Supreme Court of California Justia
Citation 48 Cal. 4th 68, 225 P.3d 516, 105 Cal. Rptr. 3d 378

McCann v. Foster Wheeler

Filed 2/18/10



IN THE SUPREME COURT OF CALIFORNIA



TERRY MCCANN et al.,

Plaintiffs and Appellants,

S162435

v.

Ct.App. 2/8 B189898

FOSTER WHEELER LLC,

Los Angeles County

Defendant and Respondent.

Super. Ct. No. BC336869



This case presents a choice-of-law issue arising in a lawsuit filed by

plaintiff Terry McCann (plaintiff) to recover damages for an illness,

mesothelioma, allegedly caused by his exposure to asbestos. Although the

complaint seeks recovery from numerous defendants, the issue before us relates

solely to the potential liability of a single defendant, Foster Wheeler LLC (Foster

Wheeler), a company that specially designed, manufactured, and provided advice

regarding the installation of a very large boiler at an oil refinery in Oklahoma in

1957. At the time the boiler was being installed at the Oklahoma refinery,

plaintiff, then an Oklahoma resident and a newly hired engineering sales trainee

employed by the construction company that was installing the boiler, allegedly

was exposed to asbestos at various times over a two-week period while he

observed the application of asbestos insulation to the boiler by an independent

insulation contractor.

1


Eighteen years later, in 1975, after working at various jobs in Minnesota

and Illinois, plaintiff moved to Dana Point, California to take a position as

executive director of Toastmasters International. In 2005, after having retired

from his Toastmasters position in 2001 and continuing to reside in California,

plaintiff was diagnosed with mesothelioma. A few months later, plaintiff filed this

action in California, naming numerous defendants, including Foster Wheeler.

Prior to trial, Foster Wheeler moved for summary judgment on various

grounds, including that plaintiff‟s action against it was governed by, and barred

under, an Oklahoma statute of repose that required any cause of action against a

designer or constructor of an improvement to real property to be filed within 10

years of the substantial completion of the improvement. In opposing the motion,

plaintiff contended, first, that his cause of action for an injury or illness caused by

exposure to asbestos should be governed by the relevant California statute of

limitations (under which the action would have been timely filed), rather than by

Oklahoma law, and, second, that in any event Foster Wheeler‟s boiler was not an

improvement to real property within the meaning of the relevant Oklahoma statute

of repose.

After the trial court initially determined that Oklahoma, rather than

California, law should apply to the timeliness issue but that there were disputed

questions of fact regarding whether the action against Foster Wheeler fell within

the reach of the Oklahoma statute of repose, the parties agreed that the trial court,

instead of a jury, should determine whether the Oklahoma statute applied. After

considering the declarations filed by each party and a number of judicial decisions

interpreting the Oklahoma statute, the trial court found that Foster Wheeler was a

designer of an improvement to real property within the meaning of the Oklahoma

statute of repose and entered judgment dismissing Foster Wheeler as a defendant

in plaintiff‟s underlying action.

2

On appeal, the Court of Appeal concluded that the trial court erred in

determining that Oklahoma law rather than California law should apply in these

circumstances; as a consequence, the Court of Appeal did not reach the question

whether the trial court erred in finding that the action against Foster Wheeler fell

within the reach of the applicable Oklahoma statute of repose. In analyzing the

choice-of-law issue under the “governmental interest” approach endorsed by the

governing California decisions, the Court of Appeal reasoned that California “has

an obvious interest in providing a remedy to its long-term residents who sustain

asbestos-related injuries,” but that Oklahoma‟s interest in the application of its

statute of repose “is substantially . . . an interest in protecting Oklahoma

defendants from liability for conduct occurring in Oklahoma.” Because Foster

Wheeler‟s corporate headquarters was located in New York rather than in

Oklahoma, the Court of Appeal found that Foster Wheeler was not “among the

defendants in whose favor Oklahoma‟s statute of repose is primarily directed” and

consequently that “any significant interest of Oklahoma in the application of its

statute of repose . . . is difficult to discern.” The Court of Appeal further

concluded that even if it were assumed a “true conflict” exists in this case, the

interests of California would be more impaired by the application of Oklahoma

law than would be the interests of Oklahoma by the failure to apply its law.

Accordingly, the appellate court held that the trial court erred in applying the

Oklahoma statute of repose to McCann‟s claim against Foster Wheeler, and

reversed the trial court‟s judgment in favor of Foster Wheeler.

On petition by Foster Wheeler, we granted review primarily to consider

whether the Court of Appeal was correct in determining (1) that Oklahoma‟s

interest in the application of its statute of repose is substantially limited to

application of the statute to companies headquartered in Oklahoma and does not

equally encompass out-of-state companies who design or construct improvements

3

to real property located in Oklahoma, and (2) that California‟s interests, rather

than Oklahoma‟s interests, would be more impaired by the failure to apply the

respective state‟s law on the facts presented here.

For the reasons discussed more fully below, we conclude that the decision

of the Court of Appeal should be reversed. As we explain, prior California choice-

of-law decisions demonstrate that, contrary to the conclusion reached by the Court

of Appeal, Oklahoma‟s interest in the application of its statute of repose applies as

fully to out-of-state companies that design and construct improvements to real

property in Oklahoma as to Oklahoma companies that design and construct such

improvements. Further, although California has a legitimate interest in affording a

remedy to a resident of California whose asbestos-related illness first manifests

itself when the individual is a California resident, past California cases indicate

that it is generally appropriate for a court to accord limited weight to California‟s

interest in providing a remedy for a current California resident when the conduct

of the defendant from whom recovery is sought occurred in another state, at a time

when the plaintiff was present in (and, in the present situation, a resident of) that

other state, and where that other state has its own substantive law, that differs from

California law, governing the defendant‟s potential liability for the conduct that

occurred within that state. Taking these factors into consideration, we conclude

that Oklahoma‟s interest would be more impaired by the failure to apply its law in

these circumstances than would be California‟s interest by the failure to apply its

law, and thus that the law of Oklahoma, rather than the law of California, should

apply to the issue presented here.

4



I

A

The facts relevant to the choice-of-law issue before us are not in dispute.

As noted, Foster Wheeler‟s asserted liability for plaintiff‟s illness is based

upon plaintiff‟s alleged exposure to asbestos in Oklahoma over a two-week period

in July 1957, nearly 50 years prior to the time plaintiff was diagnosed with

mesothelioma in 2005.

In July 1957, plaintiff, then an Oklahoma resident and a recent college

graduate, was a newly hired engineering sales trainee employed by Tulsa Refinery

Engineering Company (TRECO), an oil refinery construction company that was

engaged in constructing an expansion of an oil refinery owned by D-X Sunray Oil

Company of Tulsa, Oklahoma (Sunray). In connection with the expansion, Sunray

had ordered a specially designed steam generator from Foster Wheeler, a

corporation headquartered in New York. The generator consisted of a custom-

designed and extensively engineered boiler and related equipment that was to be

designed and manufactured by Foster Wheeler in New York, and shipped in a

disassembled condition to the refinery in Oklahoma, where it was to be assembled

and installed by TRECO at the refinery, in consultation with an advisor employed

by Foster Wheeler. The boiler in question was “huge” — more than 25 feet high

and weighing many tons — and was to be installed on a specially poured

foundation constructed by TRECO.

Pursuant to the terms of the contract between Sunray and Foster Wheeler,

the generator was shipped to Sunray without insulation. The responsibility for

installing the necessary insulation for the generator was to be borne by Sunray.

Sunray hired an independent contractor — a company other than TRECO but not

identified in the record — to install the insulation around the boiler. Plaintiff

5

maintains that Foster Wheeler specified the need for insulation and knew or should

have known the insulation was likely to contain asbestos.

As noted, at the time of the alleged exposure plaintiff was a newly hired

engineering sales trainee employed by TRECO. Plaintiff testified at his deposition

that his job responsibility at that time was simply to observe the ongoing

construction at the refinery and to learn all there was to know about building a

refinery. When plaintiff began work with TRECO, the assembly and installation

of the Foster Wheeler boiler had been largely completed, and the independent

contractor was in the process of installing insulation around the boiler and related

equipment. Plaintiff acknowledged he did not assist in the actual application or

installation of the insulation, but stated he observed the installation work for brief

periods and occasionally stepped inside the boiler to take a look. He recalled

observing the sawing of block insulation, the preparation and installation of

insulating cement on the boiler, and the rising of dust clouds created by the mixing

of the cement. In response to a question concerning the total amount of time he

had been around the Foster Wheeler boiler, plaintiff stated that a “wild guess”

would be “two or three days in total.”

Construction of the generator and its insulation was completed within a few

weeks of plaintiff‟s arrival at the Sunray refinery. After observing other aspects of

the construction of the refinery expansion for more than a year, plaintiff moved to

an office job in TRECO‟s Oklahoma headquarters in Tulsa.

In 1965, plaintiff left Tulsa and moved to Minnesota, where he began

working in the advertising industry. In 1967, plaintiff moved to Chicago, Illinois

to take a job as manager of education for a food industry trade association. While

in Chicago, he earned an MBA degree from Loyola University Chicago.

In 1975, plaintiff moved to Dana Point, California, accepting the position of

executive director of Toastmasters International, a nonprofit organization that

6

assists individuals in becoming more competent and comfortable in public

speaking. He remained director of Toastmasters for 26 years until retiring in

2001.

In April 2005, plaintiff, who continued to reside in California, was

diagnosed with mesothelioma. He filed the complaint in the underlying action in

July 2005, naming numerous defendants, including Foster Wheeler.1

B

As noted above, prior to the commencement of trial Foster Wheeler filed a

motion for summary judgment. Among other contentions, the summary judgment

motion asserted that the timeliness of the action should be governed by Oklahoma

law, rather than California law, and that under Oklahoma law plaintiff‟s cause of

action against Foster Wheeler was barred by an Oklahoma statute of repose2

1

In addition to the causes of action seeking damages for plaintiff‟s illness,

the complaint contains a cause of action on behalf of plaintiff‟s wife, Lucille
McCann, for loss of consortium. Because there is no contention that the wife‟s
loss of consortium action could be maintained against Foster Wheeler in the event
her husband‟s action against Foster Wheeler is barred under the Oklahoma statute
of repose, for convenience we employ the term “plaintiff” in the singular to refer
to Terry McCann.


After judgment was entered in the trial court and while the case was

pending on appeal, Terry McCann died. A motion was filed in the Court of
Appeal to substitute his wife as successor-in-interest pursuant to Code of Civil
Procedure section 377.32, and that court granted the motion.


