Conflicts of Laws Outline

Conflicts of Laws Outline Professor Friedenthal – Spring 2002INTRODUCTION & THE TRADITIONAL CHOICE OF LAW APPROACH Introduction1. Three Phases of Multistate Disputes: a. Jurisdiction—Where can the litigation be initiated? PJ, SMJ, Int’l b. Choice of Law—Which law will the court apply? c. Recognition and Enforcement of Judgments—Where can the resulting judgment be enforced? i. Full Faith and Credit Clause (FFC) ii. The judgment will not be enforced if the 1st court did not have jurisdiction.2. Choice of Law: a. Start with the forum → i. Judges will apply the law of their own state whenever possible. ii. In the majority of cases, forum will decide what law applies—it is the default position (unless some party shows why another law should apply. b. Often lawyers fail to introduce a conflict of law b/c it is too costly, unrecognized, etc. c. If there is a statute covering the subject matter of the state → it will be of crucial significance.3. The Source of Conflict Law is the C/L: a. First Restatement → the traditional view; this proved to be unsatisfactory. b. Second Restatement → this is dramatically different and has not gained recognition in all states. 4. Comity: Defined as something between a mere courtesy and a legal duty, as derived from the tacit consent of nations based on mutual forbearance and enlightened self- interest. Comity is based on the three following axioms: a. The laws of each state have force w/in the territory, but not beyond. b. These laws bind all those who are found w/in the territory, whether permanently or temporarily. c. Out of comity, foreign laws may be applied so that rights acquired under them can retain their force, provided that they do not prejudice the state’s powers or rights. i. The first two axioms elevate territorialism into the main operating principle. ii. The third axiom attempts to explain why the forum state will apply the law of another sovereign, but not when. iii. These axioms were later reformulated by Story (p. 13), and then rejected by Beale in favor of the English doctrine of vested rights.1 The Traditional American Approach5. The First Restatement (1934) – The Traditional Approach a. Began with the vested rights theory i. The lex loci delicti approach—apply the law of the place where the last act occurred. ii. Very strong territorial approach iii. The law looked to the place where the events occurred and rigidly applied that law. b. Potential Advantages i. Easy to apply (?) – All the court has to do is look to the place where the tort occurred; sometimes that is difficult to determine. ii. The lex loci is the only geographic factor that is common to both parties of the suit (?) – but this is not true in Carroll. iii. Neutral – It does not favor either Πs or Δs as a class, whereas applying the law of the forum would favor Πs and encourage forum shopping. iv. Predictable – Suits will be resolved in the same way no matter where the litigation is brought. c. Disadvantages i. Unfair – The rigidity was impractical and unbearable ii. Lose the values of flexibility and common sense; this results in arbitrariness and disparate treatment. iii. For defamation and other intentional torts, it is possible for the tortious person to select the state in which to commit the tort based on potential liability; perhaps there is too much predictability. d. With flexibility, however, where you sue becomes much more important, this can lead to forum shopping and less predictability. e. NOTE: That the traditional approach is still followed in the majority of states in areas other than torts and contracts.Torts6. Alabama Great Southern RR Co. v. Carroll (Ala. 1892): Rule: The cause of action arises under the laws of the state where the last act occurred. In this case, both Π (employee) and Δ (employer) were residents of Alabama, and Δ was incorporated there. Π was injured in Mississippi, while the train was traveling from Alabama to Mississippi. The cause of the injury (breach of duty of care) was a faulty inspection that occurred in Alabama. Since the injury, which vested Π’s right to sue, occurred in Mississippi, however, Mississippi law must be applied. At that time, Mississippi had the fellow servant rule—a rule disallowing an injured employee from recovering for the negligence of another fellow employee—therefore Π could not recover. If Alabama law was used, then Π would have won, since Alabama had workman’s comp laws. a. Why not use the place of the “bad act” instead of the place of injury? Because w/o an injury there is no tort. 2 b. The court read the Alabama law to apply only to injuries that occur in Alabama. But, why should a MS law, enacted to protect MS corporations, protect an AL business? i. The law could be changed to protect Π where he is injured elsewhere. ii. Make the law into a contract type of situation; expressly state that workman’s comp goes into effect regardless of where the injury occurs. c. What if MS allowed recovery and AL did not? Technically you should get the same result—MS law applies. d. The result here seems unfair, so if we don’t want the place of injury to determine what law applies, then what should be the deciding factor? Some alternatives → i. Domicile ii. Interests of the states; this is a tough question, but if you look to the policy behind the law, then Π should have won—the AL law was enacted to protect AL workers. iii. Where the “bad conduct” occurred; this could cause problems with manipulation iv. The most humane law? MN applies the “better law” v. Forum law e. How should the 2 goals of conflicts law be balanced? i. Fair rule as to what law applies; considerations of justice should play a role in formulating the rules by which the choice of law is made, but not in deciding whether or not to follow those rules. Select the law fairly, not guarantee that the law selected is fair. ii. Doing justice, i.e. assuring that the law that applies is fair. Rather than selecting the law fairly, assure that the law applied attains material or substantive justice.7. Territoriality and Vested Rights: The First Restatement a. § 1 – No state can make a law, which by its own force is operative in another state. b. § 377 – The place of the wrong is in the state where the last event necessary to make an actor liable for an alleged tort takes place. c. § 378 – The law of the place of the wrong determines whether a person has sustained a legal injury. d. § 384 – If a cause of action in tort is recognized in the place of the wrong, a cause of action will be recognized in other states. If no cause of action is created in the place of the wrong, no recovery in tort can be had in any other state. e. § 386 – The law of the place of the wrong determines whether a master is liable in tort to a servant for a wrong caused by a fellow servant. 8. Localizing the Tort: a. Π in Carroll tried to argue that the place of the wrong was the place where the negligent conduct occurred. b. The First Restatement, however, adopts a place of impact approach, therefore Π lost. c. Defamation cases—Where is the place of impact?3 i. According to the Restatement, the place of the wrong is the place where the defamatory statement is communicated. ii. What about the place where the statements are sent from? 9. Fitts v. Minnesota Min. & Mfg. Co. (Ala 1991): Rule: Alabama will adhere to the traditional law approach, since it is not clear that the modern approach is less confusing or more certain. In this case, Π brought suit in AL, seeking to recover damages for wrongful death for a plane crash that occurred in Fla., killing 5 AL citizens. Π made a motion for the law of AL to apply to the case, asking the court to adopt the modern most significant relationship conflicts approach. While the law of negligence is virtually the same in both AL and FL, Π want AL damages law to apply—AL looks to children’s capacity in determining damages, while FL does not. Δ, of course, argues that FL law should apply. The AL is not convinced that the lex loci delicti approach should be abandoned, especially where the modern approach has not proven to be more efficient. As a result, FL law applies since FL is the place of the last act. a. Predictability and stare decisis are important to the AL court, therefore they will not adopt the modern conflicts rules. b. If Π filed suit in FL, a state that has adopted the modern approach, then AL law would have been applied since that is the place with the most significant relationship to the parties and the dispute. i. The estate is in AL ii. The beneficiaries are in AL iii. Therefore the harm is in AL c. What do you do if AL would apply FL law an FL would apply AL law? This is a conundrum! i. Should AL apply only the substantive law of FL? This is what the court does in Fitts. ii. Or should AL apply the “whole law” of FL including the conflicts law (renvoi)? Renvoi is not normally applied in tort cases. EXCEPTIONS → 1. Public Policy: If we look to the law of the other state and it makes us wretch then we do not apply it. This is a big out and courts will often resist this argument from attorneys. If the place of injury is completely arbitrary then courts may consider it. 2. Procedural Law, although then the debate arises over what is substantive and what is procedural.Contracts10. Millikan v. Pratt (Mass. 1878): Rule: The validity of a contract is to be determined by the law of the state in which the contract was made; if it is valid there then it is valid everywhere and will sustain action in the courts of a state whose laws do not permit such a contract. In this case, Π-ME sold goods on credit to a customer in MA. Since the customer did not have good credit, his wife-Δ signed the contract guarantying payment. When Δ failed to pay, Π brought suit in MA to collect (at this time it would have been difficult to get jurisdiction in ME). Δ’s defense is that married women could not contract in MA (at the time the contract was made), although they were allowed to 4 contract in ME. The court must therefore determine where the contract was made in order to figure out what law applies. Although Δ signed and transmitted the contract in MA, Π completed the contract in ME by shipping the goods, therefore the contract was “made” in ME and ME law applies (this is a unilateral contract and the court applies the mailbox rule). Δ then argues that ME law should not apply b/c it is against public policy —MA should protect their married women. But this argument does not prevail since the law in MA has since changed. Π wins. a. Why is this a contract matter and not a question of the personal law of status? Foreign courts would apply the law of status and then the law of Δ’s domicile would control. The court determines that since interstate contracts are becoming more frequent and the status of married women is changing, using contract law is a more just approach. b. Suppose ME prohibited the contract, but MA would allow it → i. Under the rigid rules, the law of ME would still apply since the place of contracting is the same. ii. Then Π would argue that application of the ME law was against public policy since the courts should not allow MA women to perpetrate fraud. This probably would not have worked. c. Another Contract Rule: The law of the place where the performance is [to be] carried out governs the performance.11. Linn v. Employers Reinsurance Corp. (Penn. 1958): Rule: When a principal authorizes an agent to accept an offer made by a third party, the place of contracting is the place where the agent accepts the offer. In this case, Π-PA is a broker who set up a deal for Δ-NY. As a result, Π got 5% commission for the length of the contract. After paying Π for 27 years, Δ decides enough is enough and stops paying. Π brings suit and Δ claims that the original contract is invalid b/c of the statute of frauds. While an oral agreement of this nature is not valid in NY, it would be valid in PA, therefore the court must determine where the contract was made. The trial court found that the call, which completed the contract, was made from NY and therefore applied NY law, but this court finds that there was no evidence to that effect and therefore remands for a determination of where the phone call was placed. a. In the case of acceptance by mail or telegraph, the act of acceptance is held to be effective where the acceptance was posted or received by a neutral third party. b. By analogy, an acceptance by telephone is effective, and a contract is created at the place where the acceptor speaks. Under this rule, if Δ’s agent was in NY when he accepted Π’s offer → NY law would apply and the contract would be invalid. c. NOTE: That is both of the above situations, the risk of non-reception is born by the offeror. i. Δ takes on the B/P in showing that the call was made by Δ’s agent in NY (and therefore the acceptor spoke in NY). ii. On remand, the jury found that the call was not placed from NY, therefore the default forum law applied and Π won. d. There are two ways to control the law that applies to contracts → Forum selection clauses and choice of law clauses5 Immovables12. Lex Rei Sitae: The Restatement requires the application of the “whole law” of the place where the immovable is situated, for almost all issues and virtually w/o exception. a. Whether a thing is moveable or immoveable is determined according to the law of the situs of the thing (§ 208). b. Immoveables usually include land and buildings attached thereto. c. This is one of the few areas of law where renvoi almost universally applies. Courts look to the “whole law” of the state where the immoveable is situated and apply the law that that state would apply. d. Why are there virtually no exceptions to this rule? i. The situs state has exclusive de jure and de facto power over land situated w/in its borders. ii. Certainty and clarity of title are universally shared objectives of the law of property and cannot be accomplished if land in one state is subject to diverse and potentially conflicting laws. 1. Assure the integrity of the recording system 2. Assure uniformity of result iii. The situs state has the strongest interest in regulating land situated w/in its borders. iv. The situs rule is easy to apply and hard to manipulate b/c usually there is no question as to whether a thing is an immoveable or where it is situated. e. While a state has no jurisdiction to directly affect land situated outside its borders, it may do so indirectly by ordering parties to pay money or execute the necessary conveyances. Moveables13. Moveables: The law governing moveables depends on the relevant transaction. a. Inter vivos – For inter vivos transactions, the law of the situs applies. Thus the formal and substantive validity of a conveyance of an interest in chattel are governed by the law of the state where the chattel is at the time of the conveyance. b. Intestate & testate – For transactions that occur on death, the law of the domicile of the decedent at the time of death applies. i. If a decedent has moveable property all over the country, it is much easier to apply only the law of one state. ii. Real property will still be governed by the law of the situs, therefore if a decedent has real property in more than one state, probate should occur in the state of domicile, but a supplemental probate will have to opened in every other state where the decedent had real property. iii. Every person has only one domicile. You retain the domicile of your parents until you (1) move to a new place with (2) the intention to stay. 6 The Structure, Operation, and Escape Mechanisms of the Traditional Approach14. Conflicts Rules and The Process of Employing Them: a. A typical traditional rule consists of three ingredients → i. The legal category (e.g. torts, contracts, etc.) ii. The applicable law iii. The connecting factor, which “connects” the legal category or problem with the state that supplies the applicable law. b. The process of employing these rules consists of three steps → i. Characterization – determine which rule is applicable to a problem by fitting it into a legal category. This is often difficult. 1. Contract 2. Tort 3. Property a. Moveable b. Immoveable ii. Localize the connecting factor – determine where the tort, contract, etc. occurred. iii. Ascertain the content of the law of the state in which the connecting factor was located to determine how much of that law is applicable to the case and if there were any defenses available. c. NOTE: That each of the above steps offer different opportunities for escape or manipulation.Characterization15. Alabama Great Southern RR Co. v. Carrol (Ala. 1892): (See facts above). As an alternate theory for recovery, Π argued that his relationship w/ Δ was governed by a contract entered into in AL. This contract, Π argued, incorporated the workman’s comp laws. Π maintained that the contract governed his relationship w/ Δ no matter where he happened to be. The court does not agree with this characterization of the case; this is not a contracts issue, it is a torts issue. a. What law decides how a case should be characterized? Generally and according to the Restatement, the law of the forum (Some scholars have argued differently). b. Once a case is characterized and localized however, the classification and interpretation of concepts and terms employed by the applicable law are determined in accordance with that law.16. Levy v. Daniels’ U-Drive Auto Renting Co. (Conn. 1928): In this case, Δ-CT rented a car to a CT resident who drove the car into MA and had an accident. Suit was brought by the passenger of the car. CT had a law declaring car rental companies to be liable for any persons or property injured by the operation of their rented vehicles. MA had no such law. The trial court dismissed the case, characterizing it as a tort case subject to the laws of MA b/c that it where the injury occurred. On appeal, however, the case is classified as a contract case (Π is the 3rd party beneficiary to the rental contract between Δ and the 7 driver/customer. Since the contract was made in CT, and CT law is incorporated into the contract, the CT statute applies and Π can recover. a. In this case the contract was made in CT, but where was the contract performed? Performance did not occur in MA b/c performance is living up to the terms of the contract, i.e. paying the bill, returning the car. b. This case adds another dimension: The court looks to the policy behind the CT law and determines that it is highway safety. Car rental companies should take care who they rent to or assume liability for the damage caused. This court began a trend of looking at the policy behind a particular law. c. Would the CT statute law apply to a car rented outside CT but driven into CT? It depends on how the case was characterized—if it was deemed a tort case → CT law would apply. i. Matteis v. Nat’l Car Rental Systems: The CT law did not apply where a CT citizen rented and drove a car in LA, having an accident there. This would expose the LA rental company to liability under the laws of any state where a customer resides and would not provide protection for the justified expectations of the parties. ii. Bosler v. Nat’l Car Rental: CT law applied where CT resident rented a car in MA and the accident occurred in RI b/c it was determined that the CT statute was designed to allow individuals to secure relief from the lessor. iii. Brunow v. Burnett: Where neither Π or Δ where from CT, but the accident occurred there, the court found that the CT law applied. 17. Haumschild v. Continental Cas. Co. (Wisc. 1959): Rule: The law of domicile applies in determining any issue of incapacity to sue based on familial relationship. In this case husband and wife, domiciled in WI, went on a trip to CA where they had a car accident. Π-wife brings suit against Δ-husband, represented by Ins. Co., to recover for injuries sustained. At this time, CA had interspousal immunity, but WI did not. Δ argues that CA law should apply, since that is the place of injury, and therefore the case should be dismissed. The court has no problem determining that the law of CA should apply in determining whether or not the husband was negligent. But, under the concept of depecage, CA law does not have to apply to the entirety of the case. As to the separate issue of whether Π can sue her husband, the law of the marital domicile should apply. Therefore, WI law is applied to the issue of capacity and Π can sue, CA law will applied to determine whether the husband was negligent. a. Depecage—A notion that the issues of a case may be separated out and different substantive laws can apply to different aspects of the case; or different laws can apply w/ respect to substance and procedure. b. The court continued the Levy trend and looked to the policy behind interspousal immunity and determines that marital harmony is already gone if the parties want to sue each other. BUT, they aren’t really suing each other in this case. Π is suing the insurance company. Without interspousal immunity, states open the door for insurance fraud. 