Motor Club of America Insurance v. Hanifi ( 1998 )

PUBLISHED
UNITED STATES COURT OF APPEALS
FOR THE FOURTH CIRCUIT
MOTOR CLUB OF AMERICA INSURANCE
COMPANY,
Plaintiff-Appellant,
and
LORRAINE WEIL; CAROL WILKE;
LAWRENCE WILKE; MICHAEL WILKE,
Plaintiffs,
No. 96-1603
v.
EBRAHIM HANIFI; GULAGHA SULTAN,
Defendants-Appellees,
and
ALLSTATE INSURANCE COMPANY,
Defendant.
Appeal from the United States District Court
for the District of Maryland, at Baltimore.
Andre M. Davis, District Judge.
(CA-94-2021-AMD)
Argued: April 9, 1997
Decided: May 21, 1998
Before WILKINSON, Chief Judge, WIDENER, Circuit Judge, and
DUFFY, United States District Judge for the District of
South Carolina, sitting by designation.
_________________________________________________________________
Vacated and remanded by published opinion. Judge Widener wrote
the opinion, in which Chief Judge Wilkinson and Judge Duffy joined.
COUNSEL
ARGUED: Joanna Jesperson, EPSTEIN, BECKER & GREEN, P.C.,
Washington, D.C., for Appellant. Richard Thomas Radcliffe, Jr.,
CHURCH & HOUFF, P.A., Baltimore, Maryland, for Appellees. ON
BRIEF: David E. Manoogian, Peyton S. Isaac, EPSTEIN, BECKER
& GREEN, P.C., Washington, D.C., for Appellant.
_________________________________________________________________
OPINION
WIDENER, Circuit Judge:
In this case, Motor Club of America Insurance Company appeals
the April 3, 1996 order of the United States District Court for the Dis-
trict of Maryland granting summary judgment in favor of two New
York defendants, Ebrahim Hanifi and Gulagha Sultan. The district
court ruled that Maryland's law governed the issue of liability for the
automobile accident so the plaintiffs had to establish the identity of
the driver and show his negligence. The court therefore rejected the
application of New York Traffic and Vehicle Law§ 388 which
imposes vicarious liability on the owners of vehicles registered in
New York for the negligence of any permissive users, even when the
car is outside of New York. The court decided that the plaintiffs could
not establish a genuine issue of fact as to the identity of the driver of
the vehicle which caused the accident and thus summary judgment
was appropriate as to both defendants.
We reverse the grant of summary judgment because we find the
plaintiffs did establish a genuine dispute of fact as to the identity of
both the driver and the car. Additionally, we find summary judgment
as to Hanifi was also improper where the district court erred in not
applying New York Section 388.
I.
The plaintiffs, Lorraine Weil, and the Wilkes--Lawrence, Michael
and Carol--resided in New Jersey at the time of the accident. The
defendants, Ebrahim Hanifi and his brother-in-law Gulagha Sultan are
2
residents of New York. At all times relevant to this action Mrs. Weil
had an uninsured motorist policy with plaintiff-intervenor Motor Club
which provided her with insurance coverage in the event that she
became injured, or otherwise incurred damages from the actions of an
uninsured motorist. The Wilkes were not insured by Motor Club.
On May 11, 1991 at about seven a.m. the plaintiffs were traveling
south in the passing lane on Interstate 95 in a vehicle owned and
driven by Robert Weil, Mrs. Weil's husband. According to the plain-
tiffs and witnesses the accident resulted when a white car from the
northbound lanes crossed over the median strip into the southbound
lanes just in front of the plaintiffs' car. The police report indicates that
the white car performed a U-turn into the southbound lanes, and while
it did not strike the plaintiffs' car, in swerving to evade the white car,
the plaintiffs' car struck another and overturned. The white car left the
scene heading south.
The occupants of two other southbound cars witnessed the accident
and reported what they saw to police. John McGovern was driving
south on Interstate 95 with his wife Elda McGovern in the passenger
seat when they saw the accident and proceeded to follow the white
car as it drove off. They both saw the license plate and Mrs. McGov-
ern recorded it. Shortly thereafter they stopped at a fire station to call
the police. Officer James Gruver later included that information in a
supplement to the accident report. The accident was also witnessed by
Colleen Young. She too followed the white car, and was observed by
the McGoverns as they both trailed the white car. Miss Young also
remembered the number and relayed the information to the police.
Officer Gruver recorded the license plate number as New York tag
number VZY-653, the same license number reported by both the
McGoverns and Miss Young. Officer Gruver investigated the tag
number and determined that Ebrahim Hanifi owned a white car with
that license plate. The police report reflects that the McGoverns iden-
tified the occupants of the cars as three black males, while Young said
they were three white males.
Hanifi admits that in May 1991 he owned a white car with New
York plates VZY-653. However, he states that in April 1991 he had
loaned the car to his brother-in-law, Sultan. Sultan's statement cor-
3
roborates this, and he states that he had exclusive possession of the
vehicle, and that only he knew where he kept the spare set of keys.