On September 22, 2008, plaintiff filed a motion in this court, requesting

that we take judicial notice of both the motion to substitute filed in the Court of
Appeal and the Court of Appeal‟s order granting the motion. Because the
documents in question already had been transmitted to this court by the Court of
Appeal, we denied the request for judicial notice, explaining that the documents in
question were part of the record on appeal transmitted to this court by the Court of
Appeal.

2

In Geist v. Sequoias Ventures, Inc. (2000) 83 Cal.App.4th 300, 305, the

court explained the general difference between a statute of limitations and a statute
of repose: “[W]hile a statute of limitations normally sets the time within which

(footnote continued on next page)

7

providing that any tort action for injury arising from “the design, planning,

supervision, or observation of construction or construction of an improvement to

real property” must be brought within 10 years of the “substantial completion” of

the improvement. (Okla. Stat. tit. 12, § 109 (hereafter section 109).) Because

plaintiff‟s lawsuit was filed long after the 10-year period specified in the

Oklahoma statute of repose had expired, Foster Wheeler maintained that the action

against it must be dismissed.

In support of this contention, the summary judgment motion first

maintained that under the “governmental interest” analysis generally applied by

California courts in resolving choice-of-law issues, the application of Oklahoma

law rather than California law is appropriate. Thereafter, to support its claim that

section 109 — the Oklahoma statute of repose — applies to the facts of this case,

the summary judgment motion relied upon an Oklahoma decision that determined

the statute was applicable to the manufacturer and designer of a very large,

specially designed piece of equipment installed in an industrial building. (Ball v.

Harnischfeger Corp. (Okla. 1994) 877 P.2d 45 [holding § 109 applied to designer

and manufacturer of large crane specially designed for installation in a particular

building].) The motion attached a declaration of an engineer describing in detail

(footnote continued from previous page)

proceedings must be commenced once a cause of action accrues, [a] statute of
repose limits the time within which an action may be brought and is not related to
accrual. Indeed, „the injury need not have occurred, much less have been
discovered. Unlike an ordinary statute of limitations which begins running upon
accrual of the claim, [the] period contained in a statute of repose begins when a
special event occurs, regardless of whether a cause of action has accrued or
whether any injury has resulted.‟ [Citation.] A statute of repose thus is harsher
than a statute of limitations in that it cuts off a right of action after a specified
period of time, irrespective of accrual or even notice that a legal right has been
invaded. [Citation.]”

8

the size and features of the boiler in question and the extensive engineering efforts

that were entailed in designing and constructing the boiler to meet the particular

specifications of the Sunray refinery.

In his opposition to the motion for summary judgment, plaintiff first

maintained that section 361 of the Code of Civil Procedure (section 361) —

California‟s so-called “borrowing statute,” which we discuss below (post, pp. 15-

20) — requires application of the California statute of limitations in this case

without consideration of the governmental interest analysis that ordinarily governs

the resolution of choice-of-law issues under California law. Although section 361

provides that, in general, a cause of action arising in another state cannot be

maintained in California if the other state‟s law bars the action due to a lapse of

time, this statute contains an exception for a person “who has been a citizen of this

State, and who has held the cause of action from the time it accrued.” The

opposition to the summary judgment motion argued that plaintiff fell within this

exception and that, as a consequence, section 361 mandated application of the

relevant California statute of limitations without regard to the governmental

interest analysis.

Plaintiff further argued that even if section 361 did not preclude resort to

the governmental interest analysis, under a proper application of that analysis

California law, rather than Oklahoma law, should be found applicable. Plaintiff

maintained that California‟s governmental interest would be significantly impaired

by application of the Oklahoma statute of repose to bar plaintiff‟s action against

Foster Wheeler, whereas Oklahoma had no interest in barring a cause of action

that, plaintiff claimed, arose outside Oklahoma‟s borders because plaintiff first

incurred the symptoms and effects of mesothelioma while he was a longtime

resident of California. Finally, plaintiff contended that even if Oklahoma law

were applicable, Foster Wheeler did not fall within the reach of the Oklahoma

9

statute of repose, because Foster Wheeler was merely the manufacturer of a

defective product and should not be considered the designer of an improvement to

real property within the meaning of the Oklahoma statute.

In ruling on the summary judgment motion, the trial court, although

agreeing with Foster Wheeler‟s argument that Oklahoma law, rather than

California law, should govern the timeliness of the action, nonetheless denied

Foster Wheeler‟s motion for summary judgment, on the ground that there was a

triable issue of fact concerning whether Foster Wheeler was a designer of an

improvement to real property for purposes of the Oklahoma statute of repose.

Thereafter, Foster Wheeler filed a motion under Evidence Code section

402, seeking to have the trial court determine the “narrow factual question”

whether Foster Wheeler was a designer of an improvement to real property under

the terms of the Oklahoma statute of repose. Plaintiff joined in the request to have

this question resolved by the trial court rather than by a jury, asking the trial court

to rule in its favor on this issue and to preclude Foster Wheeler from bringing any

evidence relating to the Oklahoma statute of repose before the jury.

After considering the evidence and legal argument presented by both

parties on this issue, the trial court found that Foster Wheeler was a designer of an

improvement to real property within the meaning of the Oklahoma statute of

repose. Accordingly, the trial court entered judgment in favor of Foster Wheeler,

dismissing plaintiff‟s action against Foster Wheeler.

C

In the Court of Appeal, plaintiff on a number of grounds challenged the

trial court‟s judgment in favor of Foster Wheeler.

First, plaintiff asserted the trial court erred in failing to conclude that the

timeliness of plaintiff‟s action should be governed by California law, rather than

Oklahoma law. Plaintiff again argued initially that application of the California

10

statute of limitations was compelled under the provisions of section 361,

California‟s borrowing statute, without any need to consider the governmental

interest analysis generally applicable to choice-of-law issues. Further, plaintiff

maintained that even if the governmental interest analysis were applied, under that

analysis the California statute of limitations for asbestos-caused injuries or

illnesses, rather than the Oklahoma statute of repose, should apply.

Second, plaintiff maintained that even if Oklahoma law were applicable,

the trial court erred in finding that Foster Wheeler fell within the reach of the

Oklahoma statute of repose, because the evidence failed to support the trial court‟s

conclusion that the boiler was an improvement to real property for purposes of the

Oklahoma statute. In advancing this argument, plaintiff relied primarily upon

Foster Wheeler‟s failure to prove that the boiler had been taxed as real property in

Oklahoma.

In addressing plaintiff‟s contentions, the Court of Appeal initially expressed

skepticism regarding plaintiff‟s argument that the provisions of section 361

properly should be interpreted to compel application of the California statute of

limitations without consideration of the governmental interest analysis, whenever

the plaintiff in an action filed in a California court is a citizen of California at the

time his or her cause of action accrues. Instead, the Court of Appeal suggested

that although the language of section 361 requires a California court to apply the

law of a foreign state barring an action arising in the foreign state as untimely

when the plaintiff is not a California citizen at the time the cause of action accrues,

when the plaintiff is a California citizen when the cause of action accrues “the

statute, on its face, permits the court to apply California law . . . but it does not

expressly require the court to do so; it merely excepts California citizens from the

mandatory application of foreign law. We doubt . . . that the statutory exception

for plaintiffs who were citizens when their cause of action accrued requires the

11

court to apply California law, in circumstances where the application of

California‟s choice of law principles would dictate otherwise.” The Court of

Appeal went on to state, however, that “[w]e need not definitively determine the

point,” in light of that court‟s subsequent conclusion that in this case “California‟s

choice of law principles require the application of California law rather than

Oklahoma law.”

Thereafter, in discussing the choice-of-law issue, the Court of Appeal

began by summarizing the governmental interest approach set forth in prior

California decisions: “Three steps are involved. First, the court must determine

whether the foreign law differs from California law. Second, if there is a

difference, the court must determine whether a „true conflict‟ exists by

determining whether both states have a legitimate interest in applying their own

law to the case at hand. [Citation.] Third, when both states have a legitimate

interest in the application of their respective laws, the court analyzes the

„comparative impairment‟ of the interests of the two states and applies the law of

the state whose interest would be more impaired if its law were not applied.

[Citation.]” The appellate court then proceeded to apply this approach to the

circumstances here at issue.

The Court of Appeal first observed that the laws of Oklahoma and

California clearly differ, because if the Oklahoma statute of repose applied,

plaintiff‟s action against Foster Wheeler would be barred by the lapse of time,

whereas plaintiff‟s action would be timely under the applicable California statute

of limitations (Code Civ. Proc., § 340.2), which permits an action for injury or

illness based upon exposure to asbestos to be brought within a year of the date the

plaintiff first suffered disability and knew or reasonably should have known that

such disability was caused by exposure to asbestos.

12

In considering the second step of the analysis — whether a “true conflict”

exists — the Court of Appeal stated that “[w]e harbor serious doubt that a true

conflict exists in this case between the interests of California and Oklahoma.

California has an obvious interest in providing a remedy to its long-term residents

who sustain asbestos-related injuries . . . . Oklahoma‟s interest — in protecting

defendants who design or construct improvements to real property by placing a

time limitation on their liability for tortious conduct — is considerably less evident

in the circumstances of this case. Oklahoma‟s interest is substantially a local one,

that is, an interest in protecting Oklahoma defendants from liability for conduct

occurring in Oklahoma. [Citation.] In this case, however, Foster Wheeler is not a

citizen of Oklahoma, and is therefore not among the defendants in whose favor

Oklahoma‟s state of repose is primarily directed. Moreover, Foster Wheeler‟s

allegedly tortious conduct was in the design and fabrication of the boiler, which

conduct occurred in New York or some location other than Oklahoma.

Consequently, any significant interest of Oklahoma in the application of its statute

of repose — and hence a „true conflict‟ — is difficult to discern.”

Finally, in the third step of the analysis, the Court of Appeal stated that

even if it assumed Oklahoma has a legitimate interest in the application of its

statute of repose in this case, California law should apply because California‟s

interest would be more impaired than Oklahoma‟s interest if its law were not

applied. In reaching this conclusion, the Court of Appeal reasoned: “California

has a significant interest in permitting [plaintiff] to seek compensation for

asbestos-related injuries manifesting themselves in California. [Plaintiff] has been

a California resident for many years, his injury accrued in California, and he relied

on California‟s health care facilities for his care. California has an interest in

limiting health care costs that accrue as a result of barred claims. This is

particularly important in light of the prevalence of debilitating asbestos-related

13

disease. California‟s interest in providing him with a remedy is far more

significant than Oklahoma‟s interest in protecting a nonresident defendant from

excessive financial burdens, particularly when the nonresident defendant‟s liability

is premised on design and manufacturing activity that did not occur in Oklahoma.

We therefore conclude that the interests of California would be more significantly

impaired by the application of Oklahoma law than the converse. Accordingly, the

trial court erred in applying the Oklahoma statute of repose to [plaintiff‟s] claim

against Foster Wheeler.”

