Opinion ID: 521021
Heading Depth: 2
Heading Rank: 3

Heading: the jury instructions on damages

Text: 34 The plaintiffs challenge the district court's instructions on damages. They contend that the district court erred in instructing the jury that (1) it was not permitted to award damages for the loss of the videotapes; (2) it was not permitted to speculate as to whether the plaintiffs would have remained in Aramco's employ for a long time; and (3) the general practice of the Saudi Labor Commission is to award three months' lost wages to employees terminated without a valid reason.
35 The district court did not err in instructing the jury not to award damages for the loss of the videotapes. As noted above, Aramco's employment contracts in effect incorporate Section 74 of the Saudi Labor Law. This section provides that damages for a workman terminated without a valid reason shall take into account the nature of the work, the period of service, the workman's age, the pay he was receiving, the family burdens he shoulders, the extent to which his income from his new job is lower than the income from his old job, the degree of arbitrariness of the discharge decision, the extent to which the discharge affects the workman's reputation, and any other conditions and concomitant circumstances in accordance with the rules of equity and current generally accepted practice. 36 Aramco presented the testimony of an expert on Saudi labor law to the effect that Section 74 does not permit the award of damages for losses to an employee's property. Since this testimony was uncontradicted, we find no basis for the plaintiffs' argument. 37 Even if Texas law provided the standard for contract damages in this case, we would hold that the district court's instruction was proper. Under Texas law, damages for breach of contract include losses that are natural, probable, and foreseeable consequence[s] of the breach. LaChance v. Hollenbeck, 695 S.W.2d 618, 621 (Tex.App.1985). The plaintiffs have never seriously disputed testimony to the effect that the Saudi authorities ordered the confiscation and destruction of the videotapes. Under these circumstances, we cannot characterize the destruction of the tapes as a consequence of Aramco's decision to terminate the plaintiffs.
38 We also reject the plaintiffs' argument that the district court erred when it instructed the jury that Saudi law prohibits speculation as to whether the plaintiffs would have remained in Aramco's employ for a long time. RT Vol. 8, 1468. Section 74 states that damages awards must reflect current generally accepted practice. Aramco's expert witness on Saudi law testified that Saudi practice is to limit damages to losses which are not speculative and which are foreseeable. In this respect, Saudi law does not differ from standard American contract law, which requires that damages be certain. Calamari and Perillo, Contracts 599 (1987). 39 The plaintiffs did not present any evidence suggesting that workers in their position reasonably could expect to remain with Aramco for a long time. Had Aramco not terminated the plaintiffs because of their operation of the videotape rental club, it is possible that after a few years the plaintiffs would have left Aramco for professional or personal reasons or conditions in the industry could cause reductions in the employment force.
40 The plaintiffs' challenge to the district court's instruction on the customary awards of the Saudi Labor Commission is similarly unpersuasive. An expert witness's testimony that the Commission generally awards three month's wages was uncontradicted. The Commission's practice of awarding three months' wages is obviously evidence of current generally accepted practice in Saudi Arabia. Moreover, any error in this instruction was harmless because the district court explained to the jury that you are free to exercise your own judgment and you are not bound by what the Saudi Labor Commission or a Saudi Court would do or award. RT Vol. 8, 1468-69. Nor was the jury award so limited.IV. THE SUMMARY JUDGMENT FOR ARAMCO ON THE TORT CLAIMS 41 We review the district court's grant of summary judgment to Aramco on the tort claims de novo. Viewing the evidence in the light most favorable to the nonmoving party, we must determine whether the district court overlooked any issue of material fact or committed any legal error. Darring v. Kincheloe, 783 F.2d 874, 876 (9th Cir.1986). 42 The district court's summary judgment decision for Aramco on the tort claims presents questions pertaining to both the choice of the proper legal standards and the application of those standards to the case at hand. We find that the district court was correct in its determination that Saudi law governed the defamation, intentional infliction of emotional distress, fraud, and conversion claims and that Saudi law barred recovery on those counts. 43 California resolves choice-of-law questions using governmental interest analysis, to find the proper law to apply based upon the interests of the litigants and the involved states. Offshore Rental Co. v. Continental Oil Co., 22 Cal.3d 157, 161, 583 P.2d 721, 723, 148 Cal.Rptr. 867, 869 (1978) (quoting Reich v. Purcell, 67 Cal.2d 551, 553, 432 P.2d 727, 729, 63 Cal.Rptr. 31, 33 (1967)). The burden is on the party seeking to invoke foreign law; California applies its own rule of decision unless a party litigant properly invokes the law of a foreign state. A party advocating application of foreign law must demonstrate that the [foreign] rule of decision will further the interest of that foreign state and therefore that it is an appropriate one for the forum to apply to the case before it. Hurtado v. Superior Court, 11 Cal.3d 574, 581, 522 P.2d 666, 670, 114 Cal.Rptr. 106, 110 (1974); see Liew v. Official Receiver and Liquidator, 685 F.2d 1192, 1197 (9th Cir.1982). 44 California's version of governmental interest analysis entails three steps. First, the court must determine whether the proposed foreign rule of decision differs from the forum rule. Offshore Rental, 22 Cal.3d at 161-62, 583 P.2d at 723-24, 148 Cal.Rptr. at 869-70. If there is a difference in the possible rules of decision, the court must next examine each jurisdiction's interest in the application of its standard to determine whether a true conflict exists. Id., 22 Cal.3d at 163, 583 P.2d at 725, 148 Cal.Rptr. at 870-71. If only one jurisdiction has a legitimate interest in the application of its rule of decision, there is a false conflict and the law of the interested jurisdiction is applied. If more than one state has a legitimate interest, the court must move to the third stage of the analysis, which focuses on the comparative impairment of the interested jurisdictions. At this stage, the court seeks to identify and apply  'the law of the state whose interest would be the more impaired if its law were not applied.'  Id., 22 Cal.3d at 165, 583 P.2d at 726, 148 Cal.Rptr. at 872 (quoting Bernhard v. Harrah's Club, 16 Cal.3d 313, 320, 546 P.2d 719, 723, 128 Cal.Rptr. 215, 219 (1976)). If distinct claims for relief implicate different alignments of interests among the relevant jurisdictions, separate applications of a governmental interest analysis are required. See Beech Aircraft Corp. v. Superior Court, 61 Cal.App.3d 501, 518, 132 Cal.Rptr. 541, 550 (1976). 45 A. Defamation and Intentional Infliction of Emotional Distress. 46 There is no real dispute that California law and Saudi law differ as to the treatment of the plaintiffs' defamation and emotional distress claims. California permits recovery for damage to character, Gomes v. Fried, 136 Cal.App.3d 924, 186 Cal.Rptr. 605, 614 (1982), and for emotional injury caused by willful and outrageous behavior, Fletcher v. Western National Life Ins. Co., 10 Cal.App.3d 295, 97 Cal.Rptr. 577, 582-83 (1971). In contrast, Saudi law, according to the uncontradicted declaration of Aramco's expert Dr. Saba Habachy, does not allow money damages for injuries of this nature. 47 California's connections to the plaintiffs in this case are insufficient to create an interest in applying California law to the plaintiffs' defamation and emotional distress claims. The McGhees have never resided in California. The Rudhs resided in California before David Rudh took his position with Aramco. However, when the alleged defamation and intentional infliction of emotional distress occurred, the Rudhs had long since abandoned their California residence and had no intention of returning within the next six years. 6 We are unaware of any case in which a California court (or a federal court applying California law) has held that a litigant's former residency in California, abandoned before the events giving rise to a cause of action, helps to place that cause of action within California's sphere of legitimate influence. The Rudhs' return to California does not assist them. Following Justice Traynor's analysis in Reich v. Purcell, 67 Cal.2d 551, 553, 432 P.2d 727, 729, 63 Cal.Rptr. 31, 34 (1967), the lead case on governmental interest analysis in California, the courts have consistently declined to recognize after-acquired residence as a source of governmental interest on the grounds that consideration of this factor would encourage forum shopping. See, e.g., Roesgen v. American Home Prods. Corp., 719 F.2d 319, 321 (9th Cir.1983); Zimmerman v. Allstate Ins. Co., 179 Cal.App.3d 840, 847, 224 Cal.Rptr. 917, 920 (1986). But see id., 179 Cal.App.3d at 848-49, 224 Cal.Rptr. at 921 (dissenting opinion). 7 48 Plaintiffs also advance a novel and wholly unsupported theory that American states have an interest, recognizable under California governmental interest analysis, in extending the benefits of American common law to American citizens living and working abroad. 