Conflict of Laws Outline

Overview

Conflict of laws can simply be defined as “whose laws (which forum or which sovereign) are we going to follow as we strive to litigate this case?” In other words, conflict of laws is also known as “choice-of-laws” which was covered briefly in Civil Procedure I.

Despite this straightforward definition, there are several choice of law theories. The unfortunate matter is that none of the states have unanimously adopted only one theory. So, it is vital to be well informed of which state applies what theories. Below is a brief overview of each theory and the terms associated with them.

• Traditional
• Significant Contacts
• 2nd Restatement
• Interest Analysis
• Lex Fori
• Better Law
• Combined Modern

Significant Terms

• Comity – When one jurisdiction is not required to, but accepts the law of another jurisdiction.
• Lex loci – “the law of the place.”
• Lex loci contractus – “the law of the place of the contract.”
• And lex loci delicti – “the law of the place of the tort.”
• Vested Rights – When you have a claim to one state, then you have a claim in another.
• Domicile – Where an entity resides.

Traditional Approaches

This approach is also shown in the First Restatement and has three steps:

1. Characterize the Issue (contract or tort)
2. Determine the connecting factor between the local rule and the claims
3. Apply the law of the place identified by the connecting factor.

Although traditional choice of law methods are generally considered outdated, there are a few states that still adhere to the principles in torts.

Torts

Unintentional Torts

Alabama Great Southern Railroad v. Carroll, 97 Ala. 126 (1892).

For an unintentional tort, such as negligence, the choice of law will be where the injury was inflicted or felt.

Each state has the sovereignty to choose the laws for themselves. Although the contract was in Alabama, the parties from Alabama, and the negligence occurring in Alabama, no injury actually occurred (or was even inflicted) within the state. As such, the plaintiff has no recourse in Alabama and must rely on Mississippi law for a remedy. Here, Mississippi did not provide a remedy. Consequently, the plaintiff was out of luck (when suing the railroad company).

Levy v. Daniels’ U-Drive Auto Renting Co., 108 Conn. 333 (1928).

In this case, a car rental company contractually agreed to be vicariously liable for an accident caused in their car (Conn had the law and the parties agreed to follow that law).

First Restatement Sections

Also consider the following sections from the First Restatement of Conflicts: §§377-79, 382, 384-87, 390-91, 398-99, 412, and 421. Essentially, these sections say, for tort, “the last event necessary to make an actor liable.” As in Carroll, this is where the injury occurs “the place of the wrong”.

Intentional Torts

Bullard v. MRA Holding, LLC, 292 Ga. 748 (2013).

The place where the last event occurred to make an actor liable is the place where a remedy can be found. Typically, this is the place where the injury is felt.

This case was originally filed in a federal court. According to Klaxon v. Stentor, the federal courts will follow the choice of law of the state where the federal court is located.

Georgia says that they will follow the laws of the jurisdiction where the tort occurred.

Although the filming occurred in Florida, the injury was felt primarily in Georgia. Thus, the Georgia court says that the tort occurred in Georgia. As a result, the plaintiff could have a cause of action within Georgia.

A couple issues arise considering how this is an intentional tort. Because this is intentional, should the tortfeasor be sued in the place where the intent occurred? Also, the issue with intentional torts is that it can induce forum shopping, something the courts generally oppose.

Marra v. Bushee, 317 F. Supp. 972 (D. Vt. 1970).

In this case, the court said that the place of injury was also the place where the conduct occurred. Different, because it wasn’t just where the injury was felt.

Contract

First Restatement of Conflicts

§§ 7, 311-12, 314-15, 323, 325-26, 332-36, 340, 355, 358, 360-61, 372.

Essentially, the choice of law state will be based on where the contract was formed and becomes effective. The sections determine how we which state is where the contract was formed (e.g., where a telephone call for acceptance constitutes formation) Additionally, if there is a contract, performance will be measured by the state where the performance is to be completed. We will also need to ask who is breaching performance because different parties may be performing in different states.

Poole v. Perkins

A contract is formed and governed in the state where the performance is to be completed.

To determine whose laws will apply, the court will consider where the contract was formed. To determine where the contract was formed, the court will see what was the place of performance and where the parties intended to form the contract.

