Toyota Motor Company v. Linda Cook, Sanford Jones, James Thomas Lyle, Gary Gray, East Texas Educational Insurance Association, New York Marine and General Insurance Company

In The

Court of Appeals

Ninth District of Texas at Beaumont

__________________

NO. 09-17-00334-CV
__________________

TOYOTA MOTOR COMPANY, Appellant

V.

LINDA COOK, SANFORD JONES, JAMES THOMAS LYLE, GARY
GRAY, EAST TEXAS EDUCATIONAL INSURANCE ASSOCIATION,
NEW YORK MARINE AND GENERAL INSURANCE COMPANY,
Appellees
__________________________________________________________________

On Appeal from the 60th District Court
Jefferson County, Texas
Trial Cause No. B-184,121
__________________________________________________________________

OPINION

In this agreed permissive interlocutory appeal, Toyota Motor Corporation

(Toyota) appeals the trial court’s grant of Plaintiffs’ Linda Cook, Sandford Jones,

James Thomas Lyle, Gary Gray, East Texas Educational Insurance Association, and

New York Marine and General Insurance Company Motion to Apply Texas Law.

See Tex. Civ. Prac. & Rem. Code Ann. § 51.014(d) (West Supp. 2017). In a single
1
issue, Toyota asks whether the trial court should apply Texas or Mexico’s law to

Appellees’ claims against Toyota.

I. Background

This is a case arising out of an automobile accident that occurred in Mexico.

Appellees are either teachers or family members of teachers, who are all residents

of Texas. Appellees and some of their family members traveled to Mexico as part of

a Spanish immersion program. After arriving, Plaintiffs arranged on their own,

through the Mexican-owned hotel where they stayed, a tour of caves outside

Tolantongo, State of Hidalgo, Mexico. A licensed Mexican national provided

transportation and operated a Toyota Hiace van, licensed and registered in Mexico.

In Japan, Toyota designed and manufactured the Hiace model for the Mexican

market, and Toyota imported the van directly to Mexico where it was sold and placed

into the stream of commerce. There are no records indicating the Hiace van involved

in the accident had ever been in Texas or the United States. The Hiace model, in

fact, was never intended for use in or marketed by Toyota in the United States.

While en route to the caves, the driver was negotiating an unpaved descending

switchback mountain roadway when the van suddenly veered off the roadway,

flipped and rolled down the mountainside, ejecting several passengers. The accident

killed three teachers and injured other occupants of the van, some seriously. Several

2
Appellees received medical treatment in Mexico and later in Texas. The Mexican

government—the Attorney General for the State of Hidalgo—extensively

investigated the accident. Following the investigation, they held the driver of the van

criminally responsible for the accident.

On appeal, Appellees assert this is a product liability case wherein they allege

that Beaumont ISD “teachers and family members were injured or killed as a result

of a product (a van) which was defectively designed, manufactured and marketed by

Toyota Motor Co.” A review of the record reveals claims for negligence, strict

product liability, and wrongful death. Appellees allege that teachers Dorothy Gray,

Denise Wenzel and Mary Jones died as a result of the crash, and survivors Gary

Gray, Paul Gray, and Chris Gray (collectively “Gray Survivors”) suffered significant

injuries in the accident. After receiving initial treatment in Mexico, the Gray

Survivors received medical treatment in Texas. In addition to claims of negligent

design, marketing, and manufacturing, Appellees assert that Toyota is “strictly liable

to plaintiffs for designing, manufacturing and/or placing into the stream of

commerce the Hiace motor vehicle, which was unreasonably dangerous and

defective as designed, manufactured and marketed by defendant for its reasonably

foreseeable uses at the time it left the control of [Toyota].”

3
 Multiple lawsuits were filed in the District Courts of Jefferson County, Texas,

seeking to recover damages incurred as a result of the accident.1 All have been

consolidated in this appeal. After nonsuiting the Mexican van driver and the

Mexican hotel owner, Plaintiffs are proceeding solely against Toyota. Plaintiffs

moved for application of Texas law to their claims, while Toyota opposed the motion

and requested the application of Mexico’s law. The trial court granted the Appellees’

motions to apply Texas law.

All parties agree that (1) the trial court’s choice of law ruling involves a

controlling question of law, (2) there exists a substantial difference of opinion on the

trial court’s ruling, and (3) an immediate appeal will materially advance the ultimate

termination of the litigation. The trial court authorized a permissive interlocutory

appeal, and we granted the petition for permissive appeal.