Sultan further verifies that the car was in his possession in New York
on the day of the accident, May 11, 1991. Four family members
signed affidavits to the effect that the car was in Sultan's driveway
the morning of the accident. Sultan also stated that while his car was
not involved in the accident at issue, it was involved in a "slight
fender-bender" earlier in April 1991.
II.
Motor Club notes that this action had an involved procedural his-
tory prior to the filing of this suit in the Maryland district court.1 We
detail here only the procedure of the instant suit, which is all that is
relevant to the issue at hand.
On May 10, 1994 the individual New Jersey plaintiffs filed their
negligence action against the New York defendants, Hanifi and Sul-
tan, in the Circuit Court for Harford County, Maryland, alleging that
the defendants caused the Maryland wreck. The defendants removed
the action to the United States District Court for the District of Mary-
land on the basis of diversity jurisdiction. Thereafter, the defendants
filed a third-party complaint against Motor Club alleging that because
the defendants were not involved in the accident, Motor Club was lia-
ble to Mrs. Weil as her uninsured motorist carrier.
_________________________________________________________________
1 Motor Club represents that the individual plaintiffs sued Motor Club
in New Jersey on March 4, 1994. Motor Club then filed a third-party
complaint against Allstate Insurance Company, Hanifi's liability carrier.
Motor Club and Allstate entered intercompany arbitration, and the latter
was adjudged liable. The plaintiffs here have filed suit in a state court in
Maryland, where the accident occurred. That case was removed to the
district court.
The litigation in New Jersey was stayed pending the outcome of the
Maryland action, and all the parties to the New Jersey action, the individ-
ual plaintiffs and the two insurance companies, have entered into a stipu-
lation whereby all issues of liability will be decided by the Maryland
action.
4
On January 17, 1995 defendants Hanifi and Sultan filed their first
motion for summary judgment against the plaintiffs, asserting that
there was insufficient evidence to prove the identity of the driver of
the white vehicle which caused the accident. In their respective
answers to interrogatories, Hanifi admitted ownership of a white four-
door Oldsmobile with the New York registration "VZY-653," and
Sultan admitted that he possessed the white car on the day of the acci-
dent, and that it was parked at his house. Motor Club opposed the
motion for summary judgment on the grounds that it was premature,
that the prior intercompany arbitration had found that Hanifi's car had
caused the accident, and that there was sufficient evidence from
which to find the defendants liable for the accident. On March 2, 1995
the court found that Motor Club had fulfilled its burden of coming
forward with evidence to create a genuine dispute of fact and denied
the defendants' motion for summary judgment. The defendants
moved in April for reconsideration of their motion for summary judg-
ment, which the court denied on May 1, 1991.
On April 10, 1995 the defendants had moved to dismiss the third-
party complaint against Motor Club. Motor Club opposed the defen-
dants' motion and simultaneously filed its own motion to intervene in
the lawsuit. The court denied the motion to dismiss and granted Motor
Club's motion to intervene. On May 24, 1995 Motor Club filed its
complaint in intervention suing both the individual plaintiffs and the
defendants for declaratory relief and indemnification. Motor Club
alleged that because the accident was caused by a known vehicle, the
one owned, insured, and registered to Hanifi and in the admitted
exclusive possession of Sultan, Motor Club as the uninsured motorist
carrier for Mrs. Weil was not responsible for her damages.
In their third attempt to secure summary judgment, on November
15, 1995, Hanifi and Sultan renewed their motion for summary judg-
ment. In opposition to the motion, Motor Club argued that New York
Vehicle and Traffic Law § 388 applied, such that Hanifi, as the vehi-
cle owner, should be held vicariously liable for any permissive driver,
and that Sultan would be liable for his negligent operation. On Janu-
ary 4, 1996 a different judge than the one who had denied the previ-
ous motions reversed the March 2, 1995 order denying summary
judgment, and granted the motion for summary judgment as to Sultan.
The court found there was insufficient evidence as to the identity of
5
the driver of the vehicle to create a genuine issue of fact. That same
order denied the motion for summary judgment as to Hanifi because
Section 388 "seem[ed] clearly to apply" and therefore created an issue
of fact as to Hanifi's liability as the owner of the car. Thus, as the
case went to trial, Motor Club remained as an intervened plaintiff
against the individual plaintiffs and against defendant Hanifi.
On April 2, 1996 the matter came on for a jury trial before the
same judge who had issued the January 4 order dismissing Sultan and
finding that because of the application of Section 388, Hanifi could
not obtain summary judgment in his favor. Motor Club represents that
present at trial were plaintiff Lorraine Weil, defendant Hanifi and for-
mer defendant Sultan, as well as Motor Club by its counsel. Also
present under subpoena by Motor Club was eyewitness Colleen
Young and a passenger in her car, Heather Young. Further, video
depositions of John and Elda McGovern had been recorded by Motor
Club for use at trial, and Motor Club states that the police officer who
wrote the police report, Officer Gruver, had been subpoenaed and was
in attendance.