18. Folk v. York-Shipley, Inc. (Del. 1968): After a head-on collision in PA between Mr. Folk and an employee of Δ, Π-wife of Mr. Folk brings suit against Δ for loss of 8 consortium. Both parties are residents of Delaware, which permits such an action. PA, the place of the injury, does not. Π asserts two arguments for the application of DE law: (1) The injury that occurred was an injury to the marriage, which is in DE. The court rejects this argument, stating that the tort was committed in PA, only the resultant damages were experienced in DE. (2) Loss of consortium is so intimately associated with the family relationship that family law should apply and therefore the law of the marital domicile should control. Π cites Haumschild in support of this argument. The court distinguishes Haumschild in that it dealt with interspousal immunity and determines that the instant case is one of tort law, therefore the law of the place of injury controls (PA) and Π is not allowed to bring the suit. a. If the accident had occurred in DE → Π would have been able to collect. b. Is the court protecting DE Δs in case Π would happen to be a PA citizen?19. Sturiano v. Brooks (Fla. 1988): In this case husband and wife, NY citizens, were in a car accident in FL, where they resided half of the year. H was killed in the accident and W sued his estate for damages. H & W had an insurance contract, entered into in NY, so essentially W was suing the insurance company. The FL court assumed w/o discussion that the law of FL applied to whether W could sue H. Then the court decided that issue of whether W could recover from the insurance company was contractual so the law of NY controlled that issue. Under NY an injured spouse may not collect on the policy of the other spouse under there is a clause providing for such recovery in the contract. Since there was not, W could not recover and the suit was dismissed. a. Is this really a contract case? b. The law of the place of the making of the contract governs the validity of the contract. The law of the state where the performance is [to be] carried out governs the performance of the contract. c. The FL court does not discuss this distinction. Where does the performance occur? Where the insurance company is? Or where the wife is? 20. A Critique of the Traditional Approach: The Pitfalls of Characterization a. Because of the wide divergence in the characterization of identical issues by the courts of various states, the traditional approach failed to attain one of its most important goals—interstate uniformity. b. Because of its inherent manipulability, characterization became a substitute for more candid and direct analysis of conflicts cases. c. The frequent utilization of characterization as an escape from the result dictated by the traditional approach demonstrates the inherent deficiencies of the rules. Substance vs. Procedure21. Substance vs. Procedure: The forum will apply forum law w/ respect to procedure. a. Advantages: i. This facilitates ease of administration. Courts would be too difficult to administer if they had to apply the procedural laws of other courts.9 ii. Π picks the forum and thereby the applicable procedure. This is what a court is—its procedure is set out ahead of time. Applying forum law is the only practical and reasonable way to govern procedure. iii. This rule also enables the parties to hire attorneys that are familiar with the procedure of the court. b. Problem: Distinguishing between substance and procedure. Modern courts will argue over what constitutes procedure and where to draw the line between procedure and substance. The Restatement offers a list of subjects classified as procedural → i. Which court can entertain the action ii. The form of the action iii. Who may and who must be sued iv. Methods of serving process v. Methods of securing obedience to the court vi. At what moment the action will begin vii. All matters of pleading and conduct of proceedings in court viii. Whether an issue of fact will be tried by the court or jury ix. The proof in court of a fact alleged as well as presumptions and inferences to be drawn from evidence x. The competency and credibility of witnesses xi. Admissibility of evidence xii. Statute of Frauds xiii. Statutes of Limitation xiv. Limits on Recovery xv. Access to the courts 22. Grant v. McAuliffe (Cal. 1953): Rule: Procedural law is governed by the law of the forum. In this case, Π and Δ, both CA residents, had an accident in AZ. Π sues Δ’s estate for damages. Since the tort occurred in AZ, AZ law will apply to the negligence issue. But, the question for the court is whether the cause of action survives after Δ’s death. In AZ (at that time) a cause of action did not survive the death of the Δ (if the action was brought before death and Δ died in the interim it could still be maintained). CA had no such limitation. The court holds that the AZ survivorship law is procedural— it is not an essential part of the cause of action, but relates to the procedures available for the enforcement of the legal claim for damages; survival statutes do NOT create a new cause of action (like wrongful death statutes), they merely govern the enforceability of existing causes of action. Since it is a procedural law, CA law will apply and Π is able to maintain the action. a. The Dissent argued that survival statute created the right to sue; there is no right to relief when the Δ is dead. b. Who is right? Look to the policy issues → The court should seek to protect the expectations of the heirs as well as the decedent. But, it seems absurd to extend this protection to a CA Δ. i. If Δ was an AZ resident being sued in CA then this result would be questionable.10 ii. Suppose Δ was an Idaho resident and the accident occurred in CA. The AZ law would probably not extend to Δ. c. The First Restatement said survival was substantive—the court ignored this. d. The Second Restatement said it is up to the preference of the court. e. Today, most courts would follow this decision on these facts.23. Kilberg v. Northeast Airlines, Inc. (NY 1961): In this case, a plane flying from NY crashed in MA. Π brought suit against Δ-airline in a NY court. MA law will apply to the issue of negligence even though the place of the crash was fortuitous. At issue is whether a MA cap on damages will apply. MA has a limit on the amount of damages, which applies to wrongful death actions maintained against common carriers—this reflects their policy of protecting common carriers from unlimited liability. NY has no such limit and it is in fact against the public policy of NY to impose such limits. The court finds that the damages limitation is procedural—it pertains the remedy rather than the right and it does not strictly affect the rule of damages, but rather the extent of damages. Since the limitation is procedural, NY law applies and the limitation will not be enforced. a. The Restatement says the amount of damage is a substantive issue, but limitations on damages are procedural. b. NY’s strong public policy backs up this decision—NY is protecting it’s citizens. c. If this is the policy, then a NH citizen suing in NY court should not get the same protection, but if this is truly procedural then the result should be the same. 24. The Statute of Frauds: a. The SOF renders a contract unenforceable if it is oral (w/ exceptions). b. What is the policy? i. To insure that the parties are aware that they are entering into a contract. ii. To insure clarity of the terms of the contract; courts will need to interpret them later. c. This is an evidentiary rule; oral contracts are too difficult to prove. Therefore SOF questions are classified as procedural. d. Marie v. Garrison (NY 1883): The contract was unenforceable under the SOF in both the forum state (NY) and the state in which the contract was made (MO). Nevertheless, the contract was held to be enforceable: The court determined that the NY SOF was substantive and therefore did not apply to a MO contract. The court then found that the MO SOF was procedural and determined that it only affected the remedy by saying, “no action shall be brought.” Since the remedy was available in NY, Π was able to maintain the case. 25. Vest v. St. Albans Psychiatric Hospital, Inc. (WV 1989): In this case Π-WV went to VA for medical treatment and later sued for malpractice in WV. At issue is whether a VA law stating that all potential Πs in a medical malpractice suit must first supply notice to the Δ and then submit the case for review by a VA review panel. The trial court dismissed the suit for Π’s failure to comply with this statute. On appeal, Π argues that the VA statute is procedural and therefore should not apply in a WV court. The court agrees that the rule is procedural since it governs access to the courts and therefore allows Π’s suit to go forward. 11 a. One major effect of the panel’s decision is admission into evidence; providing evidence is largely considered procedural. Also, the panel’s decision is hearsay, it would come in only if there was a special rule for it. That rule exists only in VA, not WV. b. But the purpose of the panel is to determine the validity of the claim—this is substantive. The dissent points out that the 4th Circuit has held the law to be substantive. c. The WV court stresses its sovereignty—the state of VA cannot govern in WV. d. But, it is interesting that the court states that a VA citizen should not expect to sue in WV to avoid the panel law. If the law is truly procedural then nonenforcement of the VA law in WV courts should be the same for both. 26. Common Procedure vs. Substance Issues: a. Caps on damages b. Survivorship of claims c. SOF d. Statute of limitations – largely held procedural e. Right to a jury trial i. Procedural? It is part of how the court operates. People choose forum based on the availability of a jury. ii. Substantive? It is a constitutional right. But, is it a procedural right? The Seventh Amendment does not apply to the state, probably b/c it is considered procedural. f. Question of law vs. question of fact i. EX: In most states the question of whether a contract exists is a question of fact for the jury. But, in some states, in absence of credibility issues, it is a legal question for the judge. ii. The question of whether a judge or a jury decides an issue is usually procedural. g. Rules of evidence i. Barron v. Ford Motor Co. of Canada: NC prohibits evidence that Π, in an accident case, was not wearing a seatbelt. This case was brought outside of NC, so the issue is whether this law is substantive or procedural. The 7th Circuit found that it was substantive b/c the purpose of the law was to say that Π cannot be contributorily negligent, thus negating an element of the case. This was not a pure rule of evidence. ii. If the purpose of the law was to deem the evidence “bad evidence,” then it would have been procedural. A pure rule of evidence is concerned solely with accuracy and economy in litigation and should therefore be tailored to the capacities and circumstances of the particular judicial system. h. Burden of Proof – If a law is adopted for conflicts purposes, should the standard of proof be adopted as well?12 Application of the Designated LawRenvoi27. The Doctrine of Renvoi: A state adheres to this doctrine where its conflict law dictates that it apply the “whole law”—including the conflicts law—of another state. a. EX: Once the forum decides to look to the conflicts law of State X, three possibilities could arise → i. The conflicts law of State X may refer the matter to X’s own internal law. If this is so, then the substantive law of X is applied and the matter ends. ii. The conflicts law of State X may refers the matter back to the forum state. This is called remission. While, in theory, this could result in a never- ending circle, in practice the forum will accept the reference back and apply its own law. iii. The conflicts law of State X may refer the matter to the law of a third state, State Y. This is called transmission. 1. If the transmission is to the whole law of State Y (look to X’s conflict law to find out), then you would continue to look to the conflicts law of the state(s) referred to until you were referenced to substantive law or came back to the forum or the sending state. In practice there will never be a never-ending circle. 2. If the transmission is to the substantive law of State Y, then Y’s law applies and the matter ends. b. When does a forum resort to renvoi? i. Look at states’ interests and uniformity (similar cases should come out the same way). ii. First Restatement → Use of renvoi was limited to 2 situations: 1. Immoveable property → apply the “whole law” of the situs. 2. Divorce → need uniformity w/ respect to status. iii. Second Restatement → Gives more flexibility: 1. Renvoi should be used when uniformity of result is at a premium. 2. Renvoi should be used when virtually all states agree that a particular state’s law should apply. c. The forum decides whether or not to apply renvoi. d. NOTE: That renvoi is still not used very often. 28. Estate of Wright (ME 1994): In this case, a U.S. citizen, domiciled in Switzerland, died testate in ME. The will contained a choice of law provision specifying that ME law would apply to the distribution of assets. The T’s children, who were not provided for in the will, contested the application of ME law, claiming that Swiss forced share law should apply as to the Swiss assets. First the court must determine what the Swiss law is w/ respect to distribution. For this, the court looks to a treaty between the U.S and Switzerland, which states that the laws of the country where the property is situated will apply. The court determines, on the testimony of experts called by T’s estate, that the “whole law”—including the conflicts law—of Switzerland should apply. Next, the court must determine what the “whole law” of Switzerland is. The court looks again to the 13 treaty, which says that a foreigner domiciled in Switzerland can include a choice of law provision in their will. As a result, the court determines that Switzerland would apply ME law and the children do not prevail. a. A later portion of the treaty says that such a choice of law provision will not be given effect if it goes against Swiss public policy—presumably this would. b. But, neither party brought up the public policy issue; they relied solely on interpretation. 29. American Motorists Ins. Co. v. ARTRA Group, Inc. (Md. 1995): Rule: Where the forum would apply the law of the foreign jurisdiction and the foreign jurisdiction would apply the law of the forum, the balance should tip in favor of the jurisidiction with the most significant contacts. If neither has more significant contacts then forum law will apply. An IL Ins. Co. (Π) insured ARTRA (Δ), also and IL corp, but operating in MD. Δ caused ground water contamination in MD and sought money under the policy. Π brought a declaratory judgment action in MD court, asking the court to hold that the policy did not cover such contamination. The insurance contract was entered into in IL, and Δ argues that therefore IL law should apply. Under the substantive law of IL, the policy would be interpreted to provide coverage. Under MD law, such coverage would not be provided by the policy. Π argues that the court should apply renvoi and look to the whole law of IL—since IL would apply MD law in this situation (under the most significant contacts test), MD should also apply MD law. The court adopts a “limited form of renvoi” and applies MD law. Π wins. a. Maryland’s limited renvoi exception applies only to contract cases and allows the MD courts to apply MD law to contracts made outside of MD (in spite of the lex loci contractus rule) when → i. MD has the most significant relationship (or at least a substantial relationship) w/ the contract issue presented; AND ii. The state where the contract was entered into would NOT apply its own substantive law, but would apply MD law. b. Note that the court is only looking to the interests of the states in the renvoi situation, not in all situations. 30. Braxton v. Anco Electric, Inc. (NC 1991): Π-NC was injured in VA while working for an NC employer. After receiving worker’s comp in NC, Π brought the instant action for negligence against Δ, another NC company subcontracted to do work on the same construction site. While, NC has an exclusive remedy bar that prohibits Π from suing his own employer after receiving worker’s comp, he is not barred under NC from suing third parties. Under VA law, however, Π would be barred from suit. Δ argues that since the injury occurred in VA, VA law should apply. The court, however, looks to the relationship of the parties—since Π is a NC employee he is governed by the worker’s comp laws of NC and should receive the benefits of that law. Also, public policy dictates that NC law should apply since all the parties are from NC. Finally, the court cites a VA case with similar circumstances holding that NC law applies. In effect, the court applies renvoi by applying the law that VA would apply in this situation. Every interested state would agree that NC law applies in this situation—the court applies renvoi in the more modern sense. 14 31. Nailen v. Ford Motor Co. (Miss. 1988): Π’s mother, a resident of AL, was killed in a traffic accident in MS, while driving to TX. Π brought a wrongful death action in MS. MS, which had adopted the “most significant relationship” approach, determined that AL law should apply to the case. Therefore, the case was dismissed b/c the AL statute of limitations had run (the MS statute of limitations had not). The court rejected Π’s renvoi argument since there was no policy reason for applying renvoi. AL is a kneejerk state that still adheres to the traditional approach of applying the law of the state where the injury occurred (therefore AL would apply MS law). MS adopted the most significant relationship approach to avoid such mechanical applications of the law. a. Why didn’t Π file in AL? Because statute of limitations are typically procedural and perhaps AL would not have applied MS’s longer limit. b. BUT, when statutes of limitations are built in to statutory causes of action (e.g. wrongful death) many courts consider them to be substantive—like the court in the instant case. c. Also, many states have borrowed statutes of limitations, meaning that when they use the law of another state they borrow the corresponding statute of limitations. Public Policy32. Loucks v. Standard Oil Co. of New York (NY 1918): Rule: A tort committed in one state creates a right of action in another unless public policy forbids. A NY resident died in a MA accident and her estate brought a wrongful death action, authorized by MA law, in a NY court. Δ argues that the law is against NY public policy. The court holds that the law does NOT violate NY public policy. Π owns a cause of action created by the MA statute and the NY courts will help him attain his rights under that statute unless it is against public policy. The mere fact that NY does not offer a similar statutory right does not make the statute against public policy. In order for enforcement of a foreign law to be against public policy it must violate a fundamental principle, it must be obnoxious or outrageous. NY has no policy against exemplary damages or civil penalties, therefore Π is allowed to recover. 33. Kilberg v. Northeast Airlines (NY 1961): See facts above. The NY court found that MA limits on damages were against the public policy of NY b/c the legislature expressly rejected such limits. In fact, the NY constitution explicitly states that statute will not impose limits on the amount of damages recoverable for death. In this case the substantive law of MA applied, but the court refused to apply MA’s procedural cap on damages on public policy grounds.34. Cooney v. Osgood Machinery, Inc. (NY 1993): Rule: When otherwise applicable foreign law would violate some fundamental principle of justice, some prevalent conception of good morals, some deep-rooted tradition of common weal, then the court may refuse to enforce it. In this case Π, a MO employee was injured at work. He received worker’s comp and then brought the instant case for products liability against Δ, a NY sales agent who sold the machinery that injured him. Δ tried to join Π’s employer to the suit for contribution, but under MO law employer’s are exempt from liability where they provide worker’s comp. NY has no such law. Δ does not want the MO law 15 to apply and argues that it is violative of NY public policy. The court determines that it is not. The court notes that given the flexibility of the modern conflicts approach, the public policy exception should be reserved for those laws that are truly obnoxious. The MO law is not one of those laws. Also, the court points out that contribution is a relatively new right in NY, therefore it is not deeply rooted, nor is it guaranteed in all circumstances. Since Δ did not bear the heavy B/P in showing that the MO law is against NY policy, the MO law will apply and Δ will not get contribution. a. The court states that the public policy exception should be considered only after the court determines → i. The applicable substantive law is not the law of the forum; AND ii. NY’s nexus w/ the case is substantial enough to threaten public policy. b. Since both criteria were satisfied in the above case, the court did consider the public policy argument.35. Owen v. Owen (SD 1989): Rule: SD abopts a limited public policy exception to the lex loci rule where enforcing a foreign statute is against good morals or natural justice, or when for some other reason enforcement of the statute would be prejudicial to the general interests of SD citizens. In this case, H & W, both SD residents, were involved in a car accident in IN. The couple returned to SD where W brought suit against H. SD would apply the law of IN b/c they adhere to the lex loci rule. IN, however, has a guest statute, which forbids the passenger of a car from suing a driver. SD has abolished its guest statute. The court adopts a limited public policy exception to the lex loci rule and finds that the IN guest statute will not apply. Since the SD legislature abolished such statutes, application of IN’s statute to this case, concerning only SD residents, is against “natural justice” and “prejudicial to the general interests of SD citizens.” a. What if Π was from SD and Δ was from IN? Then the court will want to apply the IN law. b. If the reasoning of this decision really had to do w/ public policy, however, it should not matter where the parties are from. 36. Bethlehem Steel Corp. v. G.C. Zarnas & Co., Inc. (Md. 1985): Rule: The lex loci rule for contract will not be applied in MD when there is a strong public policy reason against its enforcement. At issue in this case is a PA construction contract, in which Δ (MD corp; PPOB in PA) agreed to indemnify Π (DE corp; PPOB in PA) for liability resulting from the sole negligence of Π. An employee of Δ was working in Π’s plant, got injured and sued Π. Π then brought this declaratory judgment act, claiming that Δ was liable for indemnity. The trial court found the PA contract was against the public policy of MD and refused to enforce the provision. On appeal, Π argues that PA law should be applied to determine the validity of the contract, since the contract was made in PA and MD uses the lex loci rule for contracts. The court determines, however, that such indemnity clauses are contrary to MD public policy and refuses to enforce the contract. To support its rationale, the court cites a MD statute which specifically states that such clauses are “void and unenforceable” and “against public policy.” While PA C/L simply tolerates such clauses, MD specifically forbids enforcement. 