1
The record reflects that Linda Cook asserted causes of action for negligence,
product liability, and strict liability against Toyota. Cook sought compensatory and
exemplary damages. The Gray Survivors brought claims for injuries they sustained
in the crash in addition to a cause of action for the wrongful death of Dorothy Gray.
Their live pleading includes claims for negligence, product liability, strict liability,
and wrongful death. The Gray Survivors seek compensatory damages and bystander
damages, but they do not seek exemplary damages. The suit filed by the Jones
Survivors is pending in another district court, which the trial court consolidated for
purposes of discovery. We do not have their live petition but will assume their claims
are similar to those of the Gray Survivors with the exception of the bystander claims
since the Jones family members were not present when the accident occurred.

4
 II. Standard of Review

Determining which state’s law governs an issue is a question of law for the

courts. Enter. Prods. Partners, L.P. v. Mitchell, 340 S.W.3d 476, 479–480 (Tex.

App.—Houston [1st Dist.] 2011, pet. granted) (citing Torrington Co. v. Stutzman,

46 S.W.3d 829, 848 (Tex. 2000)). Therefore, we review a trial court’s decision to

apply Texas law de novo. See Minn. Mining & Mfg. Co. v. Nishika Ltd., 955 S.W.2d

853, 856 (Tex. 1996); Mitchell, 340 S.W.3d at 480.

III. Choice of Law Generally

Texas applies the most significant relationship test outlined in the Restatement

(Second) of Conflict of Laws to determine choice of law issues. Gutierrez v. Collins,

583 S.W.2d 312, 318 (Tex. 1979) (holding that “in the future[,] all conflicts cases

sounding in tort will be governed by the ‘most significant relationship’ test as

enunciated in Sections 6 and 145 of the Restatement (Second) of Conflicts”); see

also Torrington, 46 S.W.3d at 848; Hughes Wood Prods., Inc. v. Wagner, 18 S.W.3d

202, 205 (Tex. 2000); RESTATEMENT (SECOND) OF CONFLICT OF LAWS §§ 6, 145

(AM. LAW INST. 1971). Under this approach, the laws of a single state do not

necessarily govern all substantive issues; accordingly, we consider each issue

separately and apply the state law having the most significant relationship to the

5
issue. 2 See Bain v. Honeywell Int’l, Inc., 257 F.Supp.2d 872, 875 (E.D. Tex. 2002).

We only undertake a choice of law analysis if a conflict of law exists that affects the

outcome of an issue. See Duncan v. Cessna Aircraft Co., 665 S.W.2d 414, 419 (Tex.

1984). The parties agree that an actual conflict exists between the laws of Mexico

and the laws of Texas, but they do not identify the separate substantive issues

involved. See Ford Motor Co. v. Aguiniga, 9 S.W.3d 252, 259 (Tex. App.—San

Antonio 1999, pet. denied) (holding that the first step of our analysis is to “[i]nitially

. . . identify the conflict of law which would necessitate the trial court to decide a

choice of law issue”). Accordingly, we look to the allegations contained in

Appellees’ live pleadings to determine the substantive issues and analyze the choice

of law issues applying the “most significant relationship” test outlined in the

Restatement (Second) of Conflict of Laws. See Torrington, 46 S.W.3d at 848;

Gutierrez, 583 S.W.2d at 318; RESTATEMENT (SECOND) OF CONFLICT OF LAWS §§ 6,

145.

Section 6 of the Restatement (Second) outlines the general choice of law

factors courts should consider, including:

(a) the needs of the interstate and international systems,
2
The “process of applying the laws of different states to discrete issues within
the same case” is known as “depecage.” Fairmont Supply Co. v. Hooks Indus., Inc.,
177 S.W.3d 529, 534 (Tex. App.—Houston [1st Dist.] 2005, pet. denied) (citation
omitted).
6
 (b) the relevant policies of the forum,
(c) the relevant policies of other interested states and the relative
interests of those states in the determination of the particular issue,
(d) the protection of justified expectations,
(e) the basic policies underlying the particular field of law,
(f) certainty, predictability and uniformity of result, and
(g) ease in determination and application of the law to be applied.

Torrington, 46 S.W.3d at 848 (quoting RESTATEMENT (SECOND) OF CONFLICT OF

LAWS § 6(2)); see also Hughes, 18 S.W.3d at 205. Additionally, in tort cases we

consider the section 145 contacts, which include: “(a) the place where the injury

occurred, (b) the place where the conduct causing the injury occurred, (c) the

domicile, residence, nationality, place of incorporation, and place of business of the

parties, and (d) the place where the relationship, if any, between the parties is

centered.” RESTATEMENT (SECOND) OF CONFLICT OF LAWS § 145(2); see also

Torrington, 46 S.W.3d at 848. In deciding choice of law issues, the number of

contacts is not determinative, rather courts must examine the contacts in light of state

policies underlying the specific substantive issue. Torrington, 46 S.W.3d at 848;

Duncan, 665 S.W.2d at 421.

