Tuesday, June 19, 2007

Minnesota -- On The Road To Recovery

This guest post was written by Sean P. Costello. Mr. Costello is an associate resident in the Atlanta office of Jones Day. This post is entirely his work. It, of course, represents only his views, and not the views of his clients or firm:


On June 2, Beck and Herrmann posted about the “Anatomy of a Mass Tort,” telling the story of how a mass tort grows from start to finish. The post raised provocative issues along the way, and it generated quite a bit of interest.

One part of the post addressed how savvy plaintiffs’ lawyers try to revive lawsuits that would be time-barred in every state having an actual connection to the lawsuit – the plaintiff’s home state, the defendant’s home state, or the state where the plaintiff was actually injured – by filing them in a state with a more generous statute of limitations. Beck and Herrmann singled out Minnesota, joking that their readers might one day encounter a post titled, “Minnesota, Heal Thyself!”

This is that post. Well, not exactly. The proposed title doesn’t quite fit. It turns out that Minnesota is already healing itself. Minnesota courts – both trial and appellate – have quietly begun curing the forum-shopping problem that its traditional approach to statute of limitations created. Minnesota hasn’t completely healed. But it is getting there, and that’s good news for those of us on the defense side of things.

Historically, Minnesota had the malady that Beck and Herrmann diagnosed on June 2. Its choice-of-law rules dictated applying Minnesota’s statute of limitations to every case litigated in a Minnesota court, no matter where the injury occurred or where the plaintiff or defendant resided (assuming, of course, the existence of personal jurisdiction). That rule has a couple of things going for it. It is predictable. And it is easy to apply. But add to the equation the fact that Minnesota has very generous statutes of limitations compared with other states – six years for negligence and four years for products liability, compared with two years in most other states – and the result is forum shopping, big time. Minnesota had become a very popular place for products liability lawsuits. That Minnesota is a wonderful place with nice people and smart judges doesn’t entirely explain why so many products liability cases have been filed there.

The root of Minnesota’s problem grew out of a 1940 case called In re Estate of Daniel, 294 N.W. 465 (Minn. 1940). In Daniel, the Minnesota Supreme Court held that statutes of limitations are procedural, not substantive, except where the statute of limitations concerns a right created by statute. This procedure-substance distinction was important, because matters of procedure (and remedies) are governed by the law of the forum, while matters of substance are governed by a more complex choice-of-law analysis that examines the significance and connection of the action to the forum and the forum’s interest in the action. See Milkovich v. Saari, 203 N.W.2d 408 (1973) (adopting “modern,” “choice-influencing considerations” approach to substantive laws). Every so often the Minnesota Supreme Court would announce its renewed commitment to the rule it announced in Daniel. See, e.g., Am. Mut. Liab. Ins. Co. v. Reed Cleaners, 122 N.W.2d 178 (Minn. 1963). Thus, an Ohio resident injured in Ohio by a product he bought in Ohio but manufactured by a California company could evade the shorter statutes of limitations of Ohio and California and find relief in Minnesota’s generous limitations periods simply by filing suit in Minnesota, even though the substantive law to be applied would be the law of a state other than Minnesota.

In the years since Daniel, developments elsewhere began chipping away at its underlying rationale. First, in 1974, the Minnesota Supreme Court applied the “choice-influencing considerations” analysis to a statute-of-limitations issue in Myers v. Gov’t Employees Ins. Co., 225 N.W.2d 238 (1974). The court, however, did not explicitly overrule or even question Daniel.

Then, in 1988, the Restatement (Second) of Conflicts of Laws came out. Section 142 provides that the forum:

(1) should apply its own statute of limitations if it will bar the claim;

(2) should apply its own statute of limitations allowing the claim, unless doing so would serve no substantial interest of the forum” and (not or) “the claim would be barred under the statute of limitations” period of the forum that has a more significant relationship to the parties and the occurrence.”
As the commentary to Section 142 explained, “[t]he view that statutes of limitations should . . . be characterized as procedural has been abandoned in many recent decisions,” and, in most places, “the forum will no longer entertain a claim with which it has otherwise no contact simply because the claim is not barred by its own statute of limitations.” Restatement (Second) of Conflicts of Laws § 142, cmt. G (1988).

Bingo. Shazam. Amen. Bye, bye, Daniel. Well, almost. In Minnesota, at least, the Second Restatement was met with, well, the sound of chirping crickets. Nothing much happened right away.

