Spring, 2001

Mid-semester Problem

(adapted from Group 1, Markey, chair)

You should thoroughly discuss the following problem in your original group, with the group chair (you may select a different chair if you wish) responsible for summarizing your answers on the listserv. You must discuss the problem and formulate your own group's answers before looking at other groups' answers.

B.S., a Baltimore corporation, hired K.S., a Pennsylvania corporation, as a contractor to reline part of a furnace located in Delaware.  A crane was necessary to complete the job and K.S. hired E.C., a Canadian corporation, as a subcontractor, to provide the crane and operators. The rental contract between K.S. and E.C contains an indemnity provision whereby E.C. agrees to indemnify K.S., for losses resulting from negligence on the part of E.C. or any of its employees, arising out of, or occurring in connection with, the furnishing of any goods or services.  The rental contract, signed in Maryland, also contains a choice of law provision, which identifies Pennsylvania law as the law that governs performance.

Indemnification agreements that indemnify the indemnitee against its own sole negligence are against public policy in Maryland - They are enforceable in Pennsylvania and Delaware. 

Maryland uses lex loci delicti as its tort choice of law rule. Pennsylvania courts have abandoned lex loci delicti in favor of a less restrictive approach combining methodologies of "government interest analysis" and "significant relationship" approach. Delaware focuses on the place of the tort as "an important factor," taking into account the policy interests of the affected states. All the relevant states use lex loci contractus as their choice of law rule for contract disputes.

The crane came into contact with a high-voltage electric line on the job site in Delaware, killing the crane operator, an employee of E.C. E.C.'s survivors sue E.C., K.S., and B.S. in United States District Court for the District of Maryland, claiming among other things, that B.S. was negligent in not turning off the electricity in the power line. Jurisdiction is based on diversity of citizenship. B.S. files a cross claim against K.S. and E.C. for common-law contribution, alleging their negligence in working under the live line. K.S. cross claims against E.C. for indemnification. E.C. claims the indemnification clause is void under Maryland law, which, it says, applies to the case, or at least, to the indemnification part of the case.

What choice of law rule should the court use? Why? What authority?.

Suppose the case were transferred to the United States District Court for the District of Delaware. What choice of law rule should the court use after transfer? Why? What authority?

Since this case is in federal court, why does the federal court need to worry about state choice of law rules. Isn't choice of law a procedural issue, as to which lex fori applies? So why doesn't federal law apply?

What arguments can E.C. make to get the indemnification clause invalidated under Maryland law.

What arguments can K.S. and B.S. make to get the indemification clause interpreted under Pennsylvania or Delaware law?

Reconsider your answer and arguments if suit originally were filed in the United States District Court for the Eastern District of Pennsylvania.