On the day of trial, prior to the impaneling of the jury, counsel for
Hanifi submitted without prior notice to Motor Club a pre-trial memo-
randum arguing that Section 388 and its vicarious liability did not
apply and that Maryland law should govern. Over Motor Club's
objections the court heard oral argument and the court reversed the
portion of its January 4, 1996 order with respect to Section 388 and
held on the next day that Section 388 did not apply. The court ruled
that under the rule of lex loci delicti Maryland's substantive law pre-
vented the application of the New York statute in deciding the issue
of liability for the Maryland accident. Although Motor Club requested
extra time to brief the issue and pointed out that it had in its prepara-
tions for trial relied on the prior ruling of the court that New York law
applied, the district court denied Motor Club's request for additional
time and a continuance of the trial date.
The court entered its final order on the next day, April 3, 1996
granting judgment in favor of Hanifi, and entering judgment in favor
of Hanifi and all defendants against the plaintiffs and Motor Club pur-
suant to Federal Rule of Civil Procedure 50. This judgment incorpo-
rated by reference all prior rulings into its final order. Motor Club
6
appealed. The judgment recited it was entered pursuant to Rule 50,
but nothing was offered at the trial, so we consider the matter as a
motion for summary judgment under Rule 56 or a motion to dismiss
under Rule 12. Accordingly, we have jurisdiction pursuant to 28
U.S.C. § 1291.
III.
Federal Rule of Civil Procedure 56 provides that a party is entitled
to summary judgment only if "there is no genuine issue of fact and
. . . the moving party is entitled to judgment as a matter of law." Fed.
R. Civ. P. 56. See Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 247
(1986). Summary judgment is proper "if the pleadings, depositions,
answers to interrogatories, and admissions on file, together with the
affidavits, if any, show that there is no genuine issue as to any mate-
rial fact and that the moving party is entitled to a judgment as a matter
of law." Cray Communications, Inc. v. Novatel Computer Systems,
Inc., 33 F.3d 390, 393 (4th Cir. 1994) (quoting Anderson, 477 U.S.
at 322-23). "[T]he burden on the moving party may be discharged by
a `showing' -- that is pointing out to the district court -- that there
is an absence of evidence to support the nonmoving party's case."
Anderson, 477 U.S. at 249-50. We review the district court's grant of
summary judgment de novo, applying the same legal standards as the
district court and viewing the facts and the inferences drawn there-
from in the light most favorable to the nonmoving party, here, Motor
Club. Matsushita Elec. Co. v. Zenith Radio Corp. , 475 U.S. 574,
587-88 (1986). If after reviewing the record in its entirety we find that
a reasonable jury could return a verdict in Motor Club's favor, then
a genuine dispute of material fact exists and granting summary judg-
ment would be improper. Anderson, 477 U.S. at 248.
IV.
Before addressing the specific questions of whether summary judg-
ment was appropriate with regard to each defendant, we must first
clarify what facts were properly before the district court.
The defendants supported their first motion for summary judgment
with their own verified answers to interrogatories and affidavits by
relatives to the effect that Hanifi and Sultan were not in Maryland on
7
the day of the accident, and that Hanifi's car was in Sultan's driveway
in New York. The defendants note that the individual plaintiffs
responded to the defendants' first motion for summary judgment by
stating that they had no facts with which to oppose the motion. How-
ever, Motor Club did oppose the motion, and submitted the affidavits
of Hanifi and Sultan admitting ownership and possession, respec-
tively, of the car, but asserting that it was in New York. Later, after
winning the initial summary judgment motion, in its opposition to the
defendants' motion for reconsideration and then in its opposition to
the defendants' renewed motion for summary judgment, Motor Club
submitted several other documents. These submissions included: a
copy of the police report; a transcription of the statement by John
McGovern who observed the white car and recorded the license plate;
the transcribed statement of the driver of the plaintiffs' car, Robert
Weil, that the car was white; the handwritten statement of plaintiff
Lorraine Weil who also observed the white car; and finally, Motor
Club's own interrogatory responses.
During oral argument defendants' counsel contended that the plain-
tiffs could not rely on their opposition to the summary judgment
motion on the police report, which contained the license plate num-
ber, because that report contained hearsay. Thus, the defendants
argue, the motions for summary judgment were properly granted as
to both Hanifi and Sultan where the plaintiffs had not established a
material issue of fact as to the identity of the white car which caused
the accident, and where the defendants had submitted their own sworn
affidavits denying involvement in the accident which they buttressed
with sworn statements from four other individuals who stated the car
was in New York on the morning of the accident.
The defendants' hearsay objection to the admissibility of the police
report, which establishes a material issue as to the involvement of
Hanifi's car in the accident, is not well taken. The report does contain
hearsay, for at some point after the accident eyewitnesses telephoned
the police with their observations as to the license plate of the car they
saw perform the U-turn, and those statements are recorded in the
report. However, the defendants waived any objection to the admissi-
bility of that report when they submitted it to the court on at least
three separate occasions with their motions for summary judgment.
