiana statute here at issue. The Michigan court declined to characterize the Wisconsin statute as substantive or procedural, but grounded its decision upon the alleged affront to Michigan public policy as expressed in a statute specifically forbidding direct action against the insurer. But Chief Justice Butzel, for himself and two colleagues, filed a very persuasive dissent setting forth his contrary views as to public policy and further arguing that the direct action provision created a substantive vested right, transitory in nature and enforceable in Michigan.

Kertson v. Johnson, 185 Minn. 591, 242 N.W. 329, 85 A.L.R. 1, similarly holds that the Wisconsin statute creates a substantive right for purposes of the conflict of laws. The Kertson case is cited with approval in Burkett v. Globe Indemnity Co., 182 Miss. 423, 181 So. 316, where the Supreme Court of Mississippi, employing its own analysis, held that the Louisiana statute here at issue created a substantive right enforceable in Mississippi. Later, the Mississippi court overruled this decision, McArthur v. Maryland Casualty Co., 184 Miss. 663, 186 So. 305, 120 A.L.R. 846, in an opinion from which the Chief Justice vigorously dissented. In the McArthur case the court, abandoning its own characterization of the Louisiana statute, rested its decision upon the characterization allegedly given the statute by the Louisiana courts. But Louisiana in differing contexts has denominated the statute both "procedural" and "substantive" (the latter characterization having been made principally in decisions subsequent to the McArthur case).*fn8 In any event, it is the general rule that the forum will make its own characterization of foreign law.*fn9 It is no doubt true that respect should be accorded the construction of a statute by the courts of the state whose legislature enacted it; this is a valuable device for avoiding the constitutional difficulties which might result from refusing to enforce as "procedural" a right regarded as "substantive" in another state.*fn10 But that is not the problem here, and we think we should rely for conflict of law purposes upon the characterization (purporting to conform to Louisiana decisions) given the statute by the Supreme Court. See Lumbermen's Mutual Casualty Co. v. Elbert, supra, 348 U.S. 48, 51, 75 S. Ct. 151, 154, wherein appears the following: "The Louisiana courts have characterized the statute as creating a separate and distinct cause of action against the insurer which an injured party may elect in lieu of his action against the tortfeasor. West v. Monroe Bakery, 217 La. 189, 46 So.2d 122; Jackson v. State Farm Mutual Automobile Ins. Co. [211 La. 19, 29 So.2d 177]." Cf. Wells v. American Employers' Ins. Co., 5 Cir., 132 F.2d 316.

This is not a mere matter of determination of proper parties to the action;*fn11 it is, as noted by the Supreme Court in the Lumbermen's Mutual Casualty Co. case, a matter of enforcement of a right of action against a designated defendant where no such right previously existed. Of course, more obfuscation than clarification is achieved through the undiscriminating use of the labels "procedural" and "substantive." The realities of the individual situation must govern. The purpose of the conflict of laws doctrine is to prevent substantial variation as a result of choice of forum in the rights and duties arising from a given legal situation. But some limitations must be placed upon the reference to foreign law in the interest of orderly administration of justice by the courts of the forum. In the instances where these limitations are imposed to promote practicality, convenience, and the integrity of local practice, local rules at the forum are applied and denominated "procedure."*fn12 The Louisiana courts have made significant distinctions as to the defenses which may be raised between suits brought directly against the insurer and those brought against the tort-feasor. See Lumbermen's Mutual Casualty Co. v. Elbert, supra, 348 U.S. 48, 51, 75 S. Ct. 151, and cases cited therein. It therefore appears that the direct action statute does more than merely shorten the legal process; it creates what is substantially a new right ...

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