This case is at seeming odds with the First Restatement approach, because it focused so much on the intent of the parties. There are many debates about how much a court should rely on intent, because of how difficult the intent can be to discern.

The court also says that the contract formation is the place of performance, then goes on to say that performance occurred in Virginia. However, as a promissory note, wouldn’t performance occur when the loan was provided? Or was performance the repayment of the loan? Virginia appears to treat repayment as the act of performance.

Linn v. Employers Reinsurance Corp.

The contract is formed in the place where acceptance is spoken from (in the case of acceptance being communicated via telephone).

Acceptance by telephone, email, etc. is called the Dispatch Rule. This rule can have some issues though. For example, what if the person accepting is in a state completely disconnected from the contract or from the parties (the acceptor was on vacation or a business trip).

Sometimes there are situations where the case can be characterized by tort or contract, and may have several issues associated with those issues. So, you need to take the problem issue by issue, also known as “Depecage.”

Domicile

First Restatement of Conflicts

§§ 9-16, 18-21, 23, 25, 27, 41

Domicile is either where a person has settled (typically where their home is), or the place where the law determines. If it is by where the law determines, the forum state’s laws will define domicile. A party only has one domicile and a corporation has domicile in the state where they are incorporated.

Ultimately, this definition is summarized into two parts: 1) physical presence with 2) the intent to remain intentionally.

Domicile is usually not used, but has a time and a place. This usually occurs when the actions are people centered (e.g., will’s a trusts).

White v. Tennant

White did everything to show that he had established a home in Pennsylvania. As such, his domicile changed to Pennsylvania when they moved there. There was no other point where he considered moving from Pennsylvania back to West Virginia (missing intent), it was still his home, despite becoming ill and passing in West Virginia.

Here, this is a probate court with an intestate death. As such, we are using the decedent’s domicile to determine who gets what. Domicile makes sense to use because you want to make sure that there is uniformity of where the action takes place (makes it easier to avoid issues with parties traveling).

Also consider Rodriguez Diaz v. Sierra Martinez, 853 F.2d 1027 (1st Cir. 1988).

Marriage

First Restatement of Conflicts

§§ 121-23, 128-30, 132-34, 136-141

As long as the marriage was valid in the state where the marriage was formed, it will be recognized anywhere (unless they travel to another state to avoid the laws of their domicile or there is a strong public policy reason against it).

Chassemi v. Ghassemi

If the marriage is valid in the state of celebration, then it will be recognized in Louisiana unless it is a violation of strong public policy.

According to Iranian law, first cousins are allowed to marry. As such, this is a valid Iranian marriage. Additionally, although the marriage is prohibited by law, there is no strong public policy keeping this marriage from occurring. This is true because Louisiana has ratified people married first cousins who were married in violation of the law. Other states don’t recognize this kind of prohibition, and others who do allow it under certain circumstances. All this information shows that although there is a public policy reason for not allowing this marriage, that reason is not strong. Consequently, this marriage is considered valid.

Compare with In re May’s Estate, 305 N.Y. 486 (1953) where a niece and uncle were married in Rhode Island (allowed as a religious exception) but the lawsuit was filed in New York (not allowed). The question was whether the marriage was valid. Here, the court said that the legislature chose not to address marriages from everywhere, just New York. So, the marriage was considered valid in New York.

Purple v. Ezeonu

Generally, if the marriage is valid in the state of celebration, then it will be recognized in New York unless it is repugnant of public policy. Polygamy is considered a repugnant public policy in New York.

The rule is important because New York does not recognize rape if you are married to the woman. So it was important to determine whether the parties involved were married.

Although the marriage was valid in Nigeria, plural marriage is repugnant to public policy in New York. For these reasons, the court will not recognize the marriage and it cannot be used as a defense against the charged crime.

The characterization here is “validity of marriage.” The connecting factor is that we look at the “celebration of marriage” unless there is an exception. Here, the exception is that this action was against a strong public policy, that is, polygamous relationships (also a crime).

Property

Real Property

First Restatement of Conflicts (regarding real property)

§§ 211, 214, 217-23, 225-27, 237-38, 244-46, 248-51

The law governing property will take place in the state where the land is located at the time when the conveyance is made.

