Petition — Harrah's Club v. Bernhard

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Opinions Below ..............-:---:-sss-s:seessesssssserssensessecerssnsnsnsnsnsnsnansnananes 2

Ne i sscsanaiiiiantininanenmmnncninnidanenscmmeisnnasennmnmnetnnta 2

Questions Presented ................-:-:-:ss-sssessseeeseensesesnsnenensnenennsnnnnanens 2

Constitutional and Statutory Provisions Involved ...................- 3

Mbatammamt Gf tae COBO ..<....0-00<e<0-e0ccrccesesesecccecscesseccenccsccsrssensseseess 4

Reasons for Granting the Writ ...............-..----..--sessssseseesseeeeeeenees 8

«se

1. The California choice-of-law approach applied in

this case to impose liability cn a sister-state de-

fendant fails to meet the standards of interstate

comity mandated by the Full Faith and Credit

i .. cccsnensiilasensianattnngeanisomnnesdnatnliainmeassaidaaneonas 8

2. The California Supreme Court violated the Full

Faith and Credit Clause by applying California

tort rules in disregard of Nevada law to regulate

conduct, within Nevada of a Nevada establishment........19

I . -ccciisinitnntsctpebiannateingantisenbtantannnisennanneiinmestinars cen ee. 27

Appendix A (Opinion of the

California Supreme Court) ...............::s---seseesnssnneeneennennenees A-1

Appendix B (Order denying Petitioner’s

Motion for Rehearing) ..................cccsccscsosssssesessecsssessnncesecsenes B-1

Appendix C (Opinion of the Court of Appeal of the

State of California, Third Appellate District) .................... C-1

CITATIONS

UNITED STATES CONSTITUTION

Aaticlln TV, 8 1. ......ccccccosesssecesccecsccscsennccoccscscesecensecssssessssesssssnsoconcees 3

UNITED STATES STATUTES

2B U.S.C. § 1788 .............-..cceseecccccscoseccecsesccessensensrsscsssseosessenssnsoeoses 3

STATE STATUTES

Motor Vehicles Ins. Act, Nev. Rev. Sirat. ch. 698.................... 22

Law of April 25, 1973, ch. 604, § 8, [1973]

ee eee 24

ee Ts Fk EEN EMR eee ere 14

CaL. BUSINESS AND PROFESSION CopE § 25602................ 3, 20, A-8

CASES

Alaska Packers Ass’n v. Industrial Accident Comm’n,

Se a IIE TUNITY cicicictsntcipenidostecieniinninitalicnsisadaiandaadla inside aceiltiis 9

Babcock vy, Jackson, 12 N.Y. 2d 473, 240 N.Y.S. 2d

ey. SN Sy SE MEI chicceceiiscnidsnscsimsnietashndsisinnbattniichiantadel 10

Bernkrant v. Fowler, 55 Cal. 2d 588 (1961).......00000000000000... A-12

Bigelow v. Virginia, 421 U.S. 809 (1975) ...0......0cccccccccceecceeeeeeeee 19

Carroll v. Lanza, 349 U.S, 408 (1955) ...0...........ccccccccceseseeeeeeeeees 9

Challoner v. Day and Zimmerman, Inc., 512 F. 2d 77

(5th Cir. 1975), vacated 96 S. Ct. 167 (1975) 2.0.0.0. 14

Clark v. Clark, 107 N.H. 351, 222 A. 2d 205 (1966) ................ 18

Cole v. Rush, 45 Cal. 2d 345 (1955).......................cccccccesccceseee A-8

Day and Zimmerman, Inc. v. Challoner,

Ef ER eis ED TT 15

Erie R.R. v. Tompkins, 304 U.S. 64 (1938) ....00..0cccce cece eee eee 14

First Nat’l Bank v. United Airlines, 342 U.S. 396 (1952) ........ 9

Forsyth v. Cessna Aircraft Co., 520 F. 2d

kf RT ADOT” 12

Gibson v. Gibson, 3 Cal. 3d 914 (1971) .....0.....c--cccecceee eeeee A-20

Hamm v. Carson City Nuggett, Inc.,

PN GP I cidecittcsitinhcdntiniaieidinanion il A-8, A-9, A-16

Pages

Hilton v. Guyot, 159 U.S. 113 (1895) ....2............sccesceeseeeceneeneeeee 9

Hughes v. Fetter, 341 U.S. 609 (1951) ...0.......cccccccecccccceeeeeeeee i)

Hurtado v. Superior Court, 11 Cal. 3d 574, 114

Cal. Rptr. 106, 522 P. 2d 666 (1974) ....12, 13, A-6, A-8, A-10

In re Paris Air Crash of March 3, 1974,

399 F. Supp. 732 (C.D. Cal. 1975) ....................cccccssccecseees 11,14

Kindt v. Kauffman, 57 Cal. App. 3d 845, 129

RG eS. 22

Klaxon v. Stentor Electric Manufacturing Co., Inc.,

RENEE a 15

Kohr v. Allegheny Airlines, Inc., 504 F. 2d 400 (7th

Cir. 1974), cert, denied sub nom. Forth Corp. v.

Allegheny Airlines, Inc., 421 U.S. 978 (1975) 000000000. 15

Lauritzen v. Larsen, 345 U.S. 571 (1953) 000000000 9

Miiler v. Miller, 22 N.Y. 2d 12, 290 N.Y.S. 2d

RK eee 11

Milwaukee County v. M. E. White Co.,

RRR EY mE ne 16

Muskopf v. Corning Hospital Dist.,

ee ee venasuniiandiaies A-20

Neumeier v. Kuehner, 31 N.Y. 2d 121, 335 N.Y. 2d

ER EL ee 11

Pacific Employers Ins. Co. v. Industrial Accident

Comma’, S06 UG. 463 (10BD) n.....n....ccccccccccecceccsecsecseeoseosee.s 9

People v. One 1953 Ford Victoria,

ER Te a A-14

Reich v. Purcell, 67 Cal. 2d 551, 63 Cal. Rptr.

. < , 2 _— , Feet 12, A-6, A-8, A-10

Pages

Rowland v. Christian, 69 Cal. 2d 108, 118-119 (1968)........ A-21

Scherk v. Alberto-Culver Co., 417 U.S. 506 (1974) ................ 8

Steele v. Bulova Watch Company, Inc.,

Tae B Ry, eee en ae ee 25

Strassheim v. Daily, 221 U.S. 280 (1911) ~............2....ceeeeeeeeeeee 20

The Bremen v. Zapata Off-Shore Co., 407 U.S. 1 (1972) ........ 8

Tooker v. Lopez, 24 N.Y. 2d 569, 301 N.Y.S. 2d

Bt Bf eee: 15

United States v. Aluminum Company of America,

"PA CC: LF, fC: | ees Sa 20

Vanity Fair Mills, Inc. v. T. Eaton Company, 234 F. 2d

633 (2d Cir.), cert. denied, 352 U.S. 871 (1956) .................. 25

Vesely v. Sager, 5 Cal. 3d 153, 95 Cal. Rptr.

623, 486 P. 2d 151 (1971) .................00+0 20, 23, A-6, A-7, A-10

Wells v. Simonds Abrasive Co., 345 U.S. 514 (1953)................ 15

MISCELLANEOUS

Baxter, Choice of Law and the Federal System,

16 Stan. L. Rev. 1 (1963) ..................... ae 25, A-11

2 J. BEALE, CONFLICT OF LAWS (1935) ...........2.......cceseeeeeeeeeeees 24

Bodenheimer, The Public Policy Exception in Private

International Law: A Reappraisal in the Light of Le-

gal Philisophy, 12 THe JuRIsT 51 (1954) -.0.....eeeceeceeeeeeeeeees 26

D. Cavers, THE CHorce-or-Law Process (1% © ................ A-11

COMMON MARKET AND AMERICAN ANTITRUST

(J. FRaE Cll, BOB cxccincccsccscctsststsntiemintmeiiaenn 20

R. Cramton, D. Currie & H. Kay, CONFLICT

ee Og, FF U6) a 24

Pages

B. Currie, SELECTED Essays ON THE

EN i)

W. Fucate, ForeicN COMMERCE AND THE

ANTITRUST Laws (2d ed. 1973) .o...o.oeecceccccccceccecececeeeceeeeee 20

H. Goopricu & E. Scores, Conriict or Laws

Nee es 25

H. Hart & H. Wecusuer, THe Feperat Courts

AND THE Feperat System (2d ed. 1973) ............000--- ee -oe-e 15

Horowitz, The Law of Choice of Law in California,

21 U.C.L.A. L. Rev. 719 (1974) .......... LEE Te A-11

Jackson, Full Faith and Credit—The Lawyer’s Clause

of the Constitution 45 Cotum. L. Rev. 1 (1945) ............... 15

R. Jackson, THE SuPREME CouRT IN THE

AMERICAN SYSTEM OF GOVERNMENT (1955)...

Kay, Ehrenzweig’s Proper Law and Proper Forum,

cosneucesiinmeenons 16

R. Lery.ar, AMERICAN ConFiicts Law (1968) — 0.000.000.0000... 12

J. Mapison, Nores or DEBATES IN THE FEDERAL

CONVENTION OF 1787 (Ohio U. Press 1966) .........00000000000.... 9

Martin, Constitutional Limitations on Choice of Law,

ee ncsusvaseoonsnsonoons 26

Reese, Choice of Law: Rules of Approach,

SL 17

Report, 9 REVISTA DI DIRITTO INTERNAZIONALE

a eeennnes 14

RESTATEMENT (First) oF Conr.iict or Laws (1934)................ 24

RESTATEMENT (SECOND) oF CoNFLICT oF Laws

EE ELL 9, 10, 18

Page

RESTATEMENT (SECOND) OF FOREIGN RELATIONS Law

UTTETEED cthasccneensiennsinmnansapditeseiicinteetnaaninininiahittiieeaitteedianalinii ities ati a8 21

Rosenberg, Comments on Reich v. Purcell, 15 U.C.L.A.

i> TE, iis CD IIE. crrtaceentcietndieiiicesideiniidlieeitiaiie 11

Wright, The Federal Courts and the Nature and Quality

of State Law, 13 Wayne L. Rev. cve (1967)........................ 11

In the Supreme Court of the United States

OcrosBer TERM, 1975

No.

HARRAH’s CLUB,

Petitioner,

Respondent.

PETITION FOR A WRIT OF CERTIORARI TO THE

SUPREME COURT OF THE STATE OF

CALIFORNIA

The petitioner Harrah’s Club respectfully prays that

a writ of certiorari issue to review the judgment and

opinion of the Supreme Court of the State of California

entered on March 2, 1976, rehearing denied on April

22, 1976.

2

OPINIONS BELOW

The opinion of the Supreme Court of the State of

California is officially reported at 16 Cal. 3d 313 and

unofficially reported at 546 P. 2d 719; 128 Cal. Rptr.

215. A copy of the opinion appears in Appendix A

hereto. The opinion of the Court of Appeal of the State

of California in and for the Third Appellate District

has been deleted from the official reports in accordance

with California practice. It is unofficially reported at

117 Cal. Rptr. 351. A copy of the opinion appears in

Appendix C hereto. No opinion was rendered by the

Superior Court of the State of California in and for the

County of Sacramento.

JURISDICTION

The judgment of the Supreme Court of the State

of California was entered on March 2, 1976. A timely

petition for rehearing was denied on April 22, 1976, and

this petition for certiorari was filed within 90 days of

that date. The jurisdiction of this Court is invoked

under 28 U.S.C. § 1257(3).

QUESTIONS PRESENTED

1. Whether the Full Faith and Credit Clause of

Article IV §1 of the United State Constitution, as im-

plemented by 28 U.S.C. § 1738, requires state courts to

articulate rules to justify the imposition of liability on

foreign defendants in favor of forum residents.

2. Whether the California Supreme Court violated

full faith and credit in purporting to regulate, for the

benefit of Californians, conduct of foreign esteblish-

ments within a sister state in disregard of sister-state

law.

3

CONSTITUTIONAL AND STATUTORY PROVISIONS

INVOLVED

United States Constitution, Article IV § 1:

Full Faith and Credit shall be given in

each State to the public Acts, Records, and

judicial Proceedings of every other State.

And the Congress may by general Laws pre-

scribe the Manner in which such Acts, Records

and Proceedings shall be proved, and the Ef-

fect thereof.

United States Code, Title 28 § 1738:

State and Territorial Statutes and Judicial

Proceedings: Full Faith and Credit

The Acts of the legislature of any State,

Territory, or Possession of the United States,

or copies thereof, shall be authenticated by

affixing the seal of such State, Territory or

Possession thereto.

The records and judicial proceedings of any

court of any such State, Territory or Posses-

sion, or copies thereof, shall be proved or ad-

mitted in other courts within the United States

and its Territories and Possessions by the at-

testation of the clerk and seal of the court

annexed, if a seal exists, together with a certi-

ficate of a judge of the court that the said

attestation is in proper form.

Such Acts, records and judicial p

or copies thereof, so authenticated, shall have

the same full faith and credit in every court

within the United States and its Territories

and Possessions as they have by law or usage

in the courts of such State, Territory or Pos-

session from which they are taken.

California Business and Professions Code § 25602:

Sales to Drunkard or Intoxicated Persons

Every person who sells, furnishes, gives, or

causes to be sold, furnished, or given away any

alcoholic beverage to any habitual or common

drunkard or to any obviously intoxicated per-

son is guilty of a misdemeanor.

4

STATEMENT OF THE CASE

Petitioner Harrah’s Club is a Nevada Corporation

which owns and operates a hotel and casino in Reno,

Nevada. Respondent, Richard A. Bernhard, a resident

of the State of California, was injured when the 1955

Harley Davidson motorcycle he was riding collided

with a 1961 Pontiac automobile owned by Fern Virginia

Myers and Philip George Myers, a married couple, who

were returning from a trip to Reno, Nevada to their

home in California. The accident happened on July

25, 1971 on Highway 49 near Nevada City, California.