Because it concluded the trial court erred in failing to apply California law

in determining the timeliness of plaintiff‟s action against Foster Wheeler, the

Court of Appeal did not reach plaintiff‟s alternative contention that the trial court

erred in finding that, under Oklahoma law, Foster Wheeler was entitled to the

protection of the Oklahoma statute of repose. Having concluded that plaintiff‟s

action against Foster Wheeler was timely under California law, the Court of

Appeal reversed the trial court‟s judgment in favor of Foster Wheeler.

We granted Foster Wheeler‟s petition for review.

II

Traditionally, a state‟s general choice-of-law rules have been formulated by

courts through judicial decisions rendered under the common law, rather than by

the Legislature through statutory enactments. In California, over the past four

decades this court‟s decisions have adopted and consistently applied the so-called

“governmental interest” analysis as the appropriate general methodology for

resolving choice-of-law questions in this state. (See, e.g., Reich v. Purcell (1967)

67 Cal.2d 551 (Reich); Bernhard v. Harrah’s Club (1976) 16 Cal.3d 313

(Bernhard); Offshore Rental Co. v. Continental Oil Co. (1978) 22 Cal.3d 157

(Offshore Rental); Kearney v. Salomon Smith Barney, Inc. (2006) 39 Cal.4th 95

(Kearney).)

14

With respect to the category of statutes of limitation and statutes of repose,

however, many jurisdictions have enacted specific statutory provisions that

address the subject of choice of law. As discussed in a leading treatise and a

number of law review articles, a majority of American states have adopted so-

called “borrowing statutes” that direct the courts of a state, in lawsuits filed within

that state, to apply or “borrow” the relevant statute of limitations or statute of

repose of a foreign jurisdiction under the particular circumstances specified in the

statute, rather than to apply the statute of limitations of the forum jurisdiction.

(See generally Leflar et al., American Conflicts Law (4th ed. 1986) §§ 127-128,

pp. 348-354 (Leflar Treatise); Ester, Borrowing Statutes of Limitation and Conflict

of Laws (1962-1963) 15 U. Fla. L.Rev. 33 (Ester Article); Vernon, Statutes of

Limitation in the Conflict of Laws: Borrowing Statutes (1960) 32 Rocky Mtn.

L.Rev. 287 (Vernon Article).)

The general popularity of borrowing statutes is explained by the common

law background against which such statutes were enacted. Under early common

law conflict-of-law principles, rules of law ordinarily were characterized as either

“substantive” or “procedural,” and procedural matters universally were held to be

governed by the local or forum law. Because early common law decisions

characterized statutes of limitations as procedural rather than substantive, the

general rule at that time was that the local statute of limitations of the forum

state — rather than another state‟s statute of limitations — applied to an action

filed in the forum state, regardless of the location of the most significant events

and circumstances underlying the cause of action or relating to the parties. (Leflar

Treatise, supra, § 127, pp. 348-349.) Thus, even when a cause of action arose out

of an accident in one state and all the parties were residents of that state, if a

lawsuit were filed in a different state, the court in which the action was filed

15

generally would apply its own state‟s statute of limitations, rather than the statute

of limitations of the other state.

When the period specified in the forum state‟s statute of limitations was

shorter than that in the other state‟s statute of limitations, application of the early

common law rule would not necessarily create a serious problem or result in an

unfair result, because if the forum‟s statute of limitations had expired the plaintiff,

at least as a theoretical matter, still could bring the action in the other state. A

more problematic situation was presented, however, when the period provided in

the applicable statute of limitations of the forum state was longer than that in the

applicable statute of limitations in the state where the cause of action arose. In

that setting, a plaintiff who failed to timely file an action in the state in which the

action arose would be provided the opportunity to search out another jurisdiction

in which the applicable period under the relevant statute of limitations for the

cause of action at issue was longer and in which the action could be maintained —

a classic example of questionable forum shopping.

This is the principal problem to which borrowing statutes were generally

addressed. (See, e.g., Pack v. Beech Aircraft Corporation (Del. 1957) 132 A.2d

54, 57.) Although the provisions of the various states‟ borrowing statutes differ in

a variety of respects, these enactments typically “borrow” the statute of another

state when the cause of action in question “arose,” “originated,” or “accrued” in

the other state and would be barred as untimely in that state. (See Ester Article,

supra, 15 U. Fla. L.Rev. 33, 45-56.) Many borrowing statutes, however, also

include exceptions that exempt from the reach of the borrowing statute lawsuits

that are filed in the courts of the enacting state by residents or citizens of that state.

(See id., at pp. 69-72.)

California first enacted a borrowing statute very early in its history, in

1851, as part of the state‟s initial comprehensive legislation regulating proceedings

16

in civil cases. (Stats. 1851, ch. 5, § 532, p. 134.)3 When the Code of Civil

Procedure was adopted in 1872, the early 1851 statute was codified, with only a

minor change in language, as section 361. The language of section 361, as

enacted in 1872, remains unchanged to this day.

Section 361 provides in full: “When a cause of action has arisen in another

State, or in a foreign country, and by the laws thereof an action thereon cannot

there be maintained against a person by reason of the lapse of time, an action

thereon shall not be maintained against him in this State, except in favor of one

who has been a citizen of this State, and who has held the cause of action from the

time it accrued.”

Section 361 thus creates a general rule that when a cause of action has

arisen in another jurisdiction but cannot be maintained against a particular

defendant in that jurisdiction because of the lapse of time, the action cannot be

maintained against that defendant in a California court. The statute contains an

exception, however, for a plaintiff “who has been a citizen of this State, and who

has held the cause of action from the time it accrued.” Past cases establish that

this exception applies only where the plaintiff was a California citizen at the time

the cause of action accrued, and does not extend to a plaintiff who became a

citizen of California after the cause of action accrued but before the lawsuit in

question was filed. (See, e.g., Biewend v. Biewend (1941) 17 Cal.2d 108, 115;

Grant v. McAuliffe (1953) 41 Cal.2d 859, 865; accord, Miller v. Stauffler Chem.

Co. (Idaho 1978) 581 P.2d 345, 347-348.)

3

The 1851 statute provided in full: “When a cause of action has arisen in

another State, or in a foreign country, and by the laws thereof an action thereon
cannot there be maintained against a person by reason of the lapse of time, an
action thereon shall not be maintained against him in this State, except in favor of
a citizen thereof, who has held the cause of action from the time it accrued.”

17

Although application of section 361 generally is straightforward in a case

involving, for example, a typical automobile accident — in which the allegedly

tortious conduct, the resulting injury, and compensable damage all occur at the

same time and in the same place — proper application of the statute is more

problematic in a case, like the present one, in which the defendant‟s allegedly

injury-producing conduct occurred in another state at a much earlier date but the

plaintiff‟s resulting illness or injury does not become apparent and reasonably is

not discovered until many decades later, at a time when the plaintiff has

established residence in California.4 In the factual setting here at issue, it may be

reasonably debatable whether plaintiff‟s cause of action against Foster Wheeler

“arose” in Oklahoma or instead in California for purposes of section 361, and

whether plaintiff was a citizen of California or of Oklahoma at the time the cause


4

In Buttram v. Owens-Corning Fiberglas Corp. (1997) 16 Cal.4th 520, 529

(Buttram), we discussed some of the difficulties in determining when a cause of
action for asbestos-related mesothelioma can be said to accrue: “Mesothelioma is
a latent, progressively developing disease — decades can often pass between the
time a person is first exposed to asbestos and the time he first develops a
cancerous mesothelioma tumor. Moreover, although early formation of
undetected cellular changes ultimately leads to contraction of the disease, it may
be years before the cancerous cells will result in a tumor large enough to be
detected, be medically diagnosed, or cause symptomatology of the disease. It has
been observed generally that „diagnosis of toxic related disease is almost always
an uncertain enterprise, particularly in the early stages of the disease. Lack of
understanding of biological and physiological mechanisms, absence of serious
dysfunction, and the slowly progressive nature of some diseases contribute to the
difficulties of diagnosis. . . . [¶] The combination of lengthy latency periods and
diagnostic difficulties is a unique feature of toxic substance cases for purposes of
statutes of limitations analysis [or related legal issues]: No temporally discrete
event exists that encompasses the defendant‟s breach and the plaintiff‟s injury.
Instead, insidious disease litigation involves an extended chronology of causation
unlike traditional snapshot torts.‟ ” (Material in brackets added in Buttram.)

18

of action “accrued” within the meaning of the term as used in this borrowing

statute.5

Even if we assume either that the cause of action at issue “arose” in

California for purposes of section 361 or that plaintiff was a citizen of California

from the time the cause of action “accrued” within the meaning of this statute —

and thus that section 361 does not require application of Oklahoma law rather than

California law on the facts of this case — we agree with the Court of Appeal that

this statute cannot properly be interpreted to compel application of the California

statute of limitations without consideration of California‟s generally applicable


5

As we explained in Buttram, supra, 16 Cal.4th 520, 530, “a cause of action

may be viewed in the eyes of the law as „accruing‟ [or „arising‟] for different
purposes on different dates, depending on the purpose for which the accrual [or the
arising] determination is being sought.” (Material in brackets added here.)


In the present circumstances, there may be some question whether, for

purposes of section 361, plaintiff‟s cause of action should be considered to have
“arisen” in Oklahoma, where plaintiff was exposed to the asbestos for which
Foster Wheeler assertedly is responsible, or, instead, in California, where plaintiff
resided when his illness first was diagnosed and gave rise to compensable damage
that constitutes a necessary element of his cause of action. Similarly, it may be
debatable whether plaintiff was a citizen of California when his cause of action
“accrued” within the meaning of section 361 (because, under California law, the
general rule is that “for statute of limitations purposes, . . . a cause of action for a
latent injury does not accrue until the plaintiff discovers or reasonably should have
discovered that he has suffered a compensable injury” (Buttram, supra, 16 Cal.4th
520, 530)), or, instead, plaintiff should be viewed as having been a citizen of
Oklahoma when his cause of action “accrued” within the meaning of section 361
(to avoid the risk that persons who have been exposed to a toxic substance but
have not yet suffered a compensable injury may “forum shop” by thereafter
moving to California).


In a variety of settings, cases in other jurisdictions have reached differing

conclusions in determining where a cause of action has “arisen” or “accrued”
within the meaning of a borrowing statute. (See generally Annot. (1959) 67
A.L.R.2d 216, 221-223; Annot. (1944) 149 A.L.R. 1224, 1226-1227; Annot.
(1931) 75 A.L.R. 203, 211-220.)

19

choice-of-law principles. Although at the time section 361 was adopted, the then-

prevailing choice-of-law doctrine generally would have called for the application

of the relevant California statute of limitations in a case in which section 361 did

not mandate application of another jurisdiction‟s law (see, e.g., Royal Trust Co. v.