Our review of the record indicates that the defendants submitted the
8
report with at least the following: (1) their denied motion for sum-
mary judgment of January 17, 1995; (2) their denied motion for
reconsideration of the summary judgment of April 27, 1995; (3) their
opposition filed April 27, 1995 to a motion of Allstate, and (4) their
renewed motion for summary judgment of November 15, 1995
(granted as to Sultan). Indeed, Motor Club noted in its very first oppo-
sition to summary judgment that the defendants had submitted the
police report as their Exhibit 2, and that the report contained Colleen
Young's description of the car bearing Hanifi's license plate as the
vehicle causing the accident. Having resolved that evidentiary issue
and determined the facts properly before the district court at summary
judgment, we now address the propriety of granting summary judg-
ment to defendants Sultan and Hanifi.
V.
Even aside from any extraterritorial effect of New York's Traffic
and Vehicle Section 388, the district court's initial ruling denying
summary judgment to Hanifi and Sultan was correct given the dispute
of fact presented. Thus, its later rulings to the contrary should be
reversed.
Maryland requires proof of an owner's negligence, or some sort of
agency to hold the owner liable for the driver's negligence.
Mere ownership of a car does not impose liability for inju-
ries caused in the driving of it. Liability, when it exists, is
not for the car, but only for the act or omission of the person
driving. And when the owner has not himself been the negli-
gent cause of an injury, he can be held vicariously liable
only when the negligence has been that of his servant
engaged in his affairs.
Schneider v. Schneider, 152 A. 498, 499 (Md. 1930). With this
requirement in mind we review the conflicting nature of the facts
properly before the district court at summary judgment.
A.
Hanifi admitted he owns a 1987 white four door Oldsmobile Delta
88 with New York license plate VZY-653. He admitted that he had
9
loaned that car to his brother-in-law at the time of the accident. His
brother-in-law's sworn statement is to the same effect and categori-
cally states that he had exclusive possession, that the car was in his
driveway in New York, and that it was not involved in the accident.
Four family members similarly stated the car was in that driveway on
the morning in question.
In contrast, the police report contains the statements of eyewit-
nesses, apparently unrelated to the Weils, whose statements put Hani-
fi's car at the scene of the accident in Maryland. One George Reid
told the reporting officer that the accident was caused by a white car
that made a U-turn through the median. Colleen Young advised the
officer that the car was a white four door Oldsmobile or Buick with
New York license VZY-653 which caused the accident, and that it
was occupied by three black males. While John McGovern indicated
the car was driven by three white males, his report was otherwise con-
sistent inasmuch as the report indicates he described the vehicle as a
mid-size white car with New York registration.2
The conflicting statements illustrate a genuine dispute of material
fact both as to the identity of the car and the driver. The district court,
in its first ruling on the summary judgment issue, correctly applied
Rule 56(c) when it denied the motion stating as follows:
The motion will be DENIED. Summary judgment cannot be
granted unless there is no genuine dispute of material fact.
Fed. R. Civ. P. 56(c). Here, the opponent of the motion,
Motor Club of America Insurance, has fulfilled its burden of
bringing forward evidence that a reasonable fact finder
could use to justify a finding in its favor by a preponderance
that Hanifi was the owner -- and Sultan, with his permis-
sion, the operator -- of the "phantom car" whose illegal
U-turn caused the accident, injuring the plaintiffs. It may
well be that the movants and their friends swear the car was
_________________________________________________________________
2 McGovern's statement in the police report does not indicate the num-
ber of the New York license plate, thus the report seems to indicate that
only Young provided the actual plate number. However, McGovern's
subsequent video deposition is unambiguous that he called in the plate
number.
10
elsewhere, but the eyewitness puts it at the scene, and other
evidence established the ownership and use of the vehicle.
This evidence, though in part circumstantial, is plainly
enough to generate a triable dispute. Celotex Corp. v.
Catrett, 477 U.S. 317 (1986); Anderson v. Liberty Lobby,
Inc., 477 U.S. 242 (1986).
In light of this genuine dispute of material fact, it was error for the
district court to later grant as to each defendant the motions for sum-
mary judgment.
B.
Further supporting a denial of Hanifi's motion for summary judg-
ment are Maryland's longstanding common law presumptions that the
operator of a motor vehicle is both the agent of the owner and a per-
missive user. Campfield v. Crowther, 249 A.2d 168, 173 (Md. 1969)
("It is presumed that the operator of an automobile is the agent, ser-
vant, or employee of the owner of the vehicle acting within the scope
of his employment,"); State Farm Mutual Auto Ins. Co. v. Martin
Marietta Corp., 657 A.2d 1183, 1186 (Md. App. 1995) (presumption
that driver had owner's permission). Thus "[t]he owner who asserts
the driver was not an agent has the burden of production and persua-
sion on that issue." State Farm, 657 A.2d at 1186. Based on the facts
recited above we disagree with the district court's conclusion during
the pre-trial hearing that the defendants had "clearly and unequivo-
cally and undisputedly" rebutted the presumption of agency.