Bernhard brought actions against Mr. and Mrs. Myers,

as well as against Harrah’s Club, in the Sacramento

County Superior Court.

Bernhard’s amended complaint contained the follow-

ing pertinent allegations: Harrah’s Club is doing busi-

ness in California; Mr. and Mrs. Myers werit to Nevada

in response to its advertisements and solicitations to

drink and gamble; Mr. and Mrs. Myers become ob-

viously intoxicated but Harrah’s Club employees none-

theless continued to furnish them drinks, thus rendering

them more obviously intoxicated. The couple left the

establishment incapable of driving safely and Fern

Virginia Myers negligently, carelessly, and recklessly

caused the accident. (R 17-28).

Mr. ana Mrs. Myers failed to appear and are not

parties to the subsequent appeals. Harrah’s Club filed

a general demurrer on the ground the complaint

failed to state a cause of action under applicable Nevada

common law. In opposing the demurrer Bernhard ar-

gued California law applied and the California Supreme

Court had implied a civil remedy from a California

.

oe at

——_ —

5

penal statute which prohibits supplying alcoholic bev-

erages to obviously intoxicated persons. The trial court

sustained the demurrer without leave to amend further

and entered a judgment of dismissal.

Bernhard appealed to the California Court of Appeal,

Third Appellate District, which reversed. The Cali-

fornia Supreme Court then granted Harrah’s Club’s

petition for a hearing and, in accordance with Cali-

fornia practice, heard the case as one on appeal from

the trial court. It also decided against Harrah’s Club

and subsequently denied a petition for rehearing.

Both of the California appellate courts concluded

California law, which renders tavern keepers liable for

torts committed by drunken patrons, rather than Ne-

vada law, which does not provide for such liability,

applied. Both courts premised this conclusion on the

need to further California’s interest in protecting Calli-

fornians. The California Supreme Court conceded Ne-

vada has a policy, propounded by the Nevada Supreme

Court, of protecting hotels and tavern-owners against

“ruinous exposure every time [they] pour a drink” and

in avoiding “multiply[ing] litigation endlessly in a

claim-conscious society.” [Appendix A-9] Using the

terminology of the so-called governmental interest ap-

proach to choice of law, the court therefore found a

“true conflict” between Nevada’s interest in protecting

its hotel and tavern owners and California’s interest in

protecting Californians from injuries resulting from the

excessive use of alcohol. To resolve this conflict in Cali-

fornia’s favor the court invoked a “comparative im-

pairment” doctrine. According to this doctrine the court

in a “true conflict” situation applies the law of the state

6

whose interest would be more impaired if its policy

were subordinated to the policy of the other state. The

California Supreme Court reasoned California can-

not effectuate its policy of preventing the sale of alcohol

to intoxicated persons if the California tort rule would

not also reach out-state establishments. Unwilling

to delineate the full extraterritorial sweep of the forum’s

tort rule, the court stated at least those foreign

establishments who solicit the business of Californians

must bear the brunt of dramshop liability to avoid a

very significant impairment of California’s policy. In

contrast, Nevada’s policies would not be significantly

impaired by applying the California rule to such out-

of-state defendants. Imposing liability would not create

a new duty on Nevada establishments, because a Ne-

vada penal statute already prohibits the sale of alcohol

to obviously intoxicated persons. They would merely

be subjected to an increased economic exposure, a fore-

seeable and coverable business expense.

In short, the California Supreme Court determined

under the comparative impairment doctrine the

California tort rule could be applied at least to certain

classes of Nevada hotels and tavern keepers for injuries

caused by their patrons, notwithstanding a Nevada

policy to the contrary. In making this determination

the Court, at least in part, erroneously relied on a

Nevada criminal statute that had been previously re-

pealed.

At each stage of the proceedings in the trial and

appellate courts Harrah’s Club raised the federal ques-

tion sought to be reviewed. The briefs accompanying

the demurrer to Bernhard’s initial and the amended

7

complaints [R 13-15, 24-31), the reply brief in the inter-

mediate appellate court [R 65-78], the petition for

a hearing [R 79-98], and the petition for rehearing

([R 155-174) all cite the Full Faith and Credit Clause

of Article IV, § 1 of the United States Constitution,

and Harrah’s Ciub consistently maintained that ap-

plication of California law to the facts alleged by Bern-

hard would violate this Constitutional provision. Neither

the opinion of the intermediate appellate court nor

that of the California Supreme Court, however, ad-

dress this issue.

The decision of the California Supreme Court has

legal and economic implications that transcend the

importance of this particular case. Financially, the im-

position of California standards on Nevada establish-

ments has had an immediate, substantial impact on the

insurance premiums paid by Nevada establishments,

large and small, wherever they may be doing business

in their home state. Thus, the California decision im-

poses a direct burden on Nevada’s hotel and casino

business, an industry fundamental to the very survival

of the state. Legally, this decision marks a further notch

in the continuing erosion of full faith and credit and

interstate comity in the wake of the so-called “con-

flicts revolution.”

8

REASONS FOR GRANTING THE WRIT

|. THE CALIFORNIA CHOICE-OF-LAW APPROACH

APPLIED IN THIS CASE TO IMPOSE LIABILITY ON

A SISTER-STATE DEFENDANT FAILS TO MEET THE

STANDARDS OF INTERSTATE COMITY MAN-

DATED BY THE FULL FAITH AND CREDIT CLAUSE.

(1) In the instant case the California Supreme Court

applied California law to hold a Nevada corporation

liable for conduct in Nevada which, according to Ne-

vada law, would entail no liability. The case therefore

poses the question to what extent the courts of one state

must defer to the laws of another. This question, central

in a federal system, has become increasingly doubtful.

Current state practice and pronouncements by this

Court suggests that little, if any, faith and credit is due

to sister-state law, so that the constitutional mandate

has become a dead letter.

In marked contrast, recent Supreme Court decisions

have stressed the importance of international comity.

The Bremen v. Zapata Off-Shore Co., 407 U.S. 1 (1972),

and Scherk y. Alberto-Culver Co., 417 U.S. 506 (1974),

upheld choice-of-forum and arbitration clauses against

the contention of American plaintiffs that to pursue

their disputes with foreign parties abroad would defeat

American policies. Thus, the Court has let the principle

of party autonomy prevail over asserted national in-

terests. This principle, as all of the conflict of laws, is

but a manifestation of a more fundamental idea re-

flected in the Court’s rejection of the

parochial concept that all disputes must be

resolved under our laws and in our courts .. .

We cannot have trade and commerce in world

markets and international waters exclusively

on our terms.

9

417 U.S. at 519; 407 U.S. at 9.

These cases reaffirm the Court’s continued adherence

to the tenets of international good will and orderliness.’

Similarly, the Court increasingly emphasizes the im-

portance of federal/state comity. However, it has re-

frained, in recent times, from correcting encroachments

by state courts upon interstate comity.

The Court’s inaction is surprising considering that

interstate and international orderlines are, at the very

least, of equal importance. See RESTATEMENT (SECOND)

or ConFuict or Laws § 10 (1971). Indeed, state courts

should have less power to disregard sister-state than

foreign law. Id. comment d at 39; see J. MapIson, Nores

OF DEBATES IN THE FEDERAL CONVENTION OF 1787, at 570

(Onto U. Press 1966).

(2) It is true that a number of Supreme Court

opinions suggest that sister-state law is entitled to full

faith and credit pursuant to Article IV, § 1 of the Con-

stitution and 28 U.S.C. § 1738 (1970) .2 However, com-

mentators have seized upon language in some of these

very decisions to conclude that choice-of-law rules have

become obsolete and forum law should reign preeminent.

Primarily, they rely upon Alaska Packers Ass’n v. In-

dustrial Accident Comm’n, 294 U.S. 532 (1935), and

Pacific Employers Ins. Co. v. Industrial Accident Com-

m’n, 306 U.S. 493 (1939). See B. Currm, SELEcTED

1 For this tradition, which dates back to Mr. Justice Story’s Lamous

treatise, see, e.g., Lauritzen v. Larsen, 345 U.S. 571 (1953); Hilton v.

Guyot, 159 U.S. 113 (1895). The Court’s continued emphasis on in-

ternational comity accords with the national poli implicit in_this

country’s joining the Hague Conference on Private International Law.

2 See, e.g., First Nat'l Bank v. United Airlines, 342 U.S. 396 (1952);

er v. Fetter, 341 U.S. 509 (1951); Carrol v. Lanza, 349 U.S. 408,

414, 422 (1955) (Mr. Justice Frankfurter dissenting).

10

EssaYs ON THE ConFLict or Laws, 117, 201-13, 271, 475-

78, 602, 613-14 n.87, 631 (1963) (hereinafter cited as

CurRIE) ; Horowitz, The Law of Choice of Law in Cali-

fornia, 21 U.C.L.A. Rev. 719, 728-29 (1974). Paradoxi-

cally, these cases did not pose any choice-of-law prob-

lems. They dealt with the extraterritorial reach of work-

ers’ compensation acts. Unlike courts in torts or con-

tracts litigation, the state agencies administering such

acts never apply sister-state law, so that conflicts issues

do not arise. See RESTATEMENT (SECOND) OF CONFLICT

or Laws, Introductory Note to §§ 181-85 at 536 (1971).

By sanctioning the state practice of giving these pro-

tective enactments broad extraterritorial coverage the

Court could prevent the dismissal of meritorious claims

arising out of interstate accidents. This solution is all

the more reasonable considering the common policy

and the substantial similarities between the various

workers’ compensation acts.

However, without regard to these pecularities, aca-

demicians, borrowing verbiage found in the workers’

compensation cases, developed novel choice-of-law doc-

trines. California is not the only state to discard con-

flicts rules and to embrace a conflicts “approach.” A

glance at the entries in Shepard’s Citator following the

listing of Babcock v. Jackson, 12 N.Y. 2d 473, 240 N.Y.S.

2d 743, 191 N.E. 2d 279 (1963), the first opinion of a

highest state court to abandon rules, indicates the

new trend has swept the nation.

(3) Many judges and commentators, however, de-

plore this development. The present Chief Justice of

the New York Court of Appeals, disavowing interest

analysis, decried the “shifting ideologies in the choice of

11

law”* as well the “preverse parochialism” of applying

local law to foreign transactions involving forum resi-

dents.‘ To quote a federal judge,

gallons of ink spill across the law review pages

as the conflicts revolution engages a counter-

revolution in a rhubarb as esoteric and _per-

me! as anything American law has ever

own.

Another observer warns against letting choice of law

become

isticated game . . . that adds com-

~ multistate litigations to the crushing case-

oad of busy courts.®

Criticism has also been voiced in the Ninth Circuit:

The law on “choice of law” in the various states

and in the federal courts is a veritable jungle,

which, if the law can be found out, leads not to

a “rule of action” but a reign of chaos...

In re Paris Air Crash of March 3, 1974,

399 F. Supp. 732, 739 (C.D. Cal. 1975).

The Court of Appeals seems equally disenchanted. A

recent opinion comments:

This appeal presents a classic example of the

wilderness in which courts sometimes find

themselves when searching for solutions to

roblems arising under the judicial nightmare

fave as Conflict of Laws.

3 Neumeier v. Kuehner, 31 N.Y. 2d 121, 130, 335 N.Y. 2d 64, 71, 286

N.E. 2d 454, 459 (1972) (Breitel, J., concurring).

4 Miller v. Miller, 22 N.Y. 2d 12, 23, 29, 290 N.Y. 2d 734, 743, 748, 237

N.E. 2d 877, 883, 887 (1968) (Breitel J., dissenting).

5 Wright, The Federal Courts and the Nature and Quality of State Law,

13 WayYNE L. Rev. 317, 334 (1967).

6 Sr Coody Comments on Reich v. Purcell, 15 U.C.L.A. REV. 551, 641,

12

Forsyth v. Cessna Aircraft Co., 520 F. 2d

608, 609 (9th Cir. 1975).

(4) These pronouncements suggest the discon-

tent with the modern approaches to choice of law is

directed mainly to the sophisticated ratiocinations they

demand. However, if one reads the judicial opinions

using such approaches for what they hold rather than

for what they say, more important defects become

apparent. The new orthodoxy, it seems, simply serves

the purpose of furnishing verbal justifications for dis-

regarding foreign law.’ Also, the large majority of cases

involve torts litigation and the plaintiff almost invari-

ably wins. These observations certainly apply to Cali-

fornia as shown by the instant case and its predecessors,

Reich v. Purcell, 67 Cal. 2d 551, 63 Cal. Rptr. 31, 432

P. 2d 727 (1967), and Hurtado v. Superior Court, 11

Cal. 3d 574, 114 Cal. Rptr. 106, 522 P. 2d 666 (1974).

Thus, the pronouncements of the California Supreme

Court demonstrates the homing trend inherent in in-

terest analysis. This approach, premised on a philosophy

of state egotism (see, e.g., CuRRIE at 53, 89, 112, 190,

592-93), imports a parochialism unparalled in American

conflicts law. The process of balkanization equally af-

fects the federal courts. In diversity cases they function

as champions who must vindicate local law and the

7 Too often the search for governmental interests in a particular

case, especially for the purpose of sustaining application of forum

law, is artificial . . . Since some reasons, usually a variety of them,

can be called up in support of almost any rule of law that is on the

books, it is nearly always possible for a good ~~ to conjure up

governmental interest in just about any state t has any con-

nection with a set of facts. It is not at all unusual for one state to

discover that it has such interests in a set of facts though another's

courts would say otherwise. A court is usually more discriminat-

ingly hard-boiled in analyzing another state’s interests than in

onnipdinn its own.

