Opinion
No. 3:04-CV-401-TS.
October 22, 2004
MEMORANDUM OF DECISION AND ORDER
This matter is before the Court on the Defendant's Motion to Dismiss for Failure to State a Claim [DE 9], filed on July 22, 2004, and the Defendant's Motion to Strike Plaintiff's Untimely-Filed Response [DE 17], filed on August 24, 2004.
The resolution of the Motion to Dismiss turns on which of two limitations laws applies to this diversity action: (1) Indiana's ten-year statute of repose or (2) New Jersey's two-year statute of limitations. The Defendant, Ford Motor Company, argues that Indiana's ten year statue of repose bars the product liability claims brought by Plaintiffs Norman L. Smith, individually and as the representative of the estate of Beverly Smith, Kevin L. Smith, and Jeffrey S. Smith. The Plaintiffs argue that New Jersey law, which does not contain a statue of repose, applies to this case.
BACKGROUND
On March 5, 2003, Beverly Smith, a resident of Indiana, was fatally injured in a car accident in Fort Wayne, Indiana. The accident involved another Indiana resident, Heather Freeman. Mrs. Smith was driving a 1989 Ford Escort, which had been sold and delivered to its initial user nearly fourteen years earlier on July 28, 1989.
The Ford Escort was manufactured and designed by Ford Motor Company and was assembled in Edison, New Jersey. The Defendant is a Delaware Corporation with its principal place of business in Michigan. The Plaintiffs are all Indiana residents. Mrs. Smith bought the 1989 Ford Escort in Indiana from Bob Jackson Ford, Inc., an Indiana corporation.
On October 23, 2003, the Plaintiffs filed a complaint against the Defendant in the Superior Court of the State of New Jersey, alleging that the manufacture of the seat belt in the Defendant's product was defective and negligent and that the seat belt failed to adequately protect Mrs. Smith. On December 3, 2003, the case was removed to the federal district court in Newark, New Jersey. On May 26, 2004, the case was transferred to the Northern District of Indiana upon the Defendant's motion for a more convenient forum. On June 10, 2004, the South Bend Division received and filed the case. On July 6, 2004, the district court in South Bend transferred the case to the Fort Wayne Division based on improper venue.
Before filing their New Jersey case, the Plaintiffs filed a complaint in the Allen County Superior Court against Ford Motor Company, Bob Jackson Ford dealership, and Heather Freeman for the wrongful death of Mrs. Smith. The Plaintiffs voluntarily dismissed, without prejudice, Ford Motor Company and the dealership. The Plaintiffs then re-filed their claims against Ford Motor Company in state court in New Jersey.
On July 22, 2004, the Defendant moved to dismiss the Plaintiffs' Complaint for failure to state a claim, arguing that Indiana's ten-year statue of repose barred the Plaintiffs' suit. On August 20, 2004, the Plaintiffs substituted counsel and also responded to the Defendant's Motion to Dismiss: they asserted that New Jersey, not Indiana, law governed their suit. On August 31, 2004, the Defendant filed a Reply.
On August 24, 2004, the Defendant moved to strike the Plaintiffs' August 20 response as untimely. The Plaintiffs responded on September 14 and the Defendant replied on September 15.
STANDARD OF REVIEW
A motion to dismiss pursuant to Federal Rule of Civil Procedure 12(b)(6) tests the sufficiency of the complaint and not the merits of the suit. Gibson v. City of Chicago, 910 F.2d 1510, 1520 (7th Cir. 1990). The court presumes all well-pleaded allegations to be true and views them in the light most favorable to the plaintiff, and accepts as true all reasonable inferences to be drawn from the allegations. Whirlpool Fin. Corp. v. GN Holdings, Inc., 67 F.3d 605, 608 (7th Cir. 1995). A dismissal under Rule 12(b)(6) for failure to state a claim is not proper "unless it appears beyond doubt that the plaintiff can prove no set of facts in support of his claim which would entitle him to relief." Strauss v. City of Chicago, 760 F.2d 765, 767 (7th Cir. 1985) (quoting Conley v. Gibson, 355 U.S. 41 (1957)).
