Opinion
C.A. No. 03C-10-010 (THG).
Submitted: February 21, 2005.
Decided: April 20, 2005.
Craig A. Karsnitz, Esquire, Young, Conaway, Stargatt Taylor, Georgetown, DE.
Daniel E. Wolcott, Jr., Esquire, Potter, Anderson Corroon, Wilmington, DE.
Jeffrey K. Martin, Esquire, Margolis Edelstein, Wilmington, DE.
Robert J. Leoni, Esquire, Morgan, Shelsby, Leoni, Newark, DE.
Deirdre O'Shea, Esquire, Smith, O'Donnell, Feinberg Berl, Georgetown, DE.
Dear Counsel:
This is the Court's decision regarding Rental Equipment Center's request to apply Maryland law to the Plaintiffs' claims. For the following reasons, the motion is DENIED.
Rental Equipment Center (hereinafter "REC") is a Maryland corporation that rents equipment to the general public. On June 28, 2003, Allawishes Gove rented a trailer and stump grinder from the REC store in Salisbury, Maryland. Before releasing the equipment, REC required Mr. Gove to complete and authorize a written contract containing the rental terms and conditions.
The rented trailer and stump grinder were later directly involved in a motor vehicle accident in Seaford, Delaware. The accident resulted in the death and physical injuries of two Delaware residents. The Plaintiffs filed a civil action for damages arising out of the accident in the Sussex County Superior Court.
The Plaintiffs insist that the application of strict liability to a lessor, according to Delaware law, is appropriate. REC, however, requested that this Court apply Maryland law, which precludes strict liability of lessors. REC contends that Maryland law should apply since its store is located in Maryland, the rental agreement was formed in Maryland, the lease agreement requires the equipment to be used in Maryland and the contract leasing the stump grinder to Mr. Gove specifically cites the application of Maryland law.
These arguments, however, ignore the fact that the central issue and parties in this case are essentially unrelated to the equipment rental and lease agreement. If this case was a personal injury or wrongful death action by Mr. Gove, the lessee, then the contractual formation and obligations between those parties might be more relevant. But the case before the Court centers around the death of William Eby and the physical injury of Jeanette Eby, who had no connection to the rental agreement.
The only connection between the Ebys and REC is an automobile accident that occurred in Delaware. The accident did not arise out of the contract formed in Maryland nor are the Plaintiffs in this action bound by that contract. Therefore, any breach of the agreement between REC and Mr. Gove as to usage or any expectation of the applicable law established by the leasing agreement shall have minimal effect on the choice of law in this action. Instead of focusing on the contractual agreement between Mr. Gove and REC, this Court will interpret the choice of law question in relation to the automobile accident that resulted in this wrongful death and personal injury action.
In 1991, the Delaware Supreme Court adopted the "most significant relationship" test found in RESTATEMENT (SECOND) OF CONFLICTS (1971) as the appropriate standard to apply for conflict of law disputes. The state with the "most significant relationship" to the claim at issue is determined by balancing the following factors:
Travelers Indem. Co. v. Lake, 594 A.2d 38, 47 (Del. 1991).
1. The needs of the interstate and international systems;
2. The relevant policies of the forum;
3. The relevant policies of other interested states and the relevant interests of those states in the determination of the particular issue;
4. The protection of justified expectations;
5. The basic policies underlying the particular field of law;
6. Certainty, predictability and uniformity of result; and
7. Ease of determination and application of the law to be applied.
First, as applied to this case, the needs of the interstate and international systems are not likely to be affected by the choice of law decision in this case. The application of strict liability to Maryland lessors whose products injure Delaware residents will not likely change the course of commerce between the two states or affect either state's liability systems.
Second, the relevant policies of the forum state, Delaware, provide for the added protection of its citizens by holding lessors strictly liable for the inspection and upkeep of rental equipment. Holding lessors strictly liable for damages arising out of the use of its equipment creates a system whereby 1) liability is borne by the individual profiting from the rental; 2) the lessor is in the best position to inspect rental equipment and avoid the rental of defective equipment; 3) an implied representation of fitness accompanies the rental of equipment; and 4) the risk of defective equipment is lessened by the caution taken by lessors to prevent the application of strict liability. Strict liability is not limited to the parties to a lease contract because "[t]he doctrine of strict liability in tort has been extended to injured bystanders." Therefore, the Court sees no reason why the added protection of Delaware law should be denied to Delaware residents harmed on a Delaware roadway by equipment leased in Maryland.