16 a. The dissent believes the majority has confused the policy behind a statute w/ the fundamental policy of the state, based simply on the words the legislature chose to use. He believes that the exception will swallow the rule. b. Why wasn’t the case brought in PA? B/C under PA conflicts rules, the law of the situs of the accident (MD) would be applied. Π wants application of MD’s rigid lexi loci contractus rule. c. Why did MD look at the policy of PA? If the clause violates MD public policy that should be enough. Is this a balancing test? d. Also, the MD court could have applied renvoi, since PA would apply MD law. 37. Notes on the Public Policy Exception: a. The first Restatement included the public policy exception near the end, signifying that the exception should only be considered after the court has determined the applicable law, w/o regard for its content. b. The Restatement said that application of the exception is extremely limited. Due to a strong public policy of the U.S. in enforcing the laws of other states and the need for uniformity, the public policy exception should not be used unless absolutely necessary. c. In all traditional systems, a mere difference between forum law and foreign law does NOT trigger the exception. d. Should it make a difference if the rule being scrutinized under the public policy exception is the minority or the majority rule among the states? i. In Cooney, the forum law permitting contribution against an employer was a minority view, which the court even admitted in a footnote before deciding not to apply the law. ii. In Owen, however, the foreign statute was a minority view and the forum held it to be against public policy. e. Under the traditional theory, the public policy exception was not a conflict rule, but rather an exception to all conflict rules. It was supposed to function only negatively by repelling obnoxious foreign laws, rather than affirmatively by justifying the application of forum law. f. Under the modern theory, the forum’s public policy is an integral affirmative factor.The Penal & Tax Exception38. Loucks v. Standard Oil Co. of New York (NY 1918): Rule: A foreign statute that is penal in some sense, is not necessarily penal for all purposes. (See facts above). After invoking the public policy exception, Δ tried to invoke the penal exception, which says that the “courts of one country/jurisdiction will not execute the penal laws of another.” The NY court agrees that the MA statute is penal in the sense that it imposes punishment on the wrongdoer according to his level of guilt. But, under private int’l law, the MA law is not penal. To be penal, a law must not grant reparation to one aggrieved, but rather vindication of the public justice. While admitted that some states have classified the MA law as penal, the NY court finds that it is not b/c the purpose of the punishment is reparation to the aggrieved, enforcing a private right; this is especially true 17 since the right is only enforceable if there is a surviving family member. The penal law exception does not apply. a. Some crimes, like traffic violations have been de-criminalized and are civil rather than criminal. This is so b/c if they were criminal → Δ would get all constitutional rights and this would be a hassle. b. When a criminal of VA is found in DC → he is extradited/moved to the place where the crime occurred. DC will not enforce VA penal laws. c. The distinction between civil and criminal is not always clear, e.g., civil fines imposed on a polluting corp. d. Strictly speaking, the penal law exception is not a choice-of-law question, rather it is merged into the court’s jurisdictional question.39. The Tax Law Exception: a. Another old rule is that one sovereign will not enforce the revenue laws of another sovereign. Rationales → i. Reluctance to inquire into another system’s tax law. ii. Risk offending another jurisdiction by refusing to apply the law. b. If there is a criminal failure to pay taxes → the Δ can be extradited. c. TODAY, this law has been abandoned as between the states of the U.S. i. All states expressly authorize application of the tax laws of sister states on the condition of reciprocity. ii. We do not want to provide a legal asylum for tax offenders. d. The question is still open in the int’l arena.Judicial Notice and Proof of a Foreign Law40. Geller v. McCown (NV 1947): Rule: The courts do NOT take judicial notice of either the written or unwritten laws of a foreign country. Such laws must be pleaded and proved the same as any question of fact. In the case the divorced W of decedent, sued the administrator of the will, claiming she was entitled to a portion of decedent’s property in Canada under Canadian dower laws. Π failed to plead the laws of Canada. The courts of one jurisdiction are assumed to be only familiar with the laws of their jurisdiction. As a result, a party wishing to invoke the laws of another jurisdiction under conflicts rule must plead and prove the foreign law. If the party fails to do so, the court will assume that the forum law applicable to the subject applies. Π is allowed to amend her complaint. a. Judicial Notice – Courts will take notice of things that are not subject to dispute. b. All states allow courts to take judicial notice of the laws of sister states. As to the law of foreign nations, the law is different, b/c the law is not readily available. c. This case represents the original C/L position that foreign law is a question of fact. 41. Walton v. Arabian American Oil Co. (2 nd Cir. 1956): Rule: The law of a foreign country is a fact that must be proved. In this case Π traveled to Saudi Arabia (SA) and was involved in an accident with an employee of Δ—a NY company engaged in business in SA. Π sued Δ in NY court, which follows the lex loci rule for torts. Neither party pled18 nor proved the law of SA and the trial judge, refusing to take judicial notice of the law dismissed the case. Π appealed. The federal court, sitting in diversity jurisdiction, is bound to apply NY law on the subject. Although NY has a statute authorizing judicial notice of foreign law, this is applied sparingly and not when the foreign law is unclear and Π has done nothing to help the court. Π argues that the court should presume that rudimentary tort principles are applicable in SA unless Δ proves otherwise. This is not true; SA is not a C/L country therefore such assumptions cannot be made (especially as to respondeat superior) and Π has the B/P in proving SA law. The court thinks this is unfair since Δ, engaged in business in SA, had better opportunity to discern SA law than Π, only transiently in SA. Yet, the court must apply NY law, which puts the B/P on Π. Π also argues that SA is “uncivilized” and therefore NY law should apply to the tort. The court is “loathe” to except this w/o proof, which Π did not supply. Since Π deliberately refrained from supplying the proof necessary at trial, even when given an opportunity for adjournment, the case is dismissed. a. Why didn’t Π prove SA law? Probably b/c SA law did not recognize respondeat superior claims (i.e. employer liable for torts of employee). b. While dismissal is one option, as seen above, the other option is to apply forum law under the theory that forum law is the basic, residuary law that applies in all cases unless good cause is shown for displacement. c. Most courts today see foreign law as a question of law, although Π may still be required to supply help. d. If the foreign law is different, the courts will often ignore conflicts rules and apply forum law. The court also won’t raise the foreign law question b/c it is expensive, requires experts, etc. CONTEMPORARY APPROACHES TO THE CHOICE-OF-LAW PROBLEM 42. Why the Modern Approaches? a. Some states still use the traditional approach. i. Some for tort & K ii. Some for just K iii. Some for just tort. b. The modern approaches developed b/c of the problems with the traditional rules. Even when the rules worked as designed, courts were not happy with the results. As exceptions developed, the rigidity was relaxed, destroying the one good thing about the traditional system. Also, the simplicity of the system was not designed for the modern day.43. Brainerd Currie and Interest Analysis: Currie revolutionized conflict laws. His theories are not formally accepted in all states w/o exceptions, but he did change states’ views of the conflict problems. Courts did not simply adopt Currie’s theories, but they began searching for something better during the Currie revolution. The Currie Interest Analysis is as follows → a. The law of the forum is applied unless otherwise requested.19 b. If foreign law is requested, the court should look to the policies behind the respective laws and determine whether one state or both have an interest in applying their law. c. If only one state has an interest → this is a false conflict and the law of the interested state should apply. d. If both states have an interest → this is a true conflict. i. Currie suggests reconsideration now. Balance the interests—is one state more interested? If so, apply the law of that state. ii. If both states are equally interested → Currie says apply forum law. 1. This step encourages forum shopping. 2. This also will result in different results depending on where the case is brought. e. If no state has a true/real interest → apply forum law. The Center-of-Gravity Approach44. Auten v. Auten (NY 1954): Rule: Under the “center-of-gravity” or “grouping of contacts” approach to conflicts problems, the court will apply the law of the place having the most interest in the problem. In this case, H & W were married and lived in England. Later H abandoned W and moved to NY. The couple signed a separation agreement in NY under which H agreed to pay support and W agreed not to sue H. When H failed to pay W filed for (but did not follow through with) divorce in England to “enforce” the separation agreement. In the instant suit, W seeks arrearages for H’s failure to pay. The lower courts, determining that NY law applied, found that W breached the agreement when she filed in England. On appeal, however, this court determines that English law applied to the contract, b/c England has the most significant interest in the dispute. England has the most contacts w/ the suit—all are English citizens, the marriage occurred in England, W and children live in England, etc. The only reason the contract was made in NY was b/c W had to come there to get H to provide support. The case is therefore remanded for a determination of whether England would consider the contract breached by W’s suit. 45. Haag v. Barnes (NY 1961): Rule: In determining the law applicable to a contract, the courts, instead of regarding as conclusive the parties’ intention or the place of the making or performance, lay emphasis upon the law of the place which has the most significant contacts with the matter in dispute. In this case, Π and Δ entered into a contract under which Δ agreed to pay support for a child born out of wedlock. In return Π surrendered all future claims for support. The contract was made in IL and specified that it should be interpreted under IL law (this is imp’t in the contact analysis, but not controlling). The child was conceived in NY, born in IL, and now lives w/ Π in NY; Δ has paid all the support necessary and then some. Π brought the instant suit for child support under the laws of NY and Δ asserts the contract as a defense. The court determines that IL has the most significant contacts: intention of the parties, place of birth, support paid in IL, etc. NY’s contacts are minimal: liason occurred in NY; Π now lives in NY. Therefore IL law applies UNLESS enforcement of the contract would violate NY public policy of providing for the welfare of the child. Since this contract 20 adequately provides for the child it does not violate public policy and the contract is a bar to the present action. a. Note that the courts are starting to look at the policies behind competing laws. This is a major breakthrough. b. The courts aren’t applying a knee-jerk rule to contracts. Policy Analysis Approach – Introduction to False Conflicts 46. Policy-Based Analyses: a. Policy-based analyses are a combination of approaches other than the center-of- gravity approach. b. Courts using this approach examine the policies underlying the competing substantive laws in order to determine which laws should apply in a given case. c. Few states rely only a single approach—they are more interested in reaching what they perceive to be the proper result and tend to use modern approaches interchangeably. d. One of the major breakthroughs of the policy-based approach is issue-by-issue analysis. Instead of classifying the case as tort, contract, etc., the court separates out the issues to determine what law should apply. Where the court applies the laws of two separate states to two separate issues, this is called depecage. e. According to Currie (above) a state’s interest is the product of → i. A governmental policy AND ii. The concurrent existence of an appropriate relationship between the state having the policy and the transaction, the parties, or the litigation. f. Currie’s definitions → i. False conflict – When two or more states are involved in the dispute and only one in “interested” in having its law applied. This turns out to be a balancing approach. ii. True conflict – A conflict in which more than one of the states involved is interested in having its law applied. iii. Apparent conflict – A case in which each state would be constitutionally justified in asserting an interest, but on reflection, the conflict is avoided by a moderate definition of the policy or interest of one state or the other; a case in which reasonable men may disagree on whether a conflicting interest should be asserted. This is also a balancing approach—virtually when there is an apparent conflict → it is a false conflict. iv. No-interest – A case where none of the states involved are interested in applying their law. False Conflicts47. Babcock v. Jackson (NY 1963): Rule: Since the lex loci rule for torts gives way to unjust and anomalous results, it is abandoned in favor of a policy-based approach, under which the policy considerations and objectives of the states’ laws that could possibly apply. In this case Π and Δ (both NY citizens) took a trip together to Canada. While driving in Ontario, Δ crashed the car and Π was injured. Π brought the instant suit21 in NY to recover for negligence. As a defense, Δ asserts the guest statute of Ont., claiming that the place of the injury is the law that should apply. The court, however, finds that NY law should apply, and since NY has no such guest statute, Π will be allowed to sue. The court first notes that all the parties are from NY and NY has the most significant contacts with the case. Then the court goes on to examine the policies: (1) NY has a strict policy of compensating guests for the negligence of a tort-feasor—the legislature has repeatedly declined to limit or deny such recovery; (2) Ont’s guest statute on the other hand seeks to prevent collusion between passenger and driver resulting in insurance fraud. Since the Ont. statute is clearly aimed at protecting Ont. ins. companies, surely Ont. has no interest in applying the statute where a NY ins. co. is concerned. Since NY law applies Π is not barred from asserting her claim. a. Distinction between conduct-regulating rules and loss-allocating rules: The court takes care to note that if the issue were whether Δ was operating his vehicle w/ due care → Ont. law would apply. Ont. has the predominant, if not exclusive, interest in regulating conduct w/in its borders. i. Conduct-regulating rule operate territorially; they involve the place where the conduct occurred. ii. Loss-allocating rules do NOT operate territorially; they involve the relationship of the parties. Currie said such rules “follow the person.” b. Since Ont. has no interest, this case can be classified as a false conflict, even though the court does not characterize it as such. c. Currie made the assumption that laws were in place to protect the state’s own citizens (selfish approach). Currie implicitly rejected an altruistic approach and his theories were criticized for this reason. d. Babcock represents the transition from the center-of-gravity approach to the modern policy-based approach. 48. Rong Yao Zhou v. Jennifer Mall Restaurant, Inc. (DC 1987): Rule: A “false conflict” occurs when the policy of one state would be advanced by application of its law, while the policy of another state would NOT be advanced by application of its law. Π-DC was injured by a drunk driver in MD. The drunk had been illegally served alcohol, after he was known to be intoxicated, in Δ’s establishment in DC. The parties assumed DC law applied, but the court examines the conflict issue anyway since the accident occurred in MD. MD has a dram shop act, which would relieve Δ of liability. The court notes that the act is in place to protect MD bar owners. By contrast, DC has no such act to promote the policy of holding such bar owners liable for injuries caused by their drunk customers. DC also has another interest: protecting DC citizens, which Π is. Since a MD bar owner is not involved in the case MD has no interest and DC law applies. The court also notes that other jurisdictions, when confronting this problem, have applied the law of the state where the bar is situated b/c the crash site is largely fortuitous.22 The Second Restatement Approach49. The Second Restatement: a. A lot of states have opted to adopt the Restatement. i. There is not enough certainty in the Currie approach and it is not altruistic. 1. Note that the Restatement offers a true balancing test. 2. Under Currie’s interest analysis, a real balancing test is not allowed. ii. The Restatement is a compromise between the traditional and modern approaches to conflict resolution. b. Guiding Principles of the Second Restatement → i. A court, subject to constitutional restrictions, will follow a statutory directive of its own state on choice of law. ii. When there is no such directive, the factors relevant to the choice of the applicable rule of law include: 1. The needs of the interstate and int’l systems 2. The relevant policies of the forum 3. The relevant policies of other interested states and the relative interests of those states in the determination of the particular issue. 4. The protection of justified expectations 5. The basic policies underlying the particular field of law 6. Certainty, predictability and uniformity of result 7. Ease in the determination and application of the law to be applied a. By contrast, Currie’s approach relies basically on the factors of 2, 3, and 5. b. The Restatement is concerned w/ making the system work well. c. Absolute Rules of the Second Restatement → i. Real Property – The law of the situs applies. ii. Moveable Property (inter vivos) – The law of the place where the property is located. iii. Succession of Moveables – The law of the place where the decedent is domiciled at the time of death. iv. Status – The law of the domicile. d. Presumptive Rules of the Second Restatement → i. In some cases/areas of law the drafters tentatively determined which state has the most significant relationship and directed the courts to apply the law of a particular state. This is a rebuttable presumption as to what law applies—the presumption is usually the traditional rule. ii. These presumptions can be overcome “if, with respect to a particular issue, some other state has a more significant relationship.” Then that state’s law should be applied. iii. Basically, the presumptive rules are just “pointers,” directing the court to the likely applicable law. iv. Examples →23 1. Torts – The applicable law will normally be the place where the injury occurred. 2. Intrafamily Immunity – The applicable law will normally be the law of the state of the parties’ domicile. 3. Contracts – Subject to some exceptions, if the place of the making and the performance of the contract are the same, then the local law of that place will apply. 4. Capacity to Contract – The applicable law is normally the place of domicile of the party. 5. Contractual Formalities – Usually the place where the contract was executed. e. For scenarios where the drafters devises no presumptive rules, they authorize ad hoc balancing analysis. EXAMPLES: i. Torts – Place of injury, domicile, residence, nationality, place of business, place where the relationship between the parties is centered. ii. Contracts – Place of negotiation, execution, performance, location of the subject matter, and domicile, residence, nationality and place of business of the parties. f. The analysis under the Restatement is supposed to proceed in 3 layers → i. Consideration of the specific law itself (is there a Restatement section that addresses this law?) ii. Consideration of the general law in the area (how does the Restatement treat torts, contract, etc.? iii. Consideration of the guiding factors (policies, uniformity, etc.