If a district court considers matters outside the pleadings, the district court must convert the motion into a motion for summary judgment under Rule 56. Ribando v. United Airlines, Inc., 200 F.3d 507, 510 (7th Cir. 1999). However, a district court may take judicial notice of matters of public record without converting a motion for failure to state a claim into a motion for summary judgment. General Elec. Capital Corp. v. Lease Resolution Corp., 128 F.3d 1074, 1080-81 (7th Cir. 1997). This exception applies to matters of public record, orders, items appearing in the record of the case, and exhibits attached to the complaint. Id. at 1081.
DISCUSSION
A. Motion to Strike Untimely ResponseThe Defendant requests that this Court strike the Plaintiffs' response to its Motion to Dismiss because it was filed beyond the fifteen-day period provided in Local Rule 7.1. The Defendant moved to dismiss on July 22, 2004, and served opposing counsel by mail. In its electronic filing of the motion, the Defendant noted that a response was due by August 11, 2004. On August 20, 2004, the Plaintiffs substituted counsel and filed a response.
Northern District of Indiana Local Rule 7.1 allows an adverse party fifteen days after service of a motion to file a response. The adverse party has three additional days to respond when service is by mail. N.D. Ind. L.R. 7.1; Fed.R.Civ.P. 6(e). Under Local Rule 7.1, failure to file a response may subject the motion to summary ruling. The Seventh Circuit has recognized that a district court's "decision whether to apply [a local] rule strictly or to overlook any transgression is one left to the district court's discretion." Stanciel v. Gramley, 267 F.3d 575, 579 (7th Cir. 2001) (quoting Little v. Cox's Supermarkets, 71 F.3d 637, 641 (7th Cir. 1995)).
This Court finds no compelling reason to strike the Plaintiffs' response and will decide the issues before it on their merits. The violation was not egregious, did not adversely affect the Court's docket, and did not prejudice the Defendant.
Moreover, the local rule provides only that the motion may be subject to "summary ruling" upon failure to file a response within the time prescribed. This does not mean that the merits of the motion go unaddressed. In a motion to dismiss under Rule 12(b)(6), the Court's review is limited to the allegations in the complaint. Thus, the Court's analysis, were it to summarily rule on the Defendant's motion without the benefit of the Plaintiffs' response, would not differ from its review of the fully briefed motion insofar as the materials the Court is expected, and allowed, to examine under Rule 12(b)(6). The Defendant's Motion to Strike is denied.
B. Motion to Dismiss 1. Does Indiana or New Jersey Law Apply?
"Statutes of limitations are generally considered part of the forum state's substantive law which federal courts must apply when sitting in diversity." Evans ex rel. Evans v. Lederle Labs., 167 F.3d 1106, 1112 (7th Cir. 1999) (citing Guaranty Trust Co. v. York, 326 U.S. 99, 109-10 (1945)). When a case has been transferred from another district, as it has here, the court must determine whether the state laws of the transferee or the transferor court will apply. The resolution of this issue depends on the basis for the transfer. Wisland v. Admiral Beverage Corp., 119 F.3d 733, 735 (8th Cir. 1997) ("When a diversity case is transferred from one federal court to another, the choice of law depends on the nature of the transfer.").
A district court may transfer a case for the convenience of the parties and witnesses under 28 U.S.C. § 1404(a). A district court must dismiss or transfer a case that is in the wrong division or district. 28 U.S.C. § 1406(a). If the transfer is one for the convenience of the parties, the law of the transferor court applies. Van Dusen v. Barrack, 376 U.S. 612 (1964) (applying law of the transferor forum after a § 1404(a) transfer initiated by the defendant); Ferens v. John Deere Co. 494 U.S. 516, 523 (1990) (discussing the policies that require a transferee forum to apply the law of the transferor court upon transfer under § 1404(a) regardless of who initiated the transfer). Because this case was transferred from New Jersey for convenience reasons, New Jersey choice of law principles apply.