R. LEFLAR, AMERICAN CONFLICTS Law 252 (1968).

13

rights of local residents at the expense of sister-state

law and non-residents. As a result, some of the courts

in a federal system give less comity to sister-state law

than they would have to accord, pursuant to this

Court’s decisions, to Cuban confiscations or contractual

clauses choosing a foreign law or tribunal.

Two examples may serve to illustrate the coincidence

of parochialism and ethnocentricity, a combination that

compounds disdain of comity with disregard for equal

protection. In Hurtado v. Superior Court, after quoting

CurrIiE at 183 to the effect that

(nlormally, even in cases involving foreign ele-

ments, court should be ex , asa

matter of course, to apply the rule of decision

found in the law of the forum,

the California Supreme Court said:

California does not have this interest [to com-

pensate decedent’s beneficiaries) in applying

its wrongful death statute here because plain-

tiffs are residents of Mexico.

11 Cal. 3d 574, 582, 114 Cal. Rpir.

106, 522 P. 2d 666, 672 (1974).

A federal judge faithfully echoed this view, saying that

the California courts would protect resident

defendants and would not allow enhanced re-

covery to plaintiffs because of the fortuitous

place of the crash or residence of the litigants.

14

In re Paris Air Crash of March 3, 1974

399 F. Supp. 732, 744 (C.D. Cal. 1975) .°

In Caiifornia, it seems, the outcome of interstate and

international tort cases depends on who sues whom.

(5) The predictable result of this trend has been to

encourage largescale forum shopping. Plaintiffs in in-

terstate tort cases benefit from two conflicts privileges:

the ever-expanding reach of leng-arm jurisdiction (of

which California furnishes a cogeni example’) combined

with the conflicts revolution permit counsel to select

the most advantageous law together with the most ad-

vantageous forum. The faith and credit due to sister-

state judgments effectively protects the forum shoppers’

gains.

Intrastate maneuvering was among the reasons

prompting the Court to overturn almost 100 years of

precedent in Erie R.R. v. Tompkins, 304 U.S. 64 (1938).

Interstate forum shopping seems hardly more desirable

considering that “uniformities other than just those

within the state are to be observed in a federal system.”

8 The judge also quoted the following passage from a Fifth Circuit

opinion:

We are a Court of the United States, an instrumentality created

to effectuate the laws and policies of the United States. We con-

clude that in this case we have no warrant, legal or moral, to

frustrate well established American policies by an application of

the local policies of a foreign government.

Id. at 745. The decision containing this passage, Challoner v. Day and

Zimmerman, Inc., 512 F. 2d 77, 82 (5th Cir. 1975), has since been

vacated by this Court, 96 S. Ct. 167 (1975). The vacatur should

please at least those who realize that American judicial opinions are

also read abroad.

9 See CaL. Cope or Crv. Proc. ! 410.10.

19 The obvious connection between the soongpition of sister-state judg-

ments and sister-state law is demonstra by recent developments in

the European Community, a quasi-federal system. After adop a

convention that, in effect, provides for full faith and credit to r

state judgments, the unification of national choice-of-law rules was con-

sidered necessary to prevent forum shopping. See Report, ch. I § 2, 9

te DI DIRITTO INTERNAZIONALE PRIVATO E PROCESSUALE 189, 201

15

Wells v. Simonds Abrasive Co., 345 U.S. 514, 519, 521

(1953) (Mr. Justice Jackson dissenting).

(6) Two remedies could inject orderliness and pre-

dictability into the adjudication of interstate transac-

tions: (1) federal choice-of-law rules or (2) the federal-

ization of larger areas of substantive law. Mr. Justice

Jackson seriously considered the first of these alterna-

tives" and it has been espoused since by a respectable

array of scholars.’* However, Congress has not seen fit

to exercise the power to enact choice-of-law rules pur-

suant to Article IV, § 1, and the Court in Day and Zim-

mermann, Inc. v. Challoner, 96 S. Ct. 167 (1975),

unanimously adhered to Klaxon vy. Stentor Electric

Manufacturing Co., Inc., 313 U.S. 487 (1941). The

second alternative could hardly appeal to those who

believe in federalism. However, in light of the hazards

posed by current conflicts approaches to an effective

administration of interstate justice, it is understandable

that some judges favor the expansion of federal com-

mon law rules.“ Thus, paradoxically, Klaxon undercuts

the very thrust of Erie.

(7) Unless there is some middle ground, state law will

remain vulnerable either to sister-state or to federal en-

croachments. The Full Faith and Credit Clause clearly

11 In addition to the dissenting opinion in Wells, see THE SUPREME COURT

IN THE AMERICAN SYSTEM OF GOVERNMENT 41-44 (1955); Full Faith

and Credit — The Lawyer's Clause of the Constitution, 45 CoLuM. L.

Rev. 1, 26-28 (1945).

12 See H. Hart & H. Wecusier, THe FeperaL Courts AND THE FEDERAL

System 713-18 (2d ed. 1973) (with further references) .

13 See, e.g., Kohr v. Allegheny Airlines, Inc., 504 F. 2d 400 (7th Cir.

1974), cert. denied sub nom. Forth Corp. v. “~~ Airlines, Inc.,

421 U.S. 978 (1975); In re Paris Air Crash of March 3, 1974, 399 F.

Supp. 732 (C.D. Cal. 1975); Tooker v. Lo 24 N.Y. 2d 569, 586, 592,

301 N.Y.S. 2d 519, 533, 538, 249 N.E. 2d 394, 404, 408 (1969) (Burke J,.

concurring); see generally Wright, supra note 5.

16

empowers this Court to require a modicum of comity."

Indeed, it is the only tribunal in the nation that could

effectively restrain the indiscriminate recourse to forum

law. The most minimal restraint would be to require

the states, in the interests of private litigants and

comity, articulate choice-of-law rules that promise some

degree of predictability and uniformity. Thus, the Court

could provide guidance without having to construct a

conflicts code. Ultimately, it can be expected the

rules devised by state courts or legislatures will con-

verge.

The vice of the “conflicts revolution” is that common

to all upheavals: the suspension of the rule of law.

CurrIgE, at 183, contended: “We would be better off

without choice-of-law rules.” One of his followers main-

tained that “conflict of laws is a field, not of laws, but

of men.”” The California Supreme Court has endorsed

such a non-rule philosophy. It said that

the true function of this methodology can prob-

ably be appreciated only casuistically in its

application to an endless variety of choice-of-

law problems.

[Appendix A-14)

(8) While the trend toward unprincipled decision-

making seems to accord with the spirit of our times,

Professor Cavers, one of the early conflicts revolution-

14 The very purpose of the full faith and credit clause was to alter the

status of the several states as independent foreign sovereignties,

each free to ignore obligations created under the laws of by the

judicial proceedings of the others ,and to make them integral parts

of a single nation Gasugneut which a remedy upon a just obliga-

- t be demanded as of right, irrespective of the state of its

Milwaukee County v. M. E. White Co., 296 U.S. 268, 276-77 (1935).

15 may oo Proper Law and Proper Forum, 18 OKLA. L. Rev.

17

aires, warned against “slipping into a chaos of essentially

meaningless ad hoc decisions.” THE CHoIcE-or-LAw

Process 121 (1965). He observed “the problem

we face today is not how to exorcise choice-of-law rules

and principles but how to develop them.” Jd. at 113.”

A former Solicitor General said:

Quite a from the function of conflict of

laws in the international scene, its function

within the United States is to bring order out

of this chaos, and to provide some rules of law

which will make it possible for states to decide

cases having some external elements on a ra-

tional and reasonably consistent basis.

Within the United States, there can very

rarely be any legitimate basis for one state to

apply its “public policy” against the laws of

another state. Pa

If each court . . . applies only its own law,

then diverse precedents will surely develop,

and counsel for plaintiffs will be remiss in their

duty if they do not... file their suit ... in

a state which will give them a favorable result.

* * *

16 According to the Reporter for the RESTATEMENT (SECOND) OF COoN-

FLICT OF Laws,

.. . throughout the ages the development of rules has been one of

the primary objectives of the common law judge. This has been so

because of the advantages that rules bring. Perhaps the most

obvious of these benefits are certainty and predictability, its import-

ant factors not only for those planning future transactions bu‘ also for

those confronting either lawwits or problems of how much to offer

or accept by way of settlement. An equally important advantage of

rules is the fact that Say qeaty facilitate judicial task .. .

Far more difficult is the of a judge when an approach is in-

volved. Here he is told simply to consider one or more enumerated

factors in arriving at his conclusion and usually is given little, if

any, guidance as to the relative weight he should give these factors.

As a result, each decision will be essentially ad hoc and the judge

will rarely be able to rely upon, or even to obtain much guidance

from, earlier opinions.

Reese, Choice of Law: Rules or Approach, 57 Cornmiu L. Rev. 315,

316-17 (1972).

18

Not only is this a denial of yond me but

a denial of the purpose of the conflict of laws,

but also it is a denial of law itself.

* * *

We will not always be successful in achiev-

ing uniformity, but we will surely have more

success if we constantly hold up uniformity of

results as a major objective, and recognize that

there can be no true justice without it.

Griswold, id. at 20, 22, 23.

Opinions of this Court also seem to recognize the

need for norms. Both in Klaxon and in Challoner the

Court directed diversity judges to apply state “con-

flict of laws rules” [emphasis added]. 313 U.S. at 496;

96 S. Ct. at 168. Indeed, one might question whether

Klaxon would have been decided the same way against

a backdrop of conflicts lawlessness and caprice.

(9) In part the present anarchy is an overreaction

to the rigid and simplistic methodology of the first

Conflicts Restatement. However, this Court need not

require states to formulate wooden and insensitive

choice-of-law rules. Even the broad formulations of the

RESTATEMENT (SECOND) OF ConFLIcT oF Laws might

pass constitutional muster. Nor need the Court’s man-

date preclude state courts from following the lead of

New Hampshire in articulating alternative reference

rules geared to the intrinsic merits of competing laws.”

This Petitioner simply contends that a total abolition

of choice-of-law rules, such as displayed by the Calli-

fornia Supreme Court in the instant case, violates full

faith and credit. The decisions of the California Su-

preme Court are consistent only in their refusal to

17 See Clark v. Clark, 107 N.H. 351, 222 A. 2d 205 (1966).

19

apply sister-state rules that differ from California law.

The modicum of comity essential to a federal system,

however, calls for ascertainable standards to assure

that choice-of-law decisions comport with full faith and

credit. An ad hoc evaluation of competing interests,

real or imaginary, that invariably leads to the pre-

ordained result of applying forum law cannot withstand

constitutional scrutiny. The very purpose of law is to

provide for order and equality. California’s non-rule

approach cannot satisfy even the barest minimum of

deference to which sister-state law should be entitled.

ll. THE CALIFORNIA SUPREME COURT VIOLATED

THE FULL FAITH AND CREDIT CLAUSE BY AP-

PLYING CALIFORNIA TORT RULES IN DISREGARD

OF NEVADA LAW TO REGULATE CONDUCT,

WITHIN NEVADA, OF A NEVADA ESTABLISH-

MENT.

(1) To justify subjecting Harrah’s Club to a judg-

ment premised on the California dram shop rule, the

California Supreme Court reasoned that California

could not reasonably effectuate its policy if it would

not extend its regulation to include at least certain

out-f-state tavern keepers and that “California’s in-

terest would be very significantly impaired if its policy

were not applied to defendant.” [Appendix A-17]

It is doubtful whether this assertion meets even the

most expansive standards devised to justify the extra-

territorial application of forum law. In Bigelow v. Vir-

ginia, 421 U.S. 809, 824 (1975), the Court said:

A State does not acquire power or supervision

over the internal affairs of another State merely

because the welfare and health of its own citi-

20

zens may be affected when they travel to that

State.

Whether or not this rule is limited to First Amendment

rights and interstate travelers, the formulation suggests

that the attempt of state courts to regulate activities

of foreign enterprises in disregard of sister-state laws

are suspect.

Courts usually justify the extraterritorial reach of

local law by invoking principles of legislative jurisdic-

tion. Pertinent to the instant case would be the objec-

tive territorial principle first articulated by Mr. Justice

Holmes in Strassheim v. Daily, 221 U.S. 280 (1911), and

applied by Learned Hand, J., in United States v. Alumi-

num Company of America, 148 F. 2d 416 (2d Cir. 1945).

Both judges, however, insisted the foreign conduct

to which forum law was applied be intended to produce

local effects in the forum state. Even this restrictive

version of the principle is highly controversial. Its ap-

plication has provoked foreign remonstrations™ and the

soundness of objective territoriality has been questioned

by commentators in this country as well.’’ Indeed, the

California Supreme Court specifically conceded that

CALIFORNIA BUSINESS AND PROFESSIONS CopE § 25602

on which it had relied in Vesely v. Sager, 5 Cal. 3d 153,

95 Cal. Rptr. 623, 486 P. 2d 151 (1971), to impose civil

liability could not be applied extraterritorially to the

facts at bar. [Appendix A-19]

18 See W. FUGATE, FOREIGN COMMERCE AND THE ANTITRUST Laws 50-51

n.28 (2d ed. 1973).

19 See COMMON MARKET AND AMERICAN ANTITRUST 357-59, 361-63, 382-92,

414-16 (J. Rahl ed. 1970).

21

(2) RESTATEMENT (SECOND) OF ForREIGN RELATIONS

Law § 18 (1965) ,” which purports to codify the Strass-

heim/Alcoa rule, hedges it with several qualifications

to prevent overbroad extraterritorial assertions. Cali-

fornia’s judically created dram shop act fails to meet

the test of § 18(a), since only a minority of jurisdictions

holds tavern keepers liable for acts of their patrons.”!

Nor are the requirements of § 18(b) met since the

accident in California was not the direct result of Har-

rah’s Club’s conduct in Nevada but depended on the

alleged intervening negligence of a California driver.

According to § 18 comment f at 50, clause (b) “requires

more than a mere casual relationship” to satisfy the

criterion of directness.