—listed above). iv. Not all will necessary in each case.50. O’Connor v. O’Connor (Conn. 1986): Rule: The Restatement Second authorizes a court to disregard the law of a foreign jurisdiction that has, at best, a fortuitous and incidental relationship to the controversy to be adjudicated. In this case, Π and Δ (both citizens of CT) traveled to Quebec (Q) where Δ had an accident w/ an uninsured motorist, injuring Π. Π brought suit in CT to collect against Δ’s uninsured motorist policy. Δ argues for application of Q’s law, which forbids this action and provides for gov’t compensation to such victims. Π urges the court to abandon the lex loci rule and adopt the more flexible approach of the Second Restatement. The court agrees with Π and goes through the balancing tests, first looking to the policies behind Q and CT laws on the subject and determining that Q’s interests will not be advanced by application of Q law to this case. Second the court determines whether CT’s contacts with the case are significant enough to apply CT law. The court determines that they are and CT law applies. a. Williams v. State Farm: Π-CT has an uninsured policy. Π drives to NY where he has an accident w/ a NY resident. NY has a $10K minimum on auto insurance. Since Δ had the minimum, Π could collect $10K, but no more. Π’s insured motorist policy states that he can collect on the policy “to the extent that the law allows.” The question is, which law—NY or CT? The CT court takes the position24 that the NY minimum applies and Π can only get $10K. But, why should NY care if a CT citizen sues a CT insurance co.? b. Nelson v. Hix: This is a common domicile case litigated in the foreign jurisdiction. In this case H & W (Canada) have an accident in IL w/ an IL citizen. W brings suit in IL against BOTH H and Δ. Canada, but not IL, allowed interspousal suits. The court applied Canadian law to the issue of interspousal immunity, citing the fact that the Restatement says domicile will usually control for such purposes. i. This result is good for Δ b/c H’s contribution will reduce his liability. ii. This case could be characterized as an apparent conflict b/c Canada has the most interest in the relationship between H & W.51. Bryant v. Silverman (AZ 1985): This case is a good example of how the Restatement Second was intended to be applied: The case arose out of airplane crash in CO, in which three people (AZ, NM, and TX) were killed. Suit was brought for wrongful death against the airline company Δ-AZ. Π wants AZ law to apply since there is no limit on compensatory or punitive damages. Δ wants CO law, which places a limit on compensatory damages and forbids punitive damages, to apply. The court undergoes the scrutiny (from the specific to the general) recommended by the Second Restatement: a. FIRST: The court examines the factors to be taken into account when dealing w/ a wrongful death/tort case → i. Place where injuries occurred = CO ii. Place of “bad conduct” = unclear; Π argues AZ, Δ argues CO. iii. Domicile = AZ; one Π is from AZ, Δ is from AZ. iv. Relationship = CO; one Π purchased ticket in CO v. Since the contacts must be examined qualitatively, not quantitatively, the court examines each for weight and determines that the AZ contacts have more weight. b. SECOND: The court examines the policies behind the different laws → i. AZ law would both deter future wrongful conduct and insure safe air travel, even in CO. ii. Uniformity and predictability is not a great issue when negligence is the issue. iii. Either law could be applied easily. iv. Protection of expectations is not important since the place of the crashis fortuitous. v. Policies of AZ law → 1. Compensate AZ victims. 2. Prevent them from becoming wards of the state. 3. Deter future wrongful conduct vi. Policies of CO law → 1. Protect Δs from large verdicts 2. CO policy against punitive damages is not strong since CO allows in other situations. 3. [What about CO’s interest in assuring that airlines fly to CO? The court does not mention this]. 25 vii. Based on this analysis, AZ has the greater interest. c. THIRD: The court examines the policies of other involved states, i.e., NM and TX. While their laws are not exactly the same as AZ, they are more similar to AZ than to CO, therefore the policies of these states will be better effectuated if AZ law is applied. d. Determining that AZ has the greater interest in the case, AZ law applies. i. NOTE: Today most jurisdictions characterize the issue of what damages are allowable as substantive, as opposed to procedural (in which case forum law would apply. ii. What about limits on damages? There are two major approaches → 1. Jury’s determination stands unless irrational. 2. Judge can change the amount in any case in his discretion. 3. This is probably procedural since it involves the standard for overruling the jury.52. Selle v. Pierce (SD 1993): Π-NE sued Δ-NE in a SD court for defamation. The injury occurred partially in NE and partially in SD. Π, wanting SD’s punitive damages to apply, alleged that SD law should apply b/c he was injured there. Δ argued that NE law should apply, which does not allow punitive damages in defamation cases. The court started with the Restatement (2nd), which says that in defamation cases, the law of the Π’s domicile is presumed to be the place w/ the greatest interest. Starting w/ the presumption that NE law applies, the court examines the SD contacts and determines that they are minimal in comparison w/ NE’s contacts. Also, the court notes that it wants to discourage forum shopping. NE law applies and Π can’t get punitive damages.Result-Oriented Approaches53. Milkovich v. Saari (Minn. 1973): Rule: MN adheres to Professor Leflar’s “better law approach.” In this case Π and both Δs were residents of Ont. The three drove to MN where they had an accident in which Π was injured. Π brought suit in MN, claiming MN law applies (no guest statute). Δs claim Ont. law should be applied (guest statute). Under the better law approach, MN law applies and Π is allowed to maintain the action. The court notes that the forum (the law-administering state) should not give up its notions of fairness and justice. Since the case has significant contacts will MN and MN is the “better law,” MN law applies. a. The court notes that it is reluctant to make treatment in a MN hospital a deciding factor b/c it does not want to encourage hospital shopping. b. Interest analysis would probably lead you to a different result in this case, especially since all the parties are from Ont. c. Professor Leflar’s Better Law Approach: Leflar argued that the courts should consider the following non-hierarchical list of “choice-influencing considerations” in determining the applicable law → i. Predictability of result ii. Maintenance of interstate and int’l order iii. Simplification of the judicial task iv. Advancement of the forum’s governmental interests26 v. Application of the better rule of law d. Note that the last two considerations are basically the same and courts have tended to blend the two concepts. e. The better law approach does at least require that the forum have substantial contacts will the controversy (not necessarily the most substantial). f. The court in Milkovich found that the first three factors weren’t significant to their analysis (torts aren’t predictable, int’l order would not be disrupted by application of either law, and both laws were easy to apply), therefore the decision turned on the final two factors and led the court to apply MN law. g. Collins v. Trius (Me. 1995): This case involved a fact pattern identical to Milkovich, but the court came out the other way and applied Canadian law, where Can. did not allow damages for pain and suffering, but ME did. The court held that the common domicile of the parties is superior in determining the application of loss-allocating rules and Can. has an interest in achieving uniformity of recovery for Can. citizens.54. Comparative Negligence Conflicts: Both of the following cases follow the same fact pattern of Milkovich and Collins, except the suit was filed in the state of common domicile → a. Hataway v. McKinley (Tenn. 1992): Where contributory negligence was an absolute defense in TN and the state of the accident applied comparative negligence, the TN court applied TN law b/c it was the law of the common domicile of the parties. b. Chambers v. Dakotah Charter, Inc. (SD 1992): Where SD’s modified compartive negligence law would bar Π’s recovery if her negligence was more than “slight” and the state of the accident would impose modified comparative negligence, allowing Π to recover according to the amount of the negligence attributed to Δ, SD determined its law should apply b/c it was the common domicile of the parties. c. Are these loss-allocating rules or conduct-regulating rules? The court in Hataway did not address the issue, but the Chambers court decided that they were loss- allocating rules, therefore the interests of the state of the accident would not be furthered by their application to foreign parties. d. You could argue that such law are conduct-regulating in that they make the victim conduct himself more carefully. This was the result reached by NJ in Moye v. Palma (holding that comparative negligence is generally viewed as a liability rule rather than a damage doctrine). 55. Other Result-Oriented Approaches: a. Professor Ehrenzweig and Forum Favoritism: He postulates that the application of forum law is the exception rather than the rule. i. The exception should only be used when “true choice of law rules” exists. Such rules include the laws for real property and wills. ii. When no true rule exists then the court should apply forum law, unless the underlying policies reveal that it is inapplicable the case. iii. If forum law is inapplicable → the case should be dismissed.27 iv. If dismissal is in appropriate → forum law should apply regardless. v. This encourages forum shopping, but Ehrenzweig suggests changing forum non conveniens to forum conveniens for this purpose. b. The “Best Law” Approach: Under this theory court are not restricted to the laws of the states involved in the conflict, rather they should choose the best law available from all sources. c. Professor Weintraub and the Π-Favoring Rule: In tort cases that present either a true conflict or a no-interest scenario, the court should apply the law that will favor the Π unless (1) the law is anachronistic or aberrational, and/or (2) that state does not have sufficient contact w/ Δ or Δ’s actual or intended course of conduct to make application of its law reasonable. d. Letting the Π Choose: This concept lets the Π choose what law should apply. Ascertaining State InterestsFalse Conflicts56. Pardey v. Boulevard Billiard Club (RI 1986): In this case Πs-MA drive to a RI bar-Δ and consume alcohol. On the way back, in MA, they collide w/ another MA citizen (another Π). The trial court determines that the RI dram shop act applies to the case and Δ is held liable. On appeal, Δ argues that the RI dram shop act should not apply, b/c the Πs are from MA and the accident occurred in MA. The court rejects this argument. Using the better law approach, the RI court examines the relevant factors and determines the RI law should apply; plus, if the MA law applies then there would be no remedy b/c the MA law only applies to MA bars. Alternatively, Δ argues that the RI dram ship act does not apply extraterritorially to accidents occurring outside RI; the court finds that it does. a. This case is a false conflict. MA has no interest in applying its dram shop act to a RI bar. b. Note that a dram shop act has elements of both conduct-regulation (deterring bars) and loss-allocation (compensating victims). c. Zygmuntowicz v. Hospitality Investments (Penn. 1993): A PA dram shop act was applied to a NJ bar where the NJ bar solicited in PA. The court characterized this as a false conflict, but doesn’t NJ have an interest in protecting its bars from liability? d. Platano v. Norm’ Castle (NY 1993): The liquor was served in the forum state (NY) and the accident occurred in the CT. Both had a dram shop act, but NY’s act limited damages. The court applied NY’s dram shop act as to liability and CT’s act as to damages. 57. Social Host Statutes: a. Knoell v. Cerkvenik-Anderson Travel (AZ 1996): AZ law was found to apply where a social host served alcohol to a minor in Mexico. The AZ law made the social host liable for the damage caused by a minor after the host allows such minor to become intoxicated. The trial court found that the AZ law would apply, but it determined that MX’s drinking age, a territorial law, would apply as to the age of majority, therefore Δ was not liable. In reversing this decision, the 28 appellate court found that Δ (an AZ tour operator) availed himself of the AZ law and therefore AZ’s drinking age would apply. Δ was held liable. i. This case falls out of the pattern b/c the forum does not reject forum law. ii. Only difference is the advertising in PA. Did Δ voluntarily surrender the protection of the NJ law by advertising in PA? b. Johnson v. Yates (10 th Cir. 1994): OK citizens began drinking in OK and continued to drink as they drove into TX where they collided w/ a NM citizen-Π. Π sued the passengers of the car for supplying liquor to the driver. Δ’s conduct was not illegal in TX b/c they owed no duty to avoid making alcohol available to the driver. The conduct was illegal in OK. The federal court, sitting in TX, determined that TX law applied b/c the accident and much of the conduct occured there. This case has a bad result.58. DC v. Coleman (DC 1995): A DC cop-Δ (resident of MD), en route from one part of DC to another, briefly passed through MD where he witnessed two men beating up a third. Δ intervened and in breaking up the fight shot and killed one of the aggressors. As a result, Π-MD filed a wrongful death suit. Under MD law the defenses of contributory negligence and assumption of risk would bar recovery by Π. DC does not supply such defenses to cops who failed to follow rules regarding excessive force. The court determines that MD law should apply b/c MD has the only interest. According to the court, DC is only interested in applying its law w/in its borders (is this really true?). a. According to the court this is a false conflict and MD law applies. b. It is always appropriate for a federal court to decide that forum law does not apply.59. Bledsoe v. Crowley (DC 1988): Rule: When the policy of one state would be advanced by application of its law, and that of another state would not be advanced by the application of its law, a false conflict appears and the law of the interested state prevails. Where each state would have an interest in application of it own law to the fact, a true conflict exists and the law of the jurisdiction with the stronger interest will apply. In this case, Π-DC went Δ-MD for medical treatment. As a result of Δ’s failure to diagnose a brain tumor, Π brought a med mal action in DC Fed. Ct (which, sitting in diversity jurisdiction was bound to apply DC conflicts rules. The trial court found that MD law applied and dismissed the case for Π failure to comply w/ a MD statute requiring arbitration of med mal cases. On appeal Π claims it was erroneous to apply MD law. Π first contended that the trial court failed to consider the renvoi issue. The court agrees that such a consideration has a place in the interest analysis, but finds that an MD court would apply MD law b/c MD adheres to the lex loci rule. Since it is impossible to separate the bad conduct from the injury (Π alleged brain tumor occurred in DC), it is evident that the place of the tort is MD. Next, Π contends that DC’s interest in the case is greater than MD’s. The court also rejects this argument since the entire relationship was in MD. This is a false conflict case and MD law applies. a. The forum can always decide that forum law does not apply. b. Kaiser-Georgetown v. Stutsman (DC 1985): VA resident (Π), who worked in DC, was insured through his employer by Kaiser (Δ), a DC corp. Π went to a VA Kaiser location to receive medical treatment and later brought a suit in DC 29 alleging med mal. Π wants DC law to apply b/c VA imposes a cap on damages. The DC court determines the policies of the VA law were not affected by imposing the law on DC corps. DC law applied. c. The concurrence in Bledsoe notes that if the law of the individual were to apply → hospitals may adopt policies of rejecting out-of-state patients. This would destroy the ability to seek expert medical help.True Conflicts and Various Methods for Deciding Them60. Possibilities when a True Conflict Exists: a. Pick the better law (some states) b. Apply forum law (traditional rule); but this is arbitrary c. Weigh the interests; essentially this is what the modern approach does, but it causes problems b/c judges want automatic, defined rules.61. Foster v. Leggett (KY 1972): Rule: In KY, the basic law is the law of the forum and it will not be displaced without valid reasons. In this case a KY citizen and Δ-OH were driving from KY to OH when they had a car accident and the KY resident was killed. Π brought an action for wrongful death and Δ asserted that the guest statute of OH should apply. The court determines that KY’s contacts w/the case are significant since the decedent lived in KY, both parties worked in KY, Δ rented a room in KY, and the trip started and was supposed to end in KY. Even though the accident occurred in OH and Δ was a citizen of OH, KY law will still apply. KY courts take the position that if KY has significant contacts, not necessarily the most significant contacts, then forum law will not be displaced. a. This case is a true conflict—both OH and KY have significant contacts and the interests of both states will be furthered by applying their respective laws. Although the court does not mention Currie, they basically take on his approach and favor the forum. b. Currie thought that courts had no constitutional power to weigh gov’t interests. c. Forum favoritism is appealing to some judges and has been adopted in KY, NV, and MI. i. Monteko v. MGM Dist., Inc. (NV 1996): NV courts are of the view that forum law applies to tort cases unless some other state has an overwhelming interest. A state has an overwhelming interest if it has two or more of the following contacts → 1. Place where “bad conduct” occurred 2. Place where the injury is suffered 3. Place where parties have a common domicile 4. Place where relationship of the parties is centered ii. Sutherland v. Kennington Truck Service, Ltd. (Mich. 1997): MI courts will apply MI law unless a rational reason exists to do otherwise. In determining whether a rational reason exists the court takes on a two-step analysis: (1) Does any foreign jurisdiction have an interest in applying its law? (2) If yes, do MI interests mandate that MI law should be applied? This case involved an accident in MI between an OH-Π and Ont.-Δ. The 30 case would have been untimely under either states statute of limitations, but not under MI’s. The court concluded that there was no rational reason to abandon the MI limitations period in favor of either OH or Ont. Ont. had not interest in applying its law, even though it would favor the Ont.-Δ b/c under Ont. conflicts laws Ont. would apply MI law. 62. Lilienthal v. Kaufman (OR 1964): Rule: Where there exists a true conflict and the interests of the forum state and the foreign state are equally strong, OR courts, as the instruments of state policy, will apply OR law. In this case, Π-CA entered into a contract w/ Δ-OR. Π did not know that Δ had been declared a spendthrift under OR law (which made him unable to contract). Π files suit in OR, seeking to collect money owed him under the contract; Π argues that CA law should apply b/c that is the place of the execution of the contract. The court examines the relevant interests of both states. CA has an interest in helping Π collect and does not have a spendthrift law. OR also has commercial interests in enforcing the contract (preventing fraud, encouraging residents of other states to contract w/ OR citizens, etc.), but these interests are outweighed by OR’s strong public policy embodied in the spendthrift law. Both states also have contacts with the case. Since the interests of both CA and OR are equal, the court decides to apply OR law and Π cannot collect. a. If Π had brought the case in CA → he would have won. But Π did not know Δ was a spendthrift. This was the attorney’s error. b. The court essentially applies Currie’s approach; where there is a true conflict → forum law applies. c. What if this case had been brought in NV? Then forum law would not apply. How would a NV court decide between the competing interests of CA and OR. Currie said the court should treat itself as a “super-legislature.” d. Even courts favoring Currie’s interest analysis have sometimes rejected his approach to resolving true conflicts. Instead courts have developed other ways of dealing with such problems. The range of possible solutions includes → i. Currie’s “Restraint and Moderation” Approach—Is this just an apparent conflict? ii. Comparative Impairment iii. Overt weighing of State Interests iv. Approach the Restatement (2nd) v. “Principled” Territorialism vi. The Approaches developed by NY and CA—the nation’s two leading conflicts jurisdictions. Restraint and Moderation63. People v. One 1953 Ford Victoria (Cal. 1957): In this case Δ-TX sold a car to a TX citizen (Smith) and authorized a mortgage. The terms of the mortgage said Smith was not to take the car out of TX w/o permission. In violation of the contract, Smith took the car to CA where he was caught transporting drugs. As a result the car was seized. Δ asserted its mortgage. Π argues that CA law should apply, which states that an innocent mortgagee does not surrender its interest in a seized automobile if the mortgagee has 31 engaged in a reasonable inquiry in to the character of the purchaser. Under TX law, no such inquiry is required and Δ did not conduct such an inquiry. The court evaluates CA interests w/ restraint, noting that it is not the policy of the law to punish innocent mortgagees. The court also concludes that the statute cannot be reasonably interpreted to require character investigation is other states—a person financing a car in another state will look to the laws of his state, not the laws of all 50 states. In this case especially, where Δ prohibiting Smith from leaving TX and Smith left w/o his knowledge, Δ cannot be expected to follow the laws of CA since he had no idea the car would be taken there. CA’s interests are not subverted in this case b/c CA can still cause the wrongdoer to forfeit the car and the legislature did not intend to punish innocent mortgagees. a. This case is an example of an apparent conflict. By using restrained judgment the court was able to see that CA’s interests in strictly applying its law were not of the utmost importance. CA was able to effect the purpose of its law on Smith, while applying TX law as to the innocent Δ. b. But, this was not the way Currie perceived application of Restraint and Moderation. He thought that restraint should be exercised by the forum for the benefit of its own citizens: a selfish approach. In this case, the CA laws were restrained for the benefit of a non-citizen. 