On this record, the best shape in which Hanifi can get out of the
question of the agency relation would be submitting that question to
a jury as a matter of fact. Since Hanifi has denied driving the car, if
a jury should find that the car was involved in the accident, the pre-
sumption is that whoever the driver might have been was Hanifi's
agent, and that is not shown to have been overcome by this record.
Thus, far from requiring a judgment favorable to Hanifi, the record
goes a long way toward entering a judgment against him subject only
to a fact-finder believing that the car was involved in the accident.
"The presumption [of agency] is rebuttable but to rebut the pre-
sumption as a matter of law the evidence required to accomplish this
11
must be both uncontradicted and conclusive." Campfield, 249 A.2d
at 173 (emphasis in original) (recently cited by State Farm, 657 A.2d
at 1188). Indeed, where there was contradictory evidence as here
regarding who drove the car, under Maryland law the issue of who
drove and whether the driver was an agent should properly have gone
to the jury: "if the evidence as to agency be contradicted, or if uncon-
tradicted is not conclusive, the question should be submitted to the
jury." Campfield, 249 A.2d at 173.
Accordingly, the district court erred when it found as a matter of
law the presumption of agency had been rebutted. For this additional
reason we would reverse the grant of summary judgment as to Hanifi.
VI.
We turn now to whether Maryland would enforce New York Traf-
fic and Vehicle Section 388 extraterritorially as intended by the New
York legislature. We emphasize, however, that as stated above, our
decision to deny summary judgment to Hanifi and Sultan does not
depend solely on the question of the application of this New York
statute which imposes vicarious liability on the owner and requires he
be insured therefor.3 The district court did not grant summary judg-
ment as to Hanifi until it reversed its earlier ruling, moments before
trial, and decided that Section 388 would not apply.
While we disagree with the district court that there are no factual
questions, we are further of opinion that the Maryland Court of
Appeals would give extraterritorial effect to New York Section 388,
and this provides another reason that summary judgment was inappro-
priate as to defendant Hanifi.
A.
Defendants argue that because Maryland traditionally has followed
the rule lex loci delicti, and because the accident occurred in Mary-
_________________________________________________________________
3 Indeed, with regard to Sultan it is irrelevant whether Maryland would
give effect to Section 388. Under Section 388, as under the Maryland
law, the driver (for that is the only role Motor Club ascribes to Sultan)
is liable at common law for his own negligence.
12
land, the district court was correct to apply Maryland's substantive
law, requiring the driver to be the owner's agent, to determine Hani-
fi's liability. We note initially that it is well settled that a federal court
sitting in diversity jurisdiction must apply the choice-of-law rules of
the forum state. Klaxon Co. v. Stentor Electric Mfg. Co., Inc., 313
U.S. 487 (1941). Maryland adheres to the traditional rule of lex loci
delicti in deciding conflict-of-law questions. See Jacobs v. Adams,
505 A.2d 930, 935 (Md. App.), cert. denied, 510 A.2d 259 (Md.
1986); Hauch v. Connor, 453 A.2d 1207 (Md. 1983)("The rule of lex
loci delicti is well established in Maryland. When its rationale has
been put into question `this Court has consistently followed the
rule.'") (quoting White v. King, 223 A.2d 763 (Md. 1966)). Hauch
decided that an even better reason for its decision than lex loci delicti
was that, where the forum state was Maryland and the parties had
received Maryland workers' compensation benefits, a conflict
between Delaware workers' compensation and Maryland workers'
compensation law would be decided favorably to Maryland, the
forum state, although the accident happened in Delaware.
In the case at hand, if Maryland's law prevented the application of
Section 388 the plaintiffs would face a higher burden as to Hanifi's
liability, not only at summary judgment, but also at trial. The district
court decided that it was bound to follow Maryland's conflict-of-law
rule, and that under the lex loci approach, Maryland's negligence rule
would govern Hanifi's liability.
If the accident happened in Maryland, you look to Maryland
law to determine the rights and liabilities of the parties,
whether a duty existed, whether a duty was breached, and
whether that breach of duty proximately caused injury. We
look to Maryland law for all of those determinations.
Thus, the district court reversed itself and decided that where the
plaintiffs had not put forward affirmative evidence as to the identity
of the driver, they could not overcome summary judgment under
Maryland law.
We can find no case in which the Maryland Court of Appeals has
addressed the application of Section 388. In the absence of precedent
our task is to "determine the rule that the . . .[state] Supreme Court
13
would probably follow, not fashion a rule which we, as an indepen-
dent federal court, might consider best." Lowe's North Wilkesboro
Hardware v. Fidelity Mut. Life Ins. Co., 319 F.2d 469, 472 (4th Cir.
1953). Accordingly, we are of opinion that the existence of Maryland
common law which is different from Section 388 would not of itself
cause the Maryland Court of Appeals to deny full faith and credit to
a statute of a sister State which requires the liability insurance of a
resident of the latter State to compensate innocent victims injured in
an accident in Maryland. As explained below, Section 388 provides
a statutory cause of action which supplements existing common law
owner liability. Additionally, the policies underlying Section 388 mir-
ror those recognized by the Court of Appeals as guiding Maryland
law, so that Maryland's public policy would not be offended by
applying the New York statute.