Martin v. Ryder Truck Rental, Inc., 353 A.2d 581 (Del. 1976).
Wilson v. Dover Skating Center, Ltd., 566 A.2d 1020 (Del.Super. 1989).
Martin v. Ryder Truck Rental, Inc., 353 A.2d 581, 587 (Del. 1976)
Third, Maryland's approach to lease and bailment liability is quite different from Delaware law. Maryland applies a general negligence standard to the lessor of equipment. A lessor's liability there will depend on the Plaintiff's ability to show that the lessor knew of a defect or that a reasonable inspection of the rental equipment would have exposed a defect prior to leasing. Maryland's interest in the application of Delaware law to a Maryland lessor lies in the potential strict liability judgments against lessors that will result under the more stringent standard.
Bona v. Graefe, 285 A.2d 607, 611 (Md. 1972) (finding that "the liability of the lessor of a chattel, as distinguished from that of a vendor, if it is to be imposed at all in Maryland, must be imposed in a tort action for negligence.").
Id. citing Smith v. Kelly, 229 A.2d 79, 81 (Md. 1967).
While Maryland lessors may be harmed by the application of strict liability to actions that arise in Delaware, they are in a better position to absorb the costs of those risks than an individual resident of Delaware. The potential harm occasioned by the application of Delaware law can only result in Maryland lessors taking greater care before releasing equipment to consumers. To avoid the application of strict liability, lessors can prohibit the transport of rental equipment across the border into Delaware. Here, the evidence supports an inference that REC knew the equipment would be used in Delaware. Delaware provided sound reasoning for its adoption of lessor strict liability. I am persuaded by the same reasons in finding that Delaware's interest in protecting its residents from injuries caused by defective leased equipment is greater than Maryland's protection of its lessors from strict liability judgments.
Fourth, the justified expectations of the parties in this action are at odds. According to its lease agreement, REC required its equipment to be used in the Salisbury metropolitan area exclusively. REC contends that it expected Maryland law to encompass any action arising out of its rental, as a function of its anticipated rental area and the language contained it its lease agreements.
However, the lease agreement also put REC on notice that Mr. Gove was a Delaware resident. Mr. Gove listed a Delmar, Delaware address in the rental agreement. In Paragraph 2(b) of the lease contract, the lessee agrees to use the rental equipment "only at the address designated . . ." in the agreement. By releasing the equipment to Mr. Gove, pursuant to the lease agreement, REC effectively released the property into Delaware. Plaintiffs also contend that discovery revealed numerous REC rental contracts with Delaware residents. REC's history of renting to Delaware residents, its knowledge that this specific lessee resided in Delaware and its lease language requiring that rental equipment be used at the address listed was sufficient to alert REC to Delaware's jurisdiction of personal injury actions involving this equipment.
Additionally, REC contends that its rental contract to Mr. Gove set forth the applicable law governing their agreement. But the fact that the agreement between REC and Mr. Gove sets forth Maryland law as governing the contract does not indicate that torts arising out of the contract will be treated similarly. Courts have previously found that broad choice of law clauses encompass tort actions that arise out of contractual agreements. However, the choice of law clauses in those cases used broader governing language such as "any litigation arising out of or relating to [this] Agreement" or "any claim arising out of or relating to" the agreement.
Turtur v. Rothschild Registry Int'l, Inc., 26 F.3d 304 (2d Cir. 1994); VGS, Inc v. Castiel, 2003 WL 723285 (Del.Ch. 2003).
VGS, Inc, 2003 WL 723285, at *7 n. 29 (Del.Ch. 2003).
Turtur v. Rothschild Registry Int'l, Inc., 26 F.3d 304, 309 (2d Cir. 1994).
Here, the rental agreement is narrowly drawn, stating only that " [t]his Rental Contract is consummated in the State of Maryland and shall be governed by Maryland law." Similar choice of law clauses have been rejected as encompassing tort actions. The choice of law clause chosen by REC refers only to the terms of the agreement and is not broad enough to cover torts arising out of the rental agreement.