64. Bernkrant v. Fowler (Cal. 1961): In this case, Π-NV owed Δ-CA money. After paying the money for awhile, Δ needed a lump sum payment and asked Π to refinance his home. Π took out a second mortgage and with the money paid off a large portion of his debt to Δ. In exchange, Δ agreed to include a provision in his will extinguishing Π’s debt upon death. Δ died and the will included no such provision. Π sued for cancellation of the debt. The contract would be void under CA SOF, but valid under NV law. In analyzing the relevant interests of the states, the court finds that NV had the most interest—the property, Π, and the making and performance of the contract is in NV. There is also some question as to whether Δ lived in NV when the contract was made. The expectations of the party’s also indicate that NV law should apply, especially since Δ may have lived there at the time. Finally the SOF had recently changed in CA and Π could not be expected to predict changes in the law when making a contract. CA does have an interest is protecting estates from false claims, but this is outweighed by NV’s interest. Also, enforcement of this contract effect CA’s policy of enforcing lawful contracts. This case is merely an apparent conflict and NV law applies. a. This is another example of restraint exercised to the benefit of non-citizens. b. Also, the court gives effect to the expectations of the parties, a consideration that Currie was unwilling to consider. Comparative Impairment65. Bernhard v. Harrah’s Club (Cal. 1976): Rule: Once a preliminary analysis has identified a true conflict, the “comparative impairment” approach should be used to determine which state’s interest would be more impaired if its policy were subordinated to that of the other state. In this case two CA residents drove to NV and visited Δ’s casino, where they were served too much liquor. The two proceeded to drive back to CA where they hit a CA motorcyclist (Π), who sustained serious injuries. Π 32 brought the instant action for damages against Δ, claiming that CA’s dram shop act applies. Δ asserted that NV law, which has no dram shop act, should apply. The court finds preliminarily that there is true conflict b/c both states have significant contacts and opposing policies. Then the court proceeds with the comparative impairment analysis and determines that CA law should apply. NV already imposes criminal penalties on taverns in such situations, therefore their policy will not be vitiated by application of the CA law. CA interests would be impaired however; CA cannot fully effect the purpose of its laws if it is not extended to taverns that advertise and solicit business in CA (which Δ does). By doing so, Δ put itself at the heart of CA’s regulatory interests. a. The comparative impairment test was actually advocated by Professor Baxter, not Currie. While Baxter, like Currie, thinks that courts should not engage in a weighing of the interests, he essentially does advocate a weighing of the losses each state would experience if the law of the other were applied. i. Baxter distinguishes internal and external gov’t objectives → 1. Internal objectives underlie a state’s resolution of conflicting private interests in wholly domestic cases. 2. External objectives are the objectives of each state to make its law apply to persons to whom it owes a responsibility. ii. In a true conflicts case, Baxter subordinates the external objectives of the states whose internal objectives would be least impaired by application of the other state’s law. b. CA courts effectively fused the two when confronted with a true conflict. 66. Offshore Rental Co. v. Continental Oil Co. (Cal. 1978): Rule: In doing the comparative impairment analysis, if one of the competing laws is archaic and isolated, it may reasonably yield to more prevalent and progressive law, all other factors being equal. In this case and employee of Π (CA corp, doing a lot of business in LA) traveled to LA where he was injured on the premises of Δ (DE corp/PPOB LA). Δ compensated the injured worker, and now Π seeks compensation under a CA law that allows employers to recover for the loss of employees. LA has no such law and has a policy against them. The court finds that the laws are directly in conflict and each state has contacts w/ the case. The court proceeds to do the comparative impairment analysis and determines that LA law should apply. First, the majority of states have abandoned laws simlar to CA (isolated) and CA itself rarely applies the law (archaic). Second, LA’s policy of attracting business to LA would be significantly impaired by application of this law; CA policy would not be impaired since CA rarely applies the law anyway. Finally, Π could have insured itself to guard against this situation, therefore there exists another means of satisfaction. LA law applies and Π cannot recover. Overt Weighing of Interests67. Eger v. E.I. Du Pont Denemours Co. (NJ 1988): In this case, Π-NJ worked for a NJ company, which was subcontracted by Δ-SC. Π was required to perform services in Δ’s nuclear power plant, where, he alleges, he was exposed to radiation which caused leukemia. Π received worker’s comp in NJ. Subsequently Π brought suit against Δ for liability in tort. Under SC laws, a subcontractor is treated as a statutory employer, 33 immune from suit where the employee receives worker’s comp. Under NJ law, Δ would be subject to suit. Since there is a conflict, the court weighs the interests of the two states and determines that SC’s interest in regulating the way its employees are compensated would be frustrated by application of the NJ law. NJ has no stronger interest, especially where compensation of the employee was not neglected. SC law applies and Π cannot maintain the suit. a. The same result was reached in a case involving an identical fact pattern under the Restatement (2nd) analysis. b. Cleveland v. U.S. Printing Ink, Inc. (Conn. 1991): After applying the most significant relationship test, the CT court concluded that CT law should apply to allow a NJ employee (injured in CT on business) to recover more money from his NJ employer who already paid him worker’s comp. This was allowed by a CT statute, but under NJ law worker’s comp was the exclusive remedy. Can this case be reconciled w/ Eger?“Principled” Territorialism68. Cipolla v. Shaposka (Penn. 1970): Π-PA attended high school in DE. Δ-DE drove Π home one day and was involved in an accident in DE, in which Π was injured. Π brought this action to recover for injuries. If DE law is applied → Π will barred from recovering b/c DE has a guest statute. PA has no guest statute. The court determines that the contacts of the two states are equal and proceeds to examine the relative state interests. The court determines that it is only fair for DE law to apply; DE cannot be expected to raise its level of protection just b/c Π enters its state. This is a territorial approach, but the court notes that all other things being equal, a departure from territoriality should not be taken lightly. a. Did Π really accept DE law by getting into the car? b. This court finds that guest statutes are loss-allocating rules. c. Cf. Zygmuntowicz (above); Cipolla would come out differently under this case, but remember that in this case the bar solicited PA customers. d. The dissent finds that the interests of both states are evenly balanced and would then apply the “better law,” which he perceives to be PA law.No-Interest Cases69. The No-Interest Case: a. A no-interest case is one in which the deciding court determines that none of the involved states have an interest in applying their law. b. In such a case, Currie tells us to apply forum law.70. Erwin v. Thomas (OR 1973): Rule: Where no state has an interest in the law to be applied, forum law will apply. In this case, Π-WA sued Δ-OR for loss of consortium. OR recognizes such claims, WA does not. Due to the conflict, the court engages in interest analysis and determines that neither state has an interest. WA does not care if OR law applies to a WA Π. OR does not care if its law applies since the Δ is from OR, 34 the OR legislature did obviously not intend for its law to benefit foreign citizens. Since neither state has an interest forum law (OR) will apply and Π’s case can proceed. a. The court questions whether this decision will conflict w/ a previous decision in which the OR statute was held inapplicable where Π was from OR and Δ was from WA. Ultimately, the court decides that it does not. b. Hurtado v. Superior Court (Cal. 1974): Here a potential no-interest case became a false conflict. A Mexican citizen was a guest in a CA car, which collided with another CA car. The Mexican died in the crash and his relatives brought a wrongful death action in CA against both drivers. Mexico imposed limits on damages in such cases, CA did not. MX did not care if the limit was imposed, since neither of the Δs were MX citizens. CA apparently did not care if unlimited damages were imposed b/c Π was not from CA. But, the court found that unlimited damages served to deter wrongful conduct w/in its territory, therefore CA did have an interest. CA law applied. The law was both loss-allocating and conduct-regulating. 71. Kaiser-Georgetown Comm. Health Plan, Inc. v. Stutsman “Stutsman I” (DC 1985): VA resident (Π), who worked in DC, was insured through his employer by Kaiser (Δ), a DC corp. Π went to a VA Kaiser location to receive medical treatment and later brought a suit in DC alleging med mal. Π wants DC law to apply b/c VA imposes a cap on damages. The court examines the relevant interests and determines that neither state has an apparent interest in applying its law. DC does not care if a cap is imposed and has no interest in enforcing unlimited limited liability on a DC corp for the benefit of a VA resident, BUT the court determines that DC does have an interest in protecting a member of its workforce (apparently a deciding factor). VA has no interest in imposing the cap where an unlimited judgment will not hurt a VA corp and will help a VA citizen, BUT VA does have an interest in keeping insurance premiums of VA doctors down—the court downplays this interest. In the end, DC law applied. a. Although the court eventually finds a DC interest, this case could be classified as a no-interest case. b. Here the court exhibits rational altruism and Π-favoritism.72. Stutsman v. Kaiser Foundation Health Plan “Stutsman II” (DC 1988): The Π in the above case died and her husband brought an action against Δ, the treating facility in VA, for loss of consortium. DC law allowed such an action, but VA law did not. Both Πs were domiciled in VA. On the precedent of Stutsman I, Π argued that VA had no interest in seeing its law applied to deny recovery to its citizens for an injury perpetrated by a DC corp. Finding that the action was strongly tied to marriage, the DC court decided otherwise. VA had a more significant interest in regulating the legal rights of its married citizens, therefore VA law applied. Also, if this case had been brought in VA, VA would apply their law (examination of the renvoi issue). This case was distinguished from Stutsman I in that DC had no interest in protecting Π—he was not a member of the DC workforce like his wife. 35 73. Ardoyno v. Kyzar (LA 1976): In this case, Π-LA brings an action for (1) interference w/ contract and (2) slander against Δ-MS. Π is an LA attorney who consistently represents MS clients. The federal court will apply LA conflicts law → a. Interference w/ contract: LA does not recognize such an action, but MS does. LA law states that it will not recognize such a claim even against a foreign Δ, and even where the K was made and performed in LA. This is a firm rule, which Π failed to adequately dispute. On the other hand, MS has no interest in applying its law, which applies only to MS contracts. This is a false conflict and LA law will apply. Π cannot maintain this action. b. Slander: MS allows punitive damages and LA does not. MS has an interest in preventing intentional torts committed w/in its territory, especially where such torts cause damage in MS (damage to Π’s MS reputation). LA has an interest in protecting its judicial system from speculative punitive damages. This is a true conflict so the court turns to the Restatement (2nd) to resolve the conflict. After considering the factors, the court determines that MS law should apply. Also, the court notes that under the comparative impairment approach, MS law would be more impaired by an application of LA law than vice versa; this is especially true since LA has recently changed its law to allow punitive damages in this situation. While the law cannot be applied retroactively, this fact helps the court discern the policy of LA. MS law applies. i. Is this a no-interest case? ii. Should MS care if a LA Δ gets the benefit of its law? Should DC want to enforce a damage limitation against a foreign Δ? c. This is a classic case of depecage. d. NOTE: The above cases (Hurtado, Stutsman I, Ardoyno) are altruistic cases (favoring foreign Π) under the veil of conduct regulation (punishing resident Δ). 74. Depecage: a. Where the laws of different states are applied to different substantive issues in the same cause of action → this is depecage. b. Depecage is the result of the issue-by-issue analysis that resulted when the traditional rules were abandoned. c. Inappropriate depecage occurs when the rule of one state that is chosen is so closely interrelated to a rule of the same state that is not chosen that applying one w/o the other would dramatically upset the equilibrium established by the two rules and would distort and defeat the policies of that state. New York Twists75. Neumier v. Kuehner (NY 1972): In this case Π-Ont. was a passenger in Δ-NY’s car when the car was struck by a train in Ont. In this wrongful death suit, Δ asserts Ont’s guest statute as an affirmative defense. Π claims that NY law should apply. The NY court has adopted a set of rules that will help to insure predictability and uniformity in guest statute cases → These are basic RULES applicable to loss-allocating laws: a. When passenger and driver are from the same state and the car is insured there → the law of that state will apply regardless of where the injury occurred.36 b. (1) When the accident occurs in a state w/ a guest state and the driver is domiciled there → that state’s law should apply; he will not be liable under the law of the victim’s state. (2) Where the guest is injured in his state and the state permits recovery → the guest can recover; the driver who has come into that state cannot assert his state’s law as a defense. [This is b/c guest statutes are loss-allocating; when loss-allocating → law of domicile applies]. c. In other situations where the guest and the driver are from different states → the law of the situs of the accident will apply UNLESS it can be shown that displacement of that law will advance relevant substantive law purposes w/o impairing the smooth working of the multistate system or producing great uncertainty for litigants. d. This basic framework can be applied to all loss-allocating rules! This case clearly falls into the third category. Since the plaintiff did not prove that NY law should apply, the court will apply the law of the situs—Ont. Π cannot recover. 76. Schultz v. Boy Scouts of America (NY 1985): In this case, Π-NJ brought suit for the (1) psychological and emotional injuries caused her sons by sexual abuse of her sons and the (2) wrongful death of one of her sons (suicide), allegedly caused by Δ, who allowed a priest to continue being employed by it even though the priest was engaging in such misconduct. Δ1 is the Boy Scouts of Am. (BSA), of NJ. Δ2 is the Franciscan Brothers (FB), of OH. The alleged sexual abuse occurred in NY. Π wants NY law to apply, b/c NJ law grants immunity to charitable organizations; the only exception is suit by a nonbeneficiary of the org, but Π and her sons were all beneficiaries. NY law grants no such immunity. Since this is a loss-allocating rule, the court extends the rules of Neumeier → a. Δ1: Since the parties are common domiciliaries, the law of the common domicile applies. NJ law applies as to BSA and Π is barred from suit. Reasons for applying the law of the common domicile include: i. Discourages forum shopping ii. Rebuts the presumption that the forum favors its own laws/favors rules permitting recovery iii. The concepts of mutuality and reciprocity support consistent application of the common domicile rule iv. The rule is easy to apply, predictable, and certain b. Π argues that NY law should be favored for the following reasons, but the court say these are just Π-favoring rules: i. Protects medical creditors in the forum ii. Prevents tort victims from becoming wards of the state iii. Deterrent effect on tortfeasors c. Δ2: (The choice of law is still between NY and NJ; FB did not argue for OH law since it is essentially the same as NY.) Where the parties are of different domiciles, the place of the wrong determines the applicable law. This place is determined by the “last act” necessary to make the actor liable. As to the wrongful death, the place of the wrong is NJ, and FB will be immune. As to the psychological/emotional injuries to the sons, the place of the wrong is both NY and NJ therefore a conflict exists. The court begins by engaging in interest 37 analysis, in which, domicile and the locus of the tort have since become the most important factors. Then the court distinguishes between loss-allocating and conduct regulating rules: i. Where rules are conduct-regulating, the place of the tort will usually have a predominant, if not exclusive, concern. ii. Where rules are loss-allocating, the state’s interest and the party’s reliance are less important. Here, the court starts with a presumption that NY law will apply (place of the tort). But, the court finds that NJ’s interests in applying its own law are superior —make Π bear the burden of choosing becoming a beneficiary of a charitable org, promote charitable orgs. NY really has no interest (false conflict?). Therefore NJ law applies and Π is barred from suit.77. Padula v. Lilarn (NY 1994): In this case Π-NY fell from scaffold while working for Δ- NY on his building in MA. NY law places absolute liability on an employer when an employee is injured by a defective scaffold. Should NY or MA (must prove negligence) law apply? Since the parties are common domiciliaries, you would expect the NY court to apply NY law, but the court says this is a conduct-regulating rule, therefore MA law applies.78. Cooney v. Osgood Machinery Inc., (NY 1993): Rule: If conduct-regulating rules are at issue then the law of the jurisdiction where the tort occurred will generally apply; if loss-allocating (“post-remedial”) rules are at issue then other factors must be taken into account, chiefly the domiciles of the parties. In this case Π, a MO employee was injured at work. He received worker’s comp and then brought the instant case for products liability against Δ, a NY sales agent who sold the machinery that injured him. Δ tried to join Π’s employer to the suit for contribution, but under MO law employer’s are exempt from liability where they provide worker’s comp. NY has no such law. Δ does not want the MO law to apply and argues NY law should apply. The court goes through the three Neumeier rules, and determines that this case fits into the second rule. Under the true conflict mold of Neumeier’s 2nd rule, where the local law of each litigant’s domicile favors that party, and the action is pending in one of those jurisdictions, the place of the injury governs. Therefore MO law controls. Also, Osgood did not expect MO law to apply, but he also could not have expected contribution given the fact that he started working before the contribution laws went into place. Δ on the other hand expected MO law to apply. Therefore deciding on MO law comports w/ the parties reasonable expectations. (NY seems to add this as another consideration— protection of the parties’ reasonable expectations). See above for public policy argument advanced by Π, but rejected. 79. Venturini v. Worldwide Marble and Granite Corp. (NY 1995): In this case Π-NJ, a truck driver, driver from NY to MI, where the marble slabs he was hauling fell on to him. They had been negligently loaded in NY. Π first got worker’s comp from his NJ employer, then he sued the NY and MI companied involved in the shipment. They sought contribution from the NJ employer. Contribution was barred in NJ and MI, but available in NY. The court concluded that under the 2nd and 3rd Neumeier rules, the place38 the injury (last act) controlled, therefore MI law applied and the employer could not be joined.Does Policy Analysis Work? A Look at Tort Cases80. The Judicial Model – Neumeier a. Loss-Allocating Rules: i. Common Domicile (CD) Cases – Apply the law of the CD w/o exception. 1. No exception when the accident occurs in a state that does not limit recovery and the CD state does. 2. No exception for a pre-existing relationship. 3. No exception if the parties are domiciled in different states w/ identical rules. For example: Π-State X, Δ-State Y, both have guest statutes, accident occurs in State Z, which has no guest statute. This would fall under Rule 3 and the law of State Z would apply. Wouldn’t it be better to apply the common law? ii. Split-Domicile Cases 1. Cases in which the situs of the accident is at the domicile of the tortfeasor, whose law protects him → Apply the law of the tortfeasor’s state w/o exception. 2. Cases in which the situs of the accident is at the domicile of the victim, whose law protects her → Apply the law of the victim’s state UNLESS special circumstances exist. 3. Split-Domicile and split conduct-injury cases? Neumeier fails to provide for such situations. The courts of NY have looked to the “last act.” iii. Other Split Domicile Cases – The residual rule → The law of the situs should be applied UNLESS special circumstances exist. 1. Cases in which the situs is at the domicile of the tortfeasor whose laws don’t protect him. a. Might be categorized as a no-interest case. b. Probably apply law of the situs. 