Section 388 provides as follows:
Every owner of a vehicle used or operated in this state shall
be liable and responsible for death or injuries to person or
property resulting from negligence in the use or operation of
such vehicle, in the business of such owner or otherwise, by
any person using or operating the same with the permission,
express or implied, of such owner.
N.Y. Vehicle and Traffic Law § 388. "In New York, the owner of a
motor vehicle is liable for the negligence of one who operates the
vehicle with the owner's express or implied consent." Horvath v. Lin-
denhurst Auto Salvage, 104 F.3d 540, 542 (2d Cir. 1997). The New
York Court of Appeals has explained the policy behind the statute as
follows.
Vehicle and Traffic Law § 388 is part of the legislatively
prescribed system for protecting innocent victims of auto-
mobile accidents by assuring that there will be a financially
responsible party who is available to answer in damages. . . .
In addition to making the owner of a vehicle vicariously lia-
ble for the negligence of anyone driving it with permission,
the statute requires that all vehicle owners procure insurance
to cover the liability it creates (see, Vehicle and Traffic Law
§ 388[1], [4]). This linkage of an owner's vicarious liability
14
to an owner's obligation to maintain adequate insurance
coverage suggests that the Legislature's goal was to ensure
that owners of vehicles that are subject to regulation in New
York "act responsibly with regard to those vehicles."
Fried v. Seippel, 599 N.E.2d 651, 655 (N.Y. 1992) (citations omitted).
Since Farber v. Smolack, 229 N.E.2d 36, 39 (N.Y. 1967), there has
been no question but that the New York Legislature intended the stat-
ute to apply extraterritorially.4
We most recently addressed the policy and extraterritorial effect of
Section 388 in Klippel v. U-Haul Co., 759 F.2d 1176, 1180 (4th Cir.
1985). There a New York passenger was injured in an accident in
South Carolina. The suit was transferred from the district court in
New York to South Carolina. 759 F.2d 1177-78. Under the rule in
Van Dusen v. Barrack, 376 U.S. 612 (1964), transferee court must
apply law of original court, we reached the conclusion that South Car-
olina law would apply by determining what law the Court of Appeals
of New York would apply, because the matter had been transferred
from that forum. Klippel, 759 F.2d 1178. New York follows a "`cen-
ter of gravity,' or `grouping of contacts,' or`interest analysis'
approach to the resolution of conflicts questions in tort cases,"
whereby the court determines which State has the greatest interest in
the application of its law to matter at hand. 759 F.2d at 1179. Thus,
where the accident occurred in South Carolina; the truck was regis-
tered in Michigan, not New York; the trip was between Florida and
South Carolina, and the rental contract was made in Florida, "though
the injured plaintiff was a resident of New York, New York has little
interest in regulating the rights and liabilities arising out of the Florida
lease." 759 F.2d at 1182. Accordingly, we found that the New York
Court of Appeals would apply the South Carolina substantive law.
759 F.2d 1182.
_________________________________________________________________
4 The New York Court of Appeals opined that "[i]t is clear that in
adding the words `in this state' to the predecessor of [Section 388], the
legislature was not concerned with extraterritorial effect. It was substitut-
ing `in this state' for the former words `upon a public highway' in order
to cover the situation of an accident on private roadways and parking
lots." Farber, 229 N.E.2d at 39.
15
Because in Klippel the court followed New York choice of law
rules, and because the contacts with New York were considerably less
than in the instant case, the result in Klippel is not overly relevant to
the case at hand. But our analysis of Section 388 as set forth in the
third part of Klippel is both instructive and persuasive. There we
noted that:
Enforcement of the liability created by New York Vehicle
Traffic Law § 388 is different. Its application is not a means
of avoidance of restrictive barriers created by other jurisdic-
tions. It creates a new substantive cause of action where
none before existed.
Klippel, 759 F.2d at 1180. We observed that by its terms the statute
explicitly applied to accidents outside of New York, so long as there
was sufficient connection to New York.
In this scheme, the innocent victim class is not limited to
New Yorkers, but there must be a connection between the
vehicle and its owner on the one hand and the state of New
York. That connection is required by the statute itself, and
is essential to New York's exercise of its legislative power.
. . . Indeed, § 311(4)(a) of New York's Vehicle and Traffic
Law provides that the owner's insurance coverage[required
for § 388 liability] must extend to any claim arising within
the continental United States or the Dominion of Canada.
