Toyota Motor Company v. Linda Cook, Sanford Jones, James Thomas Lyle, Gary Gray, East Texas Educational Insurance Association, New York Marine and General Insurance Company

In The
Court of Appeals
Ninth District of Texas at Beaumont
__________________
NO. 09-17-00334-CV
__________________
TOYOTA MOTOR COMPANY, Appellant
V.
LINDA COOK, SANFORD JONES, JAMES THOMAS LYLE, GARY
GRAY, EAST TEXAS EDUCATIONAL INSURANCE ASSOCIATION,
NEW YORK MARINE AND GENERAL INSURANCE COMPANY,
Appellees
__________________________________________________________________
On Appeal from the 60th District Court
Jefferson County, Texas
Trial Cause No. B-184,121
__________________________________________________________________
OPINION
In this agreed permissive interlocutory appeal, Toyota Motor Corporation
(Toyota) appeals the trial court’s grant of Plaintiffs’ Linda Cook, Sandford Jones,
James Thomas Lyle, Gary Gray, East Texas Educational Insurance Association, and
New York Marine and General Insurance Company Motion to Apply Texas Law.
See Tex. Civ. Prac. & Rem. Code Ann. § 51.014(d) (West Supp. 2017). In a single
1
issue, Toyota asks whether the trial court should apply Texas or Mexico’s law to
Appellees’ claims against Toyota.
I. Background
This is a case arising out of an automobile accident that occurred in Mexico.
Appellees are either teachers or family members of teachers, who are all residents
of Texas. Appellees and some of their family members traveled to Mexico as part of
a Spanish immersion program. After arriving, Plaintiffs arranged on their own,
through the Mexican-owned hotel where they stayed, a tour of caves outside
Tolantongo, State of Hidalgo, Mexico. A licensed Mexican national provided
transportation and operated a Toyota Hiace van, licensed and registered in Mexico.
In Japan, Toyota designed and manufactured the Hiace model for the Mexican
market, and Toyota imported the van directly to Mexico where it was sold and placed
into the stream of commerce. There are no records indicating the Hiace van involved
in the accident had ever been in Texas or the United States. The Hiace model, in
fact, was never intended for use in or marketed by Toyota in the United States.
While en route to the caves, the driver was negotiating an unpaved descending
switchback mountain roadway when the van suddenly veered off the roadway,
flipped and rolled down the mountainside, ejecting several passengers. The accident
killed three teachers and injured other occupants of the van, some seriously. Several
2
Appellees received medical treatment in Mexico and later in Texas. The Mexican
government—the Attorney General for the State of Hidalgo—extensively
investigated the accident. Following the investigation, they held the driver of the van
criminally responsible for the accident.
On appeal, Appellees assert this is a product liability case wherein they allege
that Beaumont ISD “teachers and family members were injured or killed as a result
of a product (a van) which was defectively designed, manufactured and marketed by
Toyota Motor Co.” A review of the record reveals claims for negligence, strict
product liability, and wrongful death. Appellees allege that teachers Dorothy Gray,
Denise Wenzel and Mary Jones died as a result of the crash, and survivors Gary
Gray, Paul Gray, and Chris Gray (collectively “Gray Survivors”) suffered significant
injuries in the accident. After receiving initial treatment in Mexico, the Gray
Survivors received medical treatment in Texas. In addition to claims of negligent
design, marketing, and manufacturing, Appellees assert that Toyota is “strictly liable
to plaintiffs for designing, manufacturing and/or placing into the stream of
commerce the Hiace motor vehicle, which was unreasonably dangerous and
defective as designed, manufactured and marketed by defendant for its reasonably
foreseeable uses at the time it left the control of [Toyota].”
3
Multiple lawsuits were filed in the District Courts of Jefferson County, Texas,
seeking to recover damages incurred as a result of the accident.1 All have been
consolidated in this appeal. After nonsuiting the Mexican van driver and the
Mexican hotel owner, Plaintiffs are proceeding solely against Toyota. Plaintiffs
moved for application of Texas law to their claims, while Toyota opposed the motion
and requested the application of Mexico’s law. The trial court granted the Appellees’
motions to apply Texas law.
All parties agree that (1) the trial court’s choice of law ruling involves a
controlling question of law, (2) there exists a substantial difference of opinion on the
trial court’s ruling, and (3) an immediate appeal will materially advance the ultimate
termination of the litigation. The trial court authorized a permissive interlocutory
appeal, and we granted the petition for permissive appeal.
1
The record reflects that Linda Cook asserted causes of action for negligence,
product liability, and strict liability against Toyota. Cook sought compensatory and
exemplary damages. The Gray Survivors brought claims for injuries they sustained
in the crash in addition to a cause of action for the wrongful death of Dorothy Gray.
