The opinion of the court was delivered by: STEWART DALZELL, District Judge
Joseph Powell, III rented a car from Budget Rent-A-Car Systems, Inc.
in Michigan and drove it to New York, where he picked up Nicole Chappell.
While Powell was driving through Pennsylvania with Chappell, the car was
involved in an accident, and Chappell suffered serious injuries. Budget
brought this action for a declaratory judgment on the extent of its
vicarious liability for Powell's negligence. The parties' cross-motions
for summary judgment, which raise vexing and consequential choice of law
problems, are now before us.*fn1
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While visiting North Carolina in August of 2001, twenty-six year old
Nicole Chappell of New York met Joseph Powell, III, a Michigan resident
who had nearly reached his twenty-first birthday. Simon Decl. Ex. A
("Stip.") ¶ 1, Ex. B ("Chappell Decl.") ¶¶ 2-3. Even after returning to
their homes, Chappell and Powell maintained a friendship through weekly
telephone conversations and occasional reunions. Id. ¶ 3. As Valentine's
Day, 2002, approached, Powell planned to surprise Chappell by driving
from Michigan to New York to deliver roses and a bracelet. Simon Decl.
Ex. D. ("Powell Dep.") at 10. Thus, in late January of 2002, he began his
preparations by arranging for a one week rental of a Ford Explorer from
Budget Rent-A-Car Systems, Inc. ("Budget Systems")*fn2 in Warren,
Michigan. Stip. ¶ 11.
For reasons that will become apparent later, we now consider at length
minutiae that in any other context would be far too arcane to warrant
On January 30, 2002, Nissan North America, Inc. transferred a 2002
Nissan Xterra with Vehicle Identification Number 5N1ED28Y02C532670 (the
"Xterra") to a Nissan dealership in Florida, and the dealership promptly
transferred that vehicle to Budget Systems in Michigan. Simon Decl. Ex.
J. Assuming that
Budget Systems followed its regular procedures, after the Xterra
arrived in Romulus, Michigan, a Budget Systems fleet clerk obtained
Michigan license plate NVQ532 and placed that plate on one of the
Xterra's seats. Simon Decl. Ex. F ("Schenk Dep.") at 3, 5-19; Stip. ¶
12.*fn3 A "lot person" later removed the plate from the Xterra's seat
and affixed it to the vehicle.*fn4 Schenk Dep. at 14, 19. After placing
the plate in the Xterra, the fleet clerk wrote license plate number
"NVQ532" at the top of the vehicle's certificate of origin and took the
certificate to the office of Michigan's Secretary of State. Schenk Dep.
at 21-23; Simon Decl. Ex. J.*fn5 Someone unknown crossed out the fleet
clerk's initial reference to "NVQ532" and wrote "PHS756" next to it.
See Schenk Dep. at 37-38; Simon Decl. Ex. J.
An employee at the Secretary of State's office used the certificate of
origin, including the handwritten annotation for the license plate, to
register the Xterra and to create an Application for Michigan Vehicle
Title for it. Schenk Dep. at 21-29. Because someone had written "PHS756"
on the certificate of origin, the Secretary of State's office registered
the Xterra with Michigan license plate PHS756 and prepared a title
application for the transfer of Michigan license plate PHS756 to the
Xterra. See Simon Decl. Exs. E, K; Schenk Dep. at 39-40.
After the lot person affixed Michigan license plate NVQ532 to the
Xterra, but before the Secretary of State had registered the vehicle,
Budget Systems transported it about thirty miles from Romulus, Michigan
to Warren, Michigan.
The morning of February 12, 2002, Powell arrived at Budget Systems's
Warren, Michigan location to pick up the Ford Explorer that he had
reserved a few weeks before. Because there were no Ford Explorers
available at that time, a Budget Systems rental agent suggested that
Powell take the Xterra instead. Stip. ¶ 13. Powell agreed to the
substitution, signed a Rental Agreement,*fn6 and drove away with the
Xterra. Stip. ¶ 12. As
Powell drove away from Budget Systems's Warren, Michigan location, the
Xterra bore Michigan license plate NVQ532, id., and was not yet
After a short rest, Powell drove the Xterra for eight consecutive hours
and reached Chappell's home around 11:00 p.m. on Tuesday, February 12,
2002. Simon Decl. Ex. D ("Powell Dep.") at 16; Chappell Decl. ¶ 5.
Powell remained in New York for the rest of the week while Chappell
worked. On the evening of Friday, February 15, after Chappell completed
her work week, she and Powell left New York in the Xterra. They planned
to spend the weekend together in Michigan. Chappell Decl. ¶¶ 5-6.
While driving through Pennsylvania early the next morning, Powell fell
asleep at the wheel of the Xterra. The car drifted from the left lane of
Interstate 80, across the right lane, and into the right guardrail,
causing it to roll over. Simon Decl. Ex. H ("Accident Report") at 8.
Powell escaped the crash largely unscathed, but the force of impact
ejected Chappell from the Xterra. Id. at 4. A helicopter transported her
from the scene of the accident to Mercy Hospital in Pittsburgh, where
doctors diagnosed, among other injuries, a broken femur, broken ribs, and
spinal injuries. Simon Decl. Ex. P ("Carfi Decl."). These injuries have
rendered Chappell permanently paraplegic. Id.
Budget Systems initiated this action for a declaratory judgment against
Powell and Chappell and asks us to determine which state's law governs
the extent of its vicarious liability
for Powell's negligence. Compl. at 4. Chappell brought two counterclaims
against Budget Systems*fn7 and a cross-claim against Powell.
Even before this suit began, Budget Group and several of its
subsidiaries, including Budget Systems, had filed a voluntary petition
for relief under Chapter 11 of the United States Bankruptcy Code. Stip.
¶ 5. With Budget Group unable to reorganize itself successfully, United
States Bankruptcy Judge Mary F. Walrath approved an agreement in which,
among other things, Cherokee Acquisition Corporation ("Cherokee") assumed
Budget Systems's liability in this case. Simon Decl. Ex. M §§ 2.2(ii),
2.5(a)(iv). Soon after the transfer, Cherokee changed its name to Budget
Rent-A-Car System, Inc. ("Budget").*fn8 Stip. ¶ 8. We allowed this case
to proceed with Budget as a substitute plaintiff for Budget Systems, and
Budget and Chappell have filed cross-motions for summary judgment on
Budget's claim for a declaratory judgment.
As noted, the parties seek a declaratory judgment as to whether the
law of New York or Michigan governs the extent of Budget's vicarious
liability to Chappell for Powell's negligence.
Like any federal court faced with a choice of law issue, we apply the
choice-of-law rules of the state in which we sit. See Klaxon Co. v.
Stentor Electric Mfg. Co., 313 U.S. 487, 496 (1941). Thus, Pennsylvania
choice-of-law rules will determine whether New York or Michigan
substantive law controls the disposition of the declaratory judgment
A. Choice of Law Framework
In Griffith v. United Air Lines, Inc., 203 A.2d 796, 805, 416 Pa. 1, 21
(1964), the Pennsylvania Supreme Court abandoned the traditional lex loci
delicti rule*fn9 "in favor of a more flexible rule which permits
analysis of the policies and interests underlying the particular issue
before the court." Our Court of Appeals has explained that the Griffith
"methodology combines the approaches of both Restatement II (contacts
establishing significant relationships) and `interest analysis'
(qualitative appraisal of the relevant States' policies with respect to
the controversy)." Melville v. American Home Assurance Co., 584 F.2d 1306,
1311 (3d Cir. 1978).
In applying Griffith's "hybrid" approach, we begin with an "interest
analysis" of the policies of all interested states and then based on
the results of that analysis proceed to characterize the case as a true
conflict, false conflict, or
unprovided-for case. Lacey v. Cessna Aircraft Co., 932 F.2d 170, 187 &
n.15 (3d Cir. 1991); See also LeJeune v. Bliss-Salem, Inc., 85 F.3d 1069,
1071 (3d Cir. 1996). A true conflict exists "when the governmental
interests of both jurisdictions would be impaired if their law were not
applied." Lacey, 932 F.2d at 187 n.15. On the other hand, there is a false
conflict "if only one jurisdiction's governmental interests would be
impaired by the application of the other jurisdiction's law." Id., at
187. An unprovided-for case arises when neither jurisdiction's interests
would be impaired if their law were not applied.
When interest analysis identifies a false conflict or an unprovided-for
case, resolving the choice-of-law issues becomes relatively
straightforward. In false conflicts, the Court applies the law of the
only interested jurisdiction. See e.g., Kuchinic v. McCrory, 222 A.2d 897,
899-900, 422 Pa. 620, 623-24 (1966) (applying Pennsylvania law when
Georgia was not a "concerned jurisdiction"); Griffith v. United Air
Lines, Inc., 203 A.2d 796, 807, 416 Pa. 1, 25 (1964) (applying
Pennsylvania law when Pennsylvania had an interest in having its law
applied but Colorado had no such interest). Lex loci delicti, however,
continues to govern unprovided-for cases. See, e.g., Miller v. Gay,
470 A.2d 1353, 1355-56 (Pa. Super. 1983) (applying Delaware law ...