The Defendant argues that, because the Plaintiffs originally filed their case in Indiana and only filed in New Jersey because it was a more favorable forum, the rule that the law of the transferor court is applied for § 1404(a) transfers should not be followed. In essence, the Defendant argues that because the Plaintiffs attempted to forum shop first, the Defendant's own attempt to forum shop should be disregarded. The Defendant has not demonstrated that a departure from the rule prescribed in Van Dusen and Ferens is warranted. The dismissal of the original action in Indiana was without prejudice and there is no evidence that New Jersey was not a permissible forum, i.e., that the transfer was for any reason other than convenience. When the Supreme Court held that a transferee forum must apply the law of the transferor court, regardless of who initiated the transfer, it did so faced with a scenario created by forum-shopping plaintiffs. See Ferens, 494 U.S. at 520 ("The issue now before us arose when the Ferenses took their forum shopping a step further."). The policy considerations that applied in Van Dusen and Ferens apply here also, despite any forum shopping, and this Court must apply the laws of New Jersey.
Each side accuses the other of forum shopping. It has not escaped this Court's attention that the Defendant, upon moving to transfer the case to Indiana as a more convenient forum, acknowledged the holding in Van Dusen and argued to the New Jersey district court that New Jersey choice of law rules would still apply even if the case was transferred to the Northen District of Indiana. (DE 10, Cause No. 2:03-cv-5707, Def.'s Reply Br. at 2) (judicially noticed by this Court as a public record). The Court also notes that it was the Defendant who opted to remove the New Jersey action to federal court after the Plaintiffs filed in state court.
In Ferens, the plaintiffs sued for damages incurred in a three-year-old accident in federal district courts in both Pennsylvania and Mississippi. The Pennsylvania action raised contract and warranty claims to which the Pennsylvania statute of limitations had not yet run. The Mississippi action alleged tort causes of action that would have been barred in Pennsylvania, but were timely under Mississippi's six-year tort statute of limitations. After taking advantage of Mississippi's statute of limitations, the Ferenses then moved under § 1404(a) to transfer the Mississippi action to the federal court in Pennsylvania as the more convenient forum. 494 U.S. at 1277-78.
Deciding that New Jersey's choice of law principals govern does not end the inquiry on the issue of whether New Jersey's two-year statute of limitations or Indiana's ten-year statute of repose applies to bar the Plaintiffs' claims. The Defendant argues that even if New Jersey law is found to apply, its choice of law rule results in application of Indiana's statute of repose.
This case was filed within New Jersey's two-year statute of limitations for personal-injury actions, but beyond Indiana's ten-year statute of repose applicable to product liability claims against manufacturers. Because of the conflict between Indiana's statute of repose and New Jersey's statute of limitations, the case poses a fundamental choice-of-law issue: which statute applies and, depending on that choice, will the Plaintiffs' action be barred? 2. Application of New Jersey's Choice of Law Rules
The Court assumes, based on the Plaintiffs' failure to conduct a New Jersey choice of law analysis, that they presumed that because New Jersey substantive law applied, its two-year statute of limitations would also, automatically, apply.
New Jersey applies a flexible "governmental interest" standard, which requires a court to apply the law of the state with the greatest interest in resolving the particular issue that is raised in the underlying litigation. Gantes v. Kason Corp., 679 A.2d 106, 109 (N.J. 1996); Veazey v. Doremus, 510 A.2d 1187 (N.J. 1986); see also Kramer v. Ciba-Geigy Corp., 854 A.2d 948, 958 (N.J.Super.Ct. App. Div. 2004) (describing standard to require "application of the law of the state with the greatest interest in, or most significant connections with, the issues raised or the parties and the transaction"). This standard was adopted after New Jersey rejected a more mechanical rule that applied the law of the place where the wrong occurred, also described as lex loci delicti. Veazey, 510 A.2d at 1189.
a. Actual Conflict
The initial prong of the governmental-interest analysis requires the court to determine whether there is an actual conflict between the laws of the respective states; this determination is made on an issue-by-issue basis. Gantes, 679 A.2d at 106; Veazey, 510 A.2d at 1187. The issue to be resolved in this case — whether the action was timely filed — is subject to an obvious and direct conflict between Indiana's ten-year statute of repose and New Jersey's two-year statue of limitations.