Their live pleading includes claims for negligence, product liability, strict liability,
and wrongful death. The Gray Survivors seek compensatory damages and bystander
damages, but they do not seek exemplary damages. The suit filed by the Jones
Survivors is pending in another district court, which the trial court consolidated for
purposes of discovery. We do not have their live petition but will assume their claims
are similar to those of the Gray Survivors with the exception of the bystander claims
since the Jones family members were not present when the accident occurred.
4
II. Standard of Review
Determining which state’s law governs an issue is a question of law for the
courts. Enter. Prods. Partners, L.P. v. Mitchell, 340 S.W.3d 476, 479–480 (Tex.
App.—Houston [1st Dist.] 2011, pet. granted) (citing Torrington Co. v. Stutzman,
46 S.W.3d 829, 848 (Tex. 2000)). Therefore, we review a trial court’s decision to
apply Texas law de novo. See Minn. Mining & Mfg. Co. v. Nishika Ltd., 955 S.W.2d
853, 856 (Tex. 1996); Mitchell, 340 S.W.3d at 480.
III. Choice of Law Generally
Texas applies the most significant relationship test outlined in the Restatement
(Second) of Conflict of Laws to determine choice of law issues. Gutierrez v. Collins,
583 S.W.2d 312, 318 (Tex. 1979) (holding that “in the future[,] all conflicts cases
sounding in tort will be governed by the ‘most significant relationship’ test as
enunciated in Sections 6 and 145 of the Restatement (Second) of Conflicts”); see
also Torrington, 46 S.W.3d at 848; Hughes Wood Prods., Inc. v. Wagner, 18 S.W.3d
202, 205 (Tex. 2000); RESTATEMENT (SECOND) OF CONFLICT OF LAWS §§ 6, 145
(AM. LAW INST. 1971). Under this approach, the laws of a single state do not
necessarily govern all substantive issues; accordingly, we consider each issue
separately and apply the state law having the most significant relationship to the
5
issue. 2 See Bain v. Honeywell Int’l, Inc., 257 F. Supp. 2d 872, 875 (E.D. Tex. 2002).
We only undertake a choice of law analysis if a conflict of law exists that affects the
outcome of an issue. See Duncan v. Cessna Aircraft Co., 665 S.W.2d 414, 419 (Tex.
1984). The parties agree that an actual conflict exists between the laws of Mexico
and the laws of Texas, but they do not identify the separate substantive issues
involved. See Ford Motor Co. v. Aguiniga, 9 S.W.3d 252, 259 (Tex. App.—San
Antonio 1999, pet. denied) (holding that the first step of our analysis is to “[i]nitially
. . . identify the conflict of law which would necessitate the trial court to decide a
choice of law issue”). Accordingly, we look to the allegations contained in
Appellees’ live pleadings to determine the substantive issues and analyze the choice
of law issues applying the “most significant relationship” test outlined in the
Restatement (Second) of Conflict of Laws. See Torrington, 46 S.W.3d at 848;
Gutierrez, 583 S.W.2d at 318; RESTATEMENT (SECOND) OF CONFLICT OF LAWS §§ 6,
145.
Section 6 of the Restatement (Second) outlines the general choice of law
factors courts should consider, including:
(a) the needs of the interstate and international systems,
2
The “process of applying the laws of different states to discrete issues within
the same case” is known as “depecage.” Fairmont Supply Co. v. Hooks Indus., Inc.,
177 S.W.3d 529, 534 (Tex. App.—Houston [1st Dist.] 2005, pet. denied) (citation
omitted).
6
(b) the relevant policies of the forum,
(c) the relevant policies of other interested states and the relative
interests of those states in the determination of the particular issue,
(d) the protection of justified expectations,
(e) the basic policies underlying the particular field of law,
(f) certainty, predictability and uniformity of result, and
(g) ease in determination and application of the law to be applied.
Torrington, 46 S.W.3d at 848 (quoting RESTATEMENT (SECOND) OF CONFLICT OF
LAWS § 6(2)); see also Hughes, 18 S.W.3d at 205. Additionally, in tort cases we
consider the section 145 contacts, which include: “(a) the place where the injury
occurred, (b) the place where the conduct causing the injury occurred, (c) the
domicile, residence, nationality, place of incorporation, and place of business of the
parties, and (d) the place where the relationship, if any, between the parties is
centered.” RESTATEMENT (SECOND) OF CONFLICT OF LAWS § 145(2); see also
Torrington, 46 S.W.3d at 848. In deciding choice of law issues, the number of
contacts is not determinative, rather courts must examine the contacts in light of state
policies underlying the specific substantive issue. Torrington, 46 S.W.3d at 848;
Duncan, 665 S.W.2d at 421.
