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Once a preliminary analysis has identified a true conflict of the governmental interests involved as applied 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. This analysis does not involve the court in weighing the conflicting governmental interests in the sense of determining which conflicting law manifests 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.
In a negligence action by Offshore Rental Company for damages resulting from an injury sustained by its vice-president, Howard C. Kaylor, while promoting its business on Continental Oil Company’s premises in Louisiana, the trial court, at the choice of law phase of the trial, dismissed the action, finding that, under the "most significant contacts theory," the law of Louisiana prevailed over that of California. A Louisiana statute had recently been judicially interpreted as precluding a cause of action by a corporate plaintiff for the loss of a corporate officer's services arising from the third party's negligence.
Did the trial court err in finding that Louisiana law applied?
The Supreme Court, though holding that the choice of law issue should have been determined by "governmental interest" and "comparative impairment" analysis, nevertheless affirmed the judgment of dismissal. This approach, the court held, incorporates several factors for consideration, namely, the history and current status of the states' laws, and the function and purpose of those laws. In the instant case, assuming that plaintiff had a cause of action under Civ. Code, § 49, subd. (c) (prohibiting any "injury to a servant which affects his ability to serve his master, other than seduction, abduction or criminal conversation"), that law had not recently been considered by the California courts and was contrary to that of the majority of common law states; moreover, its purpose could appropriately have been achieved by key employee insurance taken out by the California corporation. The Louisiana law, on the other hand, as recently interpreted, followed that of the majority of common law states, and was based on Louisiana's vital interest in promoting freedom of investment and enterprise within Louisiana's borders, among investors incorporated both in Louisiana and elsewhere. Thus, Louisiana's interests would have been the more impaired if its law had not been applied.