In Gutierrez, the Texas Supreme Court explained that certain dissimilarities

in Mexican law, including damages, limitation statutes, indexing a plaintiff’s

recovery to the prevailing wage rates set by Mexican labor law, absence of pain and

suffering damages, and the allowance of moral reparations damages capped at one

7
third of the other damages awarded, did not necessarily render them violative of

public policy. Gutierrez, 583 S.W.2d at 321–22. These are some of the differences

that Appellees complain of in the case before us. The Court specifically noted that

“there is nothing in the substance of these laws inimical to good morals, natural

justice or the general interests of the citizens of this state.” Id. at 322. 3

We cannot make a blanket determination that the law of Texas or Mexico

applies to the entire case; rather, we must determine which state has the most

significant relationship to each substantive issue in our choice of law analysis. See

Torrington, 46 S.W.3d at 848 (citations omitted) (“[W]e must evaluate the contacts

in light of the state policies underlying the particular substantive issue.”); Hughes,

18 S.W.3d at 205 (“[T]he court of appeals determined that Texas has the most

significant relationship to the case and that therefore Texas law should apply to all

3
In re Pirelli Tire, L.L.C., a forum non conveniens case cited extensively by
Appellant, involved a product liability action by surviving family members who
were Mexican residents. 247 S.W.3d 670 (Tex. 2007). The product at issue was a
tire manufactured by the defendant and put on a vehicle purchased in Texas and then
later taken to Mexico where it was maintained and driven. Id. at 673. The defendant
manufacturer was incorporated in Delaware and had its principal place of business
in Georgia. Id. The plaintiffs there argued that Mexico did not provide an adequate
forum, because “it [did] not afford a cause of action for strict liability” and that
“Mexican law [did] not provide for survival damages and severely restricts damages
for death.” Id. at 678. The Court noted that the Mexican law was not rendered
inadequate and the fact that “the substantive law of an alternative forum may be less
favorable to the plaintiff is entitled to little, if any, weight.” Id. (citing Piper Aircraft
Co. v. Reyno, 454 U.S. 235, 246–51 (1981)).
8
issues. But the Restatement requires the court to consider which state’s law has the

most significant relationship to the particular substantive issue to be resolved.”); see

also Bain, 257 F.Supp.2d at 875. “The Restatement methodology requires a separate

conflict-of-laws analysis for each issue in a case.” Alarcon v. Velazquez, 552 S.W.3d

354, 360 (Tex. App.—Houston [14th Dist.] 2018, pet. denied) (citing Greenberg

Traurig of N.Y., P.C. v. Moody, 161 S.W.3d 56, 70 (Tex. App.—Houston [14th Dist.]

2004, no pet.)); BDO Seidman, LLP v. Bracewell & Patterson, LLP, No. 05-02-

00636-CV, 2003 WL 124829, at *2 (Tex. App.—Dallas Jan. 16, 2003, pet. denied)

(mem. op.) (“[T]he substantive law applicable to the underlying tort action is not

automatically applicable to a defendant’s contribution claim.”). In addressing choice

of law issues, “it is necessary for the court to analyze liability and damages

separately.” Bain, 257 F.Supp.2d at 875 (citation omitted).

IV. Liability

A. Restatement (Second) Section 145 Factors

1. The place where the injury occurred

Both parties undisputedly agree the accident occurred in Mexico. See

RESTATEMENT (SECOND) OF CONFLICT OF LAWS § 145(2)(a). As explained above,

the van involved in the accident was directly imported from Japan to Mexico, sold

in Mexico to a Mexican national, and operated exclusively in Mexico. Therefore,

9
Mexico was not a fortuitous location where the accident occurred.4 These facts

support the application of Mexico’s law to the liability issues.

2. The place where the conduct causing the injury occurred

The location where the conduct giving rise to the injury occurred is either

Japan, where the Toyota Hiace was designed and manufactured for the Mexican

market, or Mexico, where the van entered the stream of commerce and remained

until the accident. See RESTATEMENT (SECOND) OF CONFLICT OF LAWS § 145(2)(b).

In its investigation, Mexico faulted the conduct of the Mexican driver and Mexican

hotel owner for causing or contributing to the injuries or deaths. This conduct

occurred in Mexico. See id. No party argues that Japan’s laws should apply. Thus,

this factor favors the application of Mexico’s laws.