MacBean (1914) 168 Cal. 642, 646), nothing in section 361 indicates that this

statute was intended to freeze the then-prevailing general choice-of-law rules into

a statutory command, so as to curtail the judiciary‟s long-standing authority to

adopt and modify choice-of-law principles pursuant to its traditional common law

role. (Cf. Li v. Yellow Cab (1975) 13 Cal.3d 804, 813-823.) Accordingly, now

that the earlier methodology for resolving choice-of-law issues has been replaced

in this state by the governmental interest mode of analysis (see, e.g., Reich, supra,

67 Cal.2d 551, 553-557; Bernhard, supra, 16 Cal.3d 313, 316-321), in those

instances in which section 361 does not mandate application of another

jurisdiction‟s statute of limitations or statute of repose the question whether the

relevant California statute of limitations (or statute of repose) or, instead, another

jurisdiction‟s statute of limitations (or statute of repose) should be applied in a

particular case must be determined through application of the governmental

interest analysis that governs choice-of-law issues generally. (See, e.g., Ashland

Chemical Co. v. Provence (1982) 129 Cal.App.3d 790, 793-794 [holding that

under California law, governmental interest analysis is applicable to resolve a

choice-of-law issue relating to the statute of limitations]; Nelson v. International

Paint Co. (9th Cir. 1983) 716 F.2d 640, 644 [same].)

Thus, we now turn to the task of applying the general governmental interest

analysis to the circumstances before us in the present case.

20



III

Recently, in Kearney, supra, 39 Cal.4th 95, we summarized the mode of

analysis called for by the governmental interest approach. “In brief outline, the

governmental interest approach generally involves three steps. First, the court

determines whether the relevant law of each of the potentially affected

jurisdictions with regard to the particular issue in question is the same or different.

Second, if there is a difference, the court examines each jurisdiction‟s interest in

the application of its own law under the circumstances of the particular case to

determine whether a true conflict exists. Third, if the court finds that there is a

true conflict, it carefully evaluates and compares the nature and strength of the

interest of each jurisdiction in the application of its own law „to determine which

state‟s interest would be more impaired if its policy were subordinated to the

policy of the other state‟ [citation] and then ultimately applies „the law of the state

whose interest would be more impaired if its law were not applied.‟ ” (39 Cal.4th

at pp. 107-108.)

A

With regard to the first of these steps, we agree with the Court of Appeal

that “[t]he laws of Oklahoma and California clearly differ.”

1

Under section 109 (the Oklahoma statute of repose), plaintiff‟s cause of

action would be barred by the lapse of time, because that statute “bars any tort

action which arises more than ten years after the substantial completion of the

improvement to real property.” (Riley v. Brown and Root, Inc. (Okla. 1992) 836

21



P.2d 1298, 1300.)6 Although the Oklahoma statute in question has been

interpreted not to bar products liability actions against the manufacturers and

sellers of mass-produced products (see, e.g., Durham v. Herbert Olbrich GMBH &

Co. (10th Cir. 2005) 404 F.3d 1249, 1254-1255; Uricam Corp. v. W.R. Grace &

Co. (W.D.Okla. 1990) 739 F.Supp. 1493) — and thus would not preclude plaintiff

from suing companies that manufactured or sold the asbestos insulation to which

he was exposed (Uricam Corp. v. W.R. Grace & Co., supra, 739 F.Supp. at

p. 1496) — the Oklahoma Supreme Court has interpreted the statute of repose to

protect a manufacturer/designer of a specially designed improvement to real

property. (Ball v. Harnischfeger Corp., supra, 877 P.2d 45, 50 [“If the

manufacturer was acting as a designer, planner, construction supervisor or

observer, or constructor, the statute of repose will apply. It is the specialized

expertise and rendition of particularized design which separates those protected

6

Section 109 provides in full: “No action in tort to recover damages

[¶] (i) for any deficiency in the design, planning, supervision or observation of
construction or construction of an improvement to real property, [¶] (ii) for injury
to property, real or personal, arising out of any such deficiency, or [¶] (iii) for
injury to the person or for wrongful death arising out of any such deficiency,
[¶] shall be brought against any person owning, leasing, or in possession of such
an improvement or performing or furnishing the design, planning, supervision or
observation of construction or construction of such an improvement more than
ten (10) years after substantial completion of such an improvement.”


Although section 109 was enacted in 1978, well after the boiler in question

was designed and installed, Oklahoma decisions make clear that section 109
applies to tort actions for injuries resulting from improvements that predated the
statute, and that such application does not improperly infringe upon an injured
plaintiff‟s rights. (See, e.g., St. Paul Fire & Marine Ins. Co. v. Getty Oil Co.
(Okla. 1989) 782 P.2d 915, 918-921; Jaworsky v. Frolich (Okla. 1992) 850 P.2d
1052, 1054-1056; Mooney v. YMCA of Greater Tulsa (Okla. 1993) 849 P.2d 414,
416.)

22

from mere manufacturers and suppliers”]; see also Goad v. Buschman Co. (N.D.

Okla. 2008) 2008 U.S. Dist. Lexis 27297, pp. *7-*21 and cases cited, affd. (10th

Cir. 2009) 2009 U.S. App. Lexis 6058.)

Although, as we have explained above, plaintiff argued in the Court of

Appeal and continues to maintain in this court that the trial court erred in finding

that the boiler in question was an improvement to real property for purposes of the

Oklahoma statute of repose, the Court of Appeal never reached that issue, because

it concluded that even if Foster Wheeler fell within the reach of the Oklahoma

statute, under California‟s choice-of-law principles California law would apply. In

reviewing the conclusion reached by the Court of Appeal, we similarly shall

assume for purposes of determining the choice-of-law issue that Foster Wheeler‟s

conduct brought it within the reach of the relevant Oklahoma statute of repose.7

Under this premise, plaintiff‟s action against Foster Wheeler plainly would be

untimely under Oklahoma law, because this action was filed more than 10 years

after substantial completion of the improvement.8


7

Because the Court of Appeal did not address plaintiff‟s challenge to the

trial court‟s determination that the boiler in question constituted an improvement
to real property for purposes of the relevant Oklahoma statute, we conclude, in
light of our determination that the appellate court erred in its resolution of the
choice-of-law issue, that it is appropriate to remand this matter to the Court of
Appeal to permit that court, in the first instance, to pass on plaintiff‟s challenge to
the trial court‟s application of Oklahoma law to the circumstances of this case.

8

While this matter was pending before this court, the Oklahoma Legislature

enacted comprehensive “lawsuit reform” legislation that includes the following
provision pertaining to asbestos-related claims: “Notwithstanding any other
provision of law, with respect to any asbestos or silica claim not barred as of the
effective date of this act, the limitations period shall not begin to run until the
exposed person or claimant discovers, or through the exercise of reasonable
diligence should have discovered, that the exposed person or claimant is
physically impaired as set forth in this chapter by an asbestos- or silica-related
condition.” (2009 Okla. House Bill No. 1603, § 64, subd. A [chaptered as

(footnote continued on next page)

23

2

By contrast, plaintiff‟s action against Foster Wheeler clearly would be

timely if California law were applied. Although this state has enacted a statute of

repose applicable to causes of action arising out of a latent deficiency in the design

or construction of an improvement to real property that is somewhat similar to the

relevant Oklahoma statute of repose (see Code Civ. Proc., § 337.15),9 the

California statute, unlike its Oklahoma counterpart, applies only to actions for

injury to property, not to personal injury actions. (Martinez v. Traubner (1982) 32

Cal.3d 755, 757-761.) Furthermore, California has enacted a special statute of

limitations explicitly governing the time for bringing an action “for injury or


(footnote continued from previous page)

ch. 228].)


Although the initial clause of this provision (“Notwithstanding any other

provision of law”) could be interpreted to mean that the new statute creates an
exception to the Oklahoma statute of repose for asbestos-related claims
(permitting such claims to be brought so long as they satisfy all of the
requirements and limitations embodied in the new statute), the new provision
explicitly applies only “to any asbestos . . . claim not barred as of the effective
date of this act
” (italics added) and thus would not affect an action, like the present
one, that was barred by the Oklahoma statute of repose long before the enactment
of the new legislation. Accordingly, the Oklahoma statute of repose continues to
represent the relevant Oklahoma law for purposes of the present proceeding.

9

Code of Civil Procedure section 337.15 provides in relevant part: “(a) No

action may be brought to recover damages from any person . . . who develops real
property or performs or furnishes the design, specifications, surveying, planning,
supervision, testing, or observation of construction or construction of an
improvement to real property more than 10 years after the substantial completion
of the development or improvement for any of the following: [¶] (1) Any latent
deficiency in the design, specification, surveying, supervision, or observation of
construction or construction of an improvement to, or survey of, real property.
[¶] (2) Injury to property, real or personal, arising out of any such latent
deficiency.”

24

illness based upon exposure to asbestos,” which permits such an action to be

brought up to one year after the plaintiff both (1) first suffered disability and

(2) knew or reasonably should have known that the disability was caused or

contributed to by exposure to asbestos. (Code Civ. Proc., § 340.2;10 see Hamilton

v. Asbestos Corp. (2000) 22 Cal.4th 1127, 1138.) Here, plaintiff, who previously

had retired for reasons unconnected to his asbestos-related illness, filed this action

within a few months after he first was diagnosed with mesothelioma, and thus the

action clearly would be timely under the provisions of section 340.2. (See

Hamilton v. Asbestos Corp., supra, 22 Cal.4th at pp. 1138-1147.)

Accordingly, the law of Oklahoma clearly differs from the law of

California with respect to the timeliness of plaintiff‟s cause of action.

B

The second step of the governmental interest analysis requires us to

examine “each jurisdiction‟s interest in the application of its own law in the

circumstances of the particular case to determine whether a true conflict exists.”

(Kearney, supra, 39 Cal.4th at pp. 107-108.)

1

Oklahoma decisions indicate that by establishing a relatively lengthy

(10-year) period in which a cause of action for a deficiency in design of an


10

Code of Civil Procedure, section 340.2 provides in relevant part: “(a) In

any civil action for injury or illness based upon exposure to asbestos, the time for
the commencement of the action shall be the later of the following: [¶] (1) Within
one year after the date the plaintiff first suffered disability. [¶] (2) Within one year
after the date the plaintiff either knew, or through the exercise of reasonable
diligence should have known, that such disability was caused or contributed to by
such exposure. [¶] (b) „Disability‟ as used in subdivision (a) means the loss of
time from work as a result of such exposure which precludes the performance of
the employee‟s regular occupation.”