This is called the situs rule, and governs pretty much any type of interest in real property.

Note also that there is a difference between the capacity to contract and the capacity to convey.

Burr v. Beckler

Burr filed this lawsuit to foreclose on a trust deed made to him by Ms. Beckler and her then husband Mr. Tobey. The land was in Illinois, the deed transferred in Illinois, but the promissory note authorizing payment was made in Florida. Although the state where the land is located governs the land, the deed must only be valid if the contracted note was valid. Thus, the law that will apply is where the contract was formed. Here, that was in Florida. In Florida, Ms. Beckler did not have the capacity to enter into a contract, so the note is void, as is the deed. Consequently, Burr loses.

The important characterization of this case is that it was done in contract, rather than property.

Thomson v. Kyle

This case has the opposite result of Burr. In Burr, the place where the note was made (being a contract) was the place that governed the law. Here, however, the land was in Florida, the note executed in Alabama. The main conflict is whether a woman has the capacity to contract. In Florida, they did while in Alabama they do not. Although the note was executed in Florida, the woman still had capacity because the laws governing the mortgage is Florida, the property being located in Florida.

Personal Property

First Restatement of Conflicts (regarding personal property)

§§ 255-58, 260-61, 289-91, 300-302, 306-307

The location of the chattel at the time of conveyance will govern.

During life, we will look at the situs of the movables at the time of the transaction. Upon death, it’ll be the domicile of the decedent. For marriage, it is the domicile of the marriage.

Blackwell v. Lurie

Mr. and Mrs. Lurie had purchased a valuable painting in Missouri and sent that painting to New Mexico to be displayed in a gallery on consignment. Subsequently, Mr. Lurie’s law firm went into bankruptcy and Mr. Lurie was found to be over a million dollars deficient. Mr. Blackwell, the liquidating trustee obtained a writ of execution against the painting and sought to enforce it in New Mexico.

The issue in this case is whether Mr. and Mrs. Lurie were tenants by the entirety regarding the painting. If so, then the writ cannot be executed against the painting. Missouri recognizes that Mr. and Mrs. Lurie would be tenants by the entirety while New Mexico does not.

The court utilizes the “time-and-manner-of-acquisition” rule. This rule simply states that the law where the chattel was acquired will govern. Thus, Mr. and Mrs. Lurie are considered tenants by the entirety and their debt is considered separate. Consequently, the writ for execution must be quashed.

Morson v. Second National Bank of Boston

The executor of a the deceased is attempting to recover a stock certificate that was gifted to the defendant while on a trip in Italy. The gift process was sufficient under Massachusetts laws but was lacking formalities required in Italy. So, whose laws govern, Massachusetts or Italy? The court says that stock certificates are different than other types of chattel which allows Massachusetts to govern, despite not being the location where the transfer occurred.

This case was not characterized as a transfer of personal property because stock certificates are unique. Thus, stock certificates will be evaluated based on where the corporation was incorporated. § 53 First Restatement of Conflicts. Had this been characterized as personal property, the jurisdiction would have been where the chattel was located at the time of transfer (here, Italy).

Corporations

First Restatement on Conflicts

§§ 154-55, 165-66, 182-83, 187-88, 190-92, 205

Incorporation is governed by the state where the corporation was incorporation or where the attempt was made. If successful, incorporation in one state will result in recognition by every other state.

The essence of this principle is called the internal affairs doctrine. This doctrine simply states that the state of incorporation will govern disputes about the internal affairs of the corporation (e.g., disputes between shareholders and directors, etc.).

McDermott Inc. v. Lewis

The plaintiff’s were given an improper voting device in a corporation under the laws of Delaware. However, the corporation was incorporated in Panama, which allowed the voting device in certain situations (the voting device here met those standards).

Our analysis has two parts. Does Panama allow the law? If so, whose laws govern, Panama or Delaware?

Part one is easy, Panama does allow the voting device to be utilized in the present situation.

Part two is also easy. Due to the internal affairs doctrine, the state of incorporation is designed to govern the internal affairs of the corporation. Here, the corporation was incorporated in Panama, so Panama law will govern the rules regarding the voting device.