3. The domicile, residence, nationality, place of incorporation, and place
of business of the parties

Plaintiffs are all domiciled in Texas. The Texas Toyota affiliated corporations

did not design, manufacture, buy, or sell the Toyota Hiace van. Toyota’s relevant

domicile is Japan. While Toyota does business in Texas, the vehicle at issue had no

4
This is unlike a plane crash case where courts have determined the fortuitous
location of the crash decreased this factor’s significance. See Torrington Co. v.
Stutzman, 46 S.W.3d 829, 849 (Tex. 2000) (citation omitted).
10
relationship to Texas. These factors are at most neutral. See RESTATEMENT (SECOND)

OF CONFLICT OF LAWS § 145(2)(c).

4. The place where the relationship, if any, between the parties is
centered

The fourth factor—the place where the relationship of the parties is

centered—favors the application of Mexico’s law. See RESTATEMENT (SECOND) OF

CONFLICT OF LAWS § 145(2)(d). Plaintiffs did not arrange and obtain transportation

for the cave excursion until they were in Mexico. Cf. Trailways, Inc. v. Clark, 794

S.W.2d 479, 485–86 (Tex. App.—Corpus Christi 1990, writ denied) (noting that the

bus tickets to Mexico where the accident occurred were purchased in Texas and the

accident victims boarded the bus in Texas). With respect to Toyota, it was not until

they climbed into the van in Mexico that any relationship existed between Plaintiffs

and Toyota. See Vizcarra v. Roldan, 925 S.W.2d 89, 90 (Tex. App.—El Paso 1996,

no writ) (“Because the record reflects no relationship whatsoever between any

plaintiff and any defendant until the accident, the entire relationship between the

[parties] consists of an accident that occurred in Mexico.”); see also Bell Helicopter

Textron, Inc. v. Arteaga, 113 A.3d 1045, 1057 (Del. 2015) (“[T]he fourth contact

points to Mexico, where the helicopter had been since 1979, where the fitting was

installed, and where the victims took off for their ill-fated journey.”).

11
 5. Balancing of section 145 factors

The factual contacts under section 145 overall favor the application of

Mexico’s law. Thus, the presumption of applying the law of the location of the

alleged tort is not rebutted. See RESTATEMENT (SECOND) CONFLICT OF LAWS §§ 145,

146. We must, however, analyze these factual contacts in light of their impact upon

the policy factors set out in section 6 of the Restatement. Gutierrez, 583 S.W.2d at

319.

B. Restatement (Second) Section 6 Policy Factors

Plaintiffs focus on two main themes throughout their application of the policy

factors to argue that Texas law should be applied. Particularly, Plaintiffs contend

Mexico’s approach in determining liability—which fails to provide for strict liability

or bystander causes of action—leaves them with an inadequate remedy. As to

Mexico’s lack of strict liability law, Plaintiffs also assert that as Texas residents,

Texas has a stronger policy interest than Mexico in protecting its residents by

controlling corporate action in areas such as the manufacture of defective products.

We agree Texas has a strong interest in protecting its residents to allow recovery of

adequate compensation for torts committed against them and in avoiding injury

resulting from defective products to Texas residents. But, that interest is not

dispositive because other policy factors and considerations must also be examined.

12
 1. The needs of the interstate and international systems

According to the Restatement, analyzing the factors to determine the

applicable law “should seek to further harmonious relations between states and to

facilitate commercial intercourse between them.” RESTATEMENT (SECOND) OF

CONFLICT OF LAWS § 6 cmt. d. Comment d indicates that this policy factor is

“[p]robably the most important” “to make the interstate and international systems

work well.” Id.; see also Bell Helicopter, 113 A.3d at 1057.

In a forum non conveniens case, the Texas Supreme Court stated that “[t]he

safety of Mexican highways and products within the country’s borders are also

Mexican interests.” In re Pirelli Tire, L.L.C., 247 S.W.3d 670, 679 (Tex. 2007)

(granting mandamus relief from the district court’s denial of a forum non conveniens

motion seeking dismissal of a personal injury case involving Mexican plaintiffs

arising from an accident in Mexico). Mexico extensively investigated the accident

at issue. Applying Texas law to tort claims that arose and occurred in Mexico would

work to undermine Mexico’s sovereignty and ability to regulate safety on its

highways, including the vehicles used to transport their occupants.

13
 2. The relevant policies of the forum and other interested states and the
basic policies underlying the particular field of law

This Court must also consider the relevant policies of Texas and Mexico

together with the basic policies underlying the particular field of law because of their

similarities. See RESTATEMENT (SECOND) OF CONFLICT OF LAWS § 6(2)(b), (c), (e).

Plaintiffs argue based on policy interests of Texas and because Mexico’s law

fails to provide certain causes of action and methods of recovery, Texas law should

apply. However, if the foreign law is not “against good morals or natural justice” or

“prejudicial to the general interest” of Texas residents, mere differences between

Texas law and foreign law would not render the foreign law so contrary to Texas

public policy that it should not be enforced. California v. Copus, 309 S.W.2d 227,

232 (Tex. 1958) (citations omitted); see also Gutierrez, 583 S.W.2d at 321.