2. Cases in which the situs is at the domicile of the victim whose laws don’t protect her. a. Could apply law of the situs b. Could use the escape 3. All other cases a. Could apply law of the situs b. Could use the escape c. Cook v. Goodhue (NY 1994): Π-TX and Δ-Ont. have a traffic accident in NY. Ont. law limits damages, but neither TX nor NY do. Under Neumeier, NY law should apply unless Δ demonstrates that the escape should be used. Δ must show that the purposes of ALL relevant laws will be advanced by application of the Ont. law. 39 b. Conduct-Regulating Rules i. Neumeier is not intended to apply. ii. Conflicts will almost invariably be resolved under the law of the “place of the tort.” This is sometimes difficult to determine. 81. The Legislative Model – Louisiana a. Loss-Allocating Rules: i. CD Cases – Apply the law of the CD. 1. Exception – May apply the law of another state if its policies would be seriously impaired. 2. Allows the court to apply the common law where the parties are from different domiciles w/ the same law and the accident occurs in a third state w/ a different law. ii. Split-Domicile Cases 1. Cases in which the situs of the accident is at the domicile of the tortfeasor whose law protects him → Apply the law of the tortfeasors state if both the conduct and the resulting injury occurred in that state. 2. Cases in which the situs of the accident is at the domicile of the victim, whose law protects her → Apply the law of the victim’s state UNLESS special circumstances exist. 3. Split-Domicile and split conduct-injury cases → Apply the law of the place of injury if Δ could possibly foresee that the injury could occur there. iii. Other Split-Domicile Cases → Flexible approach; could Δ have foreseen that the injury would occur there? b. Conduct-Regulating Rules i. Place of conduct and place of injury are the same → apply that law. ii. Place of conduct and place of injury are different 1. Place of conduct prescribes a higher standard of care than the place of injury → apply the law of the place of conduct. 2. Place of conduct prescribes a lower standard of care than the place of injury → apply the law of the place of injury provided that Δ could have foreseen that injury could occur there. iii. Punitive Damages – the epitome of a conduct-regulating rule b/c the purpose is to punish the tortfeasor. If two of the three following factors point to the law of the place imposing punitive damages → punitive damages will be imposed: 1. Domicile of the tortfeasor 2. Place of the conduct 3. Place of the injury 40 CONFLICT RULES IN OPERATION Products Liability 82. Gantes v. Kason Corp. (NJ 1996): In this case a GA resident was killed by defective machinery in a GA plant. Decedent’s relatives, (Π-GA) brought suit against Δ-NJ, the manufacturer of the defective machinery for products liability. Under GA law the action would be time-barred by a statute of repose, stating that actions for products liability may not be brought more than 10 years after the product was sold. Under the NJ statute of limitations, the action is timely. Since there is a true conflict, the court proceeds w/ the interest analysis. The dual purpose of the GA law is to eliminate stale claims and stabilize the insurance needs of GA manufacturers. The dual purpose of the NJ law is to encourage litigants to timely pursue actions on the one hand, and punish those who fail to do so on the other. Which policy is important depends on the contacts each state has with the litigation. NJ’s contacts include the fact that the product was made/sold in NJ and Δ is of NJ. GA’s contacts include the place of the injury and Π’s domicile. NJ has an interest in deterring the manufacture of unsafe products. GA’s interests are not relevant to the instant issue, nor are GA’s interests impaired by application of the NJ law. Even though the statute of repose is generally considered substantive and GA substantive law concededly applies, this is an issue-specific inquiry. The court decides to use depecage and applies the NJ law. a. The court takes an altruistic approach. b. Isn’t the statute of limitations procedural? Why even look at the policy? Perhaps b/c GA’s limit is substantive? i. The lower courts cited deterring forum shopping as a reason for applying GA law. ii. This court says that forum shopping should only be discouraged in cases where NJ’s contacts are slight. Here NJ has significant contacts. 1. Forum shopping is a tool often employed by products liability Π’s, but it does not always work. 2. Nesladek v. Ford Motor Co. (8 th Cir. 1995): Where Π-MN admittedly moved to MN, subsequent to the accident, to get the benefit of MN’s “useful life” statute and the action would be time- barred under the statute of repose in her former state (NE), the court, citing the great possibility of forum shopping, applied the NE law and dismissed the action. c. Rutherford v. Goodyear Tire is an example of a case facing the same issue in Gantes, but coming out the other way and holding Π’s action to be time-barred. The KY court reasoned that the longer KY statute of limitations was intended to protect KY citizens and the IN-Π could not benefit from it (Selfish approach). d. Magnant v. Medtronic (MI 1993): Where forum law was less favorable to forum Π, the court found good reason to displace forum law, reasoning that MN (manufacturer’s state) had interests in providing its corporations w/ uniformity and predictability as to what law will apply. e. At least one court has concluded that we should return to the lex loci for products liability cases. See Ness v. Ford Motor Co.41 83. Complexities of Products Liability Cases: a. There are three basic categories of products that will give rise to different issues: i. Consumer products, e.g. pharmaceuticals, foods, cosmetics, etc. ii. Industrial products, e.g. machinery iii. Means of transportation, e.g. airplanes 1. Products in the first two categories are usually intended for use in one state, while products in the third category are intended for use in more than one state. 2. Products in the last two categories are usually purchased by someone other than the eventual victim and are not subject to the victim’s control. b. These cases tend to involve both tort and contract issues and recovery may involve multiple Δs, e.g. manufacturer, local dealer and intermediaries. c. Conduct may occur in many different states, e.g. designed in one state, tested in another, manufactured in a third, and assembled in a fourth. d. The place of injury may occur in many states, especially w/ consumer products. Complex LitigationAnalyzing Interests of the Parties84. In re Air Crash Disaster at Sioux City, Iowa (Dist. Ill. 1990): This case resulted from a airplane crash in Iowa where 232 passengers from 30 states and 2 foreign countries were killed. The Δs are (1) United Airlines (DE-corp, PPOB-IL, maintained airplanes in CA, flight crew training occurred in CO); (2) McDonnell Douglas, the airplane’s designer/manufacturer (MD-corp, PPOB-MO, designed/manufactured this plane in CA); and (3) General Electric, the engine’s designer/manufacturer (NY-corp, PPOB-NY, designed this specific engine in OH). The Δs requested the court to determine the punitive damages applicable in each case. a. The federal court must normally apply the conflicts law of the state where it sits. When a case is transferred it must ordinarily apply the conflicts law of the transferor state. IL adopts the concept of depecage, so the federal court will engage in depecage. Also, the court notes that the Π’s domicile plays no role in determining punitive damages since application depends largely on the place of Δ’s conduct. b. Cases transferred from CA: CA uses comparative impairment approach. IA law will not be used b/c the place of the crash was fortuitous. i. United Airlines → IL law will apply b/c it balances the interests of CO, CA and IL in applying punitive damages. ii. McDonnell Douglas → MO and CA laws will be equally impaired by application of the other, so the laws of CA, the original forum, will apply. iii. General Electric → OH laws would be more impaired so OH law applies over NY. c. Cases transferred from CO, IA, NY, & GA & cases filed in IL: According the the court, all these states use the “most significant relationship test” of the Restatement (2nd). [BUT GA does not and neither does NY?!?]42 i. United Airlines → IL law ii. McDonnell Douglas → CA iii. General Electric → OH d. Cases transferred from PA and DC: These states apply a combination of governmental interest and the most significant relationship test, so the applications of law will be the same as above. The Argument for Application of a Single State’s Law85. ALI Complex Litigation Project: a. Liability: With regard to liability, the Project provides four choice-of-law rules to be employed in resolving non-false conflicts. The rules are to be applied in a successive order of elimination → i. The state of conduct, if the injury is also in that state; ii. The state in which all Πs and a Δ habitually reside or have their PPOB, with regard to claims against that Δ; iii. The state in which all Πs habitually reside or have their PPOB, if that state is also the place of injury; and iv. In all other cases, the state in which the injury-causing conduct occurred. 1. Is rule 1 fair w/ regard to loss-allocating rules? 2. All the rules have escapes to avoid unfair surprise or arbitrary results. b. Compensatory Damages: The same law that governs liability will govern the issue of monetary relief other than punitive damages. The issues of monetary relief and liability may be separated (depecage) if the policies underlying the former are different from those underlying the latter. c. Punitive Damages: The application of punitive damages is based on three contacts; if two of the three are met → punitive damages can be awarded: i. Place of injury ii. Place of conduct iii. PPOB or residence of Δ iv. Escape: Δ can prevent the application by showing that the imposition was not foreseeable to Δ.86. Simon v. Phillip Morris, Inc. (Dist. NY 2000): In this class action, Π from all over the country sued Δ-NY for fraudulent concealment of evidence that smoking was harmful to health. The issue was what law should apply. The court employs NY’s interest analysis of the same type that was used in Babcock and Schultz. The Neumeier rules are not applicable here b/c the situation is too complex. The court concludes that NY has the primary interest in deterrence, while all states have an equal interest in protecting their citizens, not burdening their hospitals, and preventing people from becoming wards of the state. Since conduct-regulating substantive laws are at issue, the place of the tort deserves some deference. This is primarily NY since meetings, etc. organizing the fraud were held there. The court determines that NY substantive law will generally apply to the determination of whether a conspiracy existed. NY law will NOT apply to (1) statutes of limitations, (2) affirmative defenses, (3) damages, or (4) individual causation. 43 The class can be divided into subclasses for these purposes. This ruling will ease the administration of the laws in this case involving widespread injuries and a highly mobile product. 87. Spence v. Glock (5 th Cir. 2000): This case involves a class action brought by Πs of all 50 states against Glock, a corporation manufacturing handguns. The Π allege the handguns were defective resulting in monetary losses, etc. The guns were designed and manufactured at Glock in Austria. The guns were tested and assembled at Glock in GA. The district court concluded that GA law applied and certified the class. The 5th Circuit now reverses, finding that the Πs failed to meet the burden of proving that common of questions of law predominate. The federal court, sitting in TX, is bound to apply TX conflicts law to the case; TX uses the Restatement 2nd approach, which requires the court to balance the interests of GA against other states. This was not done. While GA has substantial contacts w/ the case, it is not the place of injury (that would be the state of each individual Π) and it is likely not the place of the injury-causing conduct, which is probably Austria. Although there is a contract specifying that GA law will apply, that contract only applied to distributors of the guns and is N/A to customers. Given the fact that each customer will expect the law of his domicile to control, each case must be examined separately under the Restatement. The class is decertified. a. Application of a single law was not the correct solution in this case. b. This case is different from Simon, b/c instead of personal injuries, these damages are monetary and easier to assess individually. Party Autonomy in Contracts88. Choice-of-Law Provisions in Contracts: a. The First Restatement did not allow parties to pick the applicable law, although most courts ignored this prohibition. b. The Second Restatement formally sanctioned the principle of party autonomy and provides: i. Choice-of-law provisions will control if the issue is one which the parties could have resolved by an explicit provision in their agreement directed at that issue. ii. Choice-of-law provisions will control even if the issue is NOT one which the parties could have resolved by including the provision, UNLESS → 1. The chosen state has no substantial relationship to the parties or the transaction and there is no other reasonable basis for the choice; OR 2. Application the chosen law would be contrary to a fundamental policy of a state which has a materially greater interest than the chosen state . . . iii. In the absence of a contrary intention, the reference is to the local law of the state of the chosen law (no renvoi). 44 89. DeSantis v. Wackenhut Corp. (TX 1990): In this case, Δ-TX signed a noncompetition agreement w/ Π-FL (w/ office in TX). The contract specified that FL law would apply. After Δ quit working for Π, he began competing a Δ sued for breach. TX follows the Restatement (2nd) approach in determining whether such choice-of-law provisions apply. Since protecting the justified expectations of the parties is a basic policy of contract law, FL law should apply unless the provision falls into the exception. The court must ask 3 questions: a. Does another state have a more significant relationship w/ the parties/transaction? Yes, the contract was executed and performed in TX. b. Does that state have a materially greater interest in determining the enforceability of the agreement? Yes, both a TX resident and a TX employer are involved. c. Would application of the choice of law provision be contrary to a fundamental policy of that state? [Note: this is like comparative impairment EXCEPT you just examine the chosen law in light of the law that would otherwise apply] Yes, although “fundamental policy” is not defined, the court concludes that determining the enforceability of noncompetition contracts is a fundamental policy of TX (since TX limits the enforceability of such agreements) and allowing another state to determine the issue would be contrary to that policy. d. TX law, not FL, will control. Under the law of TX the agreement is not enforceable.90. Choice of Law Provisions: a. A choice of law provision is like a “mini-contract” w/in the larger contract. This being so, the parties must have the capacity to choose the applicable law, they must consent to the choice, there must be a meeting of the minds, and it must be in the proper form. b. What law determines if all these conditions are met? There are three options → i. The law of the forum. ii. The law that would have been applicable if the choice of law provision was not included. iii. The law chosen by the parties. 91. Instructional Systems, Inc. v. Computer Curriculum Corp. (NJ 1992): ISI-NJ sued CCC- CA alleging that CCC violated an NJ act by cutting back its franchise unilaterally. Where ISI used to distribute CCC’s products to numerous eastern states, now ISI was to be limited to a few states and CCC would take over distribution to the rest (effectively taking the customers ISI earned). The contract between CCC and ISI provides that CA law will apply. Applying the Restatement test, the court looks to the first exception: CA law is not arbitrary b/c CA has a substantial relationship w/ the parties. So, the court goes through the factors of the second exception. (1) NJ has a substantial relationship to the parties/transaction. (2) NJ has a strong policy favoring franchisees. (3) That policy would be vitiated if CA law was applied. Therefore, NJ law will apply. The court notes that most courts have held that the parties to a franchise agreement cannot avoid the franchise law of the state in which the franchisee is located by a choice of law provision. 45 Since the franchisor has superior bargaining power it cannot force the franchisee to waive its protections. a. Statutes may implicitly or expressly restrict the rights of contracting parties to choose the applicable law. The NJ act in this case did so implicitly. b. When litigation occurs in the franchisor’s states, the courts tend to be less deferential to the laws of the franchisee’s state and more receptive to choice of law provisions. See Modern Computer Systems v. Modern Banking Systems (where franchisee contract chose NE law, which extended no protections to franchisees and franchisee was from MN, which did extend “unwaivable” protections, the 8th Circuit found that the choice of law provision was reasonable).92. Nedlloyd Lines B.V. v. Superior Court (Cal. 1992): In this case Π-Hong Kong (PPOB- CA) and Δ-Netherlands, entered into a contract under which Δ agreed to buy a controlling interest in Π’s corp. The contract included a choice of law provision shoosing Hong Kong law. Later there was a falling out between the two and Π sued in CA, alleging Δ breached implied covenant of good faith and fair dealing and F/D to minority SH. Π wants CA law to apply. The court, going thru the Restatement analysis, finds that Hong Kong has a substantial relationship to the parties and there is a rational basis for choosing HK law. The 1st exception does not apply. The 2nd exception does not apply either b/c Π showed no fundamental policy of CA that would be violated by application of HK law. Π tried to distinguish the F/D claim as extra-contractual, but the court says that when sophisticated parties contract it is expected that their choice will apply to all issues arising from and related to the contract. HK law is applicable. a. Whether parties intend their choice of law to govern non-contractual issues is a question of contractual interpretation. The court above interpreted the contract broadly. b. Most courts rule that the parties may NOT designate the applicable procedural rules—i.e. parties can’t choose their own statute of limitations. c. If the parties choose a law that would invalidate the contract in whole → the Restatement provides that the choice should be disregarded b/c it can be assumed that the choice was made by mistake. (There is authority to the contrary). d. If the parties choose a law that would invalidate the contract in part → the Restatement says that the portion of the contract is invalid. e. Parties may choose different laws to govern different parts of the contract.Insurance Conflicts 93. Gilbert Spruance Co. v. Penn. Mfrs. Ass’n Ins. Co. (NJ 1993): Rule: The place of risk is a matter of intense concern to the parties of an insurance contract. As a result the parties would reasonably expect that the local law of the state where the risk is principally located would apply to determine many of the issue arising out of the contract. In this case Π-PA sued PMA-PA for coverage under an ins. contract entered into in PA. Π’s liability stemmed from disposal of hazardous waste in NJ. The policy did not cover such pollution unless it was “sudden and accidental.” The issue is whether NJ law (which would allow coverage) or PA law (which would not) should control. The court adopts the site-specific rule set forth in the Restatement, which states that → a 46 casualty-ins. policy should be interpreted under the substantive law of the state that the parties understood to be the principle location of the risk, UNLESS another state has a more significant relationship to the parties, the transaction, and the outcome under the Restatement analysis. Here the court concludes that the parties foresaw that both NJ (disposal of waste) and PA (generation of waste) were places of risk. Since there are two places → the court engages in a determination of which has the most significant relationship. The court determines that NJ does since the waste foreseeably came to NJ and NJ has an urgent concern for the health and safety of its citizens. NJ law applies. a. The court here rejects the “uniform-contract-interpretation” approach in favor of the site-specific approach. i. Under the uniform approach, the law of a single forum governs the interpretation of coverage. The court focuses on the insurance contract in deciding what law applies. ii. The site-specific approach focuses on the place of the insured risk. Sometimes this approach is too complicated to apply (when there are many sites). When such complications arise → the law of the place where the contract was entered into usually applies. b. In a case exactly the opposite of Spruance, (NJ companies, pollution in PA) the 3rd Cir. decided that NJ law would apply. c. The 3rd Cir. also said that the site-specific approach of Spruance should not be extended beyond cases involving environmental contamination. d. Automobile insurance contracts are often heavily regulated by statutes, which designate the applicable law. Statutes of Limitation 94. Keeton v. Hustler Magazine, Inc. (NH 1988): Π-NY filed an action for libel and slander against Δ (OH at the time of the libel and since moved to CA) in NH. NH only connection to the case was that 1% of the Δ’s magazine was distributed in NH. Π brought the action there b/c it is the only jurisdiction where the action is not time-barred by the statute of limitations. In spite of Δ’s arguments to the contrary, the court decides to apply the NH statute of limitations to the claim and Π is allowed to maintain the action. First, the court notes that NH characterizes its statute of limitations as procedural, and the S.Ct. has approved of this characterization. NH then goes on to apply its conflicts law to the case → a. Where the law in question is procedural, the forum applies its own law. NH has two exceptions to this rule where it will apply foreign statutes of limitation → i. Where the foreign statute extinguishes a right; or ii. Where the foreign statute is an inherent part of the statutory scheme creating the right. b. Since neither the CA nor the OH statute of limitation fall into the exceptions and NH has no borrowing statute, the NH statute of limitations appears to apply, nevertheless the court engages in an examination of the law as though it were substantive just in case. c. NH adheres to the better law approach →47 i. Predictability of result: This is not that important in a non-contract case. Plus Δ could not predict whether Π would bring a timely action. ii. Relationship among the states: NH has a significant relationship to the case b/c libelous material was sold there. iii. Simplification: Applying the NH statute is simple. The NH court cannot discern the weight the competing jurisdictions assign to their statutes and the reasons that the statutes call for a shorter limitations period. iv. Forum interests: NH has a concern w/ the orderly administration of its courts as well as protecting the respective interests of Π and Δ. There is no conflicting interest that outweighs the forum interest. v. The better law: NH believes it has the better law. NH has a general preference for decisions on the merits and has long statutes of limitations for many types of actions. d. The NH statute of limitations applies. The court was not asked to decide what substantive law applies. 