Because Panama allows the voting device, and we are applying Panama laws, the voting device is a valid application of corporate voting power.

In other words, the state of incorporation governed here because we are dealing with the shares of the international corporation (and this is an international issue). Although this is the primary doctrine applied, there are such things as migratory companies, and different laws may apply to them. See the case below.

State ex rel Weede v. Iowa Southern Utilities Co. of Delaware

The utilities company is incorporated in Delaware, but is a migratory company, doing all of its work, management, and physical presence in Iowa.

Presently, the company was in violation of a stock transfer process enacted in Iowa. The question is, does the law apply to a foreign corporation primarily doing business within Iowa?

Here, the court decided that the law could be applied to the foreign corporation because the foreign corporation subjected themselves to the Iowa law. There is no reason for the Iowa legislature to apply the law only to Iowa corporations (with a significant punishment). As such, it makes sense that foreign corporations should be subject to the law as well. This is especially true because the corporation was a Delaware corporation in a technical (only on paper) sense.

Wrinkles

Characterization

Characterization is the process of understanding what type of law will govern the case: tort, contract, property, etc. This characterization matters because the outcome may be different if a case is characterized as a tort instead of a contract.

Haumschild v. Continental Casualty Co.

When a tort occurs in another state, but the parties are spouses, it makes more sense to apply family law which uses the domicile to determine which law governs.

This is a tricky characterization. Should we characterize this case as a tort, or as family law (where domicile will determine the choice of law). If this case was characterized as a tort, California law would govern (and the wife will lose), because that is where the accident took place. However, if this case is characterized as a family law matter, the place of the marital domicile will govern (meaning Wisconsin law will apply and the wife will at least have the capacity to sue). Because this is a unique family matter, this court says that it makes more policy sense to apply family law, rather than tort law.

The court here makes the switch (from tort to domicile) for policy reasons. It makes more sense for a family based lawsuit to occur in the state where the parties are domiciled.

Renvoi

The doctrine of renvoi is the practice of selecting a foreign state’s laws, including their choice of laws rules. This could be problematic, resulting in circular reasoning. As a result, the First Restatement generally denounced the practice, except for in cases of title to land or the validity of a divorce.

Renvoi means “to send back” or “return unopened.”

Some additional terminology includes: “whole law” which is a combination of the conflicts rules + the internal laws. Most places use a partial version of renvoi (use the whole law of the first chosen state, but only the internal law of the second state); that way, the circle ends.

In re Estate of Damato

This court wants to avoid the circular reasoning of the doctrine of renvoi. So, instead of applying Florida’s conflict of laws rules, which might be circular, they instead look to their inner law. Here, Florida’s inner laws would give the balance to the beneficiary. Thus, the trial court’s ruling is affirmed.

University of Chicago v. Dater

The Dater’s were working on a sale of property in Chicago, Illinois. The note was signed in Michigan by a married woman, then sent to Illinois. However, execution of the note was dependent on receiving good title.

So, was this contract made in Illinois or Michigan. The majority says that it will apply Michigan choice of law rules (or if it applies Illinois, the result would be the same), because the note was signed in Michigan. Consequently, the woman did not have the capacity to contract and the note is void.

Here, the court uses renvoi. Value was delivered in Illinois, so use Illinois choice of law rules, where it directs it back to Michigan’s internal law. Because Michigan’s internal law says that a married woman does not have the capacity to contract, the note was void.

Substance v. Procedure

First Restatement of Conflicts

§§ 584-85, 588, 591, 594-97, 599-601, 606

The law of the forum will determine whether the issue is procedural and the law of the forum will govern all procedure. The only exception is that determination of whether a contract has been integrated is based on the state where the contract was formed.

Sampson v. Channell

Whether the issue is procedural will be determined by the forum state. If the issue is procedural, the forum state’s laws will apply regarding that issue.

The issue of the burden of proof in a contributory negligence claim is difficult to determine whether the issue is substantive or procedural in nature. This appears substantive because the answer may affect the outcome of the case. However, it is also procedural, because Massachusetts would characterize this issue as procedural. So, how do we determine whether this issue is procedural or not? Well, ask the court of the forum state. If the state would treat it as procedural, then the issue is procedural. Using Erie.