8 Plaintiffs cite two cases in support of this purported governmental interest in disfavoring foreign law. Randall v. Arabian American Oil Co., 778 F.2d 1146 (9th Cir.1985), upheld an American plaintiff's access to American courts to litigate an employment claim arising out of events in Saudi Arabia notwithstanding provisions of the Saudi Labor law that call for all such claims to be decided by Saudi labor tribunals. Randall, however, emphatically distinguished between the interest in providing an American forum and the interest in applying American law, stating we find paramount interest in providing a forum to a United States citizen seeking to sue a United States corporation on a[n] employment contract negotiated and made in the United States.... [O]ur forum provides due regard for the interests of Saudi Arabia by using the substantive Labor Law [of Saudi Arabia] as the rule for decision. Id. at 1153 (emphasis supplied). Cuevas v. Reading & Bates Co., 577 F.Supp. 462 (S.D.Tex.1983), is equally far afield. In Cuevas, a district court in Texas determined that Philippine law should govern injuries incurred on an oil drilling rig 100 miles off the coast of Saudi Arabia by workers who were Philippine domiciliaries and citizens. The court relied principally on Supreme Court precedent concerning international choice of law for maritime claims; it had no occasion to discuss the claim that American citizenship, as distinct from state domicile or residence, creates a state interest in applying more favorable American law to a state law claim. 9 49 Finally, plaintiffs also assert Aramco's contacts with California as a basis for the application of California law. The plaintiffs point out that one of Aramco's four shareholders, Chevron, has its headquarters in California and that Aramco has regularly recruited Californians for its foreign work force. Plaintiffs have not alleged, however, that Chevron or Aramco's recruitment subsidiary played any direct role in defaming or traumatizing them. California courts have rejected arguments that a party's contacts with California, unrelated to the cause of action at hand, create a basis for extending the reach of California's law. In Gallagher v. Koppers, 142 Cal.App.3d 713, 716, 191 Cal.Rptr. 241, 245 (1983), a paint company's manufacturing operations in California were considered irrelevant to the choice of law issue in a products liability suit involving an injury caused by paint that the defendant manufactured in Oregon. Similarly, in Cable v. Sahara Tahoe Corp., 93 Cal.App.3d 384, 397, 155 Cal.Rptr. 770, 778-79 (1979), the court rejected a California plaintiff's argument that California law should govern her dram shop suit against a Nevada casino for injuries she sustained in Nevada because the casino drew patrons and employees from California. The court held that the defendant's activities in California were relevant only insofar as they bore on the circumstances of the accident in question. Id. at 397, 155 Cal.Rptr. at 776. Under the second stage of California's government interest analysis, the court takes a hard look at California's interest in applying its law, reexamin[ing] its policy to determine if a more restrained interpretation of it is more appropriate. Bernhard, 16 Cal.3d 313, 316, 546 P.2d 719, 723, 128 Cal.Rptr. 215. Applying this restrained perspective, we see no policy underlying California's law of defamation and emotional distress that could support the extension of California's substantive law to these facts. 50 The absence of an interest on California's part sufficient to sustain one side of a true conflict does not settle entirely the conflicts question. Unless Saudi Arabia has a legitimate interest in the application of its law, California's weak, but pervasive, interest in applying its own law would still prevail. Aramco's expert on Saudi tort law provided little insight into the policies or interests served by the omission of a cause of action for defamation (except in the case of an action brought by the state to punish an unfounded charge of adultery), or by the general absence of a means to recover for emotional or moral harm. ER Vol. II, CR 73 at 8-9. The mode of analyzing governmental interests employed by California courts, which determines governmental interests from legislative history, case law, and inferences drawn from the logical tendency of rules to favor one class of litigants over another, may be difficult to apply to a system of law based on sacred text, clerical commentary, and royal decree. Under California law, Aramco, the party seeking to dislodge the law of the forum, bears the burden of establishing that the foreign jurisdiction has an interest, cognizable under California conflict-of-law principles, in the application of its law to the dispute at hand. While the court may take judicial notice of authoritative sources of foreign law at its disposal, see Offshore Rental, 22 Cal.3d at 163 n. 5, 583 P.2d at 725 n. 5, 148 Cal.Rptr. at 871 n. 5, when no legitimate foreign interest can be determined from the sources adduced by the party advocating foreign law, the court is entitled to apply the law of the forum. See Cal.Evidence Code Sec. 311(a) (West 1966 and Supp.1989). 10 51 In the context of the defamation and intentional infliction of emotional distress claims, where Aramco need only show some legitimate Saudi interest, we believe that Aramco has met its burden. Whatever the specific interests underlying the Saudi rule may be, it seems certain that Saudi Arabia has some legitimate interest in seeing that Saudi law determines the consequences of actions within its borders causing injury to people who reside there. See, e.g., Hernandez v. Burger, 102 Cal.App.3d 795, 802, 162 Cal.Rptr. 564, 568 (1980); see also Cable, 93 Cal.App.3d at 395-96, 155 Cal.Rptr. at 777-78. California, despite its interest in securing recovery for its residents, will not apply its law to conduct in other jurisdictions resulting in injury in those jurisdictions. Where, as here, no other jurisdiction has a legitimate interest in the application of its law, we believe that the general governmental interests in determining the legal consequences of purely local activity preempts the application of forum by default. 