It took another 15 years for a significant decision on the statute-of-limitations issue. In 2003, the Minnesota Court of Appeals – sorry, but the Minnesota Supreme Court hasn’t weighed in yet – decided Danielson v. National Supply Co., 670 N.W.2d 1 (Minn. Ct. App. 2003). Danielson was a Minnesota resident (oddly enough) who bought a ladder made by the defendant (a company incorporated in Delaware with its principal place of business in Colorado) at a store in Texas. Danielson fell from the ladder while using it in Arizona and filed a products liability lawsuit against the defendant in, of course, Minnesota. You may be saying to yourself, “I bet Arizona and Texas have shorter statutes of limitation than Minnesota, and the plaintiff blew those deadlines.” You’d be right. Arizona and Texas have two-year statutes of limitation, compared to Minnesota’s six-year limitations period. Danielson was injured on February 13, 2000 but didn’t file suit until sometime after February 13, 2002.

Danielson called into question whether Minnesota’s traditional approach of treating statutes of limitations as procedural announced in Daniel could be reconciled with the modern approach to conflicts of interest represented by cases like Myers, the Second Restatement and the approach of the majority of states. The court even went on to apply the “choice-influencing consideration” approach. Daniel, however, did not go as far as we defense lawyers would have liked. First, it did not go so far as to apply the “choice-influencing considerations” approach instead of the traditional approach. (Because this is a blog, and not a treatise, I’m not going into detail about those several factors, but, at bottom, they seek to identify the forum with the greater connection to and interest in the lawsuit.)

The court played it safe and applied both approaches, concluding that it was bound to do so until the Minnesota Supreme Court expressly changed the rule. Second, the court hedged its bets and said that, regardless of the approach, under the facts there, Minnesota’s statute of limitations would apply. While Danielson did not dispose of the traditional rule, it at least acknowledge the problem, questioned whether the old rule had any place in modern tort litigation, and paved the way for the modern approach.

Apparently, other Minnesota judges were paying attention. Shortly after Danielson, a Minneapolis trial judge applied the “choice-influencing considerations” approach instead of the traditional approach, taking its cue from the court of appeals’ decision. In Hernandez v. Crown Equipment Corp., 2004 WL 5326627 (4th Judicial Dist., Hennepin Cty., Minn. May 5, 2004), the court was clearly troubled by the obvious forum shopping that resulted in the case being filed in Minnesota. The plaintiff, Hernandez, was a California resident. He was injured in California by a forklift manufactured by a company based in Ohio. Hernandez apparently never set foot in Minnesota. The only connection with Minnesota was that the forklift manufacturer happened to sell its products in the state. If ever there were a case that warranted abandoning the traditional rule, this was it. The court agreed. It applied the “modern” approach, found that California’s shorter statute of limitations applied because California had a more substantial connection to the lawsuit (and that Minnesota had a minimal connection). Because the plaintiff had blown that deadline, the court entered judgment for the defendant.

The end result is, obviously, welcome, at least to defense lawyers and their clients. But it is the getting there that is most interesting and, potentially, helpful for any lawyers defending against what should – and would – be stale claims anywhere else. In its detailed opinion, the trial court surveyed the history of the traditional and modern approaches. Like Danielson, the court observed that cases like Milkovich and Myers and the commentary to the Restatement called into question whether the old, traditional rule had anything left to recommend it. As the court explained, “Minnesota law has evolved such that the appropriate method for resolving conflicts between statutes of limitation is now open to application of the ‘modern’ approach.” Id. at 6.

The trial court concluded that there wasn’t much left to recommend the traditional (read: old) rule. The trial judge in Hernandez went a step further than the Danielson court and concluded that, not only was Minnesota open to the modern approach, but that it was high time to adopt it. The court noted that there was “good law” – from the state’s highest court – on both sides of the question. Couple that with the fact that the Restatement, the majority of courts, and most commentators agree that the old approach of treating statutes of limitations as procedural is a dusty relic of the pre-mass tort era, and it was obvious to the court that it was time to start taking a harder look at which state’s statute of limitations should apply based on the state’s interest in and connection to the claims.

Hernandez represents the future of Minnesota’s approach to statutes of limitations. Minnesota might not be 100 percent cured – a definitive Minnesota Supreme Court decision is the only medicine for that – but it is in the process of healing itself thanks to decisions like Danielson and Hernandez.

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