The Indiana statute of repose provides that a "product liability action in which the theory of liability is negligence or strict liability in tort" must be commenced "(1) within two (2) years after the cause of action accrues; or (2) within ten (10) years after the delivery of the product to the initial user or consumer." I.C. § 34-20-3-1. The Indiana Supreme Court has interpreted this section to mean that the action must be brought within two years after it accrues but in any event within ten years after the product is first delivered to the initial user or consumer. Dague v. Piper Aircraft Corp., 418 N.E.2d 207 (Ind. 1981). Mrs. Smith's accident occurred more than ten years after the Ford Escort was delivered to the initial consumer in 1989. This action would not be timely under Indiana's ten-year statute of repose applicable to product liability actions.
New Jersey law applies a two-year statute of limitations, N.J.S. 2A:14-2, to personal injury actions, including those based on strict product liability. Gantes, 679 A.2d at 109. This suit was filed within two years of the March 5, 2003, accident and the Plaintiff's suit would not be barred under New Jersey law.
b. Governmental Polices Underlying Laws of Each State
If an actual conflict exists, as it does here, the second prong requires the court to identify the governmental policies underlying the law of each state and analyze how those policies are affected by each state's contacts to the litigation and to the parties. Veazy, 510 A.2d at 1189. If a state's contacts are not related to the policies underlying its law, then the state does not possess an interest in having its law apply. Id. at 1189-90.
i. Indiana Statute of Repose
In 1978, the Indiana legislature enacted its statute of repose as part of the Indiana Product Liability Act. See Dague v. Piper Aircraft Corp., 513 F. Supp. 19, 22 (N.D. Ind. 1980). In Scalf v. Berkel, Incorporated, 448 N.E.2d 1201, 1204 (Ind.Ct.App. 1983), the court discussed the goal of the Indiana legislature in enacting the statute in the context of a due process challenge to the statute. The court determined that the statute served two purposes: the general goal of encouraging prompt resolution of claims by limiting the period of time within which a product liability claim could be brought; and the more specific goal of reducing the skyrocketing costs of product liability insurance that manufacturers faced. Scalf, 448 N.E.2d at 1204. This rising costs of insurance was presented, to the General Assembly, as being "fueled by huge increases in the number of product liability claims, large increases in the amounts of settlements and awards, and indications that the victim of an allegedly defective product was favored over the maker of that product in the tort process." Id. The General Assembly's response was to impose a cut-off date after which the manufacturer could not be held liable for defects existing at the time of production.
ii. New Jersey Statute of Limitations
New Jersey's statute of limitations serves the purpose of stimulating litigants to pursue a right of action within a reasonable time so that the opposing party may have a fair opportunity to defend, thus preventing the litigation of stale claims. Gantes, 679 A.2d at 110. It also penalizes dilatoriness and serves as a measure of repose. Id. New Jersey also adheres to the "discovery rule," which "incorporates flexible, equitable considerations based on notions of fairness to the parties and the justice in allowing claims to be resolved on their merits." Id. New Jersey does not have a special rule, similar to Indiana's statute, governing the accrual or limitation of product liability actions.
c. Contacts of Each State
Whether the public policies underlying the laws of Indiana and New Jersey give rise to a governmental interest calling for the application of their law "depends on the nature of the contact that the state has to the litigation and to the parties." Gantes, 679 A.2d at 110. If a state's contacts are not related to the policies underlying its law, then that state does not possess an interest in having its law apply. Veazey, 510 A.2d at 1189-90. It is the qualitative, not the quantitative, nature of the state's contacts that ultimately determines whether its law should apply. Id. at 1190.