52 Plaintiffs point out that the Saudi government exempts foreign nationals living in the Aramco compounds from many legal strictures that apply elsewhere within the country. They suggest that the Saudis' toleration of practices within the confines of the Aramco compounds that are proscribed elsewhere, including coeducation, women driving and wearing western dress, and certain forms of entertainment, demonstrates a diminished interest in the application of Saudi law to Aramco's expatriate employees. The record in this case concerning the government's posture toward the Aramco compounds, however, casts doubt on the plaintiffs' portrayal of Saudi disinterest. The plaintiffs' estoppel argument in connection with their contract claims rests largely on Aramco's failure to apprise its employees of the intensity of the Saudis' concern about unlicensed businesses in the compounds. Moreover, the record contains repeated references to Saudis efforts to enforce prohibitions on pornography and alcohol in the compounds. In short, despite the extremely thin basis in the record for fixing the boundaries of Saudi Arabia's legislative jurisdiction on the basis of Saudi interests, we find that the district court was correct in applying Saudi law to the defamation and emotional distress counts and in granting summary judgment based on Aramco's uncontested showing that Saudi law would not allow recovery on these causes of action. 11 B. Fraud 53 The choice-of-law question pertaining to the fraud claim is complicated by the introduction of a third jurisdiction, Texas, into the governmental interest calculus. Aramco initially argued, in its motion for summary judgment, that Texas law provided the proper rule of decision for the fraud claim. The plaintiffs agreed that Texas had the strongest interest in the application of its rules, but argued for the application of California law on the grounds that there was no material difference between California and Texas law on points relevant to this claim. 54 The district proceeded directly to the comparison of government interests without identifying differences in the treatment of plaintiffs' fraud claim under California, Texas, and Saudi law. Presumably, this approach reflected a belief that a clear imbalance in governmental interests would obviate the need to consider the viability of the fraud claim under the laws of all three jurisdictions and the interests served by the approach of each jurisdiction. The court determined that Saudi law should govern because Saudi Arabia's strong interest in regulating and determining standards for liability of tortfeasors within its borders would be impaired to a greater extent by the application of California law (assuming a true conflict) than California's interest in applying its tort law would be impaired by application of Saudi law. ER Vol. II, CR 222 at 11. The district court granted summary judgment on the fraud claim on the strength of the testimony of Aramco's expert, based on his understanding of the facts, that Saudi law would not permit recovery on this claim. 55 We conclude that the district judge correctly applied Saudi law. The complaint states that Aramco represented to the plaintiffs, both expressly and by implication, that notwithstanding the laws, customs and mores of Saudi Arabia, the operation of private videotape clubs was permissible within Dhahran and Ras Tanura. ER Vol. I, CR 1 p 12. These alleged misrepresentations regarding videotape clubs apparently were made in Saudi Arabia. Saudi Arabia has a significant interest in regulating conduct within its borders. See, e.g., Hernandez v. Burger, 102 Cal.App.3d 795, 802, 162 Cal.Rptr. 564, 568 (1980). The alleged fraudulent representations were not made in Texas or California, and the plaintiffs have only tenuous personal connections to California, see supra section IVA, and even weaker connections to Texas. 12 C. Conversion 56 The district court correctly determined that Saudi law governed the plaintiffs' conversion claims. The tapes were confiscated in Saudi Arabia at a time when all relevant parties resided in Saudi Arabia. For the reasons recited in the earlier discussion of the defamation and emotional distress claims, California has no interest recognizable under California choice-of-law principles in the application of its law to these claims. 57 We also agree with the district court's conclusion that Saudi law precluded recovery for conversion. Dr. Habachy testified that the plaintiffs' conversion claims were not viable under Saudi law. He explained that his opinion was based on his understand[ing] that plaintiffs' videotapes were confiscated by Aramco at the direction of Saudi authorities. ER Vol. 1, CR 73 at 9. The plaintiffs do not seriously dispute the testimony of A.A. Rawai'i, Manager of Aramco Affairs for the Eastern Province, that on being informed of the plaintiffs videotape rentals, General Othman of the Saudi police ordered that the tapes be confiscated and destroyed.