In Gutierrez, the Texas Supreme Court explained that certain dissimilarities
in Mexican law, including damages, limitation statutes, indexing a plaintiff’s
recovery to the prevailing wage rates set by Mexican labor law, absence of pain and
suffering damages, and the allowance of moral reparations damages capped at one
7
third of the other damages awarded, did not necessarily render them violative of
public policy. Gutierrez, 583 S.W.2d at 321–22. These are some of the differences
that Appellees complain of in the case before us. The Court specifically noted that
“there is nothing in the substance of these laws inimical to good morals, natural
justice or the general interests of the citizens of this state.” Id. at 322. 3
We cannot make a blanket determination that the law of Texas or Mexico
applies to the entire case; rather, we must determine which state has the most
significant relationship to each substantive issue in our choice of law analysis. See
Torrington, 46 S.W.3d at 848 (citations omitted) (“[W]e must evaluate the contacts
in light of the state policies underlying the particular substantive issue.”); Hughes,
18 S.W.3d at 205 (“[T]he court of appeals determined that Texas has the most
significant relationship to the case and that therefore Texas law should apply to all
3
In re Pirelli Tire, L.L.C., a forum non conveniens case cited extensively by
Appellant, involved a product liability action by surviving family members who
were Mexican residents. 247 S.W.3d 670 (Tex. 2007). The product at issue was a
tire manufactured by the defendant and put on a vehicle purchased in Texas and then
later taken to Mexico where it was maintained and driven. Id. at 673. The defendant
manufacturer was incorporated in Delaware and had its principal place of business
in Georgia. Id. The plaintiffs there argued that Mexico did not provide an adequate
forum, because “it [did] not afford a cause of action for strict liability” and that
“Mexican law [did] not provide for survival damages and severely restricts damages
for death.” Id. at 678. The Court noted that the Mexican law was not rendered
inadequate and the fact that “the substantive law of an alternative forum may be less
favorable to the plaintiff is entitled to little, if any, weight.” Id. (citing Piper Aircraft
Co. v. Reyno, 454 U.S. 235, 246–51 (1981)).
8
issues. But the Restatement requires the court to consider which state’s law has the
most significant relationship to the particular substantive issue to be resolved.”); see
also Bain, 257 F. Supp. 2d at 875. “The Restatement methodology requires a separate
conflict-of-laws analysis for each issue in a case.” Alarcon v. Velazquez, 552 S.W.3d
354, 360 (Tex. App.—Houston [14th Dist.] 2018, pet. denied) (citing Greenberg
Traurig of N.Y., P.C. v. Moody, 161 S.W.3d 56, 70 (Tex. App.—Houston [14th Dist.]
2004, no pet.)); BDO Seidman, LLP v. Bracewell & Patterson, LLP, No. 05-02-
00636-CV, 2003 WL 124829, at *2 (Tex. App.—Dallas Jan. 16, 2003, pet. denied)
(mem. op.) (“[T]he substantive law applicable to the underlying tort action is not
automatically applicable to a defendant’s contribution claim.”). In addressing choice
of law issues, “it is necessary for the court to analyze liability and damages
separately.” Bain, 257 F. Supp. 2d at 875 (citation omitted).
IV. Liability
A. Restatement (Second) Section 145 Factors
1. The place where the injury occurred
Both parties undisputedly agree the accident occurred in Mexico. See
RESTATEMENT (SECOND) OF CONFLICT OF LAWS § 145(2)(a). As explained above,
the van involved in the accident was directly imported from Japan to Mexico, sold
in Mexico to a Mexican national, and operated exclusively in Mexico. Therefore,
9
Mexico was not a fortuitous location where the accident occurred.4 These facts
support the application of Mexico’s law to the liability issues.
2. The place where the conduct causing the injury occurred
The location where the conduct giving rise to the injury occurred is either
Japan, where the Toyota Hiace was designed and manufactured for the Mexican
market, or Mexico, where the van entered the stream of commerce and remained
until the accident. See RESTATEMENT (SECOND) OF CONFLICT OF LAWS § 145(2)(b).
In its investigation, Mexico faulted the conduct of the Mexican driver and Mexican
hotel owner for causing or contributing to the injuries or deaths. This conduct
occurred in Mexico. See id. No party argues that Japan’s laws should apply. Thus,
this factor favors the application of Mexico’s laws.
3. The domicile, residence, nationality, place of incorporation, and place
of business of the parties
Plaintiffs are all domiciled in Texas. The Texas Toyota affiliated corporations
did not design, manufacture, buy, or sell the Toyota Hiace van. Toyota’s relevant
domicile is Japan. While Toyota does business in Texas, the vehicle at issue had no
4
This is unlike a plane crash case where courts have determined the fortuitous
location of the crash decreased this factor’s significance. See Torrington Co. v.
Stutzman, 46 S.W.3d 829, 849 (Tex. 2000) (citation omitted).
10
relationship to Texas. These factors are at most neutral. See RESTATEMENT (SECOND)
OF CONFLICT OF LAWS § 145(2)(c).
4. The place where the relationship, if any, between the parties is
centered
The fourth factor—the place where the relationship of the parties is
centered—favors the application of Mexico’s law. See RESTATEMENT (SECOND) OF
CONFLICT OF LAWS § 145(2)(d). Plaintiffs did not arrange and obtain transportation
for the cave excursion until they were in Mexico. Cf. Trailways, Inc. v. Clark, 794
S.W.2d 479, 485–86 (Tex. App.—Corpus Christi 1990, writ denied) (noting that the
bus tickets to Mexico where the accident occurred were purchased in Texas and the
accident victims boarded the bus in Texas). With respect to Toyota, it was not until
they climbed into the van in Mexico that any relationship existed between Plaintiffs
and Toyota. See Vizcarra v. Roldan, 925 S.W.2d 89, 90 (Tex. App.—El Paso 1996,
no writ) (“Because the record reflects no relationship whatsoever between any
plaintiff and any defendant until the accident, the entire relationship between the
[parties] consists of an accident that occurred in Mexico.”); see also Bell Helicopter
Textron, Inc. v. Arteaga, 113 A.3d 1045, 1057 (Del. 2015) (“[T]he fourth contact
points to Mexico, where the helicopter had been since 1979, where the fitting was
installed, and where the victims took off for their ill-fated journey.”).
11
5. Balancing of section 145 factors
The factual contacts under section 145 overall favor the application of
Mexico’s law. Thus, the presumption of applying the law of the location of the
alleged tort is not rebutted. See RESTATEMENT (SECOND) CONFLICT OF LAWS §§ 145,
146. We must, however, analyze these factual contacts in light of their impact upon
the policy factors set out in section 6 of the Restatement. Gutierrez, 583 S.W.2d at
319.
B. Restatement (Second) Section 6 Policy Factors
Plaintiffs focus on two main themes throughout their application of the policy
factors to argue that Texas law should be applied. Particularly, Plaintiffs contend
Mexico’s approach in determining liability—which fails to provide for strict liability
or bystander causes of action—leaves them with an inadequate remedy. As to
Mexico’s lack of strict liability law, Plaintiffs also assert that as Texas residents,
Texas has a stronger policy interest than Mexico in protecting its residents by
controlling corporate action in areas such as the manufacture of defective products.
We agree Texas has a strong interest in protecting its residents to allow recovery of
adequate compensation for torts committed against them and in avoiding injury
resulting from defective products to Texas residents. But, that interest is not
dispositive because other policy factors and considerations must also be examined.
12
1. The needs of the interstate and international systems
According to the Restatement, analyzing the factors to determine the
applicable law “should seek to further harmonious relations between states and to
facilitate commercial intercourse between them.” RESTATEMENT (SECOND) OF
CONFLICT OF LAWS § 6 cmt. d. Comment d indicates that this policy factor is
“[p]robably the most important” “to make the interstate and international systems
work well.” Id.; see also Bell Helicopter, 113 A.3d at 1057.
In a forum non conveniens case, the Texas Supreme Court stated that “[t]he
safety of Mexican highways and products within the country’s borders are also
Mexican interests.” In re Pirelli Tire, L.L.C., 247 S.W.3d 670, 679 (Tex. 2007)
(granting mandamus relief from the district court’s denial of a forum non conveniens
motion seeking dismissal of a personal injury case involving Mexican plaintiffs
arising from an accident in Mexico). Mexico extensively investigated the accident
at issue. Applying Texas law to tort claims that arose and occurred in Mexico would
work to undermine Mexico’s sovereignty and ability to regulate safety on its
highways, including the vehicles used to transport their occupants.
13
2. The relevant policies of the forum and other interested states and the
basic policies underlying the particular field of law
This Court must also consider the relevant policies of Texas and Mexico
together with the basic policies underlying the particular field of law because of their
similarities. See RESTATEMENT (SECOND) OF CONFLICT OF LAWS § 6(2)(b), (c), (e).
Plaintiffs argue based on policy interests of Texas and because Mexico’s law
fails to provide certain causes of action and methods of recovery, Texas law should
apply. However, if the foreign law is not “against good morals or natural justice” or
“prejudicial to the general interest” of Texas residents, mere differences between
Texas law and foreign law would not render the foreign law so contrary to Texas
public policy that it should not be enforced. California v. Copus, 309 S.W.2d 227,
232 (Tex. 1958) (citations omitted); see also Gutierrez, 583 S.W.2d at 321.