Indiana's contacts are as the site of the accident and the domicile of the Plaintiffs. Also, the car involved in the accident, and the subject of the lawsuit, was sold by an Indiana dealership. The car was assembled, however, in New Jersey.
In Gantes, the New Jersey Supreme Court undertook a choice of law analysis to determine whether Georgia's ten-year statute of repose or New Jersey's two-year statute of limitations should apply to a product liability case filed in New Jersey. The allegedly defect product was manufactured in, and placed into the stream of commerce from, New Jersey. The fatal injury occurred in Georgia and the plaintiffs were Georgia residents. The Court concluded that New Jersey had the more significant contacts in relation to the policies behind the competing limitation statutes. Gantes proves relevant to this Court's New Jersey choice of law analysis.
The Gantes court recognized the deterrent goal of tort law to be especially important in the field of products liability law. 679 A.2d at 111. The court concluded that New Jersey had a
strong interest in encouraging the manufacture and distribution of safe products for the public, and conversely, in deterring the manufacture and distribution of unsafe products within the state. That interest is furthered through the recognition of claims and the imposition of liability based on principles of strict products-liability law.Id. at 111-12. Further, the case was materially connected to New Jersey by the fact that the allegedly defective product was manufactured in and then shipped from that state by the defendant-manufacturer.
This material connection alleviated the problem that the policy against forum shopping was aimed to solve: ensuring that New Jersey courts were not burdened with cases that had only "slender ties" to New Jersey. Gantes, 679 A.2d at 113.
Having determined that New Jersey had a cognizable and substantial interest, the court went on to compare and weigh this interest against any governmental interest Georgia had in applying its statue of repose in light of Georgia's contacts with the litigation and the parties. Id. at 113. Georgia's statute of repose was enacted as an effort to stabilize the Georgia insurance industry and to keep stale claims out of Georgia courts. Thus, because Georgia had no contacts with the defendant manufacturer, the policies behind its statute of repose did not give rise to a governmental interest that had to be protected by applying its statute of repose to foreclose the suit in New Jersey. Id. No Georgia law would be frustrated by applying New Jersey's statute of limitations to allow the action to proceed. Id. at 113-14.
The Gantes case is directly on point and dictates that this Court apply New Jersey's two-year statute of limitations rather than Indiana's ten-year statute of repose. Although the Plaintiffs are Indiana residents and the accident at issue happened in Indiana, these contacts with the state of Indiana do not implicate the policies of its statute of repose. In contrast, the Defendant's contact with New Jersey, as the state where the product was assembled, is material and implicates New Jersey's policy in deterring tortious conduct of manufacturers.
The Defendant attempts to distinguish Gantes on two grounds. First, the Defendant argues that the policy behind Indiana's statute of repose would be frustrated if New Jersey law is applied. However, just as in Gantes, there is no evidence that the Indiana legislature intended to protect manufacturers outside Indiana. Rather, the statute of repose was the General Assembly's response to the specific problem of skyrocketing product liability insurance costs. Likewise, in Gantes, the court reasoned that the statute of repose was enacted to stabilize the Georgia insurance industry and concluded that Georgia's contacts did not implicate the state's concerns about open-ended liability on the insurance industry. Here, the Defendant has not shown how allowing the Plaintiffs' claim to go forward against the Defendant would frustrate Indiana's concerns given that the Defendant is not an Indiana manufacturer and the Ford Escort was not manufactured in Indiana. That the Plaintiffs are Indiana residents does not implicate the policies of Indiana's statute of repose.