(3) Finally, a state claiming extraterritoriality should

heed the limitations imposed by ResTaTEMENT (SEc-

OND) OF ForEIGN RELATIONS Law § 40,” a provision

20 Jurisdiction to Prescribe with Respect to Effect within Territory

A state has jurisdiction to prescribe a rule of law attaching legal

consequences to conduct that occurs outside its territory and causes

an effect within its territory, if either

(a) the conduct and its effect are generally recognized as con-

stituent elements of a crime or tort under law of states that

have reasonably developed legal systems, or

(b) (i) the conduct and its effect are constituent elements of ac-

tivity to which the rule applies; (ii) the effect within the territory

is substantial; (iii) it occurs as a direct and foreseeable result of

the conduct outside the territory; and (iv) the rule is not incon-

sistent with the principles of justice generally recognized by states

that have reasonably developed legal systems.

21 The wisdom of such a rule is open to doubt. Unlike products liability,

which ultimately imposes the duty to compensate upon those best able

to bear it, dramshop acts reach into the shallower pockets of barkeeps,

a or small, who have no further recourse against potent manu-

acturers.

22 Limitations on Exercise of Enforcement Jurisdiction

Where two states have jurisdiction to prescribe and enforce rules

of law and the rules they may prescribe require inconsistent con-

duct upon the part of a person, each state is required by interna-

tional law to consider, in good faith, moderating the exercise of its

enforcement jurisdiction, in the light of such factors as

(a) vital national interests of each of the states,

(b) the extent and the nature of the hardship that inconsistent

22

designed to inhibit exorbitant enforcement jurisdiction.

Since the California Supreme Court attempted to regu-

late conduct in Nevada territory of a Nevada corpora-

tion, the factors listed in § 40(c) and (d) are present.

Moreover, even though the court called the state in-

terests “important and abiding,” [Appendix A-18),

they clearly do not rise to the dignity of a “vital in-

terest,” such as antitrust policy. Rather, as the instant

litigation demonstrates, dramshop liability in Califor-

nia simply serves as a stop-gap measure designed to

provide some liability coverage despite the state’s failure

to enact or police effective mandatory automobile in-

surance. In contrast, Nevada has enacted a compre-

hensive scheme of no-fault motor vehicle insurance.

See Motor Vehicle Ins. Act. Nev. Rev. Stat. ch. 698

(1973). The “increased economic exposure” the Cali-

fornia court imposed on sister-state taverns for the

benefit of Californians shifts the burden of California

law reform upon Nevada. As a recent California decision

indicates, the judically created dramshop liability not

only raises numerous puzzling issues but is so onerous

that it may force tavern owners out of business. It is

obvious that the California Supreme Court’s opinion

is directly aimed at and interferes with Nevada’s hotel

and casino business, an industry fundamental to the

very survival of the state.

Recent newspaper accounts declare that lia-

bility insurance carriers are imposing vastly

enforcement actions would impose upon the person,

(c) the extent to which the required conduct is to take place in

the territory of the other state,

(d) the nationality of the person, and

(e) the extent to whicl. enforcement by action of either state can

reasonably be expected to achieve compliance with the rule pre-

scribed by that state.

23

increased premium rates on California tavern

owners as a consequence of the third-party

claims emanating from Vesley v. Sager. The

same accounts reveal fears that some tavern

owners may be forced out of business; alter-

natively t the price of drinks must be

raised. Liability to injured customers as well

as third persons would add to the reported

economic burden . . . The past years have

witnessed the expansion and extension of tort

liability doctrines without corresponding at-

tention to the reparations system. Commerce

and industry have experienced increased lia-

bility insurance costs, which are ultimately

borne by the consuming public. As the current

medical malpractice predicament illustrates,

insurance cost increases, justified or unjustified,

ultimately result in politico-economic pres-

sures which arouse legislative attention. The

rate-fixing practices of the insurance industry,

not ongoing social need, finally generate some

legislative renovations. Judicial development of

new or extended liability doctrines thus trig-

gers forces far beyond judicial control. The

courts must fit decisional law to changing times

as best the may, leaving the executive and

legislative branches to protect the business

community and the public against unwarranted

financial burdens.

Kindt v. Kauffman, 129 Cal. Rptr. 603, 615, 622-23

n.11, 57 Cal. App. 3d 845, 862, 874 n.11 (1976) (dissent-

ing opinion).

Similarly, insurance premiums of all Nevada hotels,

casinos and taverns, whether they be located in Wen-

dover, Lake Tahoe or Reno, will increase drastically,

since the California Supreme Court expressly declined

to delineate the outer limits of the new rule it created.

[Appendix A-16)

24

It therefore appears that Nevada’s interests are con-

siderably more impaired than California’s.

California’s laudable concern for the victims of auto-

motive accidents should rely on domestic resources. The

improvement of California’s balance of payments hardly

serves to justify mulcting a small neighboring state

whose inhabitants are unable to protest this action

through their own legislative processes, as they did

when they repealed the criminal santcions against

giving liquor to drunks.”

(4) Accordingly, the California Supreme Court, while

conceding Nevada’s interest, has disregarded even those

restraints that are customarily observed among sover-

eign nations and should, with even greater cogency, be

honored among sister states.

Beyond that, the pertinence of the objective terri-

toriality principle to areas traditionally governed by

choice-of-law rules seems doubtful. The principle was

developed in the context of penal and regulatory enact-

ments where, as in workers’ compensation, there is no

choice between competing laws. Indeed, this appears

to be the first reported decision ever to grant recovery,

under forum law, against a sister-state tavern. The

RESTATEMENT (First) oF ConFuiicr oF Laws (1934),

which espouses the place-of-injury rule, in § 397 com-

ment a modified this territorial principle, to avoid un-

fair surprise, by exempting foreign conduct attributable

to defendants who had not “submitted” themselves to

forum law. See also 2 J. BEALE, Conriict or LAws

1297 (1935). Even interest analysts seem to reach the

same conclusion. See R. Cramton, D. Currie & H. Kay,

23 Law of April 25, 1973, ch. 604, § 8, [1973] Nev. Laws 1062.

25

ConFLict oF Laws 294 (2d ed. 1975) (commenting on

the intermediate appellate court decision in the instant

case). One text specifically questions the constitutior

ality of holding foreign taverns liable under forum law.

H. Goopricu & E. Scotes, Conriict or Laws 174 (4th

ed, 1964).

The only Supreme Court decision dealing with a

situation similar to the instant case is Steele v. Bulova

Watch Company, Inc., 344 U.S. 280 (1952), which

applied the Lanham Act to acts committed in Mexico.

However, the majority gave decisive weight to the fact

that defendant was a United States citizen and

resident. See Vanity Fair Mills, Inc. v. T. Eaton Com-

pany, 234 F. 2d 633 (2d Cir.), cert. denied, 352 U.S.

871 (1956).

(5) There can be little doubt that this Court has the

power to proscribe the aggressive interference by one

state with the police power of anot»er. The Court has

stated, on more than one occasion that it is the ultimate

arbiter to resolve conflicting assertions of state interests.

While the instant opinion of the California Supreme

Court (as well as those in Reich and Hurtado) stu-

diously avoids any reference to the Full Faith and

Credit Clause, it borrowed the “comparative impair-

ment” doctrine from an article devoted to the role of

the Supreme Court in the field of conflicts law.* The

author, decrying the homing trend, advocated the over-

ruling of Klaxon. He conceived of comparative impair-

ment as a notion of federal common law derived from

the Full Faith and Credit Clause.* The very idea of

allocating spheres of legal control assumes a neutral

ra] Res)” Choice of Law and the Federal System, 16 Stan. L. Rev. 1

25 Id. at 41-42.

26

decisionmaker as opposed to a forum bent on protecting

local interests.

Perhaps the California Supreme Court simply meant

to predict how this Court would decide the case. If so,

its interpretation of comparative impairment, and the

resulting application of California law is entirely with-

out Supreme Court or any other authority.

Accordingly, the instant case is an appropriate one

for this Court to exercise its powers under the Full Faith

and Credit Clause. Such a decision would fulfill an im-

portant responsibility owed to the states* and could

serve as an antidote to the beggar-thy-neighbor prac-

tices currently in fashion. Conversely, to let full faith

and credit lie dormant will encourage continued extra-

territorial forays.”” The time seems ripe to correct a

major misdirection and to clarify once again that

comity, rather than state egotism,” is the ultimate goal

of conflicts law.

26 See id. at 24.

27 When the approach that allows a state to apply its own law in

marginal cases is ngueeies by expanded bases of personal juris-

diction and the mechanism of the class action, the combination

raises the specter of massive invasions of one state into the policies

of another, rigidly enforced by the rules of full faith and credit to

judgments . . . Progress lies with more limitation, not less, and

with a requirement that in applying its own law the state give

proper regard to the interests of other states.

Martin, Constitutional Limitations on Choice of Law, 61 CORNELL L.

Rev. 185, 230 (1976).

28 It would seem to be quite unsound to seek the roots of Conflicts

law in the little vanities and susceptibilities of states or rn-

ments. . . . It would be a denial of essential justice to hold that a

bona fide transaction consummated by the parties within a certain

state and presumably with a view to the laws of that state should,

by the intervention of a more or less adventitious foreign fo

suddenly be controlled by a legal system which the saute onal

not have expected to become the governing law of the transaction.

Bodenheimer, The Public Policy Exception in Private International

og ® “ | | in the Light of Legal Philosophy, 12 Tue Jurist

27

CONCLUSION

In applying California law to a Nevada establishment

incorporated and doing business in Nevada for conduct

that took place exclusively in Nevada the California

Supreme Court overstepped tiie boundaries of inter-

state comity, federalism and fu!! faith and credit. For

this reason a writ of certiorari should issue to review

the judgment and opinion of the California Supreme

Court.

Respectfully submitted,

JOHN QUINCY BROWN, JR.

LEO H. SCHUERING, JR.

HARDY, ERICH & BROWN

A Professional Corporation

800 Ninth Street

Sacramento, California 95814

Telephone: (916) 444-7231

FRIEDRICH K. JUENGER

University of California at Davis

Law School

King Hall

Davis, California 95616

Telephone: (916) 752-2890

Attorneys for Petitioners

APPENDIX A

BERNHARD V. HARRAH’S CLUB A-1

16 C. 3d 313; 128 Cal Rptr. 215, 546 P. 2d 719

APPENDIX A

OPINION AND JUDGMENT OF THE SUPREME COURT

OF THE STATE OF CALIFORNIA

(S.F. No. 23242. In Bank. Mar 2, 1976.1

RICHARD A. BERNHARD,

Plaintiff and Appellant, V.

HARRAH’S CLUB

Defendant and Respe:dent.

SUMMARY

The trial court entered a judgment of dismissal follow-

ing an order sustaining a demurrer without leave to

amend to a personal injury complaint against a Nevada

tavern keeper by a California resident who was struck

on a highway in this state by an automobile driven by

another California resident who had allegedly been

furnished alcoholic beverages in defendant’s drinking

and gambling establishment after becoming obviously

intoxicated. (Superior Court of Sacramento County,

No. 224584, Joseph G. Babich, Judge.)

The Supreme Court reversed and remanded the cause

to the trial court with directions to overrule the de-

murrer and to allow defendant a reasonable time within

which to answer. The court held that the trial court

erred in failing to apply California law under which

civil liability may be imposed on tavern keepers who

furnish liquor to intoxicated persons rather than the

Nevada rule of nonliability. Stating that both states

had a legitimate but conflicting interest in applying its

A-2 BERNHARD V. HARRAH’S CLUB

16 C. 3d 313;___Cal. Rptr. , P. 2d___

own law in respect to the civil liability of tavern keepers,

the court employed the “comparative impairment” of

governmental interest approach. Though it did not

determine the outer limits to which the state policy

of affording protection to persons injured by intoxicated

persons who have been sold or furnished alcoholic bev-

erages while intoxicated should be extended, the court

held that the policy clearly encompassed one who, as

alleged in the complaint, advertised for or otherwise

solicited the business of California residents at its Ne-

vada drinking and gambling establishments, knowing

and expecting such persons, in response thereto, to use

California public highways in going and coming from

such establishments. The court held that the interest

of California of preventing tavern keepers from selling

alcoholic beverages to obviously intoxicated persons

who are likely to act in California in the intoxicated

state would be very significantly impaired if that policy

were not applied under the circumstances alleged,

whereas the interest of Nevada in protecting its tavern

keepers from unrestricted civil liability would not be

significantly impaired by imposing liability only on

those tavern keepers who actively solicit California busi-

ness. (Opinion by Sullivan, J., expressing the unani-

mous view of the court. )

BERNHARD V. HARRAH’S CLUB A-3

16 C. 3d 313;___Cal. Rptr. —

HEADNOTES

Classified to California Digest of Official Reports, 3d

Series

(1) Conflict of Laws § 13 — Torts — Interest of States

Involved — When faced with the problem of choos-

ing between the laws of two states as to which

governs a tort action, a court must make an

analysis of the respective interests of the states

involved, the objective of which is to determine the

law that most appropriately applies to the issue

involved.

(2) Conflict of Laws § 1—Application of Law or Foreign

State. — Generally, the court of the forum will

apply its own rule of decision unless a party litigant

timely invokes the law of the foreign state. In such

event he must demonstrate that the foreign rule

of decision will further the interest of the foreign

state and therefore that it is an appropriate one

for the forum to apply in the case before it.

(3) Alcoholic Beverages § 24 — Offenses — Sale to In-

toxicated Person — As Creating Civil Liability —

Sale in Sister State. — In an action by a California

resident who alleged that he was injured in this

state by an intoxicated California motorist who had

been served alcoholic beverages in Nevada by de-

fendant, a resident tavern keeper in that state, the

trial court, in ruling on defendant’s demurrer, erred

in failing to apply California law under which civil

liability may be imposed on tavern keepers who

furnish liquor to intoxicated persons rather than

A-4 BERNHARD V. HARRAH’s CLUB

16 C. 3d 313; Cal. Rptr. : jj =

the Nevada rule of nonliability, where plaintiff al-

leged that defendant advertised for and solicited

the business of California residents, expecting such

persons, in response thereto, to use California high-

ways in going and coming from its establishments.