For example, the failure of Mexico to recognize a strict liability cause of
action would not render Mexico’s law inadequate in and of itself. See Piper Aircraft
Co. v. Reyno, 454 U.S. 235, 255 (1981) (concluding that despite Scottish courts not
permitting strict liability claims, and potential damage awards being potentially
smaller, no danger exists for the claimants being deprived of any remedy or unfair
treatment). Relying upon Piper Aircraft, the Fifth Circuit has held that both
Mexico’s lack of a strict liability theory of recovery and limitations on damage
recovery did not render Mexico’s laws inadequate in a forum non conveniens case.
14
See Gonzalez v. Chrysler Corp., 301 F.3d 377, 381, 383 (5th Cir. 2002) (citing Piper
Aircraft, 454 U.S. at 255).
According to David Lopez, Plaintiffs’ legal expert on Mexico’s law, while
Mexico’s law does not provide for a strict liability cause of action, Mexico does
allow for the recovery of damages caused by defective products under negligence
principals. Lopez explained the damages available under Mexico’s law and how to
calculate compensation for such damages. While “[i]t is true that the laws of Texas
and Mexico still differ in several aspects,” including the limitation of damages, “the
mere fact that these aspects of the law differ from ours does not render them violative
of public policy.” Gutierrez, 583 S.W.2d at 321–22.
Mexico’s underlying policy interest in adopting laws restricting tort causes of
action and recovery is to protect Mexican businesses and citizens from excessive
liability claims. Gonzalez, 301 F.3rd at 381–82. Mexico investigated this accident
and concluded that the van’s driver was criminally responsible. Thus, under the facts
of this case, we conclude that Mexico has a policy interest in applying its law.
Plaintiffs also argue that Texas law should be applied because Mexico has no
interest in protecting Texas residents by ensuring their safety while in Mexico.
Appellees claim that because Toyota does business in Texas, and a considerable
amount of Mexico’s tourism results from Texas residents, Toyota should employ the
15
same U.S. safety standards with respect to its vehicles marketed in Mexico.
However, the business conducted by Toyota in Texas is completely unrelated to
Plaintiffs’ causes of action in this case. The record reflects the van involved in the
accident was not designed, manufactured, sold, used, or even intended for any
market other than Mexico.
The tort at issue in this case does not involve any product that entered the
stream of commerce from or in Texas. Texas law, including the application of U.S.’s
strict automobile safety standards, does not apply. See Crisman v. Cooper Indus.,
748 S.W.2d 273, 277–78 (Tex. App.—Dallas 1988, writ denied) (“[W]e conclude
that the fact that appellee conducts some part of its business, unrelated to the subject
matter of the present claim, in Texas and maintains its principal place of business in
Texas carries no weight in our determination of whether Texas . . . substantive law
is applicable[.]”). Mexico, the market for which the van was made, has a greater
interest in having its laws applied. See Bell Helicopter, 113 A.3d at 1055–56
(explaining modern choice of law considerations suggest the jurisdiction where the
product is marketed has the greatest interest, in a case where the helicopter that
crashed was not marketed, sold, or the complained of part intended for use in the
U.S., but rather only in Mexico). Therefore, in addition to its interest in overseeing
products marketed and used within Mexico, as well as its interest in Toyota and other
16
companies doing business in Mexico, Mexico also regulates the activities of drivers
within its borders. “Mexico has no reason to defer to the State of Texas for
regulation” of these activities. Vizcarra, 925 S.W.2d at 91. “Texas therefore does
not have an appreciable interest in applying its law to an automobile accident caused
by negligent driving in a jurisdiction having its own laws regarding the operation of
automobiles.” Id. at 91–92.
In this case, the only connection that Toyota has with Texas is that it conducts
business with unrelated products within the State. Texas had nothing to do with the
Hiace van’s design, manufacture, sale, and use, all of which were performed outside
of Texas. “Whether [] Texas has an important policy interest in policing the conduct
of subsidiaries of businesses with Texas offices that occurs outside Texas and has
no effect on its territory” would be only one of several factors to consider under
Section 6. CPS Int’l, Inc. v. Dresser Indus., Inc., 911 S.W.2d 18, 34 (Tex. App.—El
Paso 1995, writ denied).