For an example of a case where the plaintiffs' domicile was important and constituted a significant contact, see Veazey v. Doremus, 510 A.2d 1187 (N.J. 1986). In Veazey, the court held that the law of Florida, the plaintiff and defendant spouses' state of domicile, rather than New Jersey, where the car accident happened, was applicable in determining whether interspousal immunity applied to bar one spouse from suing another for personal injuries arising out of her negligent operation of a car. New Jersey's interests, as the situs of the accident, were unrelated to the immunity of a party from suit because of family relationship. Veazey, 510 A.2d at 1190.
The second argument the Defendant makes in attempt to distinguish Gantes is that the Defendant does not have the "intimate relationship" with New Jersey that the manufacturer in Gantes had by being incorporated and having its principal place of business in New Jersey. Here, the Defendant was incorporated in Delaware and had its principal place of business in Michigan. The Defendant does not indicate how this contact is significant in light of the policies behind the statutes at issue. In fact, the Gantes court did not even focus on these contacts in its choice of law discussion. The significant contact, rather, was the state where the product was manufactured, which also happened to be New Jersey. Cf. Heavner v. Uniroyal, Inc., 305 A.2d 412 (N.J. 1972) (concluding that New Jersey had no substantial interest in a products liability action where the defendant was incorporated in New Jersey but there was no allegation that the defendant had actually manufactured the allegedly defective product in New Jersey). This Court concludes that it is more sensible to determine product liability limitations not by focusing on the place of the accident, the domicile of the plaintiffs, or the defendant's state of incorporation, but rather, by focusing on the state where the product at issue was manufactured.
Although Gantes is not distinguishable, the cases cited by the Defendant are. First, the Defendant cites Seals v. Langston Co., 502 A.2d 1185 (N.J.Super.Ct. App. Div. 1986), where a New Jersey appeals court applied Louisiana's limitations laws over New Jersey's laws even though the allegedly defective product was manufactured in New Jersey. The court based its ruling on a desire not to discriminate against its own residents. The New Jersey Supreme Court held in Gantes: "We disagree with the rationale employed in Seals and the lower court's reliance on that decision." 679 A.2d at 112. Thus, Gantes specifically overruled Seals and the Defendant's reliance on it is misplaced.
Second, the Defendant cites Heavner v. Uniroyal, Inc., 305 A.2d 412 (N.J. 1973), which as mentioned above, is distinguishable because, in that case, there was no allegation that the defendant, a New Jersey corporation, actually manufactured the allegedly defective product in New Jersey. See Gantes, 679 A.2d at 110-11 (describing the defendant in Heavner as having a "virtual nonpresence" in New Jersey because its only contact was that it was incorporated in that state and distinguishing it with a case where the defendant was not merely incorporated in New Jersey, but had its principal place of business there).
The third case relied upon by the Defendant, Deemer v. Silk City Textile Mach. Co., 475 A.2d 648 (N.J.Super.Ct. App. Div. 1984), was also convincingly distinguished by the New Jersey Supreme Court in Gantes:
The Deemer case, relied on by the lower courts to reach a different conclusion, is distinguishable. In that case, the court found that the application of New Jersey law to allow an action brought by the North Carolina resident against a manufacturer that was no longer in New Jersey would actually "frustrate the policies of North Carolina's workers' compensation laws." 193 N.J. Super. at 651, 475 A.2d 648. No Georgia law is frustrated by the application of New Jersey's statute of limitations to allow the action to proceed in this State.679 A.2d at 114. Here, the Defendant has not demonstrated that Indiana's law would be frustrated by applying New Jersey's statute of limitations.
On the narrow issue of whether the action will be deemed time-barred, the Court concludes that Indiana's contacts with the litigation and the parties, although numerically greater, are not more significant or weighty than those of New Jersey. Accordingly, New Jersey's two-year statute of limitations applies and the Plaintiffs' suit is timely. The Defendant's motion to dismiss is denied.
CONCLUSION
For the foregoing reasons, the Defendant's Motion to Dismiss [DE 9] is DENIED and the Defendant's Motion to Strike [DE 17] is DENIED.
SO ORDERED.