For example, the failure of Mexico to recognize a strict liability cause of

action would not render Mexico’s law inadequate in and of itself. See Piper Aircraft

Co. v. Reyno, 454 U.S. 235, 255 (1981) (concluding that despite Scottish courts not

permitting strict liability claims, and potential damage awards being potentially

smaller, no danger exists for the claimants being deprived of any remedy or unfair

treatment). Relying upon Piper Aircraft, the Fifth Circuit has held that both

Mexico’s lack of a strict liability theory of recovery and limitations on damage

recovery did not render Mexico’s laws inadequate in a forum non conveniens case.
14
See Gonzalez v. Chrysler Corp., 301 F.3d 377, 381, 383 (5th Cir. 2002) (citing Piper

Aircraft, 454 U.S. at 255).

According to David Lopez, Plaintiffs’ legal expert on Mexico’s law, while

Mexico’s law does not provide for a strict liability cause of action, Mexico does

allow for the recovery of damages caused by defective products under negligence

principals. Lopez explained the damages available under Mexico’s law and how to

calculate compensation for such damages. While “[i]t is true that the laws of Texas

and Mexico still differ in several aspects,” including the limitation of damages, “the

mere fact that these aspects of the law differ from ours does not render them violative

of public policy.” Gutierrez, 583 S.W.2d at 321–22.

Mexico’s underlying policy interest in adopting laws restricting tort causes of

action and recovery is to protect Mexican businesses and citizens from excessive

liability claims. Gonzalez, 301 F.3rd at 381–82. Mexico investigated this accident

and concluded that the van’s driver was criminally responsible. Thus, under the facts

of this case, we conclude that Mexico has a policy interest in applying its law.

Plaintiffs also argue that Texas law should be applied because Mexico has no

interest in protecting Texas residents by ensuring their safety while in Mexico.

Appellees claim that because Toyota does business in Texas, and a considerable

amount of Mexico’s tourism results from Texas residents, Toyota should employ the

15
same U.S. safety standards with respect to its vehicles marketed in Mexico.

However, the business conducted by Toyota in Texas is completely unrelated to

Plaintiffs’ causes of action in this case. The record reflects the van involved in the

accident was not designed, manufactured, sold, used, or even intended for any

market other than Mexico.

The tort at issue in this case does not involve any product that entered the

stream of commerce from or in Texas. Texas law, including the application of U.S.’s

strict automobile safety standards, does not apply. See Crisman v. Cooper Indus.,

748 S.W.2d 273, 277–78 (Tex. App.—Dallas 1988, writ denied) (“[W]e conclude

that the fact that appellee conducts some part of its business, unrelated to the subject

matter of the present claim, in Texas and maintains its principal place of business in

Texas carries no weight in our determination of whether Texas . . . substantive law

is applicable[.]”). Mexico, the market for which the van was made, has a greater

interest in having its laws applied. See Bell Helicopter, 113 A.3d at 1055–56

(explaining modern choice of law considerations suggest the jurisdiction where the

product is marketed has the greatest interest, in a case where the helicopter that

crashed was not marketed, sold, or the complained of part intended for use in the

U.S., but rather only in Mexico). Therefore, in addition to its interest in overseeing

products marketed and used within Mexico, as well as its interest in Toyota and other

16
companies doing business in Mexico, Mexico also regulates the activities of drivers

within its borders. “Mexico has no reason to defer to the State of Texas for

regulation” of these activities. Vizcarra, 925 S.W.2d at 91. “Texas therefore does

not have an appreciable interest in applying its law to an automobile accident caused

by negligent driving in a jurisdiction having its own laws regarding the operation of

automobiles.” Id. at 91–92.

In this case, the only connection that Toyota has with Texas is that it conducts

business with unrelated products within the State. Texas had nothing to do with the

Hiace van’s design, manufacture, sale, and use, all of which were performed outside

of Texas. “Whether [] Texas has an important policy interest in policing the conduct

of subsidiaries of businesses with Texas offices that occurs outside Texas and has

no effect on its territory” would be only one of several factors to consider under

Section 6. CPS Int’l, Inc. v. Dresser Indus., Inc., 911 S.W.2d 18, 34 (Tex. App.—El

Paso 1995, writ denied).