3. Protection of Justified Expectations of All Parties
Appellees initiated the contact in this instance by traveling to Mexico, staying
in a Mexican-owned hotel, and then made the arrangements for an excursion in
Mexico, where the Mexican citizen and driver chose to use a Toyota van to transport
the passengers. The van was neither designed nor manufactured in the United States;
17
it was imported to Mexico from Japan, sold by a Mexican dealership to a Mexican
resident, licensed in Mexico, driven exclusively in Mexico, and was being driven on
a Mexican highway when the accident occurred. Thus, when Plaintiffs left Texas,
the Appellees lacked any reasonable expectations that Texas law would govern in
the event of an accident in Mexico.
Comments to the Restatement provide that, “[g]enerally speaking, it would be
unfair and improper to hold a person liable under the local law of one state when he
had justifiably molded his conduct to conform to the requirements of another state.”
RESTATEMENT (SECOND) OF CONFLICT OF LAWS § 6 cmt. g. Toyota molded its
conduct, and moreover manufactured its Hiace van, to comport with the law of either
Japan or Mexico. We conclude it is unreasonable to expect Toyota to anticipate the
residence of each potential passenger and further, to be held to the various laws of
each passenger’s home state, rather than the law applicable to an accident’s location.
4. Certainty, predictability, uniformity of result and the ease in the
determination and application of the law to be applied
We consider factors (f) and (g) together. See RESTATEMENT (SECOND) OF
CONFLICT OF LAWS § 6(2)(f), (g). According to the Restatement, applying the law of
the place where the injury occurs is “easy . . . and leads to certainty of result” because
“[t]he place of injury is readily ascertainable.” Id. § 146, cmt. e. Adjudicating tort
liability issues arising from incidents on foreign roadways under the laws of the
18
victim’s home state as opposed to the place of the injury may lead to uncertain and
unpredictable results for corporations doing business in the foreign jurisdiction,
where they have designed and manufactured products solely for that market.
Applying Mexico’s standards of care for a tort occurring in that state under these
circumstances fosters predictability and uniformity.
Plaintiffs argue Texas law should be applied because it would be “more
difficult for the parties to educate the Court on relevant Mexican law.” The Texas
Supreme Court rejected this argument, stating “the members of this state’s judiciary
are fully capable of comprehending and applying laws of other jurisdictions[,]” and
“courts elsewhere than Texas have experienced no great difficulty in applying
foreign laws which on their face appear to be no less exotic[.]” Gutierrez, 583
S.W.2d at 321. Plaintiffs have already supplied an affidavit from their expert on
Mexico’s law. Based on the foregoing analysis, we conclude that the laws of Mexico
apply to the liability issues, even if certain causes of action are unavailable to
Appellees.5
5
As some of the Plaintiffs have filed wrongful death claims, those claims are
encompassed in the foregoing analysis. See RESTATEMENT (SECOND) CONFLICT OF
LAWS §§ 6, 175 (AM. LAW INST. 1971).
19
V. Compensatory Damages
Appellees also contend that statutory limits for certain damages and no
compensation for pain and suffering and mental anguish or punitive damages leave
them with an inadequate remedy if Mexico’s law is applied. Compensatory damages
are designed to fairly compensate the injured plaintiff. Torrington, 46 S.W.3d at 848
(citation omitted). Compensatory damages in Texas include economic and
noneconomic damages. See Waste Mgmt. of Tex., Inc. v. Tex. Disposal Sys. Landfill,
Inc., 434 S.W.3d 142, 152 (Tex. 2014). Economic damages are intended to
compensate a plaintiff for actual economic or pecuniary loss and do not include
exemplary or noneconomic damages, whereas noneconomic damages are
awarded for the purpose of compensating a claimant for physical pain
and suffering, mental or emotional pain or anguish, loss of consortium,
disfigurement, physical impairment, loss of companionship and
society, inconvenience, loss of enjoyment of life, injury to reputation,
and all other nonpecuniary losses of any kind other than exemplary
damages.
Id. (citation omitted). The Texas Supreme Court has explained that “[a]ctual or
compensatory damages are intended to compensate a plaintiff for the injury she
incurred and include general damages (which are non-economic damages such as
for loss of reputation or mental anguish) and special damages (which are economic
damages such as for lost income).” Hancock v. Variyam, 400 S.W.3d 59, 65 (Tex.
2013).