Here, Massachusetts would treat the burden of proof issue as procedural and say that the defendant has the burden of proof in contributory negligence claims. Because this rule was not applied at trial, the case must be reversed and remanded for further proceedings.

This case shows has an issue can be characterized as either substantive or procedural, depending on the jurisdiction.

O’Leary v. Illinois Terminal Railroad

In Missouri, the defendant has the burden of proof to show contributory negligence. However, in Illinois, the plaintiff has the burden of proof to show that no contributory negligence occurred.

The burden of proof in a contributory negligence claim is sticky in nature. On the outside, it appears procedural (who has to prove something at court). However, on the inside, the burden of proof becomes substantive because it affects the plaintiff’s right to recover. So, Missouri determines that the burden of proof is substantive and determines that Illinois substantive law should apply, being the place of the tort.

Burden of proof is one of the gray areas regarding procedural v. substantive conflict of laws. Other examples consider the statute of fraud, statute of limitations, joinder, survival of a cause of action, availability of equitable relief.

Grant v. McAuliffe

An issue is procedural if it is not an essential part of the cause of action, but relates to the procedures to be applied in the case.

This case is also difficult to ascertain whether the survival of a cause of action is procedural or substantive in nature. At first glance, it may appear substantive because success of a lawsuit depends on whether there is a cause of action. However, this case is merely procedural. There is not a new cause of action being granted (as is the case in a wrongful death action). Instead, this is simply the continuation of an ongoing cause of action with the local procedure of estate administration.

There are also policy implications to use California law. Specifically, the estate is located in California and it is easier and cleaner to adjudicate the estate in one place.

Statute of Limitations

First Restatement of Conflicts

§§ 603–05

A cause of action will be governed by the statute of limitations of the forum unless the condition for bringing the cause of action is based on the statute of limitations within the substantive part of the foreign state.

Duke v. Housen

The statute of limitations of the forum state will apply unless the forum state will apply the statute of limitations of another state.

Because Wyoming is the forum state, the statute of limitations will apply except for the borrowed statute. Thus, the statute of limitations will apply from a foreign state where the cause of action arises in accordance with the First Restatement § 377, the place of the wrong. Here, the majority determines that at the place of the wrong is New York. Because New York has a two-year limitation period, the case is barred.

However, the dissent argues that the forum state will govern and the borrowing statute does not apply because either all the possible states need to have barred the action (and Nebraska hasn’t). If not, then there is no clear way of telling where the wrong actually occurred. In this situation, the limitation period of the forum state would apply.

Wyoming (and many other states) had enacted these borrowing statutes (the forum will use the statute of limitations where the cause of action arose. But pay careful attention to the language of the statute). The main purpose of these statutes were to avoid forum shopping. Borrowing statutes are considered choice of law rules, rather than statute of limitations rules (that way renvoi doesn’t apply).

However, consider the Uniform Conflict of Laws – Limitations Act which determines that if the statute of limitations is substantive in nature, the forum will apply the another state’s statute of limitations.

Also consider the difference between statutes of repose v. the statute of limitations. A statute of repose bars a lawsuit after a set period of time, regardless of when the cause of action accrues. Most courts determine that the statutes of repose are going to be substantive.

Public Policy

A law will not be enforced in another state if it is a violation of their strong public policy. However, this rule only applies for when the parties are trying to establish a cause of action rather than when trying to establish a defense. First Restatement of Conflicts § 612.

Laboratory Corp. of America v. Hood

If the lack of a cause of action is a violation of strong public policy, then the court will still allow the cause of action to occur.

Public policy is defined as “some fundamental principle of justice, some prevalent conception of good morals, some deep-rooted tradition of the common weal.”

Holzer v. Deutsch Reichsbahn-Gesellschaft

The contract was formed in Germany so German law will apply. German law did not allow a cause of action to arise so there can be no remedy for wrongful termination. However, there may be a cause of action for breach of contract (if the facts lead to that discovery during discovery).

So, what makes Holzer different from LabCorp where the public policy exception would not apply? There are two main distinctions. First, in LabCorp, the parties were all domiciled in Maryland where most of the actions took place. