July 20, 2011

District Judge in air crash action analyzes choice of law rules specific to punitive damages; finds no-cap New York law trumps Virginia's $350,000 cap

Judge William Skretny, sitting in the Western District of New York, has undertaken a lengthy analysis of competing principles concerning the question of what jurisdiction's law to apply in a mass tort case raising punitive damages issues. Noting that the choice-of-law analysis may result in application of different state law with respect to compensatory damages, the judge focused on the fact that punitive damages are meant to be "conduct regulating" rather than "loss allocating." Accordingly, the court concluded that the "lex loci delicti" rule should be the default rule, such that the law of the jurisdiction where the tort occurred will generally apply because that jurisdiction has the greatest interest in regulating behavior within its borders.

The practical effect of this ruling is that families suing over the deaths of 50 people resulting from a 2009 Continental plane crash into a house near Buffalo, New York, will have the benefit of New York's punitive damages law, which does not impose any cap. The defendant flight operator was based in Virginia at the time of the crash, and had argued that Virginia's $350,000 cap should apply. The judge agreed that, in plane crash cases, the domicile of the plaintiffs is not determinitive, nor is the fortuitous location of the crash. Moreover, the judge said he "does not lightly dismiss Defendants’ arguments that Virginia law should apply because of the number of significant contacts relating to punitive damages that occurred there." The judge nonetheless ruled that the allegedly wrongful conduct at issue largely occurred in New York rather than in Virginia:

"Plaintiffs’ punitive damages claims are not limited to what occurred in Defendants’ boardroom. Although Plaintiffs allege that punitive damages are warranted because Defendants failed to implement adequate safety programs and negligently hired and trained their flight crews — allegations that reasonably implicate corporate decision-making and policies — they also allege that Defendants failed to adequately supervise their flight crews and negligently operated an aircraft in New York in an unsafe manner, resulting in the crash of Flight 3407. Essentially, Plaintiffs maintain that punitive damages are in order because Defendants recklessly operated Flight 3407 in New York with deficient, unfit pilots who lacked the fundamental knowledge and ability to safely operate the Q400 aircraft. New York therefore has a compelling interest in seeing its punitive damages laws applied."

The judge added that Virgnia's interest in having its law applied was diminished because, since the time of the accident, the defendants had moved their center of operations out of Virginia.