Date of Examination: December 14, 1993
Professor
J.R. PIELEMEIER
CODE OF CONDUCT
Violations of the Code of Conduct include: (1) unauthorized con- versation among students concerning the examination; (2) giving, receiving, or soliciting unauthorized aid; (3) using materials which are not specifically permitted by the written examination instruction; (4) exceeding the examination time limit; or (5) any other dishonest conduct in connection with the examination.
INSTRUCTIONS
a. This examination consists of three questions, with suggested times as follows: Question I: 30 minutes; Question II: 90 minutes; Question III: 45 minutes. The total amount of suggested times is two hours and forty-five minutes, leaving you an extra fifteen minutes to allocate as you deem appropriate.
b. Particularly with respect to Question II, you are urged to spend a significant amount of time thinking about and organizing your answer before you begin writing. (Preferably at least one third of the suggested time for Question II).
c. Taking into account the amount of suggested times, discuss all issues reasonably raised by each question, even though your resolution of one issue may seem to render the others moot.
Bob Edwards was born in Arizona in 1968, and grew up and went to college in that state. As he was growing up, Bob and his parents would make occasional holiday visits to Bob's Uncle John and Aunt Leslie, who lived in Minnesota. When he was sixteen, Bob spent the entire summer at John and Leslie's in Minnesota, during which he spent a lot of time fishing.
In 1990, Bob took a public tour of a Ford Motor Company assembly plant in Arizona. During this tour, Bob was severely injured in an accident that appeared to be the fault of Ford. These injuries included severe painful burns over much of his body. Bob had to be hospitalized in Arizona for several months.
In 1992, Bob moved to Minnesota, where he obtained full-time employment as an accountant. Bob then sued Ford in a Minnesota court for the injuries incurred in the Arizona accident.
The laws of Minnesota and Arizona pertinent to Bob's claim are essentially identical, with one exception. In 1989, as part of extensive tort reform legislation, Arizona passed a statute limiting damages for pain and suffering in tort actions to no more than $300,000. Although some plaintiffs challenged the constitutionality of this legislation in the Arizona courts (as infringing on one's right to a jury trial, for example), it was upheld by the Arizona Supreme Court and review was denied by the U.S. Supreme Court. Minnesota law has no limit on the amount of damages that can be awarded for pain and suffering in tort actions.
Assume that the Minnesota court asserted assert personal jurisdiction over Ford in Bob's action based on the presence of the Ford plant in St. Paul. Assume this was constitutionally permissible. Also assume that the Minnesota court, using the Better Rule approach, applied Minnesota law on the issue of damages for pain and suffering, that the jury returned a verdict which included $2,000,000 in damages for pain and suffering, and that judgment was entered accordingly.
The judgment was affirmed by the Minnesota appellate courts. Ford, which has raised the issue throughout the litigation, has successfully sought review by the U.S. Supreme Court on the issue of whether it was constitutionally permissible for the Minnesota courts to apply Minnesota law on the issue of damages for pain and suffering. Discuss how the Court should rule.
Note: A brief summary of the state laws referred to in this question appears on the last page of this exam. You may find it helpful to detach and refer to it in reading and preparing your answer to this question.
The "Tri-Cities" area is a moderately-sized metropolitan area which includes three small cities and some suburbs in three different states (States X, Y, and Z). The following people live in this area. Mary Adams and John Baker are domiciliaries of State X. David Cass is a small businessman who is a domiciliary of State Z. He owns and operates the Cass Bar, which is located in the main entertainment district of the Tri-Cities, which is in State Z. Cass is also half owner of Cass Video, a small video rental store in State X. Cass Video is set up as a partnership, with David and his son Bill being equal general partners. Bill manages the operation of Cass Video.
One day Adams, who was twenty one weeks pregnant, was driving in State Y when Baker's automobile collided with hers. Although this occurred in State Y, it happened only three blocks away from the Cass Bar. Baker had been drinking at the Cass Bar and was highly intoxicated. Although Mary was not wearing her seat belt, her own physical injuries were not terribly severe (two broken bones and some non-facial cuts, which satisfactorily healed after a number of weeks). Shortly after the accident, however, she suffered a miscarriage (apparently as a result of the accident), causing her severe emotional pain.
Adams has come to your office and wishes to sue. You have reason to believe that Baker has no substantial assets and has only the minimum insurance coverage required by State X. You also have reason to believe that Cass has significant insurance coverage, which he purchased in State Z, for any liability arising out of the operation of the Cass Bar. You have doubts that Cass has any other substantial unsecured assets.
Your review of the laws of the states has revealed the following.
States X and Z apply principles of comparative fault, permitting plaintiffs to recover against a defendant if their fault was not greater than that of the defendant (with a reduction in damages proportionate to the plaintiff's fault). In State Y, contributory negligence is a complete defense. State Y, however, has a statute that provides, "In any action for personal injury incurred in the course of operating a motor vehicle, evidence of failure to wear a seat-belt shall not be admissible to prove contributory negligence." Such evidence would be admissible as relevant to the issue of comparative fault in States X and Z.