25

improvement to real property may be brought, but at the same time terminating all

liability after that deadline regardless of whether the plaintiff‟s injury had yet

occurred or become manifest, the relevant statute of repose was intended to

balance the interest of injured persons in having a remedy available for such

injuries against the interest of builders, architects, and designers of real property

improvements in being subject to a specified time limit during which they would

remain potentially liable for their actions in connection with such improvements.

(See, e.g., St. Paul Fire & Marine Ins. Co. v. Getty Oil Co., supra, 782 P.2d 915,

920-921.) The Oklahoma high court held in St. Paul Fire & Marine Ins. Co. that

the statute of repose, by establishing this type of fixed time limit in which any

cause of action must be brought, serves “the legitimate government objectives of

providing a measure of security for building professionals whose liability could

otherwise extend indefinitely.” (Id. at p. 921.) The court further noted that the

statute “also serves the legitimate objective of avoiding the difficulties of proof

which arise from the passage of time.” (Ibid.)

In discussing the interest of Oklahoma embodied in the statute, the Court of

Appeal in the present case expressed the view that “Oklahoma‟s interest is

substantially a local one, that is, an interest in protecting Oklahoma defendants

from liability for conduct occurring in Oklahoma.” The appellate court indicated

that Oklahoma‟s interest in the application of this statute does not extend to, or at

least does not apply as strongly to, a non-Oklahoma business that designs or

constructs an improvement to real property located in Oklahoma. Because Foster

Wheeler is a non-Oklahoma corporation (incorporated in Delaware, with its

headquarters in New York), and because the design and manufacture of the boiler

occurred in New York, the Court of Appeal expressed the view that “any

significant interest of Oklahoma in the application of its statute of repose . . . is

difficult to discern.”

26

We conclude that the Court of Appeal did not accurately assess the interest

of Oklahoma embodied in the statute of repose here at issue. When a state adopts

a rule of law limiting liability for commercial activity conducted within the state in

order to provide what the state perceives is fair treatment to, and an appropriate

incentive for, business enterprises, we believe that the state ordinarily has an

interest in having that policy of limited liability applied to out-of-state companies

that conduct business in the state, as well as to businesses incorporated or

headquartered within the state. A state has a legitimate interest in attracting

out-of-state companies to do business within the state, both to obtain tax and other

revenue that such businesses may generate for the state, and to advance the

opportunity of state residents to obtain employment and the products and services

offered by out-of-state companies. In the absence of any explicit indication that a

jurisdiction‟s “business friendly” statute or rule of law is intended to apply only to

businesses incorporated or headquartered in that jurisdiction (or that have some

other designated relationship with the state — for example, to those entities

licensed by the state), as a practical and realistic matter the state‟s interest in

having that law applied to the activities of out-of-state companies within the

jurisdiction is equal to its interest in the application of the law to comparable

activities engaged in by local businesses situated within the jurisdiction.

This court‟s decision in Offshore Rental, supra, 22 Cal.3d 157, supports the

foregoing conclusion. In Offshore Rental, the plaintiff was a California company

that brought suit to recover economic damages it had suffered when one of its key

employees had been injured in Louisiana, allegedly as a result of the negligence of

one of the defendant company‟s employees in Louisiana. The case presented a

choice-of-law issue because California law permits a company to maintain a cause

of action for the economic damage suffered by the company as a result of an

injury to a key employee (an action separate from, and independent of, the

27

employee‟s own personal injury action), whereas Louisiana law does not permit an

employer to maintain such a cause of action (permitting only the employee‟s

personal injury action). The defendant company in Offshore Rental was a

Delaware corporation, headquartered in New York, that did business in Louisiana,

California, and other states.

In examining the question whether Louisiana had an interest in having its

law (denying the plaintiff company‟s cause of action for injury to a key employee)

applied in the circumstances of that case, the court in Offshore Rental, supra, 22

Cal.3d 157, explained: “The accident in question occurred within Louisiana‟s

borders; although the law of the place of the wrong is not necessarily the

applicable law for all tort actions [citation], the situs of the injury remains a

relevant consideration. At the heart of Louisiana‟s denial of liability lies the vital

interest in promoting freedom of investment and enterprise within Louisiana‟s

borders, among investors incorporated both in Louisiana and elsewhere. The

imposition of liability on defendant, therefore, would strike at the essence of a

compelling Louisiana law.” (22 Cal.3d at p. 168, italics added and deleted.) Thus,

although the defendant in that case was an out-of-state company doing business in

Louisiana, the California court in Offshore Rental recognized that the interest of

Louisiana in protecting companies from what the latter state viewed as excessive

liability extended to such a company.11


11

The defendant company in Offshore Rental, supra, 22 Cal.3d 157, owned

property in Louisiana in addition to doing business in that state (id. at pp. 160-161,
164), but the policy underlying the applicable Louisiana rule — to protect
businesses acting within Louisiana‟s borders “from the financial hardships caused
by the assessment of excessive legal liability or exaggerated claims resulting from
the loss of services of a key employee” (id. at p. 164) — would apply to all
commercial entities doing business in Louisiana.

28

In concluding that Oklahoma had little or no interest in the application of

its law to the present case because Foster Wheeler was not an Oklahoma company,

the Court of Appeal relied upon two passages in Reich, supra, 67 Cal.2d 551, in

which the court observed that “[t]he state of the place of the wrong has little or no

interest in [the application of its statute limiting damages for wrongful death]

when none of the parties reside there” (67 Cal.2d at p. 556), and that a state‟s

interest in avoiding the imposition of excessive financial burdens on defendants is

a “primarily local” interest. (Ibid.) The Court of Appeal also relied upon a similar

passage in Hurtado v. Superior Court (1974) 11 Cal.3d 574, which declared that

“a state‟s interest in limiting recovery in wrongful death actions is in protecting

resident defendants from excessive financial burdens.” (11 Cal.3d at p. 586.)

Both Reich and Hurtado, however, concerned automobile accidents involving

private individuals, not commercial entities, and nothing in those decisions

suggests that a state‟s interest in the application of a statute limiting liability for

specified commercial activity carried on within the state applies only to local

companies and not equally to out-of state companies doing business within the

state. Unlike our decision in Offshore Rental, supra, 22 Cal.3d 157, Reich and

Hurtado had no occasion to address that question.

Furthermore, just as the Court of Appeal erred in relying on the

non-Oklahoma location of Foster Wheeler‟s incorporation or headquarters as a

basis for determining that Oklahoma lacked an interest in having its statute of

repose applied here, the appellate court similarly erred in suggesting that

Oklahoma‟s interest in having its statute applied was negated by the circumstance

that the design and manufacture of the boiler in question occurred in New York

rather than in Oklahoma. The statute of repose here at issue protects not only

construction-related businesses that engage in their activities at the Oklahoma site

of the improvement, but also commercial entities, such as establishments

29

performing architectural and other design-improvement work, that conduct their

activities away from the location of the improvement but whose potential liability

flows from a plaintiff‟s interaction with, or exposure to, the real property

improvement in Oklahoma. Under the premise that the activities of Foster

Wheeler in this case bring it within the reach of the Oklahoma statute of repose

(see, ante at p. 23), we conclude that, for purposes of the governmental interest

analysis, Oklahoma clearly possesses an interest in having the statute applied in

the present case and that its interest is not diminished by the circumstance that

some of Foster Wheeler‟s activities occurred outside of Oklahoma.12

Accordingly, contrary to the view expressed by the Court of Appeal, we

conclude that Oklahoma has a real and legitimate interest in having its statute of

repose applied under the circumstances presented here.

2

At the same time, we also recognize that California has an interest in

having California law applied in this case.

As discussed above, the applicable California statute — Code of Civil

Procedure section 340.2 — permits an action for injury or illness based upon

exposure to asbestos to be brought up to one year after the plaintiff first suffered

disability (as defined by the statute) and knew or reasonably should have known


12

Furthermore, although the Court of Appeal appears to have assumed that

plaintiff‟s claim against Foster Wheeler rested solely upon that entity‟s conduct in
New York, plaintiff asserted in his opposition to the summary judgment motion
that, because Foster Wheeler “knew or should have known that the normal and
intended operation of its boilers would include the use and application of asbestos
containing insulation, and that end users, like [plaintiff], would be exposed to
asbestos during the installation of that insulation[,] Foster Wheeler . . . had a duty
to warn of this foreseeable hazard.” To be effective, of course, such a warning
would have to have been communicated to plaintiff in Oklahoma.

30

that the disability was caused or contributed to by such exposure. This statute,

enacted in 1979 to lengthen the period of time in which an asbestos-related claim

may be brought, reflects a state interest in providing persons who suffer injury or

illness as a result of their exposure to asbestos a fair and reasonable opportunity to

seek recovery for their injury or illness, taking into account not only the typically

lengthy period between exposure to asbestos and the development of disease but

also the often substantial period between the initial discovery or diagnosis of a

disease and the time when the disease becomes disabling. (See, e.g., Hamilton v.

Asbestos Corp., supra, 22 Cal.4th 1127, 1138-1139; Blakey v. Superior Court

(1984) 153 Cal.App.3d 101, 105-106; Nelson v. Flintkote Co. (1985) 172

Cal.App.3d 727, 735.) The language of section 340.2 does not specify the class of

persons to whom the statute was intended to apply, but by its terms the provision

is not limited only to persons who were exposed to asbestos in California. In view

of the legislation‟s clear recognition of the unusual nature of asbestos-related

injury and illness, and the statute‟s objective to provide injured or ill persons a fair

and adequate opportunity to seek recovery for such asbestos-related harm, we

conclude that California has an interest in having this statute applied to a person,

like plaintiff, who is a California resident at the time the person discovers that he

or she is suffering from an asbestos-related injury or illness, even when the

person‟s exposure to asbestos occurred outside California.

A number of prior California cases support the conclusion that California

has a legitimate interest in having a statutory provision that affords a remedy for or

a benefit to an injured person or business applied when, as here, the injured person

or business is a California resident or business, even when the injury-producing

conduct occurs outside California. In Offshore Rental, supra, 22 Cal.3d 157, for

example, although ultimately concluding that the Louisiana rule of law denying a

cause of action for injury to a company‟s “key employee” should be applied, this

31

court, in discussing the second step of the governmental interest analysis,

determined that California had a real and legitimate interest in having its rule of

law — permitting such a cause of action — applied in favor of a California

company that had suffered such an injury, even though the injury to the company‟s

key employee had occurred in another state. (See 22 Cal.3d at p. 164

[“California‟s economy and tax revenues are affected regardless of the situs of

physical injury”].)