20
“Considering the purpose of compensatory damages, contacts such as the site
of the injury or where the tortious behavior occurred, which are important in
determining which state’s laws govern liability are less important.” Torrington, 46
S.W.3d at 849; Bain, 257 F. Supp. 2d at 878. For purposes of damages under the most
significant relationship analysis, “under Texas law, the most important factor is not
where the injury occurred but rather where the plaintiff is domiciled.” Bain, 257
F. Supp. 2d at 878 (citing Torrington, 46 S.W.3d at 849). “Compensation of an
injured plaintiff is primarily a concern of the state in which the plaintiff is
domiciled.” Torrington, 46 S.W.3d at 849 (citation omitted). Texas also has an
interest in protecting its residents in recovering adequate compensation for the
wrongful death of their relatives in foreign lands. Trailways, Inc., 794 S.W.2d at
486. The critical contacts in determining which state’s law governs compensatory
damages will usually be the ones with the greatest interest in the plaintiff’s monetary
recovery, which is typically the state of a plaintiff’s domicile, and/or the most direct
in protecting the defendant against financial hardship. Torrington, 46 S.W.3d at
848–49 (citing John B. Austin, A General Framework for Analyzing Choice-of-Law
Problems in Air Crash Litigation, 58 J. AIR L. & COM. 909, 965 (1993); Burgio v.
McDonnell Douglas, Inc., 747 F.Supp.865, 871–73 (E.D.N.Y. 1990)).
21
A. Application of Section 145 Factors
1. The Place of Injury
In determining whether Texas or Mexico has the most significant relationship
to this issue, we first note that the injuries occurred in Mexico. Courts have
recognized that this contact is not as important in a compensatory damages analysis.
Torrington, 46 S.W.3d at 849 (citing RESTATEMENT (SECOND) OF CONFLICT OF
LAWS § 145 cmt. e).
2. The Place Where Conduct Causing Injury Occurred
The conduct causing the injury also occurred in Mexico, specifically the
alleged negligence of the driver of the van. Additionally, Appellees claim that the
van was an unreasonably dangerous product defective in its design, marketing, and
introduction into the stream of commerce. The record reflects that Toyota marketed
the van in Mexico, which is also where it was introduced into the stream of
commerce. The Hiace van was not designed for the North American Market, and
Toyota never marketed or sold it in the United States. While the alleged tortious
behavior occurred in Mexico, courts have noted this factor is also not as significant
in a compensatory damages analysis. See id.; Bain, 257 F. Supp. 2d at 878.
22
3. The Domicile, Residence, Nationality, Place of Incorporation, and
Place of Business of the Parties
The Appellees are all Texas residents, Appellees dismissed the only Mexican
defendant from the lawsuit, and Toyota is a Japanese company. Although Toyota
does business in Mexico and Mexico has an interest in protecting entities engaged
in business within its borders, we do not believe that interest outweighs the interest
Texas has in ensuring its residents are fairly compensated for their injuries. This
factor strongly points to Texas as having the most significant relationship with the
compensatory damages issue. Torrington, 46 S.W.3d at 849 (citing RESTATEMENT
(SECOND) OF CONFLICT OF LAWS § 145 cmt. e).
4. The Place Where the Relationship Between the Parties is Centered
While Appellees rode in the Hiace van in Mexico, and the arrangements made
for the tour excursion occurred in Mexico, we do not believe this contact outweighs
the Appellees’ domicile being in Texas. “[W]here there is no pre-existing contractual
relationship between the parties, as in a tort action like this one, the place where the
relationship is centered is duplicative of the place of injury.” Grosskopf v. Chrysler
Grp. LLC, No. A-14-CA-801-SS, 2015 WL 6021851, at *5 (W.D. Tex. Oct. 14,
2015) (citing Denman by Denman v. Snapper Div., 131 F.3d 546, 549–50 (5th Cir.
1998)).
23
B. Application of General Section 6 Factors
The two most pertinent choice of law principles under Restatement section 6
to this issue are (1) the relevant policies of the forum state and (2) the relevant
policies of other interested states.6 We consider the policies of both Texas and
Mexico, which are consistent. Indeed, Appellees’ expert explained in his affidavit
that in Mexico, “the purpose of [compensatory] damages is to restore the victim,
through payment of compensatory damages or otherwise, to the position the victim
was in prior to the injury.” See Stephen Zamora et al., Mexican Law 525 (2004).
Texas, as the domicile of the plaintiffs, is the state that will bear the burden if
the plaintiffs are not fairly and adequately compensated. Here, although Mexico does
allow for some form of compensatory damages, allowable damages are capped based
on prevailing Mexican wage rates, which are grossly inconsistent with prevailing
6
As noted in our most significant relationship analysis for the liability issues,
the remaining general principles include “the needs of the interstate system, the
protection of justified expectations, the basic policies underlying the particular field
of law, certainty, predictability, and uniformity of result, and the ease of the
determination and application of the law to be applied[,]” but here are insignificant
in our determination of what law to apply for compensatory damages. Grosskopf v.
Chrysler Grp. LLC, No. A-14-CA-801-SS, 2015 WL 6021851, at *6, n.9 (W.D. Tex.