3. Protection of Justified Expectations of All Parties

Appellees initiated the contact in this instance by traveling to Mexico, staying

in a Mexican-owned hotel, and then made the arrangements for an excursion in

Mexico, where the Mexican citizen and driver chose to use a Toyota van to transport

the passengers. The van was neither designed nor manufactured in the United States;

17
it was imported to Mexico from Japan, sold by a Mexican dealership to a Mexican

resident, licensed in Mexico, driven exclusively in Mexico, and was being driven on

a Mexican highway when the accident occurred. Thus, when Plaintiffs left Texas,

the Appellees lacked any reasonable expectations that Texas law would govern in

the event of an accident in Mexico.

Comments to the Restatement provide that, “[g]enerally speaking, it would be

unfair and improper to hold a person liable under the local law of one state when he

had justifiably molded his conduct to conform to the requirements of another state.”

RESTATEMENT (SECOND) OF CONFLICT OF LAWS § 6 cmt. g. Toyota molded its

conduct, and moreover manufactured its Hiace van, to comport with the law of either

Japan or Mexico. We conclude it is unreasonable to expect Toyota to anticipate the

residence of each potential passenger and further, to be held to the various laws of

each passenger’s home state, rather than the law applicable to an accident’s location.

4. Certainty, predictability, uniformity of result and the ease in the
determination and application of the law to be applied

We consider factors (f) and (g) together. See RESTATEMENT (SECOND) OF

CONFLICT OF LAWS § 6(2)(f), (g). According to the Restatement, applying the law of

the place where the injury occurs is “easy . . . and leads to certainty of result” because

“[t]he place of injury is readily ascertainable.” Id. § 146, cmt. e. Adjudicating tort

liability issues arising from incidents on foreign roadways under the laws of the
18
victim’s home state as opposed to the place of the injury may lead to uncertain and

unpredictable results for corporations doing business in the foreign jurisdiction,

where they have designed and manufactured products solely for that market.

Applying Mexico’s standards of care for a tort occurring in that state under these

circumstances fosters predictability and uniformity.

Plaintiffs argue Texas law should be applied because it would be “more

difficult for the parties to educate the Court on relevant Mexican law.” The Texas

Supreme Court rejected this argument, stating “the members of this state’s judiciary

are fully capable of comprehending and applying laws of other jurisdictions[,]” and

“courts elsewhere than Texas have experienced no great difficulty in applying

foreign laws which on their face appear to be no less exotic[.]” Gutierrez, 583

S.W.2d at 321. Plaintiffs have already supplied an affidavit from their expert on

Mexico’s law. Based on the foregoing analysis, we conclude that the laws of Mexico

apply to the liability issues, even if certain causes of action are unavailable to

Appellees.5

5
As some of the Plaintiffs have filed wrongful death claims, those claims are
encompassed in the foregoing analysis. See RESTATEMENT (SECOND) CONFLICT OF
LAWS §§ 6, 175 (AM. LAW INST. 1971).
19
 V. Compensatory Damages

Appellees also contend that statutory limits for certain damages and no

compensation for pain and suffering and mental anguish or punitive damages leave

them with an inadequate remedy if Mexico’s law is applied. Compensatory damages

are designed to fairly compensate the injured plaintiff. Torrington, 46 S.W.3d at 848

(citation omitted). Compensatory damages in Texas include economic and

noneconomic damages. See Waste Mgmt. of Tex., Inc. v. Tex. Disposal Sys. Landfill,

Inc., 434 S.W.3d 142, 152 (Tex. 2014). Economic damages are intended to

compensate a plaintiff for actual economic or pecuniary loss and do not include

exemplary or noneconomic damages, whereas noneconomic damages are

awarded for the purpose of compensating a claimant for physical pain
and suffering, mental or emotional pain or anguish, loss of consortium,
disfigurement, physical impairment, loss of companionship and
society, inconvenience, loss of enjoyment of life, injury to reputation,
and all other nonpecuniary losses of any kind other than exemplary
damages.

Id. (citation omitted). The Texas Supreme Court has explained that “[a]ctual or

compensatory damages are intended to compensate a plaintiff for the injury she

incurred and include general damages (which are non-economic damages such as

for loss of reputation or mental anguish) and special damages (which are economic

damages such as for lost income).” Hancock v. Variyam, 400 S.W.3d 59, 65 (Tex.

