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ARMSTRONG CORK CO. v. DROTT MFG. CO.

January 24, 1977

ARMSTRONG CORK COMPANY
v.
DROTT MANUFACTURING CO.



The opinion of the court was delivered by: TROUTMAN

 TROUTMAN, J.

 In this diversity action, plaintiff seeks damages for the destruction of a logging machine under three theories of liability: breach of implied warranties, negligence and strict liability. Plaintiff, a Pennsylvania corporation with its principal place of business in Lancaster, purchased a Drott 40 BLC Logger with Feller Buncher, hereafter "logger", in February, 1973. The logger was manufactured in Wisconsin by defendant, Drott Manufacturing Company, a division of J. I. Case Company, a Delaware corporation. In April, 1974 the logger was destroyed by a fire of unknown origin which occurred within the logger. Defendant has moved for partial summary judgment on the issues of implied warranty and strict liability. We will grant the motion as to strict liability, but deny it as to the implied warranties.

 Strict Liability

 Because the relevant and material facts on the issue of strict liability are undisputed, we will discuss this aspect of defendant's motion first. Defendant's motion is predicated on the theory that Georgia law precludes a recovery by a corporate consumer for property damage caused by a defective product under a strict liability theory. Plaintiff does not dispute this statement of Georgia law, but contends that Pennsylvania or Wisconsin law must be applied. Under either Pennsylvania or Wisconsin law, a corporate plaintiff might recover under a theory of strict liability. We are presented with a difficult conflicts-of-law issue.

 As a federal court deriving jurisdiction from the diversity of the parties, we must apply the conflicts-of-law rule of the forum state, Pennsylvania. Klaxon v. Stentor Electric Mfg. Co., 313 U.S. 487, 85 L. Ed. 1477, 61 S. Ct. 1020 (1941). The Pennsylvania conflicts-of-law rule for torts has evolved from the traditional strict lex loci delicti rule to a more flexible approach first expressed in Griffith v. United Air Lines, Inc., 416 Pa. 1, 203 A.2d 796 (1964) and later refined in Kuchinic v. McCrory, 422 Pa. 620, 222 A.2d 897 (1966); McSwain v. McSwain, 420 Pa. 86, 215 A.2d 677 (1966) and Cipolla v. Shaposka, 439 Pa. 563, 267 A.2d 854 (1970).

 The present Pennsylvania rule is that in the case of a true *fn1" conflict of laws as to a particular issue, here, strict liability, the Court must apply the law of the jurisdiction which has the greatest interest in applying its law.

 
"In determining which state has the greater interest in the application of its law, one method is to see what contacts each state has with the accident, the contacts being relevant only if they relate to the 'policies and interests underlying the particular issue before the court'. Griffith, supra, at 21. When doing this it must be remembered that a mere counting of contacts is not what is involved. The weight of a particular state's contacts must be measured on a qualitative rather than quantitative scale * * *". Cipolla v. Shaposka, 439 Pa. 563, 566, 267 A.2d 854.

 Three states are involved in our analysis of the choice of law under plaintiff's strict liability theory: Pennsylvania, Wisconsin and Georgia. First, Pennsylvania is the "home" *fn2" state of the plaintiff; plaintiff has its principal place of business here and it is incorporated here. Approval for the purchase of the logger was finalized by plaintiff's Executive Committee here, and the check for payment was issued from plaintiff's Pennsylvania corporate headquarters.

 Application of Pennsylvania's strict liability rule would further the policy underlying the rule. Plaintiff, a Pennsylvania consumer, having purchased an allegedly defective product, would be afforded a recovery from the manufacturer for the damage caused by the defect. See Webb v. Zern, 422 Pa. 424, 220 A.2d 853 (1966); Restatement (Second) of Torts (1965) § 402(A) and comment c. The burden of the risks and costs of damage to the logger would be shifted from the Pennsylvania consumer to the manufacturer, judged, as a matter of policy, better able to bear these risks. Pennsylvania is an "interested" jurisdiction.

 Wisconsin is the place where the logger was manufactured and where the injury-producing conduct may have occurred. Wisconsin has also adopted the strict liability rule of § 402A of the Restatement for substantially the same reasons as Pennsylvania. The manufacturer is in "the paramount position to distribute the costs of the risks created by the defective product * * *". Dippel v. Sciano, 37 Wisc. 2d 443, 155 N.W. 2d 55, 58 (1967). Application of Wisconsin law would likewise shift the burden of injuries and damages caused by defective products from the ultimate purchaser-consumer to the manufacturer-seller. Here the impact of a recovery would fall upon the Wisconsin manufacturer, the party deemed appropriate to bear these costs.

 Georgia is also an interested jurisdiction. Plaintiff purchased the logger from Midco-Southern Company *fn3" , an independent distributor of defendant's products in February, 1973 in Georgia. A 3% Georgia sales tax was paid. Thereafter the logger was serviced and inspected in Georgia, and it was used there continuously and exclusively from February, 1973 until the fire occurred in April, 1974, during plaintiff's Georgia-centered operations. Georgia also has a strict liability rule, providing natural persons a cause of action against manufacturers of defective products which cause injury. Ga. Code Ann. § 105-106 (1967). See Center Chemical Company v. Parzini, 234 Ga. 868, 218 S.E.2d 580 (1975); Ellis v. Rich's Inc., 233 Ga. 573, 212 S.E.2d 373 (1975). However, the Georgia rule limits the risk-spreading function only to cases involving natural persons, thus excluding purchaser corporations such as plaintiff from the protections afforded by the strict liability rule. By limiting this risk-shifting to "natural persons", Georgia has set a policy which limits the potential scope of a manufacturer's liability, thus encouraging manufacturing and fabrication of products in Georgia. See Cavers, supra, at 152. Application of its rule here would further that policy.

 Which jurisdiction is the most interested, the one predominantly concerned? We have concluded that Georgia has the greatest interest in applying its strict liability rule under the facts of this case. First of all, plaintiff was engaged in logging operations in Georgia for over a year and used the logger in connection with these operations. After the logger was purchased from Midco-Southern, it never left Georgia's borders. The fact that plaintiff is a Pennsylvania corporation with its principal place of business in Pennsylvania does not outweigh Georgia's interest in regulating the affairs of corporations which chose to conduct operations there and purchase products for these operations. Plaintiff necessarily subjected itself to Georgia's obligations and laws, including Georgia's strict liability rules, while it was engaged in continuous business operations in that state. The policy underlying Georgia's contracted scope of strict liability would be furthered in this case. By denying this corporate plaintiff the opportunity to recover the property damage, which is the only damage alleged, manufacturing activities would be encouraged and fostered.

 On the other hand, we do not believe Pennsylvania's policies would be significantly furthered by the application of its law to the strict liability issue. The only relevant contact in this case is that a Pennsylvania-based corporation has suffered harm for which recovery might be had if Pennsylvania law were applicable. But that is the only connection and interest that Pennsylvania had with the purchase, use or damage to the logger in question. We do not believe this single connection is sufficient to place the predominant concern or interest in Pennsylvania to justify application of its law to the issue. In Cipolla, supra, at 567, the Supreme Court of Pennsylvania ...


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