Exam Number

HAMLINE UNIVERSITY SCHOOL OF LAW

Date of Examination: Monday, May 12 Professor --Pielemeier

Spring Semester 2003

FINAL EXAMINATION – CONFLICT OF LAWS

CODE OF CONDUCT

Violations of the Code of Conduct include (1) unauthorized conversation among students concerning the examination; (2) giving, receiving, or soliciting unauthorized aid; (3) using materials that 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

1. This examination consists of five (5) page(s) in addition to this cover page. Please ensure that you are not missing any pages.

2. The time allowed for this examination is three (3) hours.

3. Outside material permitted: Casebook only (may be annotated).

4. SPECIAL INSTRUCTIONS:

a. This examination consists of five questions. There are suggested amounts of time for each question. These suggested times total two hours and fifty minutes, giving you an additional ten minutes to use as you see fit.

b. An answer containing only your conclusions will receive little credit. 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.

c. Unless otherwise indicated, assume that a “state” or “F-1,” etc. is one of the United States.

QUESTION I (10 minutes)

Briefly discuss your understanding of what sorts of laws constitute “penal laws” and the rationale for the traditional choice of law principle that States will not enforce the penal laws of other States.

QUESTION II (10 minutes)

Hughes v. Fetter (page 394 of your casebook) has been described as standing in part for the principle that States cannot discriminate against causes of action from other States. Yet, in Marchlik v. Coronet Insurance Co. (page 158 of your casebook) and Davis v. Furlong (in your supplemental materials), Illinois and Minnesota declined to enforce claims brought under the Wisconsin direct action statutes. Describe your understanding of why the decisions in Marchlik and Davis are not inconsistent with the Hughes non-discrimination principle.

QUESTION III (30 minutes)

Smith, who is 26, and Taylor, who is 13 are from State X. They took vacations with their families at the same resort in Mexico. During the vacation, Taylor was seriously injured when he was hit by a personal watercraft operated by Smith. Smith was likely at fault and Taylor was arguably at fault. Taylor sued Smith in a court in State X.

Under the law of Mexico, damages in such cases are limited to actual economic loss, in this case probably medical and rehabilitative expenses. In addition, under the law of Mexico, contributory negligence is a complete defense. Under the law of state X, damages for pain and suffering would be permissible, and a form of comparative fault would apply.

Discuss the result you believe the courts of X would reach on the choice between Mexico law and the law of State X, (1) if the courts of State X applied the “Better Law” approach using Professor Leflar’s choice influencing factors, and in the alternative (2) if the courts of State X applied traditional territorialist choice of law rules. Include discussion of how you think the court would reason to its result under each approach. Conclude your discussion with your opinion on which of the two approaches is more satisfactory and why.

QUESTION IV (60 minutes)

States X and Y are adjacent to each other. Adams, who lived in State X, had high levels of cholesterol. In July of 2002, he was at home when he read an advertisement in a popular magazine for Lowercol, a prescription drug. The advertisement proclaimed that Lowercol was very effective in reducing cholesterol.

Adams went to his doctor in State X and asked him if he would write Adams a prescription for Lowercol. The doctor did so, but informed Adams that he should make appointments 1, 2, 4, and 6 months after Adams began taking the drug to undergo some blood tests. The doctor gave Adams a card on which he wrote approximate dates Adams should make these appointments.

Adams had the prescription filled in State X and began taking the drug. He neglected, however, to make the first three follow-up appointments with his doctor. He did make an appointment in January, 2003, after which it was determined that Adams had suffered severe and irreversible damage to his liver, probably as a result of his taking Lowercol.

Lowercol is manufactured by Baler, Inc., a State Y corporation with its principal place of business and manufacturing facilities in state Y. In literature Baler provides to physicians, liver damage is listed as a possible side effect of Lowercol. The literature advises physicians to do the blood tests Adams’ doctor had recommended, and to advise their patients to discontinue taking Lowercol if there is any indication of liver damage on any of the tests. If Adams had made the earlier appointments that he missed, it is likely that liver damage would have been detected, that he would have been advised to discontinue the drug, and that he would have avoided the severe and irreversible damage from which he now suffered.

The law firm for which you work has agreed to represent Adams in a lawsuit against Baler. The theory of recovery is that Baler negligently failed to warn Adams about possible liver damage resulting from Lowercol. There had been no warnings of any kind in the magazine advertisement that Adams had read. The suit has been filed in State Y for reasons that will become apparent. There are two issues in the case on which the court’s choice of law will be important.

The first issue is whether Baler is protected by the “learned intermediary” doctrine. Under this doctrine, a drug manufacturer is relieved from warning each patient who receives its product when the manufacturer has informed the prescribing physician of the product’s dangers. Thus, a drug manufacturer’s duty to warn about the dangers of its products extends only to the prescribing physician, who acts as a “learned intermediary” between the manufacturer and the individual patient, who can weigh the health benefits of the medication against its potential danger.

Under the law of state X (and every other state in the United States except state Y), the learned intermediary doctrine would prevent Adams from recovering against Baler.