Under the law of State Y, there is no cause of action for the wrongful death of a fetus. A case so holding reasoned that "damages and causation would be too speculative to warrant liability against a defendant." Under the law of State X there is such a cause of action. Available damages in such an action in State X are limited to an estimate of the pecuniary benefits that the child would have contributed to the family had it been born and lived a normal life. Jurors may infer that an unborn child would have contributed a "reasonable" amount of pecuniary benefits. State Z also recognizes a cause of action for the wrongful death of a fetus, but in contrast to State X, only if the fetus was "viable" at the time of death (reasoning that a fetus is a "person" under its wrongful death statute only if it could normally survive outside the womb). Medical evidence is conflicting on whether a twenty one week old fetus is "viable." Available damages in such an action in State Z include, in addition to the damages permitted by State X, awards to parents for their "loss of society and companionship" of the child, and for their mental pain and suffering. Assume that State Z's laws on this issue reflect the modern "trend" in the United States.
Both States X and Y have dram shop statutes which, if applicable, are likely to permit liability against the Cass Bar for its continued serving of alcoholic beverages to Baker when he was obviously intoxicated. Under the dram shop law of State Y, punitive damages would be available under these circumstances. State Z has no dram shop law, and its law would not permit the imposition of any liability on the Cass Bar.
Finally, under the laws of State X and State Y, insurance coverage for punitive damages is void, and an award of punitive damages may not be paid out of insurance coverage. The rationale is that the availability of insurance would undercut the deterrence and punishment purposes of punitive damages, which should be recovered out of the personal resources of the defendant. Under the law of State Z, such insurance coverage is not void, and punitive damages may be paid from insurance coverage. State Z's law on this point is premised on the freedom of insurers and insureds to contract for insurance as they see fit. You understand that liability insurance policies issued in State Z have generally been construed to include coverage for such damages.
There appear to be no statute of limitations problems regarding claims against either Baker or Cass in any of the three states.
State X applies the traditional Territorialist approach to choice of law issues. State Y applies Interest Analysis. State Z applies Professor Leflar's Better Rule Approach. Each state will consider principles and precedent from all other states that use the same approach.
Where would you recommend that Adams file suit? Explain the reasoning that leads to your conclusion.
Harry and Wilma Jones were married, and during their marriage acquired houses in both Ohio and New Mexico. They considered their house in Ohio to be their primary residence.
In 1992, Harry borrowed $112,000 from BigBank, which was a bank in Ohio near their home there. Harry signed a loan agreement, which had BigBank's standard choice of law provision to the effect that "all disputes arising out of and in connection with this loan shall be governed by Ohio law".
Harry used the money to purchase stock in a corporation, and pledged the stock as security for the loan. The stock soon became worthless, and Harry defaulted on the loan.
BigBank sued Harry for the loan amount plus interest in an Ohio state court. Although Harry had notice of the suit, he did not appear to defend, and the court entered a default judgment against him in the amount of $120,000. In part because of Ohio's provision that primary residences are exempt from execution, BigBank was unable to locate sufficient assets of Harry in Ohio to satisfy the judgment.
BigBank then filed suit on the Ohio judgment in New Mexico. Again, Harry had notice of the suit, but did not appear to defend, and a default judgment against him was entered.
BigBank then initiated proceedings in New Mexico to foreclose on the Jones' New Mexico house to satisfy the New Mexico judgment, giving notice to both Harry and Wilma, and naming both as defendants. Because it was not their primary residence, this house would not be exempt from execution under either New Mexico or Ohio law.
In partial defense of the foreclosure proceedings, the Jones alleged that their New Mexico house was community property, and that because the judgment was only against Harry, BigBank could not foreclose against Wilma's interest in the house.
This would be a valid defense under Ohio law, which is a "separate property" state. Under Ohio law, joint owners of property each have a separate interest in the property, which cannot be foreclosed upon to satisfy obligations of other joint owners.
New Mexico, however, is a community property state, where property acquired by either a husband or wife during marriage is the "community property" of both.
Under New Mexico law, "community debts" may be satisfied by foreclosure upon "community property." "Community debts" under New Mexico law are debts contracted or incurred by either spouse during marriage, unless the debt is specifically excepted by law as a "separate debt."
Under New Mexico law, for a loan to constitute a "separate debt" of only one spouse, the loan documentation must expressly state that the obligation is a "separate debt." This requirement is to assure that creditors have agreed to and have notice that a "community debt" is not being created. For a judgment to create a "separate debt," the judgment must expressly state that it is doing so. Neither Harry's loan documentation, nor the judgments against him included such express provisions. (Under Ohio law, neither Harry's promise to repay the loan nor any of the judgments against him would create any obligation on the part of Wilma).
In the foreclosure proceedings, BigBank argued that in light of the foregoing laws, the New Mexico judgment should be found to be a "community debt," justifying foreclosure against both Harry's and Wilma's interest in the house.
Discuss how the proceedings should be resolved.
State X
Comparative fault
Seat Belt Evidence Admissible
Recognizes claim for wrongful death of fetus
Damages = Pecuniary benefits
Dram shop liability
Punitive damages not insurable
State Y
Contributory Negligence a Complete Defense
Seat Belt Evidence not Admissible
Does Not Recognize claim for wrongful death of fetus
Dram Shop Liability
May Include Punitive Damages
Punitive Damages not insurable
State Z
Comparative fault
Seat Belt Evidence Admissible
Recognizes claim for wrongful death of fetus if viable
Damages = Pecuniary benefits, loss of society, etc.
No Dram Shop Liability
Punitive damages insurable