95. Approaches to the Statute of Limitations (SL): a. Traditional Approach: i. If the action is barred by the SL of the forum → no action can be maintained even if the action is not barred in the state where the cause of action arose. ii. If the action is not barred by the SL of the forum → an action can be maintained in spite of the fact that the action is barred in the state where the cause of action arose. b. Traditional Exceptions to the Traditional Approach: i. Borrowing statutes – Such statutes authorize borrowing the SL of a foreign jurisdiction. They apply only when the forum’s SL is longer than that of the other state. The SL that applies is usually the state where the cause of action arose/the state whose substantive law is applied. Just b/c a state has a borrowing statute does not mean it will be applied. ii. Judicial Exceptions: SLs that “extinguish a right” or are an inherent part of the statutory scheme → 1. If by a law of a state which has created a right of action, it is made a condition of that right that it shall expire after a certain period of limitation has elapsed, no action begun after the period has elapsed can be maintained in any state. 2. Typically wrongful death statutes. c. Modern Approaches: MOST states take a modern/substantive view to the SL and run it under the normal conflict approach they use. i. The New Uniform Act: Classifies SLs as substantive, resolve by conflict laws of the state. ii. Some courts employ the same conflicts analysis to the SL as they do for other issues of the case. iii. Restatement (2nd): Whether an action will be maintained against the defense of the SL is determined under the basic principles of the 48 Restatement. In absence of exceptional circumstance which make such result unreasonable: 1. The forum will apply its own law barring the action. 2. The forum will apply its own SL permitting the action UNLESS a. Maintenance of the action would serve no significant interest of the forum; AND b. The action would be barred under the SL of a state having a more significant relationship to the parties and the occurrence. Property96. Autocephalous Greek-Orthodox Church of Cyprus v. Goldberg (Ind. 1989): At issue in this case are valuable 6th century mosaic which were stolen from Π and later secretly transported to Germany where they were kept hidden. Some years later, Δ-IN negotiated to buy the mosaics. The negotiations occurred in the Netherlands, but the mosaics were briefly transported to Switzerland (a free port w/ favorable laws) for the consummation of the sale. From Switzerland, the mosaics were transported to IN. Once Π discovered that Δ had the mosaics Π filed suit in IN, seeking application of IN law. The court examines the potential conflict between Swiss law and the law of IN. Under IN’s approach the court must first determine whether the place of the wrong bears a more than a small connection to the action. Since the art was only in Switzerland for a couple days and no one in Switzerland has any connection to this case, Switzerland itself has little connection. Next the court must determine which jurisdiction has the most substantial relationship to the case. The court determines that this is IN: Δ in IN, bank in IN, mosaics in IN. Therefore IN law applies to the case—under IN law a thief cannot pass good title therefore the mosaics go back to Π. As a sidebar the court notes that this is really not a true conflict b/c if Swiss law was applied the Swiss court would apply IN law. a. The law of Π’s country, Cyprus, was not pled therefore it was not addressed. b. The court also concluded that IN’s 6-year statute of limitations had not lapsed b/c it did not start to run until Π was put on notice as to who had the art. c. Immovables: Law of the situs applies including renvoi. d. Moveables: Greater weight will usually be given to the law of the situs of the chattel at the time of the conveyance. Marital Property97. Hughes v. Hughes (NM 1978): This case presents the issue of what happens when a couple, married and originally living a C/L state, moves to and acquires new property in a community-law state. This court follows the rule that property coming from a C/L state retains the same character as it had in the C/L state. Since the property will be characterized according to the C/L rules, it should also be divided according to the C/L rules. The C/L state (here IA) considers a number of factors in determining how property should be divided upon divorce, including the duration of the marriage, the number of children, each party’s contribution by labor or otherwise to acquiring the 49 property,earning capacities, etc. and all other relevant factors. The court remands for a determination of the issue under IA law. 98. Dawson-Austin v. Austin (TX, 1995): In this case H owned stock before the couple got married (in MN). After their divorce, H moved to TX. W filed suit in TX, claiming an interest in the stock. Neither state would regard the stock as community property since H owned it prior to the marriage. The court applies MN law w/ respect to the stock—MN would treat the increase in value as shared marital property. 99. Dawson II: On rehearing, the court decides that it erred. Under the Restatement, the law of the state w/ the most significant interest should be applied. The court determines that TX has the most significant interest. MN has no interest since neither party lives there anymore. Under TX law H gets to keep all of the stock. 100. Substantive Law: a. Community-Property States: 8 states adhere to the community property scheme. In a this regime, spouses co-own in a 50:50 ratio all property acquired by either of them during the marriage, which is not classified as being the separate property of the acquiring spouse. i. Separate property is usually only property owned prior to the marriage and any property inherited by or donated to a spouse during marriage. ii. Whatever is not separate is community. iii. The regime terminates upon death or divorce and upon termination the property is subject to a 50:50 partition at the instance of either spouse or his/her heirs. b. Separate-Property States (C/L): Begins w/ the premise that marriage does not affect the acquisitions of either spouse—each spouse owns his/her own acquisitions. These states still protect the interests of the non-acquiring spouse at the end of the marriage through the “equitable distribution doctrine.” This does not necessarily result in a 50/50 split—it depends on the circumstances. c. Conflicts Problems: Conflicts problems arise not only when marriages move, but also when property is acquired in a state w/ a different regime. i. Law of marital domicile could control ii. Law of original marital domicile could control (if parties moved) iii. Law of the situs of immoveable property could apply iv. Law the situs of moveable property at the time it was acquired could apply101. The Problem of Moving Spouses: a. From a C/L state to a CP state → i. Traditional Approach: The court applies the law of the former domicile in characterizing the property and the law of the forum state in distributing the property. If the marriage moved from a C/L state to a CP state → this would result in all assets being the “separate” assets of the breadwinner (assuming only one) and under community property laws separate property is kept separate and the other spouse would get nothing. 50 ii. Pure Borrowed-Law Approach: The court applies the law of the former domicile in both characterizing and distributing the property (Hughes). iii. The Pure Quasi-Community Property Approach: The forum state applies its own law both to characterize and distribute the property (CA). iv. The “Fourth Approach”: Property classified as community property under the laws of the forum is distributed under the laws of the forum. Property that is not classified as community property is treated as separate property, however, the acquiring spouse retains the same rights in the property as he had in the state in which he was domiciled at the time of acquisition (Dawson I). v. Dawson II Approach: Determine which state has the most significant interest and apply that state’s law. b. From a CP state to another CP state: Problems could arise if the states characterize the property differently. In such a case the conflict approach of the forum will determine which law to apply. c. From a CP state to a C/L state → Property earned during the marriage prior to the move will be considered community property. Succession & Wills102. Guidry v. Hardy (LA 1971): Rule: Issues relating to the capacity of the testator to make a will of immoveable property will be resolved by applying the laws of the place where the property is situated, irrespective of the laws of the domicile of the testator or the place where the will was executed. In this case T died in CA, leaving a will made in CA. Under the will, T left the majority of his property (both in CA and LA) to his second wife (widow). Widow probated the will is CA and Π (son of first marriage) contested the will, claiming undue influence. The court agrees w/ Π and declares the will invalid, therefore the CA property passes through CA intestate laws. BUT, CA cannot affect the property in LA, so Π brings an action in LA seeking to have the will declared invalid (normally widow would probate first, but Π jumps the gun). LA does not invalidate wills based on undue influence however, therefore the will IS VALID in LA. The court is using the law of the situs to determine capacity; this is the approach that the Restatement takes as well. Π goes on to argue that the will is invalid anyway b/c it does not meet the formal requirements of LA’s wills act. BUT, the court does not agree; LA says that if a will is created according the formalities of the wills act where it was created → it is valid everywhere (this is the general rule). a. Note Π can’t use estoppel, b/c the issue is different; this suit involves property in LA. 103. Estate of Renard (NY 1981): Rule: Moveable property, disposed of in a will, passes according to the law of the jurisdiction where the decedent was domiciled at death. In this case T moved from France to NY, where she became a U.S. citizen. She later moved back to France, where she made a will disposing of mainly NY and some French property. A clause in the will specified that NY law would apply. T died in France. The will was probated in NY where T’s son (Π) contested the will, claiming a forced share under French law. Normally French law would apply, since T was 51 domiciled there at death, but NY has a law that allows for the specification that NY law will apply to NY property to be included in a will (this is an EXCEPTION TO THE RULE). After performing a conflicts analysis (NY testamentary freedom vs. French limits on that freedom), the court concludes that, in order to carry out the obvious desires of the T and in light of T’s long residence in NY, NY law will apply and Π is not entitled to a share of the NY property. Status of Individuals104. Hermanson v. Hermanson (NV 1994): H & W were married in CA when W was 6 months pregnant w/ another man’s child. The two later split and W moved to IA for a period of years. In an attempt to reconcile, W moved to NV and when reconciliation failed, W filed for divorce. The trial court determined that CA law was applicable to determine the status of the child. The CA at the time (since repealed) established a conclusive presumption that a child born during the marriage was of the marriage. W appeals, claiming the child is not H’s and NV law should apply. The NV court applies a two-part conflict test, first determining if another state has a substantial relationship to the case and if so, second determining whether application of that state’s law would violate NV public policy. First the court determines that CA has no substantial interest—the parties have not lived there in many years and the only other connection is that the child was born there. Plus, CA has no interest in applying a repealed law. Second, application of that law would violate NV public policy. NV law is to be applied and therefore there is a rebuttable presumption that the child is of the marriage—Π may prove otherwise. 105. Smith v. Smith (MN 1994): Mother sought to establish paternity for a child born during a marriage, but not of the marriage in OR. OR did not impose a presumption of paternity, but MN did. MN law was applied b/c MN had greater interests, especially since the mother currently lived in MN. 106. Validity of Marriage: a. General presumption: If the marriage was valid where it was performed → it is valid everywhere. b. The Restatement embraces the most significant relationship test to determine what law applies, plus the presumption, unless violative of public policy c. If a marriage is not valid then it can be annulled. 107. Divorce: a. The Restatement: The local law of the domiciliary state in which the action is brought will be applied to determine the right to divorce. b. The issue in the past was not the law that applied, it was where you could get PJ.108. Incidents of Status: a. Often status is an incidental issue. For example, statue will be raised in wrongful death or succession cases. 52 b. While most of the law governing status want to assure that the determined status is recognized universally, w/ incidents of status it is not as important, so status could be affected by movement. c. Once your status is accepted, you get the rights that go along with that status. EX: If H & W are married in State A, A accepts their status as married. If H dies and W finds out he was concurrently married to another, courts won’t deny W her rights of succession (as long as she didn’t know). Courts will try to be fair. Corporate Governance 109. McDermott Inc. v. Lewis (Del. 1987): Rule: With respect to matters of corporate governance, the law of the state of incorporation applies (“Internal Affairs Doctrine”). This case involves an internal corporate matter, namely whether a DE sub of a Panama corp may vote in a manner prohibited by DE law, but allowed by Panama law. Since Panama law allows the voting practice at issue and the corp. is incorporated in Panama, the court must only determine if this in an “internal affair.” While some acts may be performed by corps and individuals, an internal affair is peculiar to a corporation; it is an act that can only be taken by a corp. Since the voting at issue is an internal affair, the law of Panama will apply. a. Most courts unquestioningly follow the internal affairs doctrine. b. Under the modern approach to this doctrine, there is a presumption that the law of the state of incorporation applies, but a more flexible policy analysis is allowed. i. Policies will come into conflict when the corp is incorporated in DE and does all of its business in another state. ii. In this situation, some courts take the position that the interests of the state where the activity occurs can govern some policies. c. Where a corporation deals w/ outside third parties → it is treated as an individual and normal conflicts law applies. CONSTITUTIONAL LIMITS ON CHOICE OF LAW Due Process and Full Faith and Credit110. Home Ins. Co, v. Dick (U.S. 1930): Rule: Where a state has nothing to with the transaction at hand, it may not apply a forum law that would deprive due process of law. Here, Dick-Π-TX was living temporarily in Mexico when he received a boat insured by a Mexican company under Mexican law. The Mexican policy had be reinsured by two NY companies. Π wanted to collect o the insurance K and brought suit in excess of the one-year limit in the policy. In trying to secure jurisdiction over the Mexican company back in the day, the court attached certain property of the NY companies. When the case came to trial only the NY companies appeared and the TX court applied a TX law, which states that a provision limiting the period in which a suit can be brought on a contract may not be less than two years. As a result the one year limit became invalid and the attached properties in NY were to be used to satisfy the judgment. The NY companies appealed alleging that they were deprived of property w/o53 due process of law and the Supremes agreed. The Court decides that the TX law is substantive, limiting the capacity of persons to contract. While TX may do so for contract made in TX, it cannot apply this law extraterritorially to invalidate any contract litigated in TX court no matter where it was made. Since neither the making nor the performance of the contract was in any way involved w/ TX, TX was w/o power to effect its terms. Where the parties have expressly agreed on a time limit → that time limit controls. NY companies win. a. The question of due process in this case involves the state’s contact with the transaction to make applying its law fair to Δ. If not → the state cannot apply its law. If the statute of limitations in TX was shorter → they could have applied it no problem, but the longer SL changes the nature and content of the case and the right of the parties. b. The type of PJ secured in this case is longer available. 111. Alaska Packers Ass’n v. Indus. Accident Comm’n of California (U.S. 1935): A Mexican employee (Palma) made a contract w/ Π-CA to work in AK. The contract specified that AK worker’s comp would apply. Palma gets back to CA and applies for CA worker’s comp (WC). Since the CA WC rules say that employers cannot contract out of them, the CA courts rule that the provision specifying AK worker’s comp is invalid and CA WC applies. There are two issue before the Supremes: a. Does due process preclude the state from giving CA WC? i. No, the statute is not extraterritorial. Here the K was made in CA—that is enough contact to apply CA law. CA also has a legitimate interest b/c it is highly improbable that the employees could successfully get WC in AK. ii. The due process clause denies to a state any power to restrict or control the obligation of contracts executed and to be performed w/o the state, as an attempt to exercise power over subject matter not w/in its constitutional jurisdiction. b. Was the CA court bound by Full Faith and Credit (FFC) to apply the AK statute rather than its own? i. Conflicts between two state statutes are not to be resolved by immediately turning the FFC (this would have the absurd result of each state applying the other’s statutes and not their own); rather, the court should appraise the governmental interests of each jurisdiction and decide which law should apply according to weight. Since the interest of AK was not shown to be superior, CA can apply CA laws. ii. The problem in this case really arises from a former S.Ct. ruling: Bradford Electric Light v. Clapper. In this case, there was an employer/employee relationship in VT, and the job was located in NH, where Π-VT was injured. Π got VT WC, and then went to NH to sue. The problem was that the VT WC scheme says that WC is the exclusive remedy—allowing Π to sue in NH would thwart the VT statute. In this case the Court held that under FCC, the NH court was bound to apply VT law and Π could not sue. 54 112. Pacific Employers Ins. Co. v. Indus. Accident Comm’n (U.S. 1939): The Court held that CA could apply CA WC laws to a MA employer, where a MA employee was injured in CA. This was true even thought the MA WC law purported to be the exclusive remedy for injuries occurring both w/in and w/o MA, where the employment K was entered into in MA. FFC does not enable one state to legislate for the other or to project its laws across state lines so as to preclude the other from prescribing for itself the legal consequences of act w/in it. Here the Court did NOT balance the interests, it merely said CA had an interest therefore CA could apply its law. In principle, this overruled the Clapper case. 113. Carrol v. Lanza (U.S. 1955): Suggests that the situs of the injury is enough for a state to apply its own laws. Here, there was an employer/employee K in MO and the employee was injured in AR. The employee received MO WC, which purports to be the exclusive remedy. Then the employee sued in AR. This was allowed b/c AR did have an legitimate interest. This seems to definitively reject a weighing of state interests. If a state has ANY interest then it can apply its own law.114. Wells v. Simonds Abrasive Co. (U.S. 1953): The Court rejected a federal choice of law standard. States may apply their own conflicts laws, subject to FFC and other constitutional provisions. FCC just sets a minimum standard.115. Order of United Commercial Travelers v. Wolfe (U.S. 1947): SD could not apply its longer statute of limitations, where under the constitution of the UCT, a six-month limitations period applied. UCT-Δ was incorporated in OH, where this provision was legal and licensed to do business in SD. When Π brought suit in excess of the six-month limit, the Court seemed to balance the interests and applied OH law under