The decision in Castro v. Budget Rent-A-Car System, Inc. (2007) 154

Cal.App.4th 1162 (Castro) also supports the conclusion recognizing a legitimate

interest on the part of California under such circumstances. In Castro, the

plaintiff, a California resident, was injured in a traffic accident that occurred in

Alabama, allegedly caused by the negligence of the driver of a rented truck that

was owned and leased by the defendant Budget Rent-A-Car. Under Alabama law,

the owner of a motor vehicle is not liable for the negligence of a permissive user

of the vehicle except under limited circumstances; under California law, by

contrast, an owner of a motor vehicle generally is vicariously liable, up to a

specified amount, for the negligence of a permissive user. (154 Cal.App.4th at

p. 1179.) In discussing whether California had an interest in having its law

applied under the circumstances presented by that case, the court in Castro first

observed that a primary purpose of the California permissive user law —

“motivating vehicle owners who allow others to use their vehicles within

California to exercise care in the selection and supervision of such permissive

users, and . . . protecting persons using California roadways” (id. at p. 1182) —

would not be furthered by the application of California law in that case, because

the accident in question occurred in Alabama rather than in California. (Id. at

pp. 1181-1182.) Nonetheless, the court in Castro concluded that California “does

have a legitimate governmental interest in having its permissive user statute

32

applied based on Castro’s status as a California resident. Application of that

statute to circumstances such as these would serve to ensure that California

residents injured in traffic accidents in other states would be compensated for

their injuries and not become dependent on the resources of California for

necessary medical, disability, and unemployment benefits.” (Id. at p. 1182, italics

added.)

Although, as we discuss further below (post, at pp. 39-40), the court in

Castro ultimately concluded in the third step of the governmental interest analysis

(the comparative impairment prong) that Alabama law rather than California law

should apply in the circumstances of that case, the passage in Castro quoted above

supports the conclusion that California has a legitimate governmental interest in

having California law applied in the present case. Application of the California

statute of limitations to a current California resident who suffers an injury or

illness as a result of his or her prior exposure to asbestos in another jurisdiction

would assist such residents in obtaining compensation for their injuries and in not

becoming dependent on the resources of California for necessary medical,

disability, and unemployment benefits.13


13

One federal court has expressed skepticism regarding whether “a state has a

legitimate interest in having one of its residents collect money from the resident of
another jurisdiction based on conduct that occurred outside the state‟s
boundaries.” (Arno v. Club Med Inc. (9th Cir. 1994) 22 F.3d 1464, 1468, fn. 5.)
Although a few early United States Supreme Court decisions demonstrate that
under some circumstances a state‟s interest in affording a remedy to a current
resident is insufficient in itself to justify the choice of forum law over the law of
another much more significantly involved jurisdiction (see, e.g., John Hancock
Mutual Life Ins. Co. v. Yates
(1936) 299 U.S. 178), more recent high court
decisions indicate that a state‟s interest in affording a remedy for an injury
suffered by a current state resident, even when the injury results from a
defendant‟s conduct in another state, is a constitutionally legitimate interest that
properly may be considered as a relevant factor in determining the validity of a

(footnote continued on next page)

33

Accordingly, California, as well as Oklahoma, has an interest in having its

own law applied in this case.

Because the applicable laws of Oklahoma and California differ and each

state has an interest in having its law applied under the circumstances of the

present case, we are faced with a “true conflict.” As explained above, in such

instances we apply the so-called “comparative impairment” approach.

C

Under the comparative impairment analysis, we must “carefully evaluate[]

and compare[] the nature and strength of the interest of each jurisdiction in the

application of its own law „to determine which state‟s interest would be more

impaired if its policy were subordinated to the policy of the other state.‟ ”

(Kearney, supra, 39 Cal.4th 95, 108.) In conducting this evaluation, our prior

decisions emphasize that it is important to keep in mind that “[t]he court does not

„ “weigh” the conflicting governmental interests in the sense of determining which

conflicting law manifested the “better” or the “worthier” social policy on the

specific issue. An attempted balancing of conflicting state policies in that sense

. . . is difficult to justify in the context of a federal system in which, within

constitutional limits, states are empowered to mold their policies as they wish. . . .

[Instead, the process] can accurately be described as . . . a problem of allocating

domains of law-making power in multi-state contexts — [by determining the

appropriate] limitations on the reach of state policies — as distinguished from


(footnote continued from previous page)

state court‟s choice-of-law ruling. (See, e.g., Phillips Petroleum Co. v. Shutts
(1985) 472 U.S. 797, 819-821; Allstate Ins. Co. v. Hague (1981) 449 U.S. 302,
318-320 (plur. opn. of Brennan, J.); see also Turcott v. Ford Motor Co. (1st Cir.
1974) 494 F.2d 173, 173-174.)

34

evaluating the wisdom of those policies. . . . [E]mphasis is placed on the

appropriate scope of conflicting state policies rather than on the “quality” of those

policies . . . .‟ ” (Bernhard, supra, 16 Cal.3d 313, 320-321.)

Accordingly, our task is not to determine whether the Oklahoma rule or the

California rule is the better or worthier rule, but rather to decide — in light of the

legal question at issue and the relevant state interests at stake — which jurisdiction

should be allocated the predominating lawmaking power under the circumstances

of the present case.

1

In light of the relevant facts of this case, we conclude that a failure to apply

Oklahoma law would significantly impair Oklahoma‟s interest. The conduct for

which plaintiff contends Foster Wheeler should be held liable — plaintiff‟s

alleged exposure to asbestos during the application of insulation to a boiler

designed and manufactured by Foster Wheeler — occurred in Oklahoma in 1957,

at a time when plaintiff was present in Oklahoma and was an Oklahoma resident.

As already discussed, the circumstance that Foster Wheeler is not an Oklahoma

company — the circumstance relied upon by the Court of Appeal — is not a

persuasive basis for finding that the failure to apply Oklahoma law would not

significantly impair Oklahoma‟s interest. Oklahoma‟s interest in the application

of its statute of repose applies equally to out-of-state businesses that design

improvements to real property located in Oklahoma and to Oklahoma businesses

that design such improvements situated within that state.

Although California no longer follows the old choice-of-law rule that

generally called for application of the law of the jurisdiction in which a

defendant‟s allegedly tortious conduct occurred without regard to the nature of the

issue that was before the court (see Reich, supra, 67 Cal.2d 551, 553), California

choice-of-law cases nonetheless continue to recognize that a jurisdiction ordinarily

35

has “the predominant interest” in regulating conduct that occurs within its borders

(Reich, supra, 67 Cal.2d 551, 556; Cable v. Sahara Tahoe Corp. (1979) 93

Cal.App.3d 384, 394), and in being able to assure individuals and commercial

entities operating within its territory that applicable limitations on liability set

forth in the jurisdiction‟s law will be available to those individuals and businesses

in the event they are faced with litigation in the future. (See, e.g., Offshore Rental,

supra, 22 Cal.3d 157, 168; Castro, supra, 154 Cal.App.4th 1152, 1180; Cable,

supra, 93 Cal.App.3d 384, 394.)

In the present case, in the event Foster Wheeler were to be denied the

protection afforded by the Oklahoma statute of repose and be subjected to the

extended timeliness rule embodied in California law, the subordination of

Oklahoma‟s interest in the application of its law would rest solely upon the

circumstance that after defendant engaged in the allegedly tortious conduct in

Oklahoma, plaintiff happened to move to a jurisdiction whose law provides more

favorable treatment to plaintiff than that available under Oklahoma law.

Although here it is clear that plaintiff‟s move to California was not

motivated by a desire to take advantage of the opportunities afforded by California

law and cannot reasonably be characterized as an instance of forum shopping (cf.

Reich, supra, 67 Cal.2d 551, 555-556), the displacement of Oklahoma law limiting

liability for conduct engaged in within Oklahoma, in favor of the law of a

jurisdiction to which a plaintiff subsequently moved, would — notwithstanding

the innocent motivation of the move — nonetheless significantly impair the

interest of Oklahoma served by the statute of repose. If Oklahoma‟s statute were

not to be applied because plaintiff had moved to a state with a different and less

“business-friendly” law, Oklahoma could not provide any reasonable assurance —

either to out-of-state companies or to Oklahoma businesses — that the time

limitation embodied in its statute would operate to protect such businesses in the

36

future. Because a commercial entity protected by the Oklahoma statute of repose

has no way of knowing or controlling where a potential plaintiff may move in the

future, subjecting such a defendant to a different rule of law based upon the law of

a state to which a potential plaintiff ultimately may move would significantly

undermine Oklahoma‟s interest in establishing a reliable rule of law governing a

business‟s potential liability for conduct undertaken in Oklahoma. (Accord,

Castro, supra, 154 Cal.App.4th 1162, 1181 [Alabama, whose law limited the

potential liability of a vehicle owner for the negligence of a permissive user, has

an interest “in not having vehicles owners and drivers in its jurisdiction subjected

to different liabilities based on the fortuity of which state a plaintiff happens to be

a resident. . . . Alabama has an interest in the uniform application of motor vehicle

laws to owners and drivers in Alabama”]; see also Hancock, The Effect in Choice

of Law Cases of the Acquisition of a New Domicile After the Commission of a Tort

or the Making of a Contract (1979) 2 Hastings Int‟l & Comp. L.Rev. 215, 218-

219.)

2

By contrast, a failure to apply California law on the facts of the present case

will effect a far less significant impairment of California‟s interest. Certainly, if

the law of this state is not applied here, California will not be able to extend its

liberal statute of limitations for asbestos-related injuries or illnesses to some

potential plaintiffs whose exposure to asbestos occurred wholly outside of

California. Nonetheless, our past choice-of-law decisions teach that California‟s

interest in applying its laws providing a remedy to, or facilitating recovery by, a

potential plaintiff in a case in which the defendant‟s allegedly tortious conduct

occurred in another state is less than its interest when the defendant‟s conduct

occurred in California. As we shall see, in a number of choice-of-law settings,

California decisions have adopted a restrained view of the scope or reach of

37

California law with regard to the imposition of liability for conduct that occurs in

another jurisdiction and that would not subject the defendant to liability under the

law of the other jurisdiction. Our view is that a similar restrained view of

California‟s interest in facilitating recovery by a current California resident is

warranted in evaluating the relative impairment of California‟s interest that would

result from the failure to apply California law in the present setting.

Two California decisions discussed above are closely in point. As we have

seen, in Offshore Rental, supra, 22 Cal.3d 157, the question before this court was

whether Louisiana law (which barred an employer from maintaining an

independent cause of action for economic damages resulting from an injury to a

key employee) or California law (which permitted such a cause of action) should

apply when an employee of a California company was injured in Louisiana

allegedly as a result of the negligence of a company doing business in that state.