2013).
20
 “Considering the purpose of compensatory damages, contacts such as the site

of the injury or where the tortious behavior occurred, which are important in

determining which state’s laws govern liability are less important.” Torrington, 46

S.W.3d at 849; Bain, 257 F.Supp.2d at 878. For purposes of damages under the most

significant relationship analysis, “under Texas law, the most important factor is not

where the injury occurred but rather where the plaintiff is domiciled.” Bain, 257

F.Supp.2d at 878 (citing Torrington, 46 S.W.3d at 849). “Compensation of an

injured plaintiff is primarily a concern of the state in which the plaintiff is

domiciled.” Torrington, 46 S.W.3d at 849 (citation omitted). Texas also has an

interest in protecting its residents in recovering adequate compensation for the

wrongful death of their relatives in foreign lands. Trailways, Inc., 794 S.W.2d at

486. The critical contacts in determining which state’s law governs compensatory

damages will usually be the ones with the greatest interest in the plaintiff’s monetary

recovery, which is typically the state of a plaintiff’s domicile, and/or the most direct

in protecting the defendant against financial hardship. Torrington, 46 S.W.3d at

848–49 (citing John B. Austin, A General Framework for Analyzing Choice-of-Law

Problems in Air Crash Litigation, 58 J. AIR L. & COM. 909, 965 (1993); Burgio v.

McDonnell Douglas, Inc., 747 F.Supp.865, 871–73 (E.D.N.Y. 1990)).

21
A. Application of Section 145 Factors

1. The Place of Injury

In determining whether Texas or Mexico has the most significant relationship

to this issue, we first note that the injuries occurred in Mexico. Courts have

recognized that this contact is not as important in a compensatory damages analysis.

Torrington, 46 S.W.3d at 849 (citing RESTATEMENT (SECOND) OF CONFLICT OF

LAWS § 145 cmt. e).

2. The Place Where Conduct Causing Injury Occurred

The conduct causing the injury also occurred in Mexico, specifically the

alleged negligence of the driver of the van. Additionally, Appellees claim that the

van was an unreasonably dangerous product defective in its design, marketing, and

introduction into the stream of commerce. The record reflects that Toyota marketed

the van in Mexico, which is also where it was introduced into the stream of

commerce. The Hiace van was not designed for the North American Market, and

Toyota never marketed or sold it in the United States. While the alleged tortious

behavior occurred in Mexico, courts have noted this factor is also not as significant

in a compensatory damages analysis. See id.; Bain, 257 F.Supp.2d at 878.

22
 3. The Domicile, Residence, Nationality, Place of Incorporation, and
Place of Business of the Parties

The Appellees are all Texas residents, Appellees dismissed the only Mexican

defendant from the lawsuit, and Toyota is a Japanese company. Although Toyota

does business in Mexico and Mexico has an interest in protecting entities engaged

in business within its borders, we do not believe that interest outweighs the interest

Texas has in ensuring its residents are fairly compensated for their injuries. This

factor strongly points to Texas as having the most significant relationship with the

compensatory damages issue. Torrington, 46 S.W.3d at 849 (citing RESTATEMENT

(SECOND) OF CONFLICT OF LAWS § 145 cmt. e).

4. The Place Where the Relationship Between the Parties is Centered

While Appellees rode in the Hiace van in Mexico, and the arrangements made

for the tour excursion occurred in Mexico, we do not believe this contact outweighs

the Appellees’ domicile being in Texas. “[W]here there is no pre-existing contractual

relationship between the parties, as in a tort action like this one, the place where the

relationship is centered is duplicative of the place of injury.” Grosskopf v. Chrysler

Grp. LLC, No. A-14-CA-801-SS, 2015 WL 6021851, at *5 (W.D. Tex. Oct. 14,

2015) (citing Denman by Denman v. Snapper Div., 131 F.3d 546, 549–50 (5th Cir.

1998)).

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B. Application of General Section 6 Factors

The two most pertinent choice of law principles under Restatement section 6

to this issue are (1) the relevant policies of the forum state and (2) the relevant

policies of other interested states.6 We consider the policies of both Texas and

Mexico, which are consistent. Indeed, Appellees’ expert explained in his affidavit

that in Mexico, “the purpose of [compensatory] damages is to restore the victim,

through payment of compensatory damages or otherwise, to the position the victim

was in prior to the injury.” See Stephen Zamora et al., Mexican Law 525 (2004).

Texas, as the domicile of the plaintiffs, is the state that will bear the burden if

the plaintiffs are not fairly and adequately compensated. Here, although Mexico does

allow for some form of compensatory damages, allowable damages are capped based

on prevailing Mexican wage rates, which are grossly inconsistent with prevailing

6
As noted in our most significant relationship analysis for the liability issues,
the remaining general principles include “the needs of the interstate system, the
protection of justified expectations, the basic policies underlying the particular field
of law, certainty, predictability, and uniformity of result, and the ease of the
determination and application of the law to be applied[,]” but here are insignificant
in our determination of what law to apply for compensatory damages. Grosskopf v.
Chrysler Grp. LLC, No. A-14-CA-801-SS, 2015 WL 6021851, at *6, n.9 (W.D. Tex.
Oct. 14, 2015) (citing RESTATEMENT (SECOND) OF CONFLICT OF LAWS § 6 (1971)).
In tort cases where the parties have not previously contracted, “the factors of the
justified expectations of the parties and of certainty, predictability, and uniformity
of result are of lesser importance.” Vanderbilt Mortg. & Fin., Inc. v. Posey, 146
S.W.3d 302, 314 (Tex. App.—Texarkana 2004, no pet.).
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wage rates in Texas where the Appellees worked as educators. Moreover, in terms