Klippel, 759 F.2d at 1180. Further, we ruled that "[c]learly New
York's legislature has the power to prescribe the terms and coverages
of the liability insurance required of the owners of all motor vehicles
registered in New York." 759 F.2d at 1183. This analysis of Section
388, finding that the New York legislature intended it to apply
extraterritorially, and explaining that Section 388 is different from tra-
ditional conflict questions because it is a distinct cause of action is not
undermined by the fact that elsewhere in Klippel we employed a New
York choice-of-law analysis. In light of our reasoning in Klippel, we
are of opinion that New York Traffic and Vehicle Section 388 does
not conflict in the traditional sense with Maryland common law negli-
gence rules, and thus the lex loci rule does not apply so that a statute
16
of the State of New York is held of no effect.5 Absent a Maryland
statute, we look to Maryland and federal decisions on the Full Faith
and Credit Clause. Therefore, we must look elsewhere for guidance
as to how Maryland would treat Section 388.
B.
In an analysis of whether one State will give effect to the law of
another State the Full Faith and Credit Clause of the Constitution is
paramount. It provides:
Full Faith and Credit shall be given in each State to the pub-
lic Acts, Records, and Judicial Proceedings of every other
State. And the Congress may by general Laws prescribe the
Manner in which such Acts, Records and Proceedings shall
be proved, and the Effect thereof.
U.S. Const., Art. IV, § 1. As the Maryland Court of Appeals has
observed, in 1948 Congress amended 28 U.S.C. § 1738, which imple-
ments the provisions of Art. IV, Section 1 of the Constitution, to pro-
vide that "`the acts of the legislature of any state' shall have the same
faith and credit in every court within the United States as they have
by law or usage in the court from which they are taken." Texaco v.
Vanden Bosche, 219 A.2d 80, 83 (Md. 1966). In that same opinion the
court recognized that in Hughes v. Fetter, 341 U.S. 609 (1951), the
Supreme Court decided that while a forum state need not automati-
cally subordinate its statutory policy to apply the statutory rule of
_________________________________________________________________
5 The defendant's argument that Section 388 does not apply rests exclu-
sively on cases supporting the proposition that Maryland follows stead-
fastly the rule of lex loci delicti. Appellee's Brief at 9 (relying on Ward
v. Nationwide Ins. Co., 614 A.2d 85, 91, n.8 (Md. 1992); Jacobs v.
Adams, 505 A.2d 930, 935 (Md. 1986); Hauch v. Connor, 453 A.2d
1207, 1209 (Md. 1983); White v. King, 223 A.2d 763, 765 (Md. 1966);
Doughty v. Prettyman, 148 A.2d 438, 440 (Md. 1959); Sacra v. Sacra,
426 A.2d 7, 9-10 (Md. App. 1981); Morris v. Peace, 288 A.2d 600, 601
(Md. App. 1972)). However, these cases were not decided on the basis
of one issue critical to the case at hand, the effect of the Full Faith and
Credit Clause. Indeed none but Hauch, at n.10, even mentions full faith
and credit.
17
another State, it is the job of the Supreme Court to"choose between
competing public policies." Texaco, 219 A.2d at 83. It was also in
Texaco that the Maryland court observed that in National Bank of
Chicago v. United Air Lines, Inc., 342 U.S. 396, 398 (1952) the Court
had "reiterated and slightly extended" the holding of Hughes that
"public acts" includes legislative enactments. Texaco, 219 A.2d at 83.
Thus the question is whether Maryland would deny full faith and
credit to a public act of New York, specifically, a statute which holds
owners of cars registered in New York liable for accidents by permis-
sive drivers, and requires them to be insured for such accidents
throughout continental North America. The district court ruled that
Section 388 created a claim that had not been developed at common
law, and not in Maryland. For that reason and because the action took
place in Maryland, it refused to apply Section 388. Full Faith and
Credit was not mentioned. Our review of Maryland precedent con-
vinces us that the district court erred in so holding. The Court of
Appeals has repeatedly stated that Maryland public policy is not vio-
lated, or indeed even implicated, where the foreign statute under con-
sideration is merely different from the Maryland rule: "[M]erely a
difference of law between the place of the wrong and the forum and
not an overriding public policy of the forum" is not sufficient to
defeat the application of the statute of another State. Harford Mutual
Ins. Co. v. Bruchey, 238 A.2d 115, 119 (1968). Bruchey held that a
Virginia statute with respect to consortium would be enforced in
Maryland although Maryland law was to the contrary, and Bethlehem
Steel Corp. v. Zarnas and Co., Inc., 498 A.2d 605 (Md. 1985), held
that where there was a conflict in the statutes of two States and the
Maryland statute had provided explicitly that another result was con-
trary to the public policy of Maryland, the Maryland statute would be
enforced, but Bethlehem Steel recognized the rule in Bruchey and
Texaco.
The Court of Appeals has made clear that the "[d]eclaration of the
public policy of the State is normally the function of the legislative
branch of government; in discerning that policy, courts consider, as
a primary source, statutory . . . provisions." Bethlehem Steel Corp.,
498 A.2d at 608 n.2 (quoting Jones v. Malinowski , 473 A.2d 429 n.4
(Md. 1984)). The court distinguished the result in Bethlehem Steel
Corp. from the results in cases in which it found Maryland public pol-
18
icy did not require the application of Maryland law in part on the
basis that those cases did not involve a Maryland statute, but as here,
involved judge-made common law. Bethlehem Steel Corp., 498 A.2d
at 608-09 (distinguishing Texaco v. Vanden Bosche, 219 A.2d 80, and
Mutual v. Bruchey, 238 A.2d 115, finding "no Maryland public policy
sufficiently strong to prevent the application of the Virginia statutes").