FFC. But the Court said it was not balancing—it was assuring uniformity; all members of the society should be treated equally.116. Allstate Ins. Co. v. Hague (U.S. 1981): Rule: A state must have a significant contact, or a significant aggregation of contacts, creating state interests, such that a choice of law is neither arbitrary nor fundamentally unfair. This case stems from an auto accident in WI involving all WI residents. Π’s husband died in the crash. Π later moved to MN, and brought suit there seeking to collect on the insurance polices of her husband. MN allowed a “stacking” of insurance polcies, so Π could collect on the insurance owned on all three of her husband’s vehicles. WI did not allow such stacking. The MN court, using the better law approach, applied MN law and Π was allowed to collect. Allstate appealed arguing that application of MN’s law violated FFC. a. The Plurality: Three contacts to MN were found → the decedent had worked there for 15 years before dying, Π moved to MN, and Allstate did business in MN. (This seems odd, b/c these contacts have nothing to do with the insurance contracts at hand). But, the plurality suggests that aggregation is important. The Court fails to distinguish between Due Process and FFC. b. The Concurrence: Believed the choice of an “arbitrary or fundamentally unfair” law would violate Due Process. This did not occur b/c the forum is almost always justified in using its own law + the stacking rule is allowed in the majority of 55 states, so application of the law did not frustrate the expectations of the parties. Also said that the purpose FFC is to insure that states “respect the legitimate interests of other states.” Since both MN and WI have interests, the choice was not unconstitutional. c. The Dissent: Said that the Constitution imposes only a “modest check” on power that applies only when there are no significant contacts—everyone seems to agree on the black letter law. The dissent only disagreed w/ the application of the law to the facts, concluding that MN did not further a legitimate state interest by applying its law. 117. Phillips Petroleum Co. v. Shutts (U.S. 1985): Rule: The Constitution is only implicated when a true conflict exists. Then, for a state’s substantive law to be selected in a constitutionally permissible manner, that state must have a significant contact or aggregation of contacts, creating state interests such that choice of law is neither arbitrary nor fundamentally unfair. This is a class action claim against Δ (DE-corp, PPOB-OK). Δ failed to pay royalties on time to the lessors of gaslands and now the class is suing for interest money lost. Fewer than 3% of the Πs and 1% of the leases had any connection to KS, yet the KS court applied KS law (which had a significantly higher interest rate). Δ appealed alleging a violation of Due Process and FFC. The Court found that the KS court failed to analyze the different state interests and reach a conclusion that KS law should be applied. The KS court just said it would apply its own law unless a compelling reason exists to apply the law of another state. The Court said that a state cannot apply its only law to a case in which it has no interest (and a state cannot use application of a single law to satisfy the requirement that a class must have a common question of law). Again, the Court failed to distinguish the Due Process and FFC standards. This case was remanded to KS. a. Seems fairly clear that de minimis contacts will not be enough; the Constitution requires contacts of some substance. b. There are obviously some limits to a states choice of law.118. Sun Oil Co. (Phillips Petroleum) v. Wortman (U.S. 1988): After the remand the KS court determined that all interested states would apply KS law, avoiding the conflicts issue. The KS court then applied its longer SL where the action would be time-barred in all other relevant jurisdictions. It reasoned that it could do this b/c SL is procedural. The Supreme agreed, sustaining the KS ruling under both Due Process and FFC challenges. Looking at the tradition behind the Constitution, Scalia reasoned that SLs have always been viewed as procedural so, this did not frustrate the expectations of the parties. a. What if KS was wrong about what the other states would do in this situation? THIS DOES NOT MATTER. A choice of law is not unconstitutional unless there is a clear cut unmistakable law in the other states that KS knew about and failed to follow. If there is a good faith mistake then there is no violation. b. It is now clear that the B/P rests on the party seeking to have another law imposed to bring that law forward and show the conflict. This switched the B/P from the courts to the parties. 56 c. Allstate still states the basic rule: There are very few constitutional limits on the choice of law. d. There is no constitutionally required balancing test!!! 119. BMW of North America v. Gore (U.S. 1996): Π purchased a new car that had been repaired for minor paint damage due to acid rain. The damage was not detected by Π and was only detected by a paint and finish expert. Π sued in AL, although he was not from AL. The jury found $4000 in compensatory damages and $4 million in punitive. The AL court reduced the punitive damages to $2M, but the court held that even the reduced damages “grossly violated Due Process.” AL does not have the power to punish BMW for conduct that was lawful where it occurred and had not impact on AL or its citizens. State’s Duty to Provide a Forum120. Hughes v. Fetter (U.S. 1951): Rule: With limited exceptions, a court must provide a forum to a transitory cause of action that arises elsewhere. This case arose out of an auto accident in IL. Suit was brought in WI under the IL wrongful death statute. The WI court refused to hear the case, arguing that WI statutes would not allow them to entertain suits brought under the wrongful death statutes of other states (but the WI wrongful death statute only covered deaths in WI). The majority of the Court held that the Illinois law was a “public act” entitled to FFC. In absence of a substantive forum law to the contrary, the sovereign interest of a law-giving state should not be so lightly disregarded. a. Π did not bring suit in IL, b/c she could not get PJ over Δ. b. Limits to Hughes rule → i. The decision does not deal w/ constitutional choice-of-law decisions. ii. The forum could refuse to hear a case based on forum non conveniens. For this to work there must be another available forum. iii. There is a loophole—if WI barred all wrongful death actions → perhaps it could refuse the case. 121. Broderick v. Rosner (U.S. 1935): A NY law provided that SHs in a NY bank were liable for the debts of the bank. The NY Bank-Π brought suit in NJ against the NJ SHs of the bank. NJ law required that ALL SHs must be joined and b/c of lack of PJ they were not, so NJ dismissed the suit. The Supremes reversed explaining that a state cannot escape the constitutional requirement of FFC by the simple device of denying jurisdiction in such cases to courts otherwise competent. When courts have general jurisdiction over the subject matter and parties → they cannot refuse to hear the case. a. Court can refuse to enforce the penal laws of another state. b. Court may adopt the remedy that it deems appropriate. c. HYPO: State long-arm statute reaches Δs who committed torts w/in the state, but not torts w/o the state. Can the state deny a forum to Π who alleges tortious conduct of a Δ who has contacts w/ the state but the tort was not committed in the state?57 122. Tennessee Coal, Iron & RR Co. v. George (U.S. 1914): Rule: A State cannot create a transitory cause of action and at the same time destroy the right to sue in any court having jurisdiction. In this case, Π-AL was injured while working in AL. Π sued his employer in GA (b/c that is the only place he could get PJ) and invoked the AL statute, which made masters liable to their servants. As a defense, Δ invoked a clause of the statute, which said that claims under the statute could only be entertained in AL. The GA court enforced the statute and Δ appealed, alleging a violation of FFC b/c GA did not enforce the limitation. The Supreme affirmed GA’s decision. AL cannot deprive the right of Π to sue in the court where he can get jurisdiction. AL cannot stop another state from trying the action—this would impose on the sovereignty of GA. a. A transitory cause of action is an action that has no particular tie to a certain court; it is a regular cause of action. The action could be tried in any court in AL therefore it was transitory. Therefore it could be tried in any court where Π could get jurisdiction. b. A statute may tie the cause of action to a specific court. In such cases it would not be transitory and the action would be limited to the specific court, e.g. bankruptcy court. The right and the remedy must be inseparable. c. A state cannot close the forums of other states. 123. Nevada v. Hall (U.S. 1979): In this case Π-employee of NV was on business in CA and was injured. Π brought suit in CA against the state of NV. NV’s own courts could not have maintained the action, but the CA court said that under CA law NV was amenable to suit. NV then said that the amount of damages must be limited to $25K b/c a NV statute places a limit on the amount of any award imposed against the state. NV argued that FFC required the CA courts to accept this limit, but the CA courts did not and over $1M in damages were awarded. NV appealed to the Supremes → a. Sovereign Immunity involves two different concepts: i. Unquestionably a state may make itself immune from suit in its own courts. ii. A state’s claim of sovereignty in the courts of another state however, would be answered by reference to the laws of the forum state, here CA. CA has made it clear that it no longer extend immunity to NV as a matter of comity. Nothing implicit in the Constitution provides a basis for the Court to impose limits on the powers of CA exercised in this case. There is no constitutional mandate for interstate comity. b. FFC: Given the interests of CA in providing full recovery, the NV limit does not require CA to enforce NV’s limit. c. There have been many cases since this one where states have been sued in the courts of other states. Other Constitutional Provisions124. The Privileges & Immunities and Equal Protection Clauses: a. The Constitution requires that all individuals must be treated equally. A state cannot favor its own citizens. b. Piper: NH was not allowed to limit admission to the NH bar to NH citizens.58 c. “Alaska Hire Act”: AK was not allowed limit the hiring of out-of-state persons. d. Limits on Privileges and Immunities Clause → i. The clause does not prohibit all discrimination, but only protect those privileges and immunities which are, in their nature, fundamental; which belong, of right, to the citizens of all free governments; and which have, at all times, been enjoyed by the citizens of the several states. ii. Thus, where gaming licenses were restricted to in-state residents, MT did not violated P&I. iii. Fundamental rights include: owning property, private employment, right to state benefits (welfare). iv. This is a sort of balancing test. It is okay to discriminate if there is a good reason and the restrictions are on trivial rights.125. The Commerce Clause (CC): a. A state law that interferes substantially w/ commerce that Congress has the power to regulate is unconstitutional. b. EX: NH had employees coming from MA to work in NH and then going back to MA to pay taxes. Taking the position that money earned in NH should to taxed in NH, NH enacted a law where the money was so taxed. To be fair, NH said the tax would not exceed the tax imposed by MA and if MA would not waive the MA taxes → the employee would not have to pay. The S.Ct. struck this law down as violative of CC. c. Brown-Forman Distiller v. NY State Liquor: A NY law said that anyone selling liquor to NY wholesalers could not charge anymore than the lowest price than they charged in any other state. The net effect was to make illegal for the seller to lower prices in other states and NY was effectively controlling prices outside of its territory. The Court struck the law down as violative of the CC.SPECIAL PROBLEMS OF CHOICE-OF-LAW IN FEDERAL COURTS 126. Erie RR v. Tompkins: Rule: Under the RDA federal courts are to apply the relevant state’s judicially created C/L. In this case Tompkins (Π) lost an arm due the negligence of a passing train. Π brought suit in federal court (in PA) based on diversity of citizenship. The standard for recovery in such situations was whether the RR had acted willfully or wantonly in creating the danger. But, since the case was brought in federal court, it was determined that it was not bound by PA decisions and allowed Π to recover. On appeal, the S.Ct. decided that federal courts sitting in diversity jurisdiction MUST apply the law of the relevant state. a. The intent of Erie is to assure that if the same case were to go to federal court and state court → the same/very similar outcomes would be reached. b. Obviously where there is a federal law → the Supremacy Clause kicks in and the court applies the federal law. c. The RDA, which had been interpreted incorrectly for years, had been allowing federal court to create a federal C/L. This is violative of the 10th Amendment and therefore it must be changed. Federal courts only gain jurisdiction by diversity, 59 they DO NOT gain the power to change/mold the law; that is reserved to the states.127. Guaranty Trust Co. v. York (U.S. 1945): Rule: “Outcome Determinative Test” → A substantive law is one that if applied in state court and not in federal court, would result in two different outcomes. In such cases, the federal court must apply state law. In this case, the issue was whether to apply the state statute of limitations or the more flexible federal “laches” doctrine to the case. York’s claim was barred under the state statute, but may have been allowed to proceed under the federal doctrine. The Court found that the federal court must apply the state statute of limitations, refusing to distinguish Erie on the basis that it involved state “substantive” law, while York involved “procedure.” If following a federal practice not available in state court might “substantially affect the result of the litigation,” the court must apply the state rule instead, to prevent diverse parties from gaining unfair advantages simply b/c they can choose federal court. The crux of this case is that Congress afforded out-of-state litigants another tribunal, not another body of law. a. York extended the Erie doctrine well beyond the area in which it is constitutionally compelled by the limits on federal power. York seemed to require federal courts to use state law in many cases even though Congress or the federal court would have the power to adopt a separate rule. b. “Distinction” (?) between procedure and substance: i. Procedure concerns the manner and means. ii. Substance significantly affects the outcome of litigation. This indicates that something that seems procedural could very well be substantive. c. The Court does not care if the SL is procedural for conflicts purposes; for the purposes of RDA/Erie, it is substantive. DO NOT CONFUSE THE TWO. d. The case says that the remedy afforded by the two different courts does not have to be the same, but readers seized on the idea of “outcome determinative.” As a result of this case ALL of the FRCP came into question b/c they could all be seen at outcome determinative.128. Byrd v. Blue Ridge Rural Elec. Cooperative, Inc. (U.S. 1958): Rule: Outcome Determinative Test + Countervailing Federal Interests → State laws cannot alter the essential character or function of the federal court—state statutes which would interfere with the appropriate performance of that function are not binding on the federal courts. In this case the issue was whether to allow a judge or jury decide whether Π was a “statutory employee” of Δ. The state law mandated that the judge decide, while the federal law left that question to the jury. The Court reaffirmed both Erie and York, but determined that the state rule allowing judges to decide “employee” status was not “bound up with the definition of the rights of the parties,” but merely a “form and mode of enforcing” the compensation scheme. Thus, this issue was one of procedure as to which the federal court was not constitutionally compelled to apply the state practice. Also, the court noted that the 7th Amendment right to a jury was implicated in this case and, given the importance of this right, the Erie policy should yield to the federal policy of broad availability of a jury trial. The decision of Byrd espoused a new three prong test for determining when to apply state law in federal court:60 a. Is the rule “bound up with the rights or responsibilities” of the state-created claim? (I.e. Is it substantive?) i. If YES → apply state law. ii. If NO → b. Is the rule outcome determinative? i. If NO → apply federal law. ii. If YES → c. Are there countervailing federal interests? i. If YES → apply federal law. ii. If NO → apply state law.129. Hanna v. Plumer (U.S. 1965): Rule: Modified Outcome Determinative Test: The Erie doctrine is not controlling when a valid Federal Rule is in conflict with state C/L policy. In this case Π brought suit in federal court against an executor and served process on Δ by leaving the summons and complaint at Δ’s home according to FR 4. The state law required in hand service. If the service was valid → the suit could go forward, but if not it would be dismissed b/c the statute of limitations had run. (RDA ANALYSIS →) The Court first concluded that whether the service is valid must be considered under the twin aims of the Erie doctrine: (1) to prevent forum shopping and (2) to prevent the inequitable administration of laws. The Court found that, viewing the outcome determinative test in light of these twin aims, the federal court was not required to apply the state rule: a. Unlikely that Π would choose a federal forum to avoid serving Δ in person. b. The different types of service are not sufficient to be viewed as an “inequitable administration of the laws.” i. In this case, both the federal and state rules are designed to give notice → they both accomplish the same thing, and are therefore procedural. REA ANALYSIS: Secondly, the Court found that there is both constitutional authority (Art. III) and statutory authority (REA) for the promulgation of the Federal Rules. This suggests that Congress and the Court have the broad constitutional authority to adopt any rule that is “arguably procedural.” c. The test must therefore be whether the rule really regulates procedure—the judicial process for enforcing rights and duties recognized by substantive law and justly administering remedy and redress for disregard or infraction of them. d. However, a Rule, though procedural under section (a) of the REA b/c it regulates the judicial process, is invalid under section (b) only if it impinges upon substantive rights. (Very few cases have rejected the use of a FR under this subsection of the REA).130. Gasperini v. Center for Humanities, Inc. (U.S. 1996): Rule: In applying the RDA analysis, the court must consider whether overriding federal interests are present, even after determining that state law “should” be applied under the twin aims. At issue in this case is the standard of review for the size of damages awarded by a jury. a. State law requires: (1) “Deviates materially” at trial level → (2) De novo at appellate level.61 b. Fed. law requires: (1) “Shocks the conscience” at trial level → (2) “Abuse of discretion” at appellate level. The Court determines that the state standard will be applied at the trial level and the federal standard will be applied at the appellate level: (1) Deviates materially → (2) Abuse of Discretion. The Court goes through and RDA analysis b/c they believe they are dealing with judge-made law. If the state courts used a “deviates materially” standard and the federal courts used a “shocks the conscience” standard → this would encourage forum shopping—litigants would go the federal courts in search of higher judgments. But, at the appellate level, there are overriding federal interests, namely the 7th Amendment’s reexamination clause. The federal appellate courts must defer to jury decisions unless there has been an abuse of discretion, therefore the federal standard of review must be applied at the appellate level. This case reinvigorated the balancing test of Byrd in those situations in which there is no clear federal rule.131. Klaxson Co. v. Stentor Electric Manufacturing Co. (U.S. 1941): Rule: A federal court sitting in diversity jurisdiction MUST apply the choice-of-law rules of the state where it sits. a. Is this really required by Erie? Don’t federal courts have the power under the FFC to make rules for choosing among state substantive law? b. There are now provisions that allow federal courts to ask state courts to issue advisory opinions on the conflicts issue. c. Federal courts have the power to transfer a case in the interests of justice, but they can only transfer to a court where Π could have originally brought the suit. This creates a new problem. If a case is brought in state A and transferred to state B → whose law applies? The S.Ct. said apply the law of the transferor jurisidiction. i. This certainly applies when Δ requests the transfer, but what about when Π requests the transfer? ii. In Ferens v. John Deere, Π brought an action in MS b/c MS was the place where the SL had not run. After securing jurisdiction, Π wants to transfer the action to PA, where the cause of action arose. The action would be time-barred in PA. The Court held that the law of the transferor court would still apply and the MS SL controlled. d. If a state court would dismiss → does the federal court have to? The trial courts are split on this issue. It is difficult to determine whether this is procedural or not. e. Today, both choice-of-law and forum selection clauses in contracts are upheld by the courts (traditionally forum selection clauses were not viewed favorably). They are upheld so long as they are reasonable and valid under K law. 62

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