Lex Loci Delictus and Global Economic Welfare: Spinozzi V. ITT Sheraton Corp

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I. INTRODUCTION

The traditional choice-of-law rule for tort was lex loci delictus--the law of the place where the plaintiff suffered the wrong. (1) Beginning with the legal realists in the 1920s, scholars (and later, courts) criticized the lex loci rule as formalistic, manipulable, unfair, and in some instances incoherent. (2) Judicial adherence to the lex loci rule has been diminishing for decades. Today only ten states embrace it. (3)

The lex loci rule has largely been replaced by interest analysis, its cousin the Second Restatement, and related approaches. (4) These modern choice-of-law methodologies are famously indeterminate and do not permit systematic generalizations about which substantive tort law governs in particular cases. But compared to the lex loci rule, the modern rules have one unmistakable consequence: they make it more likely that the forum court will apply local tort law to wrongs that occurred in another jurisdiction. For this reason, modern choice-of-law approaches give plaintiffs an incentive to sue in a forum that has more generous tort laws than the place of injury. This incentive is most powerful when plaintiffs are injured outside the United States by defendants amenable to suit within the United States. The substantive tort law and related procedural mechanisms available in U.S. courts are generally much more favorable to plaintiffs, and produce much larger recoveries, than the law and procedures available in foreign courts.

In Spinozzi v. ITT Sheraton Corp., (5) Judge Posner, in typical contrarian fashion, presented a full-throated defense of the traditional lex loci rule in the context of a transnational tort. The plaintiff in Spinozzi, a dentist from Illinois, suffered serious injuries when he fell into a maintenance pit at a Sheraton hotel while on vacation in Acapulco, Mexico. (6) The district court, sitting in diversity and applying Illinois choice-of-law rules, (7) held that Mexican law governed the case and precluded the plaintiff's recovery because Mexican law "makes contributory negligence a complete defense to negligence liability and the uncontested facts showed that Dr. Spinozzi had been contributorily negligent." (8)

A unanimous Seventh Circuit panel, in an opinion by Judge Posner, affirmed. Judge Posner purported to apply the Second Restatement's "most significant relationship" test, which prevails in Illinois. (9) But he ignored the details of that test. Instead, he implicitly drew on an analysis that he had earlier sketched in his treatise. (10) He reasoned:

  [The jurisdiction in which the accident occurs] is the place that has
  the greatest interest in striking a reasonable balance among safety,
  cost, and other factors pertinent to the design and administration of
  a system of tort law. Most people affected whether as victims or as
  injurers by accidents and other injury-causing events are residents
  of the jurisdiction in which the event takes place. So if law can be
  assumed to be generally responsive to the values and preferences of
  the people who live in the community that formulated the law, the law
  of the place of the accident can be expected to reflect the values and
  preferences of the people most likely to be involved in accidents--can
  be expected, in other words, to be responsive and responsible law,
  law that internalizes the costs and benefits of the people affected by
  it.

  ... Illinois residents may want a higher standard of care than the
  average hotel guest in Mexico, but to supplant Mexican by Illinois
  tort law would disserve the general welfare because it would mean that
  Mexican safety standards (insofar as they are influenced by tort
  suits) were being set by people having little stake in those
  standards. (11)

Judge Posner argued, in other words, that because each jurisdiction has a comparative regulatory advantage with respect to events within its territory, the lex loci rule is efficient. …