Opinion ID: 3015893
Heading Depth: 2
Heading Rank: 3

Heading: Does Michigan’s Subsection 3 Apply to this

Text: Dispute? As noted, the District Court concluded that Budget could not invoke Michigan’s limitation of liability for short-term lessors of cars in subsection 3 because “the lease between Budget Systems and Powell was ‘founded on’ a misdemeanor—Budget Systems’s grant of permission to operate the Xterra without a valid license plate—” and was therefore a “nullity” under Michigan law. Budget, 304 F. Supp. 2d at 650. The parties vigorously dispute the propriety of this holding. Because we conclude below that New York’s interest in applying its law far outweighs any interest Michigan might have in applying subsection 3 (that is, assuming subsection 3 would apply), we find it unnecessary to address the competing, complex statutory interpretation arguments presented by the parties.8 Instead, we leave the construction question to the State of Michigan and assume without holding that Michigan’s 8 If Michigan’s subsection 3 does not apply to this case, then only New York has an interest in applying its law and this case would be a “false conflict.” New York law would clearly apply. If subsection 3 does apply, Michigan has an interest in applying its law and we must weigh the “true conflict” between its interest and that of New York. Because we conclude that New York’s interest trumps in any event, we need not settle the construction of Michigan law because we reach the same result under either construction. 22 subsection 3 would apply and limit Budget’s liability in this case. Under this assumption, we turn to New York and Michigan’s competing interests. D. Identification and Weighing of State Interests In choosing between Michigan and New York law,9 we consider, inter alia, “the relevant policies of [the] interested states and the relative interests of those states in the determination of the particular issue.” Restatement (Second) of Conflict of Laws § 6 (1971). New York’s § 388(1) “was enacted to ensure access by injured persons to a financially responsible [party] against whom to recover for injuries and to change th[e] common-law rule and to impose liability upon the owner of a vehicle for the negligence of a person legally operating the car with the permission, express or implied, of the owner.” Hassan v. Montuori, 786 N.E.2d 25, 27 (N.Y. 2003) 9 It is clear that Pennsylvania does not have an interest in applying its law to this dispute. But for the chance occurrence of the accident in Pennsylvania, there is no connection between the Commonwealth and the parties. Pennsylvania has no interest in securing a recovery for Chappell nor in limiting Budget’s liability. The District Court held that Pennsylvania law applied by default under the rule of lex loci delicti because neither New York nor Michigan had an interest in applying its law. We have already stated our disagreement with those predicate determinations. 23 (internal quotations omitted); Morris v. Snappy Car Rental, 637 N.E.2d 253, 255 (N.Y. 1994). “Another . . . interest is in assuring that New York vendors who furnish medical and hospital care to injured parties are compensated . . . . Finally, New York has a public fiscal interest in assuring that . . . New York State can recoup its welfare expense[s] from [victims’] recover[ies].” Bray v. Cox, 333 N.Y.S.2d 783, 785–86 (N.Y. App. Div. 1972). Describing Michigan’s subsection 3, the District Court explained that “[i]n response to car rental companies’ complaints that Subsection 1[—which provides for unlimited vicarious liability—]was ‘inhibiting the growth of the [rental car] industry and threatening to drive some companies out of the state,’ the Michigan legislature amended the law in June of 1995 [to add subsection 3].” Budget, 304 F. Supp. 2d at 648 (quoting DeHart v. Joe Lunghamer Chevrolet, Inc., 607 N.W.2d 417, 420 (Mich. Ct. App. 1999)). That is, subsection 3 was codified to advance Michigan’s interest in preventing rental car companies from deciding not to do business (or to do less business) in the State of Michigan for fear of unlimited vicarious liability. Having identified the competing state policies implicated by this dispute, we turn to the states’ relative interests in those policies. New York’s interest is clear, direct and compelling. Chappell is a New York resident receiving treatment and care from medical providers in New York with the aid of New Yorkadministered welfare programs. Each of New York’s policy 24 justifications for enacting § 388(1) is directly implicated by this case, and New York’s interest runs to the full extent of Chappell’s recovery, dollar for dollar. It has an interest in (1) Chappell’s full recovery from a financially responsible party, (2) the compensation of New York vendors who furnish medical and hospital care to Chappell, and (3) recouping the State’s welfare expenses. Michigan, unlike New York, does not have an interest in securing a recovery for an injured citizen in this case (or associated state medical expenses). Its only interest lies in the extent of Budget’s liability (or, put another way, in the potential application of subsection 3’s liability cap). We doubt that Michigan’s interest in the application of subsection 3 is implicated at all in this case. Is it plausible that Budget will decide not to do business in the State of Michigan if it is held liable under New York law for an accident that occurred in Pennsylvania involving a car rented in Michigan? In fact, the application of New York’s more stringent law in this case likely advances Michigan’s interest in making it a relatively attractive place for rental car companies to do business by highlighting the value of Michigan’s liability cap. And if potential liability in other fora would undermine Budget’s decision to do business in Michigan, there are steps it can take to preserve the value of Michigan’s liability cap short of pulling out of the State. For example, Budget is free to limit to intrastate travel the permissible use of vehicles it rents in Michigan. It is similarly free contractually to bar its customers from operating its 25 vehicles in the State of New York. (We note that, far from restricting the use of vehicles in New York, Budget actually rents vehicles in that State, calling into question the necessity of a liability cap to induce rental car companies to do business in a state.) In short, Michigan’s interest in this particular dispute is uncertain and tenuous at best. We thus conclude that New York’s interest in the application of its law to this dispute clearly trumps that of Michigan. Thus, under Pennsylvania’s choice-of-law rules, New York law is to be applied.