Oct. 14, 2015) (citing RESTATEMENT (SECOND) OF CONFLICT OF LAWS § 6 (1971)).
In tort cases where the parties have not previously contracted, “the factors of the
justified expectations of the parties and of certainty, predictability, and uniformity
of result are of lesser importance.” Vanderbilt Mortg. & Fin., Inc. v. Posey, 146
S.W.3d 302, 314 (Tex. App.—Texarkana 2004, no pet.).
24
wage rates in Texas where the Appellees worked as educators. Moreover, in terms
of making a plaintiff whole, there are radically different costs associated with living,
obtaining medical care, and ongoing therapy in Mexico versus in Texas. “[I]t makes
little sense to apply Mexico’s measure of damages, which indexes the amount of
recovery to the prevailing wages set by the labor law of that nation” when the
Plaintiffs in this case are all Texas residents, and there are no longer Mexican
residents named in the lawsuit. See Gutierrez, 583 S.W.2d at 319. At least one
Plaintiff is a paraplegic because of the accident and will require medical services for
the remainder of her life. Assessing Appellees’ compensatory damages based on the
costs of certain services in Mexico, when some continued medical treatment will be
provided in Texas, and their employment in Texas was impacted, makes little sense.
Based on the domicile of the Appellees, the strong interest Texas has in
insuring its residents are fairly compensated, along with the prevailing policy
interests of both Texas and Mexico, we conclude that Texas has the most significant
relationship to the compensatory damages issue. Therefore, Texas law applies to this
issue. 7
7
We note that section 171 of the Restatement (Second) of Conflict of Laws
provides additional guidance regarding the interplay between determinations of
compensatory damages issues and liability issues, specifically items of loss and
apportionment of damages. See RESTATEMENT (SECOND) CONFLICT OF LAWS § 171
cmts. a–e (AM. LAW INST. 1971).
25
VI. Punitive Damages
Unlike compensatory damages, which attempt to make a plaintiff whole,
punitive damages are meant to punish and deter a defendant for conduct deemed
egregious. See Horizon Health Corp. v. Acadia Healthcare Co., 520 S.W.3d 848,
873 (Tex. 2017) (citations omitted) (noting “compensatory damages redress concrete
losses caused by the defendant’s wrongful conduct, while exemplary damages are
aimed at deterrence and retribution”); Bennett v. Grant, 525 S.W.3d 642, 650 (Tex.
2017) (“As an overarching premise, exemplary damages further the state’s interest
in punishing and deterring unlawful conduct.”). Punitive damages are inexorably
linked to a jurisdiction’s laws pertaining to liability and what is “unlawful” in a
particular jurisdiction. This is because such laws typically incorporate a standard of
care whereby conduct and its level of egregiousness are measured. We have already
determined Mexico has the most significant relationship to the issue of liability, and
its laws apply to the liability portion of Appellees’ claims. The applicable standards
of care as they exist in Mexico necessarily implicate punitive damages.
To impose damages meant to punish a party based on standards of care in
Texas, when neither the conduct giving rise to the injury nor the injury itself arose
in Texas defies logic. To do so would impose Texas legal standards on Mexico,
which made conscious decisions not to allow such awards. A State cannot punish a
26
defendant for conduct that may have been lawful where it occurred. See BMW of
North America, Inc. v. Gore, 517 U.S. 559, 572 (1996) (noting “a State may not
impose economic sanctions on violators of its laws with the intent of changing the
tortfeasors’ lawful conduct in other States”). Toyota designed the Hiace van for the
Mexican market, which presumably did not require the types of safety features the
United States requires and does not permit strict product liability claims. The
necessary inference is that Mexico did so to encourage vehicle manufacturers to
design and introduce vehicles in the Mexican marketplace that its citizens could
afford. To punish Toyota via exemplary damages as allowed under Texas law for a
product that may not have been defective where it was introduced into the stream of
commerce in a jurisdiction that does not recognize strict product liability or punitive
damages contradicts the law as enunciated by the United States Supreme Court. See
id. at 572. Mexico’s rule of law should apply to any exemplary or punitive damages
issue, even if such recovery is disallowed.
VI. Conclusion
The trial court erred in ruling Texas law applies to all issues in the case.
Having applied the Restatement’s most significant relationship test to each
substantive issue, we conclude that the law of Mexico applies to liability issues and
punitive damages issues, and Texas law applies to the issue of compensatory
27
damages. We reverse the trial court’s order of February 27, 2017, and we remand
this cause for proceedings consistent with this opinion.
REVERSED AND REMANDED.
_________________________
CHARLES KREGER
Justice
Submitted on March 1, 2018
Opinion Delivered August 8, 2019
Before McKeithen, C.J., Kreger and Johnson, JJ.
28