In fact, absent a statement by the legislature that something is con-
trary to Maryland public policy, the Maryland Court of Appeals is not
hesitant to enforce another state's law even though it would produce
a distinct or opposite outcome to that which would result under Mary-
land law. In Texaco v. Vanden Bosche, 219 A.2d 80, 83 (Md. 1966),
the court stated that "[r]ecent thinking is that a public policy which
will permit a state to refuse to enforce rights created by the law of a
sister state must be very strong indeed." Similarly, in Harford Mutual
Insurance Co. v. Bruchey, 238 A.2d 115 (1968), the court found that
a Virginia statute preventing wives from suing for loss of consortium,
while contrary to the Maryland rule, did not violate public policy. The
court reconfirmed the language of Texaco that "there is a heavy bur-
den on him who urges rejection of foreign law on the ground of pub-
lic policy." 238 A.2d at 117-18.
To the same effect, Rhee v. Combined Enterprises, Inc., 536 A.2d
1197 (Md. App. 1988), held that Maryland public policy was not so
offended that a sister-state's law should not be enforced. There the
court found that to "circumvent the announced public policy of Mary-
land barring interfamilial tort suits is not so`hurtful or detrimental to
the interest and welfare of . . . [Maryland's] citizens' as to violate the
principle of comity which would permit the law of New Jersey [which
permitted interfamilial torts] to be applied in Maryland courts." 536
A.2d at 1201. Rhee relied on Linton v. Linton, 420 A.2d 1249, 1250
(Md. App. 1980), in which the Court of Special Appeals had noted
that "a `heavy burden' is shouldered by one who seeks to block a
cause of action in Maryland courts on the premise that the case is con-
trary to this state's public policy."
Perhaps most telling, however, is Kramer v. Bally's Park Place,
Inc., 535 A.2d 466 (Md. 1988), in which the Court of Appeals
enforced a gambling contract from New Jersey, where the form of
gambling in question was legal, even though such gambling was ille-
19
gal in Maryland. Specifically, the court ruled that Maryland public
policy was not so strong as to preclude application of New Jersey law.
535 A.2d at 470. Significantly, because the court found that the New
Jersey judgment was not enforceable due to improper service, the
court enforced the contract because it found the New Jersey statute
regulating gambling and gambling debts was enforceable as to New
Jersey gambling contracts in Maryland. 535 A.2d at 467. In determin-
ing that the New Jersey statue did not violate Maryland public policy,
the court noted that New Jersey's statute authorized the gambling,
which distinguished the case from Bethlehem Steel Corp., where
Pennsylvania merely tolerated the contract provision at issue. Kramer,
535 A.2d at 468. Further, Kramer based the conclusion that Mary-
land's public policy was not offended on the fact that historically cer-
tain types of gambling were legal and enforceable in Maryland, and
thus the legislature had not taken as vehement a position on gambling
as it had on the contract provision in Bethlehem Steel Corp. Kramer,
535 A.2d at 470-71.
Similar to Kramer, in the case at bar we deal with an instance
where the General Assembly of New York has explicitly legislated a
liability and insurance statute to protect innocent victims and Mary-
land public policy is similarly oriented. The Maryland Court of
Appeals, in Pennsylvania National Mutual Casualty Insurance Co. v.
Gartelman, 416 A.2d 734 (Md. 1980), has stated Maryland's public
policy with regard to auto insurance, and it is substantially similar to
the policies behind Section 388, outlined above.
In Maryland, there is an established legislative policy
designed to make certain that those who own and operate
motor vehicles in this State are financially responsible. This
legislative policy has the overall remedial purpose of pro-
tecting the public by assuring that operators and owners of
motor vehicles are financially able to pay compensation for
damages resulting from motor vehicle accidents.
Gartelman, 416 A.2d at 736 (citations omitted).
In light of the Full Faith and Credit Clause, the decisions of the
Maryland courts with respect to the enforcement of the laws of other
States in the Maryland courts, and the similarity of the public policy
20
of Maryland to that of New York with respect to the compensation
of innocent victims in automobile accidents, we are of opinion that if
called upon the Maryland Court of Appeals would afford full faith
and credit to Section 388 of the New York law and would not hold
that enforcement of Section 388 offended the public policy of Mary-
land.
We are of opinion, as we have previously stated in Klippel, that
"[t]he state in which the injury was sustained has no interest in defeat-
ing the additional security provided to the injured person by the appli-
cation of Section 388." Klippel, 759 F.2d at 1180.
Accordingly, the judgment of the district court must be vacated and
the case remanded for further proceedings not inconsistent with this
opinion.
VACATED AND REMANDED
21