Rental Contract between REC and Allawishes Gove, of 6/28/03 at 2.
Gloucester Holding Corp. v. U.S. Tape Sticky Prods., LLC, 832 A.2d 116, 124 (Del.Ch. 2003) (finding that a choice of law clause calling for Delaware law to apply "to the rights of the parties . . . is simply not sufficiently broad enough to cover tort claims.").
The Ebys expected Delaware law to apply as they traveled Delaware's roadways. They never subjected themselves to Maryland jurisdiction. The Plaintiffs chose to file this action in Delaware, the location of the accident. The Plaintiffs expectations should not be altered simply because a contract unrelated to their action was formed in Maryland.
Fifth, this case involves personal injury and wrongful death claims. In personal injury actions, the law of the State where the injury occurred usually applies. In this case, the only connection between the parties is their alleged involvement in an automobile accident in Delaware. Despite REC's contentions, Maryland's relationship to this action remains tenuous and does not override Delaware's general jurisdiction over the matter.
Travelers, 594 A.2d at 47 (citing RESTATEMENT (SECOND) CONFLICTS OF LAWS § 146 (1980)).
Sixth, uniformity and predictability weigh in favor of applying Delaware law. Personal injury and wrongful death claimants expect to have their cases adjudicated according to the laws of the state where their injuries occurred. This Court will not upset that general rule to appease a lessor which subjected itself to Delaware's strict liability laws by leasing equipment into Delaware territory.
Finally, the Court must consider the ease of determination and application of the law to be applied. REC contends that if this Court applies Delaware law, it will become strictly liable, whereas Maryland law would allow the jury to attribute liability among the Defendants. It argues that "Delaware courts should always consider fault in assessing liability in tort cases." REC also argues that applying strict liability would affect its cross-claims against other Defendants.
Id. at 48.
But allowing REC to be subject to strict liability does not mean that it is instantly liable, res ipsa loquitor, based on a rental of equipment that is involved in a personal injury action. Nor does it mean that all other defendants are absolved of liability. Instead, the strict liability system allows that a lessor "may be held liable in tort, without proof of negligence, if the [item] it placed in circulation proved to have a defect that proximately caused personal injury or property damage to the plaintiffs." I find that Delaware's strict liability standards may be fairly and appropriately applied to this claim.
Martin v. Ryder Truck Rental, Inc., 353 A.2d 581, 588-589 (Del. 1976).
When determining the appropriate law to apply to a tort claim, the Court must consider additional contacts including:
(a) the place where the injury occurred,
(b) the place where the conduct causing the injury occurred,
(c) the domicile, residence, nationality, place of incorporation and place of business of the parties, and
(d) the place where the relationship, if any, between the parties is centered.
Travelers, 594 A.2d at 47 (citing RESTATEMENT (SECOND) CONFLICTS OF LAWS § 145 (1980)).
These contacts are to be weighed relatively given their importance to the particular issue.
Id.
REC's alleged failure to maintain its rental equipment, its rental agreement with Mr. Gove and its Maryland incorporation and principal place of business are the only factors that connect this action to Maryland. These factors, which only relate to one Defendant, are not enough to outweigh Delaware's connection to this matter.
First, and most importantly, the only connection between the Plaintiffs and the Defendants named in this action is an automobile accident that occurred on a Delaware roadway. Generally, in actions for personal injury, the law of the State where the injury occurred applies. Second, the conduct causing the injury may have occurred in Maryland or Delaware, depending on the jury's determinations of liability. Third, the Plaintiffs and at least one other Defendant are residents of Delaware. REC is the only Maryland corporation requesting that Maryland law apply. Finally, the relationship between the parties in this action centers on the accident that occurred in Delaware. A balance of these factors leaves Delaware with the most significant relationship to this accident and an overriding interest in ensuring that its residents are adequately compensated for any injuries they suffer on Delaware highways. Applying Maryland law to the Plaintiffs' action would unjustly strip Delaware residents of their full rights of recovery. The Court considers these factors to be the relevant and integral connections to Delaware, thereby establishing the proper application of Delaware law. For the foregoing reasons, the motion is DENIED.
Travelers, 594 A.2d at 47 (citing RESTATEMENT (SECOND) CONFLICTS OF LAWS § 146 (1980)).