Although recognizing that California had an interest in applying its law permitting

recovery, because the plaintiff in that case was a California company, the court in

Offshore Rental ultimately concluded that Louisiana law should apply, reasoning

in part that “[b]y entering Louisiana, plaintiff „exposed [i]tself to the risks of the

territory,‟ and should not expect to subject defendant to a financial hazard that

Louisiana law had not created.” (22 Cal.3d at p. 169.) By parity of reasoning,

because plaintiff in the present case was in (and, indeed, a resident of) Oklahoma

at the time of his exposure to asbestos, for which he claims Foster Wheeler should

be held responsible, it is reasonable to conclude that he “should not expect to

subject defendant to a financial hazard that [Oklahoma] law had not created,” and

that California has a lesser interest in applying its law in that setting than it would

in a case in which a defendant is responsible for exposing a plaintiff to asbestos

within California.

38

Similarly, in Castro, supra, 154 Cal.App.4th 1162, the Court of Appeal

reached a comparable conclusion in another choice-of-law case arising out of a

factual setting in which a California resident was injured in another state and

sought recovery from a commercial entity doing business in that other state. As

described above, in Castro the California plaintiff was injured in Alabama in an

accident allegedly caused by a negligent permissive user of a truck owned by

defendant Budget Rent-A-Car, which had been leased in Alabama to an Alabama

company. Alabama law provides that the owner of a motor vehicle who is not

personally negligent is generally not liable for damages caused by the negligence

of a permissive user of the vehicle, whereas California law generally imposes

vicarious liability, up to a limited dollar amount, on a vehicle owner when a

permissive user of the vehicle negligently injures another person. Although

recognizing that California had a legitimate interest in the application of its law

based upon Castro‟s status as a California resident (on the ground, as noted above,

that application of California law “would serve to ensure that California residents

injured in traffic accidents in other states would be compensated for their injuries

and not become dependent on the resources of California for necessary medical,

disability, and unemployment benefits” (154 Cal.App.4th at p. 1182)), the court in

Castro concluded that such an interest was “not sufficient to reallocate Alabama‟s

and California‟s „ “respective spheres of lawmaking influence.” ‟. . . [¶] . . . [B]y

entering and driving in Alabama, Castro voluntarily exposed himself to the risks

of that „territory,‟ and therefore plaintiffs should not expect to subject Budget to a

„financial hazard‟ that Alabama law had not created. Based on the respective

governmental interests of Alabama and California, Alabama‟s interest in

allocating liability and deterring negligent driving within its borders would be

more impaired by the application of California‟s permissive user statute than

would California‟s interests if Alabama law is applied.” (154 Cal.App.4th at

39

p. 1182.) (See also Tucci v. Club Mediterranee (2001) 89 Cal.App.4th 180, 190-

194 [holding that other jurisdiction‟s law would be more impaired if defendant

employer, who had obtained adequate worker‟s compensation insurance in

compliance with the law of that jurisdiction, were to be subjected to a common

law tort action, permitted under California law, that was filed by a California

resident who was injured while working for defendant in the other jurisdiction];

Arno v. Club Med Inc., supra, 22 F.3d 1464, 1468 [holding that under California

choice-of-law principles, French law, rather than California law, applied to tort

action arising out of injury to California resident that occurred in France].)

As these decisions demonstrate, in allocating the “ „respective spheres of

lawmaking influence‟ ” (Offshore Rental, supra, 22 Cal.3d 157, 165) in cases in

which a California resident is injured by a defendant‟s conduct occurring in

another state, past California choice-of-law decisions generally hold that when the

law of the other state limits or denies liability for the conduct engaged in by the

defendant in its territory, that state‟s interest is predominant, and California‟s

legitimate interest in providing a remedy for, or in facilitating recovery by, a

current California resident properly must be subordinated because of this state‟s

diminished authority over activity that occurs in another state. Although under the

circumstances of the present case this allocation of “lawmaking influence” results

in the subordination of California‟s interest to the interest of Oklahoma, in other

instances in which a defendant is responsible for exposing persons to the risks

associated with asbestos or another toxic substance through its conduct in

California, this general principle would allocate to California the predominant

interest in regulating the conduct. (See, e.g., North American Asbestos Corp. v.

Superior Court (1986) 180 Cal.App.3d 902, 907-908 [holding California law

applicable when the plaintiff was exposed to asbestos in California by a company

40

incorporated in another state, where plaintiff‟s action against the company would

have been barred as untimely under the other state‟s law].)

Plaintiff contends, however, that the foregoing analysis is erroneous and

that cases such as Offshore Rental, supra, 22 Cal.3d 157, and Castro, supra, 154

Cal.App.4th 1162, are inapposite because the circumstances of the present case —

in which plaintiff was a California resident when he was first diagnosed with an

asbestos-related disease and when he incurred medical expenses in this state as a

result of the disease — render this case analogous instead to the circumstances in

Kearney, supra, 39 Cal.4th 95, in which the defendant‟s conduct, although

engaged in within another state, had the direct effect of causing an injury in

California. In our view, the proposed analogy to Kearney is not persuasive. The

present situation is not similar to that presented in Kearney, in which the

defendant, while outside of California, participated in an interstate telephone call

with a California resident who was in California and, where the defendant, in

violation of California privacy law, recorded (without the California resident‟s

knowledge or consent) the words that were spoken by the California resident in

California. Nor is this a case similar to one in which a defendant manufactures a

product in another state and places the product in the stream of commerce under

circumstances in which it is reasonably foreseeable that the product will make its

way to California, and the product ultimately injures a person who uses it in

California. (See, e.g., Buckeye Boiler Co. v. Superior Court (1969) 71 Cal.2d 893,

906.) Instead, here plaintiff seeks to hold Foster Wheeler legally responsible for

exposing him to asbestos in Oklahoma, and it is Oklahoma that bears the primary

responsibility for regulating the conduct of those who create a risk of injury to

persons within its borders.

In arguing that Foster Wheeler should be viewed as having caused an injury

that occurred in California, plaintiff relies heavily upon the circumstances that he

41

was a resident of California when his exposure to asbestos many years earlier in

Oklahoma ultimately manifested itself as an illness and caused him to incur

considerable medical expenses resulting from the disease. Those circumstances,

however, do not realistically distinguish the present matter from a case, such as

Castro, supra, 154 Cal.App.4th 1162, in which a California resident is seriously

injured in an automobile accident in another state and returns home to California

for extensive medical treatment and long-term care. Although in such a case the

plaintiff‟s long-term medical expenses are likely to be incurred in California and,

if the plaintiff‟s resources are insufficient, the state ultimately may expend

considerable financial resources for his or her care, past California choice-of-law

decisions as we have seen have not treated that type of case as one in which a

defendant‟s conduct has caused an injury in California. Those decisions instead

have applied the choice-of-law analysis discussed above, recognizing that the state

in which the alleged injury-producing conduct occurred (and in which a significant

risk of harm to others is posed) generally has the predominant interest in

determining the appropriate parameters of liability for conduct undertaken within

its borders. (Accord, Ferren v. General Motors Corp. (N.H. 1993) 628 A.2d 265,

268-269 [choice-of-law decision applying law of state where exposure to lead dust

occurred, rather than of state where the plaintiff resided when illness was later

discovered]; Stephens v. Norwalk Hospital (D.Conn. 2001) 162 F.Supp.2d 36, 43-

44 [choice-of-law decision applying statute of limitations of state where medical

malpractice occurred, rather than of state where the plaintiff resided and where

injury manifested itself].)

3

For the reasons discussed above, we conclude that Oklahoma‟s interest (as

embodied in its statute of repose) would be more impaired if its law were not

applied under the circumstances of this case than would be California‟s interest if

42

its statute of limitations is not applied. Accordingly, we conclude that the Court of

Appeal erred in holding that California law rather than Oklahoma law should

apply to the issue before us.14

IV

The judgment of the Court of Appeal is reversed and the matter is

remanded to that court with directions to address plaintiff‟s additional contention

that the trial court erred in finding that the boiler in question constituted an

improvement to real property within the meaning of the relevant Oklahoma statute

of repose. (See, ante, at p. 23, fn. 7.)

GEORGE, C. J.



WE CONCUR:



KENNARD, J.

BAXTER, J.

WERDEGAR, J.

CHIN, J.

MORENO, J.

CORRIGAN, J.


14

Because we conclude that under California‟s choice-of-law principles the

law of Oklahoma should be applied to the issue presented by this case, we have no
occasion to address Foster Wheeler‟s claims that application of California law
under these circumstances would be so “arbitrary and unfair” as to violate the
federal Constitution (see Phillips Petroleum Co. v. Shutts, supra, 472 U.S. 797,
818-822), or would violate the equal protection clauses of the California and
federal Constitutions.

43

See next page for addresses and telephone numbers for counsel who argued in Supreme Court.

Name of Opinion McCann v. Foster Wheeler
__________________________________________________________________________________

Unpublished Opinion

Original Appeal
Original Proceeding
Review Granted
XXX 160 Cal.App.4th 689
Rehearing Granted

__________________________________________________________________________________

Opinion No.
S162435
Date Filed: February 18, 2010
__________________________________________________________________________________

Court:
Superior
County: Los Angeles
Judge: Jon Michael Mayeda

__________________________________________________________________________________

Attorneys for Appellant:

Waters & Kraus, Waters Kraus & Paul, Paul C. Cook and Michael B. Gurien for Plaintiffs and Appellants.


__________________________________________________________________________________

Attorneys for Respondent:

Sedgwick, Detert, Moran & Arnold, Frederick D. Baker; Gordon & Rees and James G. Scadden for
Defendant and Respondent.

National Chamber Ligation Center, Inc., Robin S. Conrad; Shook, Hardy & Bacon and Patrick J. Gregory
for American Tort Reform Association, Coalition for Litigation Justice, Inc., Chamber of Commerce of the
United States of America, American Chemistry Council, American Insurance Association, National
Association of Mutual Insurance Companies, Property Casualty Insurers Association of America, National
Association of Manufacturers and the State Chamber of Oklahoma as Amici Curiae on behalf of Defendant
and Respondent.

Fred J. Hiestand for The Civil Justice Association of California as Amicus Curiae on behalf of Defendant
and Respondent.

Gordon & Rees, Michael Pietrykowski and Don Willenburg for Ingersoll-Rand Company and Leslie
Controls, Inc., as Amici Curiae on behalf of Defendant and Respondent.






Counsel who argued in Supreme Court (not intended for publication with opinion):

Paul C. Cook
Waters Kraus & Paul
222 North Sepulveda Boulevard, Suite 1900
El Segundo, CA 90245
(310) 414-8146

Frederick D. Baker
Sedgwick, Detert, Moran & Arnold
One Market Plaza, Steuart Tower, 8th Floor
San Francisco, CA 94105
(415) 781-7900


Petition for review after the Court of Appeal reversed the judgment in a civil action. This case presents the following issue: Where plaintiff's exposure to asbestos in Oklahoma in 1957 (when plaintiff was a resident of Oklahoma) assertedly led to plaintiff's developing mesothelioma in 2005 (when plaintiff was a resident of California), is the timeliness of plaintiff's action against defendant (a company that designed and manufactured the boiler upon which the asbestos was being installed in Oklahoma) properly governed by Oklahoma or California law?