The legitimate interest of California of preventing

tavern keepers from selling alcoholic beverages to

obviously intoxicated persons who are likely to act

in California while intoxicated would be very sig-

nificantly impaired if that policy were not applied

under the circumstances alleged, whereas the in-

terest of Nevada in protecting its tavern keepers

from unrestricted civil liability will not be signifi-

cantly impaired by imposing liability only on those

tavern keepers who actvely solicit California busi-

ness.

[See Cal. Jur. 3d, Alcoholic Beverages, § 53; Am.

Jur. 2d, Intoxicated Liquors, § 553 et seq.]

COUNSEL

Frederick W. Stephenson for Plaintiff and Appellant.

Hardy, Erich & Brown and Leo H. Schuering, Jr. for

Defendant and Respondent.

OPINION

SULLIVAN J. — Plaintiff appeals from a judgment of

dismissal entered upon an order sustaining without

leave to amend the general demurrer of defendant

Harrah’s Club to plaintiff’s first amended complaint.

BERNHARD V. HARRAH’S CLUB A-5

16 C. 3d 313 ;____Cal. Rptr. —

Plaintiff's complaint, containing only one court, al-

leged in substance the following: Defendant Harrah’s

Club, a Nevada corporation, owned and operated gam-

bling establishments in the State of Nevada in which

intoxicating liquors were sold, furnished to the public

and given away for consumption on the premises. De-

fendant advertised for and solicited in California the

business of California residents at such establishments

knowing and expecting that many California residents

would use the public highways in going to and from

defendant’s drinking and gambling establishments.

On July 24,1971, Fern and Philip Myers, in response

to defendant’s advertisements and solicitations, drove

from their California residence to defe..uant’s gambling

and drinking club in Nevada, where they stayed until

the early morning hours of July 25, 1971. During their

stay, the Myers were served numerous alcoholic bever-

ages by defendant’s employees, progressively reaching

a point of obvious intoxication rendering them incap-

able of safely driving a car. Nonetheless defendant con-

tinued to serve and furnish the Myers alcoholic bev-

erages.

While still in this intoxicated state, the Myers drove

their car back to California. Proceeding in a northeast-

erly direction on Highway 49, near Nevada City, Cali-

fornia, the Myers’ car, driven negligently by a still

intoxicated Fern Myers, drifted across the center line

into the lane of oncoming traffic and collided head-on

with plaintiff Richard A. Bernhard, a resident of Cali-

fornia, who was then driving his motorcycle along said

A-6 BERNHARD V. HARRAH’s CLUB

16 C. 3d 313;__Cal. Rptr__...._ P. 2d___

highway. As a result of the collision plaintiff suffered

severe injuries. Defendant’s sale and furnishing of al-

coholic beverages to the Myers, who were intoxicated

to the point of being unable to drive safely, was negli-

gent and was the proximate cause of the plaintiff’s

injuries in the ensuing automobile accident in California

for which plaintiff prayed $100,000 in damages.

Defendant filed a general demurrer to the first

amended complaint. In essence it was grounded on

the following contentions: that Nevada law denies re-

covery against a tavern keeper by a third person for

injuries proximate caused by the former by selling

or furnishing alcoholic beverages to an intoxicated pat-

ron who inflicts the injuries on the latter; that Nevada

law governed since the alleged tort was committed by

defendant in Nevada; and that section 25602 of the

California Business and Professions Code which estab-

lished the duty necessary for liability under our decision

in Vesely v. Sager (1971) 5 Cal. 8d 153 [95 Cal. Rptr.

623, 486 P. 2d 151), was inapplicable to a Nevada tavern.

The trial court sustained the demurrer without leave

to amend and entered a judgment of dismissal. This

appeal followed.

(1) We face a problem in the choice of law governing

a tort action. As we have made clear on other occasions,

we no longer adhere to the rule that the law of the place

of the wrong is applicable in a California forum regard-

less of the issues before the court. (Hurtado v. Superior

Court (1974) 11 Cal. 3d 574, 579 [114 Cal. Rptr. 106,

522 P. 2d 666]; Reich v. Purcell (1967) 67 Cal. 2d 551,

BERNHARD V. HARRAH’s CLUB A-7

16 C. 3d 313;___Cal. Rptr___, P.2d

555 [63 Cal. Rptr. 31, 432 P. 2d 727].) Rather we have

adopted in its place a rule requiring an analysis of the

respective interests of the states involved — the objec-

tive of which is “ ‘to determine the law that most ap-

propriately applies to the issue involved.’ ” (Hurtado,

supra, at pp. 579-580, quoting from Reich, supra, at p.

5585. )

The issue involved in the case at bench is the civil

liability of defendant tavern keeper to plaintiff, a third

person, for injuries allegedly caused by the former by

selling and furnishing alcoholic beverages in Nevada

to intoxicated patrons who subsequently injured plain-

tiff in California. Two states are involved: (1) Cali-

fornia — the place of plaintiff’s residence and domicile,

the place where he was injured, and the forum; and

(2) Nevada — the place of defendant’s residence and

the place of the wrong.

We observe at the start that the laws of the two states

— California and Nevada — applicable to the issue

involved are not identical. California imposes liability

on tavern keepers in this state for conduct such as here

alleged. In Vesely v. Sager, supra, 5 Cal. 3d 153, 166,

this court rejected the contention that “civil liability

for tavern keepers should be left to future legislative

action . . . First liability has been denied in cases such

as the one before us solely because of the judic. lly cre-

ated rule that the furnishing of alcoholic beverages is

not the proximate cause of injuries resulting from in-

toxication. As demonstrated, supra, this rule is patently

unsound and totally inconsistent with the principles of

A-8 BERNHARD V. HARRAH’s CLUB

16 C. 3d 313;___Cal. Rptr.__..__P.. 2d_

proximate cause established in other areas of negligence

law ... Second, the Legislature has expressed its in-

tention in this area with the adoption of Evidence Code

section 669, and Business and Professions Code section

25602... It is clear that Business and Professions Code

section 25602 [making it a misdemeanor to sell to an

obviously intoxicated person] is a statute to which this

presumption [of negligence, Evidence Code section 669]

applies and that the policy expressed in the statute is

to promote the safety of the people of California... ”

Nevada on the other hand refuses to impose such lia-

bility. In Hamm v. Carson City Nuggett, Inc. (1969)

85 Nev. 99 [450 P. 2d 358, 359], the court held it would

create neither common law liability nor liability based

on the criminal statute banning sale of alcoholic bev-

erages to a person who is drunk, because “if civil liability

is to be imposed, it should be accomplished by legisla-

tive act after appropriate surveys, hearings, and investi-

gations to ascertain the need for it and the expected

consequences to follow.” It is noteworthy that in Hamm

the Nevada court in relying on the common law rule

denying liability cited our decision in Cole v. Rush

(1955) 45 Cal. 2d 345 [289 P. 2d 450, 54 A.L.R. 2d 1137],

later overruled by us in Vesely to the extent that it was

inconsistent with that decision. (See Vesely v. Sager,

supra, 5 Cal. 3d at p. 167).

Although California and Nevada, the two “involved

states” (Reich v. Purcell, Supra, 67 Cal. 2d 551, 553;

see also Hurtado v. Superior Court, supra, 11 Cal. 3d

574, 579), have different laws governing the issue pre-

BERNHARD V. HARRAH’S CLUB A-9

16 C. 3d 313;___Cal. Rptr. — i,

sented in the case at bench, we encounter a problem in

selecting the applicable rule of law only if both states

have an interest in having their respective laws ap-

plied. (2) “(Glenerally speaking the forum will apply

its own rule of decision unless a party litigant timely

invokes the law of a foreign state. In such event he must

demonstrate that the latter rule of decision will further

the interest of the foreign state and therefore that it

is an appropriate one for the forum to apply to the

case before it. [Citations.]” (Hurtado, supra, at p. 581.)

Defendant contends that Nevada has a definite in-

terest in having its rule of decision applied in this case

in order to protect its resident tavern keepers like

defendant from being subjected to a civil liability which

Nevada has not imposed either by legislative enactment

or decisional law. It is urged that in Hamm v. Carson

City Nuggett, supra, 450 P. 2d 358, 359, the Supreme

Court of Nevada clearly delineated the policy under-

lying denial of civil liability of tavern keepers who sell

to obviously intoxicated patrons: “Those opposed to

extending liability point out that to hold otherwise

would subject the tavern owner to ruinous exposure

every time he poured a drink and would multiply liti-

gation endlessly in a claim-conscious society. Every

liquor vendor visited by the patron who became intoxi-

cated would be a likely defendant in subsequent liti-

gation flowing from the patron’s wrongful conduct . . .

Judicial restrairfis a worthwhile practice when the

proposed new doctrine may have implications far be-

yond the perception of the court asked to declare it.

A-10 BERNHARD V. HARRAH’s CLUB

16 C. 3d 313;___Cal. Rptr.__,.__ P. 2d__

They urge that if civil liability is to be imposed, it should

be accomplished by legislative act after appropriate

surveys, hearings, and investigations . . . We prefer

this point of view.” Accordingly defendant argues that

the Nevada rule of decision is the appropriate one for

the forum to apply.

Plaintiff on the other hand points out that California

also has an interest in applying its own rule of decision

to the case at bench. California imposes on tavern keep-

ers civil liability to third parties injured by persons to

whom the tavern keeper has sold alcoholic beverages

when they are obviously intoxicated “for the purpose

of protecting members of the general public from in-

juries to person and damage to property resutling from

the excessive use of intoxicating liquor.” (Vesely v.

Sager, supra, 5 Cal. 3d 153, 165.) California, it is urged,

has a special interest in affording this protection to all

California residents injured in California.

(3) Thus since the case at bench involves a Cali-

fornia resident (plaintiff) injured in this state by in-

toxicated drivers and a Nevada resident tavern keeper

(defendant) which served alcoholic beverages to them

in Nevada, it is cle*r that each state has an interest

in the application of its respective law of liability and

nonliability. It goes without saying that these interests

conflict. Therefore, unlike Reich v. Purcell, supra, 67

Cal. 2d 551, and Hurtado v. Superior Court, supra, 11

Cal. 3d 574, where we were faced with “false conflicts,”

in the instant case for the first time since applying a

governmental interest analysis as a choice of law doc-

BERNHARD V. HARRAH’s CLUB A-11

16 C. 3d 313;___Cal. Rptr.__,___ P. 2d__

trine in Reich, we are confronted with a “true” conflicts

case. We must therefore determine the appropriate rule

of decision in a controversy where each of the states in-

volved has a iegitimate but conflicting interest in apply-

ing its own law in respect to the civil liability of tavern

keepers.

The search for the proper resolution of a true con-

flicts case, while proceeding within orthodox parameters

of governmental interest analysis, has generated much

scholary examination and discussion.' The father of the

governmental interest approach,? Professor Brainerd

1 Baxter, Choice of Law and the Federal System (1963) 16 Stan. L. Fev.

1; Cavers. The ice of Law Process (1965) 114-224; Horowitz, 1 .e

Law of Choice of Law in California-A Restatement (1974) 21 UCLA

L.Rev. 719, 748-758; Conflict of Laws Round Table: A Symposium

1972) 57 Iowa L.Rev. 1219-1270; Symposium, Conflict of Laws Round

able (1971) 49 Texas L.Rev. 211-245; Sedler, Reviews-Conflicts Com-

mentary 50 Texas L.Rev. 1064-1083; Weintraub, Commentary on the

Conflict of Laws (1971). We note that no case has been called to our

attention, nor are we aware of one, which has discussed this problem

in a context relevant to the case at bench.

cases has been demonstrated several writers who have u that

conflicts cases be resolved on basis of the governmental interests

involved. . . . [{] [T]he process of resolving choice cases is necessarily

one of allocating spheres of legal control among states. His [Professor

Currie] thesis, like mine, is that the process of allocation should not be

A-12 BERNHARD V. HARRAH’s CLUB

16 C. 3d 313;___Cal. Rptr. — - Sel

Currie, originally took the position that in a true con-

flicts situation the law of the forum should always be

applied. (Currie, Eelected Essays on Conflicts of Laws

(1963) p. 184) ) However, upon further reflection, Cur-

rie suggested that when under the governmental in-

terest approach a preliminary analysis reveals an ap-

parent conflict of interest upon the forum’s assertion

of its own rule of decision, the forum should reexamine

its policy to determine if a more restrained interpreta-

tion of it is more appropriate. “(To assert a conflict

between the interests of the forum and the foreign state

is a serious matter ; the mere fact that a suggested

broad conception of a local interest will create conflict

with that of a foreign state is a sound reason why the

conception should be reexamined, with a view to a more

moderate and restrained interpretation both of the

policy and of the circumstances in which it must be

applied to effectuate the forum’s legitimate purpose.

.. . An analysis of this kind . . . was brilliantly per-

formed by Justice Traynor in Bernkrant v. Fowler

(1961) 55 Cal. 2d 588 [12 Cal. Rptr. 266, 360 P. 2d 906).”

(Currie, The Disinterested Third State (1963) 28 Law

& Contempt. Prob., pp. 754, 757; see also Sedler in

Symposium, Conflict of Laws Round Table, supra, 49

Texas L.Rev. 211 at 224-225.) This process of reexam-

ination requires identification of a “real interest as

opposed to a hypothetical interest” on the part of the

performed unconsciously, that the private interests in choice cases are

necessarily in balance, and that the cases can be decided by viewing

them as instances of conflicting states interests rather than of conflict-

ing private interests.” (Baxter, Choice of Law and the Federal System,

supra, 16 Stan.L.Rev. 1, 5, 6, 22, fn. omitted.)