of making a plaintiff whole, there are radically different costs associated with living,

obtaining medical care, and ongoing therapy in Mexico versus in Texas. “[I]t makes

little sense to apply Mexico’s measure of damages, which indexes the amount of

recovery to the prevailing wages set by the labor law of that nation” when the

Plaintiffs in this case are all Texas residents, and there are no longer Mexican

residents named in the lawsuit. See Gutierrez, 583 S.W.2d at 319. At least one

Plaintiff is a paraplegic because of the accident and will require medical services for

the remainder of her life. Assessing Appellees’ compensatory damages based on the

costs of certain services in Mexico, when some continued medical treatment will be

provided in Texas, and their employment in Texas was impacted, makes little sense.

Based on the domicile of the Appellees, the strong interest Texas has in

insuring its residents are fairly compensated, along with the prevailing policy

interests of both Texas and Mexico, we conclude that Texas has the most significant

relationship to the compensatory damages issue. Therefore, Texas law applies to this

issue. 7

7
We note that section 171 of the Restatement (Second) of Conflict of Laws
provides additional guidance regarding the interplay between determinations of
compensatory damages issues and liability issues, specifically items of loss and
apportionment of damages. See RESTATEMENT (SECOND) CONFLICT OF LAWS § 171
cmts. a–e (AM. LAW INST. 1971).
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 VI. Punitive Damages

Unlike compensatory damages, which attempt to make a plaintiff whole,

punitive damages are meant to punish and deter a defendant for conduct deemed

egregious. See Horizon Health Corp. v. Acadia Healthcare Co., 520 S.W.3d 848,

873 (Tex. 2017) (citations omitted) (noting “compensatory damages redress concrete

losses caused by the defendant’s wrongful conduct, while exemplary damages are

aimed at deterrence and retribution”); Bennett v. Grant, 525 S.W.3d 642, 650 (Tex.

2017) (“As an overarching premise, exemplary damages further the state’s interest

in punishing and deterring unlawful conduct.”). Punitive damages are inexorably

linked to a jurisdiction’s laws pertaining to liability and what is “unlawful” in a

particular jurisdiction. This is because such laws typically incorporate a standard of

care whereby conduct and its level of egregiousness are measured. We have already

determined Mexico has the most significant relationship to the issue of liability, and

its laws apply to the liability portion of Appellees’ claims. The applicable standards

of care as they exist in Mexico necessarily implicate punitive damages.

To impose damages meant to punish a party based on standards of care in

Texas, when neither the conduct giving rise to the injury nor the injury itself arose

in Texas defies logic. To do so would impose Texas legal standards on Mexico,

which made conscious decisions not to allow such awards. A State cannot punish a

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defendant for conduct that may have been lawful where it occurred. See BMW of

North America, Inc. v. Gore, 517 U.S. 559, 572 (1996) (noting “a State may not

impose economic sanctions on violators of its laws with the intent of changing the

tortfeasors’ lawful conduct in other States”). Toyota designed the Hiace van for the

Mexican market, which presumably did not require the types of safety features the

United States requires and does not permit strict product liability claims. The

necessary inference is that Mexico did so to encourage vehicle manufacturers to

design and introduce vehicles in the Mexican marketplace that its citizens could

afford. To punish Toyota via exemplary damages as allowed under Texas law for a

product that may not have been defective where it was introduced into the stream of

commerce in a jurisdiction that does not recognize strict product liability or punitive

damages contradicts the law as enunciated by the United States Supreme Court. See

id. at 572. Mexico’s rule of law should apply to any exemplary or punitive damages

issue, even if such recovery is disallowed.

VI. Conclusion

The trial court erred in ruling Texas law applies to all issues in the case.

Having applied the Restatement’s most significant relationship test to each

substantive issue, we conclude that the law of Mexico applies to liability issues and

punitive damages issues, and Texas law applies to the issue of compensatory

27
damages. We reverse the trial court’s order of February 27, 2017, and we remand

this cause for proceedings consistent with this opinion.

REVERSED AND REMANDED.

_________________________
CHARLES KREGER
Justice

Submitted on March 1, 2018
Opinion Delivered August 8, 2019

Before McKeithen, C.J., Kreger and Johnson, JJ.

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