Opinion Information
Date:Citation:Docket Number:Category:Status:
Thu, 02/18/201048 Cal. 4th 68, 225 P.3d 516, 105 Cal. Rptr. 3d 378S162435Review - Civil Appealopinion issued

Parties
1McCann, Terry (Plaintiff and Appellant)
Represented by Michael Leighton Armitage
Waters & Kraus, LLP
222 N. Sepulveda Boulevard, Suite 1900
El Segundo, CA

2McCann, Terry (Plaintiff and Appellant)
Represented by Paul C. Cook
Waters & Kraus, LLP
222 N. Sepulveda Boulevard, Suite 1900
El Segundo, CA

3McCann, Lucille (Plaintiff and Appellant)
Represented by Paul C. Cook
Waters & Kraus, LLP
222 N. Sepulveda Boulevard, Suite 1900
El Segundo, CA

4Foster Wheeler, LLC (Defendant and Respondent)
Represented by James G. Scadden
Gordon & Rees
275 Battery Street, Suite 2000
San Francisco, CA

5Foster Wheeler, LLC (Defendant and Respondent)
Represented by Frederick D. Baker
Sedgwick Detert Moran & Arnold, LLP
One Market Plaza, 8th Floor
San Francisco, CA

6American Chemistry Council (Amicus curiae)
Represented by Patrick Joseph Gregory
Shook Hardy & Bacon, LLP
333 Bush Street, Suite 600
San Francisco, CA

7American Insurance Association (Amicus curiae)
Represented by Patrick Joseph Gregory
Shook Hardy & Bacon, LLP
333 Bush Street, Suite 600
San Francisco, CA

8American Tort Reform Association (Amicus curiae)
Represented by Patrick Joseph Gregory
Shook Hardy & Bacon, LLP
333 Bush Street, Suite 600
San Francisco, CA

9Chamber of Commerce of the United States of America (Amicus curiae)
Represented by Patrick Joseph Gregory
Shook Hardy & Bacon, LLP
333 Bush Street, Suite 600
San Francisco, CA

10Chamber of Commerce of the United States of America (Amicus curiae)
Represented by Robin S. Conrad
National Chamber Litigation Center, Inc.
1615 "H" Street, N.W.
Washington, DC

11Civil Justice Association of California (Amicus curiae)
Represented by Fred James Hiestand
Attorney at Law
1121 "L" Street, Suite 404
Sacramento, CA

12Coalition for Litigation Justice, Inc. (Amicus curiae)
Represented by Patrick Joseph Gregory
Shook Hardy & Bacon, LLP
333 Bush Street, Suite 600
San Francisco, CA

13Ingersoll-Rand Company (Amicus curiae)
Represented by Don Willenburg
Gordon & Rees, LLP
275 Battery Street, Suite 2000
San Francisco, CA

14Leslie Controls, Inc. (Amicus curiae)
Represented by Don Willenburg
Gordon & Rees, LLP
275 Battery Street, Suite 2000
San Francisco, CA

15National Association of Manufacturers (Amicus curiae)
Represented by Patrick Joseph Gregory
Shook Hardy & Bacon, LLP
333 Bush Street, Suite 600
San Francisco, CA

16National Association of Mutual Insurance Companies (Amicus curiae)
Represented by Patrick Joseph Gregory
Shook Hardy & Bacon, LLP
333 Bush Street, Suite 600
San Francisco, CA

17Property Casualty Insurers Association of America (Amicus curiae)
Represented by Patrick Joseph Gregory
Shook Hardy & Bacon, LLP
333 Bush Street, Suite 600
San Francisco, CA

18State Chamber of Oklahoma (Amicus curiae)
Represented by Patrick Joseph Gregory
Shook Hardy & Bacon, LLP
333 Bush Street, Suite 600
San Francisco, CA


Opinion Authors
OpinionChief Justice Ronald M. George

Disposition
Feb 18 2010Opinion: Reversed

Briefs
Jul 21 2008Opening brief on the merits filed
 
Sep 22 2008Answer brief on the merits filed
 
Oct 7 2008Amicus curiae brief filed
 
Nov 12 2008Reply brief filed (case fully briefed)
 
Jan 9 2009Amicus curiae brief filed
 
Jan 15 2009Amicus curiae brief filed
 
Brief Downloads
application/pdf icon
Amicus Brief - National Chamber Litigation Center.pdf (1052832 bytes)
application/pdf icon
Opening Brief on the Merits.pdf (2786591 bytes)
application/pdf icon
Answer Brief on the Merits.pdf (3139116 bytes)
application/pdf icon
Reply Brief on the Merits.pdf (1158057 bytes)
If you'd like to submit a brief document to be included for this opinion, please submit an e-mail to the SCOCAL website
May 21, 2011
Annotated by Tori Ballif

FACTS:

The plaintiff, Terry McCann,* brought suit against Foster Wheeler based on his alleged exposure to asbestos while working as an engineering sales trainee in July 1957. As part of his employment, Mr. McCann observed the installation of a specially designed steam generator, manufactured by Foster Wheeler, at a local oil refinery. The owners of the oil refinery hired an independent contractor to install the insulation around the generator, acting on Foster Wheeler’s advice. During the insulation installation, Mr. McCann spent roughly two or three days near the Foster Wheeler boiler.

Following his time in Tulsa, Mr. McCann moved to Minnesota and then to Chicago, where he pursued employment in the advertising and food industries, respectively. In 1975, Mr. McCann began his residence in California after accepting the position of executive director of a nonprofit organization. He worked there until his retirement in 2001. In April 2005, Mr. McCann was diagnosed with mesothelioma, leading him to bring suit against Foster Wheeler in July 2005 on the theory that Foster Wheeler, as the party specifying the need for insulation, knew or should have known the insulation material was likely to contain asbestos.

PROCEDURAL HISTORY:

Mr. McCann filed suit to recover damages for his mesothelioma in Cal. Civ. Pro. Code § 340.2, alleging his illness resulted from asbestos exposure during the installation of the Foster Wheeler boiler. Foster Wheeler filed a motion for summary judgment on the grounds that the action should be governed by Okla. Stat. tit. 12 § 109, which would bar Mr. McCann’s action under Oklahoma’s 10-year statute of repose for injury resulting from improvements to real property. The trial court denied the motion, but ultimately found that Oklahoma law applied and that Foster Wheeler’s steam engine fell within the scope of § 109 as an “improvement to real property,” effectively dismissing Mr. McCann’s claims against Foster Wheeler.

The Court of Appeal reversed the trial court’s application of Oklahoma law, McCann v. Foster Wheeler, 73 Cal.Rptr.3d 96 (2008), reasoning that Oklahoma’s interest in having its law applied to an out-of-state company was much weaker than if Foster Wheeler had been an Oklahoma company. Foster Wheeler appealed to the California Supreme Court.

ISSUES/QUESTIONS PRESENTED:

Was the Court of Appeal correct in substantially limiting Oklahoma’s interest in the application of § 109 to companies headquartered in Oklahoma?

Was the Court of Appeal correct in determining that California’s interests would be more impaired than Oklahoma’s interests by the failure to apply the respective state’s statute to the case at hand?

Which state law, Oklahoma’s or California’s, should apply to the facts of this case?

HOLDING:

Oklahoma’s interests apply equally to out-of-state companies and would be more impaired than California’s by the failure to apply its law. Therefore, the law of Oklahoma should apply to the issue presented in this case.

REASONING:

In deciding choice-of-law questions, California courts rely on “governmental interest” analysis to determine which law to apply. The Court emphasized that this analysis is not barred even where a “borrowing statute,” like Cal. Civ. Pro. Code § 361, gives state courts directions to apply or “borrow” the relevant statute of limitations from a foreign jurisdiction under certain circumstances. The Court’s governmental interest analysis involved a three-step test:

(1) First, the Court considered whether the laws from the potentially affected jurisdictions were the same or different regarding application to the issue in question. Here, the Court found the laws to be different with respect to Mr. McCann’s claims. Under Oklahoma’s 10-year statute of repose, Mr. McCann’s cause of action would be time barred. Under California’s asbestos litigation provision, Cal. Civ. Pro. Code § 340.2, Mr. McCann’s suit would still be timely.

(2) Next, the Court examined each jurisdiction’s interest in having its respective law applied to the facts of the case in order to determine if a true conflict of law existed.

The Court found that Oklahoma has an interest in the application of § 109 as a means of providing security for building professionals from endless liability and avoiding the difficulties of proof associated with the passage of time. Furthermore, the Court reasoned that Oklahoma has an interested in attracting foreign companies to do business in its state, so Oklahoma’s interest in these protections is presumed to be just as strong for out-of-state companies. The Court also found that California has an interest in the application of § 340.2 as an acknowledgment of the long latency periods that follow asbestos exposure, and as a vehicle for California citizens to obtain compensation for their injuries rather than becoming dependent on California state resources for care and assistance. Because each state had a valid interest, the Court declared a “true conflict” between the two laws.

(3) Lastly, the Court applied the “comparative impairment” approach to determine which state’s interest would be more impaired if the other state’s law was adopted. In doing so, the Court emphasized that this was not a value judgment about the “better” law, but a determination of which jurisdiction should be given the predominant lawmaking power in those circumstances. The Court concluded that, here, Oklahoma’s interests would be significantly impaired by the application of California law in large part because this would violate Oklahoma’s efforts to reasonably limit asbestos exposure liability for companies doing business in its jurisdiction. Moreover, the Court found that applying Oklahoma law would not as significantly limit California’s policy interests because those interests are given limited weight where its current resident seeks remedy for conduct that occurred in another state, at a time when the plaintiff was present in that other state, and where that other state has its own differing substantive law governing the defendant’s potential liability for the conduct that occurred within that state.

RULING:

Reversed the judgment of the Court of Appeal and remanded back to Court of Appeal to address plaintiff’s challenge to trial court’s finding that the boiler in question constituted “an improvement in real property” under Oklahoma’s § 109 statute of repose.

TAGS:

Choice-of-law, asbestos exposure, California Civil Procedure Code § 361, California Civil Procedure Code § 340.2, borrowing statutes, governmental interest analysis, statute of repose

*Mr. McCann died while the case was pending on appeal. His wife, Lucille McCann, was substituted as his successor-in-interest pursuant to Code of Civil Procedure section 377.32. Mrs. McCann did add a cause of action for loss of consortium, but the Court chose to consider the choice of law question at issue in Mr. McCann’s original claims, as Mrs. McCann’s ability to bring a loss of consortium claim against Foster Wheeler was contingent on the answer.