_ — —

BERNHARD V. HARRAH’S CLUB A-13

16 C. 3d 313;___Cal. Rptr___,____P. 2d

forum (Sedler, Valuz of Principled Preferences, 49 Texas

L.Rev. 224) and can be approached under principles of

“comparative impairment.” (Baxter, Choice of Law and

the Federal System, supra, 16 Stan. L.Rev. 1-22; Horo-

witz, The Law of Choice of Law in California — A Re-

statement, supra, 21 UCLA L.Rev. 719, 748-758.)

Once this preliminary analysis has identified a true

conflict of the governmental interests involved as ap-

plied to the parties under the particular circumstances

of the case, the “comparative impairment” approach

to the resolution of such conflict seeks to determine

which state’s interest would be more impaired if its

policy were subordinated to the policy of the other

state. This analysis proceeds on the principle that true

conflicts should be resolved by applying the law of the

state whose interest would be the more impaired if

its law were not applied. Exponents of this process of

analysis emphasize that it is very different from a

weighing process. The court does not “ ‘weigh’ the con-

flicting governmental interests in the sense of deter-

mining 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 .. .

(The process] can accurately be described as .. . ac-

commodation of conflicting state policies, as a problem

of allocating domains of law-making power in multi-

state contexts — limitations on the reach of state policies

A-14 BERNHARD V. HARRAH’s CLUB

16 C. 3d 313;___Cal. Rptr. — |

— as dinstinguished from evaluating the wisdom of

those policies. . . . [E]Jmphasis is placed on the ap-

propriate scope of conflicting state policies rather than

on the ‘quality’ of those policies .. . ” (Horowitz, The

Law of Choice of Law in California — A Restatement,

supra, 21 UCLA L.Rev. 719, 753; see also Baxter, Choice

of Law and the Federal System, supra, 16 Stan.L.Rev.

1 18-19.) However, the true function of this method-

ology can probably be appreciated only casuistically in

its application to an endless variety of choice of law

problems. (See, e.g., the hypothetical situations set

forth in Baxter, op. cit., pp. 10-17.)

Although the concept and nomenclature of this

methodology may have received fuller recognition at

a later time, it is noteworthy that the core of its ration-

ale was applied by Justice Traynor in his opinion for

this court in People v. One 1953 Ford Victoria (1957)

48 Cal. 2d 595 [311 P. 2d 480). There in a proceeding

to forfeit an automobile for unlawful transportation of

narcotics we dealt with the question whether a chattel

mortgage of the vehicle given in Texas and, admittedly

valid both in that state and this, succumbed to the

forfeiture proceedings. The purchaser of the,car, having

executed a note and chattel mortgage fo ythe unpaid

purchase price, without the consent of the mortgagee

drove the vehicle to California where he used it to trans-

port marijuana. Applicable California statutes made it

clear that they did not contemplate the forfeiture of

the interest of an innocent mortgagee, that is a person

whose “interest was created after a reasonable investi-

BERNHARD V. HARRAH’s CLUB A-15

16 C. 3d 313;___Cal. Rptr___,.. P.2d

gation of the moral responsibility, character and repu-

tation of the purchaser and without any knowledge

that the vehicle was being, or was to be, used for the

purpose charged .. . ” Texas had no similar statute;

nor had the mortgagee, though proving that the mort-

gage was bona fide, also proved that he had made the

above reasonable investigation of the mortgager.

It was clear that Texas had an interest in seeing that

valid security interests created upon the lawful purchase

of automobiles in Texas be enforceable and recognized.

California had an interest in controlling the transpor-

tation of narcotics. Each interest was at stake in the

case, since the chattel mortgage had been validly cre-

ated in Texas and the car was used to transport nar-

cotics in California. The crucial question confronting

the court was whether the “reasonable investigation”

required by statute of a California mortgagee applied

to the Texas mortgagee. Employing what was in sub-

stance a “comparative impairment” approach, the court

answered the question in the negative. “It is contended

that a holding that the ‘reasonable investigation’ re-

quirement is not applicable to respondent will subvert

the enforcement of California’s narcotics laws. We are

not persuaded that such dire consequences will ensue.

The state may still forfeit the interest of the wrong-

doer. It has done so in this case. Moreover, the Legis-

lature has made plain its purpose not to forfeit the

interests of innocent mortgagees. It has not made plain

that ‘reasonable investigation’ of the purchaser is such

an essential element of innocence that it must be made

A-16 BERNHARD V. HARRAH’S CLUB

16 C. 3d 313;____Cal. Rptr. — ,

even by an out-of-state mortgagee although such mort-

gagee could not reasonably be expected to make such

investigation.” (Jd., at p. 599.)

Mindful of the above principles governing our choice

of law, we proceed to reexamine the California policy

underlying the imposition of civil liability upon tavern

keepers. At its broadest limits this policy would afford

protection to all persons injured in California by in-

toxicated persons who have been sold or furnished

alcoholic beverages while intoxicated regardless of

where such beverages were sold or furnished. Such a

broad policy would naturally embrace situations where

the intoxicated actor had been provided with liquor

by out-of-state tavern keepers. Although the State of

Nevada does not impose such civil liability on its tavern

keepers, nevertheless they are subject to criminal pen-

alties under a statute making it unlawful to sell or give

intoxicating liquor to any person who is drunk or

known to be an habitual drunkard. (See Nev. Rev.

Stats. 202.100; see Hamm v. Carson City Nuggett, Inc.,

supra, 450 P. 2d 358.)

We need not, and accordingly do not here determine

the outer limits to which California’s policy should be

extended, for it appears clear to us that it must en-

compass defendant, who as alleged in the complaint,

“advertisles] for and otherwise solicit{s] in California

the business of California residents at defendant Har-

RAH’S CLuB Nevada drinking and gambling establish-

ments, knowing and expecting said California residents,

in response to said advertising and solicitation, to use

BERNHARD V. HARRAH’S CLUB A-17

16 C. 3d 313 ;___Cal. Rptr. — ae

the public highways of the State of California in going

and coming from defendant HarrAH’s CLusB Nevada

drinking and gambling establishments.”’ Defendant by

the course of its chosen commercial practice has put

itself at the heart of California’s regulatory interest,

namely to prevent tavern keepers from selling alcoholic

beverages to obviously intoxicated persons who are

likely to act in California in the intoxicated state. It

seems clear that California cannot reasonably effectuate

its policy if it does not extend its regulation to include

out-of-state tavern keepers such as defendant who regu-

larly and purposely sell intoxicating beverages to Cali-

fornia residents in places and under conditions in which

it is reasonably certain these residents will return to

California and act therein while still in an intoxicated

state. California’s interest would be very significantly

impaired of its policy were not applied to defendant.

Since the act of selling alcoholic beverages to ob-

viously intoxicated persons is already proscribed in

Nevada, the application of California’s rule of civil

liability would not impose an entirely new duty re-

quring the ability to distinguish between California

residents and other patrons. Rather the imposition of

such liability involves an increased economic exposure,

which, at least for businesses which actively solicit ex-

tensive California patronage, is 2 foreseeable and cover-

able business expense. Moreover, Nevada’s interest in

protecting its tavern keepers from civil liability of a

boundless and unrestricted nature will not be signifi-

cantly impaired when as in the instant case liability

A-18 BERNHARD V. HARRAH’s CLUB

16 C. 3d 313;___Cal. Rptr. — . »

is imposed only on those tavern keepers who actively

solicit California business.*

Therefore, upon reexamining the policy underlying

California’s rule of decision and giving such policy a

restrained interpretation for the purpose of this case

pursuant to the principles of the law of choice of law

discussed above, we conclude that California has an

important and abiding interest in applying its rule of

decision to the case at bench that the policy of this

state would be more significantly impaired if such rule

were not applied and that the trial court erred in not

applying California law.

Defendant argues, however, that even if California

law is applied, the demurrer was nonetheless properly

sustained because the tavern keeper’s duty stated in

Vesely v. Sager, supra, 5 Cal. 3d 153, is based on Busi-

ness and Professions Code section 25602, which is a

criminal statute and thus without extraterritorial ef-

fect. It is quite true, as defendant argues, that in Vesely

we determined “that civil liability results when a vendor

3 Defendant asserts that Nevada’s law must be applied because it is the

law of the place of sale and cites three cases in support of that proposi-

tion. Trapp v. 4-10 Investment Corporation (8th Ci. 1970) 424 F. 2d

1261; Zuker v. Vogt (D. Conn 1961) 200 F. Supp. 340; and Schmidt v.

Driscol Hotel (1957) (82 N.W. 2d 365]. It is true that all three cases

applied the law of the place of sale of the alcohol, but not for that

reason. In Trapp and Zuker all the states involved had dram shop acts

which would permit civil liability and the federal courts determined

that the applicable forum state would give effect to the common policy

of liability for sale to intoxicated persons regardless of traditional tort

conflict rules. Schmidt is the only case where one state, Wisconsin, did

not have a dram shop act and the other state, Minnesota, did. However,

in that case even ry the injury occurred in Wisconsin, the alcohol

was sold and consumed in Minnesota and all the parties involved were

from Minnesota. Moreover, none of these cases involved a case of true

conflict between two state interests where the court endeavored to re-

solve the conflict by resort to the principles of governmental interest

analysis. They are therefore inopposite.

BERNHARD V. HARRAH’s CLUB A-19

16 C. 3d 313 ;___Cal. Rptr. — ,

furnishes alcoholic beverages to a customer in violation

of Business and Professions Code section 25602 and

each of the conditions set forth in Evidence Code sec-

tion 669, subdivision (a), is established.” (5 Cal. 3d

at p. 157.)

It is also clear, as defendant’s argument points out,

that since, unlike the California vendor in Vesely, de-

fendant was a Nevada resident which furnished the

alcoholic beverage to the Myers in that state, the

above California statute had no extraterritorial effect

and that civil liability could not be posited on de-

fendant’s violation of a California criminal law. We

recognize, therefore, that we cannot make the same

determination as quoted above with respect to de-

fendant that we made with respect to the defendant

vendor in Vesely.

However, our decision in Vesely was much broader

than defendant would have it. There, at the very outset

of our opinion, we declared that the traditional common

law rule denying recovery on the ground that the fur-

nishing of alcoholic beverage is not the proximate cause

of the injuries inflicted on a third person by an intoxi-

cated individual “is patently unsound.” (5 Cal. 3d at

p. 157.) Observing that “[ulntil fairly recently, it was

uniformly held that [such] an action could not be main-

tained at common law” (id., at p. 158) and reviewing

in detail the common law rule (id., at pp. 158-164) we

concluded that “the furnishing of an alcoholic beverage

to an intoxicated person may be a proximate cause of

injuries inflicted by that individual upon a third per-

A-20 BERNHARD V. HARRAH’S CLUB

16 C. 3d 313; Cal. Rptr. —e hl

son.” We reasoned: “If such furnishing is a proximate

cause, it is so because the consumption, resulting in-

toxication, and injury-producing conduct are foreseeable

intervening causes, or at least the injury-producing

conduct is one of the hazards which makes such fur-

nishing negligent.” (Id., at p. 164.)

Proceeding to the question of the tavern keeper’s duty

in this respect and rejecting his contention that civil

liability for tavern keepers should be left to future

legislative action, we noted that “liability has been

denied in cases such as the one before us solely because

of the judicially created rule that the furnishing of

alcoholic beverages is not the proximate cause of in-

juries resulting from intoxication. As demonstrated,

supra, this rule is patently unsound and totally incon-

sistent with the principles of proximate cause estab-

lished in other areas of negligence law. Other common

law tort rules which were determined to be lacking

in validity have been abrogated by this court (see

Gibson v. Gibson (1971) 3 Cal. 3d 914 [92 Cal. Rptr.

288, 479 P. 2d 648]; Muskopf v. Corning Hospital Dist.

(1961) 55 Cal. 2d 211 [11 Cal. Rptr. 89, 359 P. 2d 457)),

and there is no sound reason for retaining the common

law rule presented in this case.” (5 Cal. 3d at p. 166.)

In sum, our opinion in Vesely struck down the old

common law rule of nonliability constructed on the basis

that the consumption, not the sale, of alcoholic bev-

erages was the proximate cause of the injuries inflicted

by the intoxicated person. Although we chose to im-

pose liability on the Vesely defendant on the basis of

BERNHARD V. HARRAH’s CLUB A-21

16 C. 3d 313;___Cal. Rptr. — + &

his violating the applicable statute, the clear import

of our decision was that there was no bar to civil liability

under modern negligence law. Certainly, we said nothing

in Vesely indicative of an intention to retain the foi mer

rule that an action at common law does not lie. The

fact then, that in the case at bench, section 25602 of

the Business and Professions Code is not applicable

to this defendant in Nevada so as to warrant the im-

position of civil liability on the basis of its vivlation,

does not preclude recovery on the basis of negligence

apart from the statute. Pertinent here is our observation

in Rowland v. Christian (1968) 69 Cal. 2d 108, 118-119

(70 Cal. Rptr. 97, 443 P. 2d 561, 32 A.L.R. 3d 496): “It

bears repetition that the basic policy of this state set

forth by the Legislature in section 1714 of the Civil

Code is that everyone is responsible for an injury caused

to another by his want of ordinary care or skill in the

management of his property.”

The judgment is reversed and the cause is remanded

to the trial court with direction to overrule the de-

murrer and to allow defendant a reasonable time within

which to answer.

Wright, C. J., McComb, J., Tobriner, J., Mosk J,

Clark, J., and Molinari, J.,* concurred.

*Assigned by the Chairman of the Judicial Council.

APPENDIX B

B-1

APPENDIX B

ORDER OF THE SUPREME COURT OF THE

STATE OF CALIFORNIA

DENYING REHEARING

CLERK’S OFFICE, SUPREME COURT

4250 State Building

SAN FRANCISCO, CALIFORNIA 94102

Apr. 22, 1976

I have this day filed Order

REHEARING DENIED

Inre: S.F. No. 23242

Bernhard

US.