However, in a case brought by a state Y resident against another state Y drug manufacturer, the Supreme Court of state Y recently carved out an exception to the learned intermediary doctrine. It held that the doctrine does not apply when the drug manufacturer markets the product directly to consumers, such as in advertisements in popular magazines that Adams read. The court stated, “When mass marketing of prescription drugs seeks to influence a patient’s choice of a drug, a pharmaceutical manufacturer that makes direct claims to consumers in our state for the efficacy of its product should not be unqualifiedly relieved of a duty to provide proper warnings of the dangers or side effects of the product.” Thus, under the law of state Y, the learned intermediary doctrine would not preclude Adams from recovery. (Assume for purposes of this question that state X would refuse to make this exception.)

The other issue on which the court’s choice of law may be important is the issue of comparative fault. Under State X law, a plaintiff can recover damages from a defendant proportionate to the defendant’s share of fault, even if the plaintiff’s fault is greater than that of the defendant. State Y also applies principles of comparative fault, but under its law, a plaintiff can recover from a defendant only if their fault was not greater than that of the defendant. You are worried that a jury may not look kindly on Adams’ failure to make his early follow-up appointments, and thus would prefer that state X law on comparative fault would apply.

State X uses the traditional territorialist approach to resolving conflict of laws issues, and you have decided not to sue there because you believe its courts would apply the learned intermediary doctrine. State Y’s courts, however, have adopted Interest Analysis. State Y’s Supreme Court has stated that it would consider arguments based on principles applied and precedent from other states that have adopted interest analysis, including New York. It also stated, however, that it was not inclined to include Comparative Impairment in its methodology, so you need not go into that in your analysis of this question.

Taking into account and noting arguments you think Baler, Inc.’s attorneys might reasonably make to the contrary, discuss how you would try to persuade state Y’s courts to apply state Y law on the applicability of the learned intermediary doctrine and state X law on the issue of comparative fault. After discussing each of these issues, give a brief evaluation of your likelihood of success.

QUESTION V (60 minutes)

This question involves three different judicial rulings. Be sure to address each of the three. Read the entire question before beginning your answer.

Calder, a resident of California, bought some Arizona real property from Davis, a citizen of Arizona. All negotiations for the purchase took place in Arizona. The purchase price was $110,000. To pay for the property, Calder paid Davis $10,000 as a down payment. He also borrowed $80,000 from BigBank, an Arizona bank, which he paid to Davis at the closing in Arizona, and he gave BigBank a first mortgage on the property, securing the $80,000 debt. Finally, he gave Davis a note and second mortgage for $20,000, securing payment of the remaining $20,000. Calder was to make monthly payments on both mortgages.

Calder soon fell behind on his mortgage payments and BigBank foreclosed on its mortgage. At the foreclosure sale, the house was purchased for approximately $80,000, which satisfied Calder’s obligation to BigBank.

Calder still owed Davis approximately $19,000 on the note. Davis sued Calder for this amount in a California court. The court denied recovery based on a California statute that read as follows:

No deficiency judgment shall lie in any event after the sale of real property for failure of the purchaser to complete his or her contract of sale or mortgage given to the vendor to secure payment of the purchase price of that real property.

Under this statute, a seller of real property who takes a mortgage to secure partial payment for the property can look only to the secured real property to recover. Thus, Davis’ only recourse for Calder’s debt was to have bid on the property at the foreclosure sale above the $80,000 winning bid and then, if he wanted, sell the property again, presumably recovering the amount of Calder’s debt from the proceeds of the sale. One purpose of the statute is to prevent sellers of real property from pricing the property beyond what it is really worth and demanding a debt from the buyer for the excess amount. If they really think the property is worth the price, they should have no qualms about looking to the property alone for recovery.

No similar legislation existed in Arizona.

In the course of the California proceeding, Davis’ attorney argued that application of the California statute violated the due process and full faith and credit clauses of the United States Constitution, but the court explicitly rejected this argument and entered judgment for Calder. (Consider this ruling number one.) Davis did not appeal.

Davis then brought suit against Calder for the $19,000 in an Arizona court. Calder defended on ground that the California judgment precluded the suit based on claim preclusion principles, and that under the Arizona court’s obligation to give the California judgment full faith and credit, the suit should be dismissed.

The Arizona court rejected Calder’s defense, asserting three grounds: (1) The California court’s application of the California statute violated the due process and full faith and credit clauses of the United States Constitution; (2) the California court had no subject matter jurisdiction to affect rights involving real estate in Arizona; and (3) the California judgment was not “on the merits,” because it was based on California’s inability to provide the remedy that was sought, rather than on a determination that Davis had no right against Calder for $19,000; and since Arizona was simply affording a remedy unavailable in California, full faith and credit did not preclude relief. The Arizona court then entered judgment for Davis against Calder for $19,000. (Consider this ruling number 2.) Calder did not appeal.

Calder had no assets in Arizona upon which Davis could execute his judgment, and he refused to write Davis a check for the amount. Davis then brought an action to enforce his Arizona judgment in California.

The California court refused to enforce the Arizona judgment on the ground that its earlier judgment had clearly been on the merits (citing several reported California cases) and that the Arizona court had unconstitutionally denied full faith and credit to California’s judgment. (Consider this ruling number 3.)

Discuss the propriety of each of the rulings.