In Banks v. International Rental & Leasing Corp., 55 V.I. 967, 976 (V.I. 2011), the Court answered a certified question from the United States Court of Appeals for the Third Circuit asking whether this Court, based on section 4, would apply the Second or Third Restatement to strict liability product defect claims brought against the lessors of chattels.
In answering that question, we provided our first substantive review of section 4 and how it interacts with the formation of common law in the Virgin Islands.
Specifically, the Court was required to determine whether section 4 mandates that "this Court is bound to follow the most recent version of the Restatement approved by the American Law Institute whenever it is required to decide an issue of first impression, or whether, like other courts of last resort, this Court possesses the inherent power to shape the common law in the Virgin Islands." Id.
The Court concluded that:
"1 V.I.C. § 4 does not incorporate all of the Restatement provisions as if they were actual statutory text; nor does it delegate to the American Law Institute the authority to enact changes in the law of the Virgin Islands in all of the areas covered by the Restatements. See Dunn v. HOVIC, 1 F.3d 1371, 1392, 28 V.I. 467 (3d Cir. 1993) (Alito, J., concurring). Rather, we hold that, because our own decisions constitute "local law" within the meaning of section 4 -- and, unless found to be manifestly erroneous by the Third Circuit, are binding on all other courts applying Virgin Islands local law -- we therefore possess the discretion to decline to follow the most recent Restatement provision." Id. at 980.
With that in mind, the Court then considered three non-dispositive factors to guide us in our determination of whether we should adopt the Restatement approach. Id. at 981-84.
First, the Court reviewed the case law of the Virgin Islands to determine whether the challenged Restatement provision had been judicially accepted and used in the Virgin Islands. Id. at 981.
The Court noted that when a doctrine gains "widespread acceptance" that there are "definite burdens associated" with rejecting it, as to do so would "disrupt the state of the law in the Virgin Islands." Id. at 983.
Therefore, where a Restatement provision has received widespread acceptance in the Virgin Islands, that reliance upon and use of the provision was " 'entitled to great respect.' " Id. (quoting People v. Todmann, 53 V.I. 431, 438 n.6 (V.I. 2010)).
Next, the Court turned to whether the majority of courts from other jurisdictions endorse the position taken by the Restatement provision. We noted that "section 4 of title 1 'is impressive evidence that the Virgin Islands Legislature intends majority rule to govern in the absence of specific legislation.' " Id. at 983-84 (quoting Robles v. Hovensa, L.L.C., 49 V.I. 491, 498-99 (V.I. 2008)).
However, we did not follow the majority blindly and cautioned that the majority rule factor, while important, was not dispositive. Id.
Finally, the Court turned to the third, and most important, factor: an examination of whether the Restatement approach is the soundest rule for the Virgin Islands. Id. at 984.
Applying those three factors in Banks, the Court recognized that the Second Restatement's approach, at least as narrowly construed by the District Court of the Virgin Islands in a previous opinion, which did not permit a strict products liability suit against the lessors of chattels, had gained widespread acceptance in the courts of the Virgin Islands.
Under that approach, those individuals that sold chattels to third parties as part of their business could be held strictly liable for product defects, but those that leased the same chattels to third parties could not.
Despite the widespread acceptance in the Virgin Islands of the District Court's approach, we noted that the same approach had been rejected by the majority of courts and by the American Law Institute itself in the Third Restatement.
Furthermore, we found that the Third Restatement's approach was the sounder rule. Specifically, the Court noted that there was no discernable distinction between a seller and a lessor of chattels, both are in the same position to protect consumers from potential product defects.
Therefore, despite the great respect given to Restatement provisions that have gained widespread acceptance, we rejected the reading of the Second Restatement from the District Court and permitted a strict liability product defect suit to go forward against a lessor of chattels. Id.