Harrah’s Club

Respectfully,

G. E. BISHEL

Clerk

APPENDIX C

en ee ee

BERNHARD v. MYERS C-1

Cite as, App., 117 Cal. Rptr. 351

APPENDIX C

Richard Alton BERNHARD, Plaintiff and Appellant,

Vv

Fern Virginia MYERS, et al., Defendants,

Harrah’s Club, a Nevada Corporation,

Defendant and Respondent.

Civ. 14030.

Court of Appeal, Third District.

Nov. 8, 1974.

Hearing Granted Jan. 8, 1975.

Action by injured California motorcyclist against

Nevada drinking establishment which allowed Calif-

ornia motorist to become intoxicated prior to accident

with motorcyclist in California. The Superior Court,

Sacramento County, Joseph G. Babich, J., sustained

a general demurrer without leave to amend, and motor-

cyclist appealed. The Court of Appeal, Paras, J., held

that California law allowing for civil liability to third

party injured by one allowed to become intoxicated in

violation of a criminal dram shop act, rather than law

of Nevada which did not allow for civil liability, would

be applied where both the individual and governmental

interests of Nevada and California were equal; and

that drinking establishment owed a common-law duty

to California motorcyclist using California highways

not to cause him injury by selling alcohol to an intoxi-

cated person.

Reversed.

C-2 117 CALIFORNIA REPORTER

1. Action Key 17

intoxicating Liquors Key 282

California law allowing for civil liability to third party

injured by one allowed to become intoxicated in viola-

tion of a criminal dram shop act, rather than law of

Nevada which did not allow for civil liability, would be

applied to action by motorcyclist, who was injured in

California accident by California resident motorist who

was allowed to become intoxicated in Nevada, defen-

dant’s gambling and drinking establishment, since both

the individual and governmental ihterests of Nevada

and California were equal. West’s Ann. Bus. & Prof.

Code, § 25602; N.R.S. 202.100, subd. 1.

2. Intoxicating Liquors Key 288

Nevada liquor establishment owed a common-law

duty to California motorcyclist, who was injured in

California when struck by California motorist who was

allowed to become intoxicated in such liquor establish-

ment, not to cause him injury by selling alcohol to

intoxicated person or known habitual drunkard. West’s

Ann. Bus. & Pro. Code, §§ 23001, 25602; West’s Ann.

Evid. Code, § 669.

Frederick W. Stephenson, Sacramento, for plaintiff

and appellant.

Hardy, Erich & Brown, Sacramento, for defendant

and respondent.

PARAS Associate Justice.

BERNHARD v. MYERS C-3

Cite as, App., 117 Cal. Rptr. 361

This is an appeal from a judgment of dismissal en-

tered by the court below following an order sustaining

a general demurrer wiihout leave to amend.'

FACTS’

On July 24, 1971, in response to the advertisements

and solicitations of defendant, Fern and Philip Myers®

drove their automobile from the State of California,

where they resided, to a gambling and drinking estab-

lishment owned by defendant in the State of Nevada.

The Myers remained at defendant’s club until the early

morning hours of July 25, 1971. During the course of

their stay the Myers were served numerous alcoholic

beverages by employees of defendant. By virtue of the

consumption of the alcoholic beverages served, the

Myers reached a point of obvious intoxication, render-

ing them incapable of safely driving a motor vehicle.

Despite this fact, defendant continued to sell, furnish

and give additional alcoholic beverages to the Myers.

While in this intoxicated state, the Myers left de-

fendant’s club and drove to Nevada County, California.

While driving on Highway 49, the Myers car drifted

across the center line into the lane of oncoming traffic

and collided head-on with plaintiff who was riding a

motorcycle. As a result of the accident, plaintiff suffered

sereve injuries.

1 The defendant Harrah’s Club, a Nevada Corporation, was the only de-

fendant named in the complaint to appear below. It filed a demurrer

alleging that the complaint failed to state facts sufficient to constitute

a cause of action against Harrah's.

2 The facts are taken from the allegations of the first amended complaint.

3 The Myers were named as defendants but are not parties to this ap-

peal. Hereinafter the word “defendant” shall be used to designate the

defendant and respondent Harrah's Club.

C-4 117 CALIFORNIA REPORTER

CHOICE OF LAW

(1] In Vesely v. Sager (1971), 5 Cal. 3d 153, 95 Cal.

Rptr. 623, 486 P. 2d 151, the California Supreme Court

considered the question of whether civil liability may

be imposed upon a vendor of alcoholic beverages for

providing alcoholic drinks to a customer who, as a

result of intoxication, injures a third person. The court

determined that the common law rule denying liability

is unsound; it held that civil liability results when (1)

a vendor furnishes alcoholic beverages to a customer

in violation of Business and Professions Code section

25602* and (2) a third person is proximately injured

or damaged thereby.

In 1969, the Supreme Court of Nevada considered

the same question. In Hamm v. Carson City Nugget,

Inc. (1969) , 85 Nev. 99, 450 P. 2d 358, the court refused

to abrogate the common law rule and held that a some-

what similar Nevada statute’ did not create civil liability

of tavern keepers to injured third parties. The court

stated that the matter was one for legislative action

and not court pronouncement (450 P. 2d at pp. 359-

360.) and that the Nevada Legislature has expressed

itself clearly in favor of no civil liability.

Thus the primary question before us is one of the

proper choice of law, given the conflicting rules of

4 This section reads: “Every person who sells, furni gives, or causes

to be sold, furnished, or given away, any alcoholic erage to any

habi‘ual or common drunkard or to any obviously intoxicated person

is guilty of a misdemeanor.”

5 N.R.S. 202.100(1) reads in part: “It shall be unlawful for the pro-

prietor, bartender or person in charge of any saloon or bar to sell or

give, or to permit to sold or given, any intoxicating liquor to any

person who ‘s drunk, or to any person known by such proprietor, bar-

tender or person in charge to be an habitual yt oe or dipso-

BERNHARD v. MYERS C-5

Cite as, App., 117 Cal. Rptr. 351

Nevada and California. Which law should apply? If

Nevada law, no cause of action is stated; and if Cali-

fornia law, the trial court erred.

Forty years ago the decision would have been a

relatively simple one. “For many years courts applied

the law of the place of the wrong in tort actions re-

gardless of the issues before the court, e.g., whether

they involved conduct, survival of actions, applicability

of a wrongful death statute, immunity from liability,

or other rules determining whether a legal injury has

been sustained.” (Reich v. Purcell (1967) 67 Cal. 2d

551, 553, 63 Cal. Rptr. 31, 33, 432 P. 2d 727, 729.) The

original Conflicts Restatement of 1934 so provided in

section 378. Section 379 more specifically detailed the

applicability of the law of the place of the wrong in torts

arising out of intentional conduct negligent conduct,

and conduct giving rise to absolute liability ; while sec-

tion 377 defined the place of the wrong as “the state

where the last event necessary to make an actor liable

for an alleged tort takes place.” Applying that rule,

which until Reich v. Purcell, supra, p. 555, 63 Cal. Rptr.

31, 432 P. 2d 727, was the California rule as well (see

Loranger v. Nadeau (1932) 215 Cal. 362 10 P. 2d 63),

this case would be resolved in favor of plaintiff.° Al-

though the defendant’s actions giving rise to liability

occurred in the State of Nevada, the accident occurred

in California and this is the last event necessary to

6 Restatement of Conflicts, (original) section 382, subdivision (2) might

at first glance appear to make an exception whereas here the act is

not tortious in Nevada where it takes palce but is in California where

the place of the wrong is. But a more careful reading of section 382,

subdivision (2) together with the comment thereto dispels any such

doubt.

C-6 117 CALIFORNIA REPORTER

create the tort. Thus California is the place of the wrong

and California law would apply.

But in the past forty years the law of conflicts has

undergone much development. In Reich v. Purcell,

supra, the California rule was redefined by Justice

Traynor as follows: “In a complex situation involving

multi-state contacts, however, no single state alone can

be deemed to create exclusively governing rights... .

The forum must search to find the proper law to apply

based upon the interest of the litigants and the involved

states. .. . Accordingly, when application of the law of

the place of the wrong would defeat the interests of the

litigants and of the states concerned, we have not ap-

plied that law. . . . As the forum we must consider all

of the foreign and domestic elements and interests in-

volved . . . to determine the rule applicable.” (Reich v.

Purcell, supra, 67 Cal. 2d pp. 553-555, 63 Cal. Rptr. p.

33, 432 P. 2d p. 729.) Justice Traynor’s approach has

been termed “the governmental interest approach”, the

objective of which is ‘to determine the law that most

appropriately applies to the issue involved.’ ” (Hurtado

v. Superior Court (1974) 11 Cal. 3d 574, 579-580, 114

Cal. Rptr. 106, 109.)

In addition to California, numerous jurisdictions

throughout the United States departed from the place

of the wrong approach (see cases cited in Reich v.

Purcell, supra, 67 Cal. 2d p. 555, 63 Cal. Rptr. 31, 432

P. 2d 727), and in 1969 the American Law Institute

rejected the place of wrong rule and in its place adopted

the principle of applying the law of the state which “has

the most significant relationship to the occurrence and

the parties....” (Rest., Conflicts 2d, § 145 et seq.) A

BERNHARD v. MYERS C-7

Cite as, App., 117 Cal. Rptr. 351

number of legal scholars have contributed their views,

not by any means with unanimity of thought. (See

Comments on Reich v. Purcell, 15 U.C.L.A. Rev. 551;

Symposium on Cipolla v. Shaposka, 9 Duquesne L. Rev.

pp. 347-465; Kasel v. Remington Arms Co. (1972) 24

Cal. App. 3d 711, 729, 730, 101 Cal. Rptr. 314.)

Applying the governmental interest approach to this

case and comparing it to other authorities in California,

we find it totally unique. There are but two states

involved, as well as two parties. The interests of the

parties cancel each other out, plaintiff being interested

in recovery, defendant being interested in no recovery.

The State of California is the place of the residence of

the plaintiff and the place where the automobile collision

‘occurred. The State of Nevada is the state of residence

of the defendant and the place where the act occurred

which it is claimed gave rise to liability. California has

an interest in compensating its resident plaintiff; Ne-

vada has an interest in protecting its resident defendant

from a money judgment in these circumstances and

thus in not compensating the foreign plaintiff. Both

states have an interest in regulating the conduct of

tavern owners and operators to the end that the service

of liquor to obviously intoxicated persons and habitual

drunkards is to be discouraged; indeed both have en-

acted penal statutes to serve this interest. By judicial

interpretation California has fortified this interest

through civil liability; by judicial interpretation, Ne-

vada has not so fortified the interest. Both states have

an equal right to expend or limit their public policy

in this area, and the decision of each is to be respected

by the other.

C-8 117 CALIFORNIA REPORTER

Thus the interests, both individual and governmental

are equal.

In Reich v. Purcell, supra, application of the govern-

mental interest approach resulted in the obvious con-

clusion that the state of the place of the wrong (Mis-

souri) had no interest in applying its law, where the

plaintiff was a resident of Ohio and the defendant a

resident of California.

In Hurtado, supra, California and Mexico were in-

volved, but the place of the accident was California and

Mexico had absolutely no interest to be protected by

a refusal to apply California law. In other words the

interests of the two governments showed upon analysis

that Mexico was not at all interested by California was.

In Kasel v. Remington Arms Co., supra, again there

were two states involved, California and Mexico. Mexico

was the place of the wrong, but the plaintiff was a Cali-

fornia resident and the defendant was a Delaware cor-

poration with its home office in Connecticut. Again the

court ruled that as between Mexico and California, Cali-

fornia’s law was the proper choice; Mexico had no in-

terest to protect.

In Grant v. McAuliffe (1953) 41 Cal. 2d 859, 264 P. 2d

944, all the parties, plaintiff and defendant, were residents

of California, and the accident occurred in Arizona;

which was held not to have such an interest as should

be given consideration when compared to the interest

of California in its own residents. Virtually the same

factual situation existed in Emery v. Emery (1955),

45 Cal. 2d 421, 289, P. 2d 218.

What distinguishes this case from those aforemen-

tioned is that we are really dealing with two distinct

BERNHARD v. MYERS C-9

Cite as, App., 117 Cal. Rptr. 351

torts. The particular tort of the Nevada defendant is

separate from the tort which more proximately caused

the plaintiff's injury, that of the Myers’, the California

residents. In the other cases, the tortious conduct and

the injury occurred in the same state ; which is generally

so. Here the alleged tortious conduct of the Nevada

defendant occurred in Nevada, while the accident and

injury (and the second tort) occurred in California.

While California may thus be treated as the “place of

the wrong”, actually and in reality the place of the

wrong insofar as the defendant’s conduct is concerned

is the State of Nevada. That the injury occurred in

California is in a sense fortuitous. (See Rest. 2d, Conflict

of Laws, § 145, com. 2, p. 419.) This case is unique in

that respect and we find no comparable case in Cali-

fornia.

Looking outside California, we note three cases with

similarity. In Cipolla v. Shasposka (1970), 439 Pa. 563,

267 A. 2d 854, the plaintiff automobile guest was a resi-

dent of Pennsylvania (the forum), while the defendant

driver was a resident of Delaware where the accident

and injury occurred. The court applied Delaware law

whose guest statute denied recovery, a proper result

under our governmental interest approach. But the

distinguishing feature is obvious — the only interest of

Pennsylvania was its resident plaintiff. In Williams v.

Rawlings Truck Line, Inc. (1965), 123 U.S. App. D.C.

121, 357 F. 2d 581, the defendant’s conduct took place

in New York, where the plaintiff and defendant both

resided ; the accident and injury occurred in the District

of Columbia (the forum). New York law was held to

C-10 117 CALIFORNIA REPORTER

apply, for the same reasons as were involved in Grant

v. McAuliffe, supra; the place of the accident was wholly

fortuitous and the case was treated as one of “false

conflicts” (See Williams v. Rawlings Truck Lines,

supra, p. 586.)

In Schmidt v. Driscoll Hotel (1957), 249 Minn. 376,

82 N.W. 2d 365, the forum state was Minnesota. Min-

nesota had a dram shop act which by statute imposed

liability upon tavern owners for injuries sustained by

third persons as a result of conduct of intoxicated per-

sons who were furnished liquor in violation of a statute

similar to the penal statutes of California and Nevada.

Our court having construed Business and Professions

Code, § 25602 as creating civil liability, we are in the

same legal position as Minnesota. The defendant in

Schmidt v. Driscoll Hotel served alcohol to one Sor-

renson in violation of the statute. Sorrenson then pro-

ceeded to drive his vehicle, in which plaintiff was a

passenger, into the State of Wisconsin where the auto-

mobile accident occurred, injuring the plaintiff. The

question for the Minnesota court was which law to

apply; its own, which gave civil liability against the

defendant ; or that of Wisconsin where the accident took

place, but where there was no dram shop law. The case

is similar on its facts to the case at bench both because

of the dram shop aspect, and because the wrongful

conduct and the injury were in different states. The

differences are that both plaintiff and defendant were

residents of the State of Minnesota, which is also the

state where the wrongful act occurred. The only thing

that happened in Wisconsin was the accident, which

really was fortuitous; from the point of view of both

BERNHARD v. MYERS C-11

Cite as, App., 117 Cal. Rptr. 351

pees it could have happened anywhere.’ The law of

Minnesota was applied.

Thus even after looking outside California, we still

find this case unique on its facts. The Williams and

Schmidt cases are indicative of stress upon the state

to the defendant’s conduct as the source of the ap-

plicable law, because the ultimate place where the

injury occurs is fortuitous. In Reich v. Purcell, supra,

67 Cal. 2d p. 556, 63 Cal. Rptr. p. 34, 432 P. 2d p. 730,

Justice Traynor appears to support this emphasis when

he states: “Missouri is concerned with conduct within

her borders and as to such conduct she has the pre-

dominant interest of the states involved.” (Emphasis

added). Here however we do not conclude that the

Nevada conduct makes the Nevada interest predomi-

nant ; for to do so would be to necessarily concede that

the happening of the accident in California was for-

tuitous. From the plaintiff’s point of view the occur-

rence of the accident in California was not fortuitous.

This is where the plaintiff lives and where he has a

perfect right to use the highways, expecting that duties

and liabilities flowing from an accident will be governed

by California law. To him, the place of dispensing liquor

is fortuitous, not the place of the injury.

The governmental interests as we note them are

sufficiently equal that we cannot say that the interest

7 The Minnesota court cited but refused to follow the original Restate-

ment rule of applying the law of the place of the wrong. The court

uttered the following dictum at page 367: “But, even if at the time of

the accident there had been in effect in Wisconsin a statute similar to §

340.95, it is doubtful if it could be applied to ascertain plaintiff's rights

against defendant since there is nothing here to support a claim that

defendant ever consented to be bound by Wisconsin law.” (Emphasis

added) The dubious reasoning destroys any precedential value the

statement might otherwise have had. _

C-12 117 CALIFORNIA REPORTER

of either state predominates. We find ourselves am-

bivalently wanting to apply California law for the bene-

fit of our resident and wanting to apply Nevada law in

order not to offend a sister state’s concept of proper

conduct of its citizens. We have concluded that the

ambivalence is to be resolved by applying California

law; we believe that this brings about both the more

equitable and the legally correct result. We rely upon

three precedents, whose rationale we accept, to justify

such resolution of the conflict (which in our view is a

true conflict of laws under which the interests of one

state must suffer while those of the other be enhanced).

Our first authority is Kasel v. Remington Arms Co.,

supra, 24 Cal. App. 3d at p. 731, 101 Cal. Rptr. at p.

327, where the court states “the forum has a definite

interest in applying its own law. The law of the forum,

‘will be displaced only if there is a compelling reason

for doing so.’ It is ‘applicable unless either the plaintiff

or the defendant has been forced into a forum devoid

of any such contact as would justify application of its

own law.’ Ehrenzweig, Conflict of Laws (1962) § 213,

page 555.” (See also Hurtado v. Superior Court, supra,

11 Cal. 3d p. 581, 114 Cal. Rptr. 106.) This is but an-

other way of saying that if the interests are evenly

divided between conflicting States, and if one of those

states is the forum, the law of the forum should be

applied. In this case that would be the law of California,

because we do find that the interests of California and

Nevada in this case are of equal dignity.

The second source of authority for our conclusion is

in Restatement 2d, Conflict of Laws, section 146 which

reads in part as follows: “In an action for a personal

BERNHARD v. MYERS C-13

Cite as, App., 117 Cal. Rptr. 351

injury, the local law of the state where the injury oc-

curred determines the rights and liabilities of the par-

ties, unless, with respect to the paritcular issue, some

other state has a more significant relationship . . . to

the occurrence and the parties, in which event the local

law of the other state will be applied.” Comment (e) to

section 146 reads in part as follows: “On occasion, con-

duct and personal injury will occur in different states.

In such instances, the local law of the state of injury

will usually be applied to determine most issues in-

volving the tort. . . . One reason for the rule is that

persons who cause injury in a state should not ordinarily

escape liability imposed by the local law of that state

on account of injury... .

The local law of the state where the personal injury

occurred is most likely to be applied when the injured

person has a settled relationship to that state, either

because he is domiciled or resides or because he does

business there.” (Emphasis added).

Again comment (b) to section 156, Restatement 2d

states in part: “If conduct and injury occur in different

states, the local law of the state of injury will be ap-

plied unless some other state, which would usually be

the place of conduct, has a more significant relationship

to the occurrence and the parties with respect to the

particular issue. . . . This is so for the reason, among

others, that persons who cause injury in a state should

not ordinarily escape liability imposed by the local law

of that state on account of the injury.” Illustration

no. 1 under section 156 then furnishes facts very com-

parable to those of our case. It determines as we do

that the interests of both states, the state of the action

C-14 117 CALIFORNIA REPORTER

and the state of the result, are equally important, but

that neither is any greater than the other. The illus-

tration concludes that the law of the place of injury

Should apply, saying “ . . . ordinarily, at least, one

should not be allowed to escape liability imposed upon

him by the local law of the state where his act caused

injury.”

The same confirming language is to be found in the

comments and illustration to Restatement 2d of Con-

flicts, section 159.

The third source of authority for our conclusion is

to be found in the work of Professor Cavers and his

principles of preference (see Cavers, The Choice of

Law Process, page 139, et seq.) The first principle reads

in appropriate part: “Where the liability laws of the

state of injury set a higher standard of conduct...

against injury than do the laws of the state where the

person causing the injury has acted, . . . the laws of

the state of injury should determine the standard .. .

applicable to the case .. . ” Referring to the plight

of the defendant to whom this rule is applied, Professor

Cavers states at page 141: “If he has not entered the

state but has caused harm within it by his act outside

it, then, save perhaps where the physical or legal con-

sequences of his action were not foreseeable, it is. . .

fair to hold him to the standards of the state to which

he sent whatever harmful agent . . . caused the injury.”

Surely it is foreseeable to any dispenser of alcoholic

beverages in Reno or the Nevada side of Lake Tahoe

that an intoxicated customer may drive his automobile

into adjoining California and injure a third person

because of incompetent driving.

BERNHARD v. MYERS C-15

Cite as, App., 117 Cal. Rptr. 351

While the choice of law in this case is not clear, as

it has been in others where application of governmental

interests principles has resulted in an unequivocal in-

dication of an interest in one state with a corresponding

lack of interest in another state, we nonetheless are

persuaded by the foregoing that the rule to be applied

by California in this case is that one which favors Cali-

fornia law and California public policy. We recognize

the awkwardness of our ruling vis-a-vis the public policy

of the State of Nevada. In that regard we emphasize

that our ruling is not based upon the applicotion of any

“better law” concept, by which we would consider our

law on this subject somehow wiser or “better” than that

of Nevada (See Professor Seidelson’s Analysis of this

theory in 9 Duquense Law Review 428 to 434.) Our

ruling is simply based upon what we consider to be

sound legal authority, applicable where the govern-

mental interests as expressed in Reich v. Purcell are

equal.

WAS THERE A TORT?

[2] Despite our conclusion regarding choice of law,

we find ourselves compelled to consider an argument

regarding the substantive law applicable to this case.

The argument states: in Vesely v. Cager, supra, lia-

bility of the dispenser of alcohol was founded upon a

combination of Business and Professions Code section

25602 and Evidence Code section 669. The most serious

question of concern to the court was whether the cafe

proprietor owes a duty to care to the third person who

is injured by the automobile accident brought about

C-16 117 CALIFORNIA REPORTER

by the negligence of the intoxicated patron. The court

noted that a duty of care and the attendant standards

of conduct required of a reasonable man may be found

in a legislative enactment which does not expressly

provide for civil liability; that negligence in presumed

from the violation of a statute intended to protect a

class of persons of which the plaintiff is a member

against the type of harm which the plaintiff suffered

as a result of the violation of the statute; and that the

Legislature had codified this presumption in Evidence

Code section 669. The Supreme Court then noted that

Business and Professions Code section 25602 imposed

the duty of care upon the defendant because it was

adopted by the Legislature “for the purpose of pro-

tecting members of the general public from injuries

. resulting from the excessive use of intoxicating

liquor.” (Vesely v. Sager, supra, 5 Cal. 3d p. 165, 95

Cal. Rptr. p. 631, 486 P. 2d p. 159.) The court’s con-

clusion was fortified by citing Business and Professions

Code, section 23001. Finding that the plaintiff was with-

in the class of persons for whose protection section 25602

was enacted and that the injuries she suffered resulted

from an occurrence that the statute was designed to

prevent, the court concluded that the presumption of

Evidence Code section 669 applies, provided that in

addition there is in fact a violation of the statute and

that it proximately causes injury to the plaintiff.

The argument proceeds: it is emphasized that the

Vesely court specifically treated of the presumption of

negligence embodied in Evidence Code section 669,

together with the provisions of Business and Profes-

sions Code section 25602, and found a consequent duty

0

BERNHARD v. MYERS C-17

Cite as, App., 117 Cal. Rptr. 351

of the defendant to the plaintiff. It did not hold, and

indeed could not hold that the defendant there violated

a Nevada penal statute or any other state’s penal

statute. What do we then have where the defendant

in the case before us has not violated section 25602 or

any other California statute? What he violated was

a Nevada statute which the Nevada Supreme Court

has said creates criminal liability, but no civil liability.

The argument states further: in the case at bench,

obviously there is no way that a Nevada resident,

acting at all times in Nevada, could violate a penal

statute of California. The only way therefore that the

plaintiff can assert liability on the part of the de-

fendant is to assert that defendant violated a statute

of his own state, a penal statute, which in turn creates

civil liability. Obviously if the California courts were

to accept this, they would be telling the Nevada courts

precisely the opposite of what the Nevada courts told

the world regarding Nevada’s own penal statute.

Thus the argument concludes that the plaintiff has

stated no cause of action, not because of choice of law,

but because there was no violation of a duty by the

defendant to the plaintiff. Neither the California statute

(which creates a civil duty) was violated by the de-

fendant nor any Nevada statute creating a civil duty.

So the defendant simply did not wrong the plaintiff.

The argument is logical and persuasive, and would

have merit but for the fact that Vesely v. Sager, supra,

went beyond pure statutory construction in its deter-

mination of liability. It reviewed the common law which

had thertofore precluded civil liability of a dispenser

of alcoholic beverages and overruled the cases enunciat-

C-18 117 CALIFORNIA REPORTER

ing that common law. The court stated, 5 Cal. 3d at p.

166, 95 Cal. Rptr. at p. 632, 486 P. 2d at p. 760: “...

liability has been denied in cases such as the one before

us solely because of the judicially created rule that the

furnishing of alcoholic beverages is not the proximate

cause of injuries resulting from intoxication. . . . this

rule is patently unsound and totally inconsistent with

the principles of proximate cause established in other

areas of negligence law. Other common law tort rules

which were determined to be lacking in validity have

been abrogated by this court (see Gibson v. Gibson

(1971), 3 Cal. 3d 914, 92 Cal. Rptr. 288, 479 P. 2d 648;

Muskopf v. Corning Hospital Dist. (1961) ; 55 Cal. 2d

211, 11 Cal. Rptr. 89, 359 P. 2d 457), and there is no

sound reason for retaining the common law rule pre-

sented in this case.”

Thus the civil duty of the purveyor of alcoholic

beverages spelled out in Vesely v. Sager arises not only

from the statute but also from the common law of

California as it now exists, and as it has existed from

and after June 24, 1971, the date of the Vesely de-

cision. On the date of the accident, July 24, 1971 de-

fendant therefore owed a common law duty to the

California plaintiff using California highways not to

cause him injury by selling alcohol to an intoxicated

person or known habitual drunkard. It was this duty

that was violated according to the allegations of the

first amended complaint.

The order sustaining demurrer and the judgment of

dismissal are reversed.

RICHARDSON, P. J., and REGON, J., concur.

CERTIFICATE OF SERVICE

I hereby certify that on this... day of July, 1976,

three copies of the Petition for Writ of Certiorari were

mailed, postage prepaid, to Frederick W. Stephenson,

Esq., Suite 303, 901 H. Street, Sacramento, California

95814, Counsel for the Respondent. I further certify that

all parties required to be served have been served.

John Quincy Brown, Jr.

Hardy, Erich & Brown

800 Ninth Street

Sacramento, California 95814

Counsel for Petitioner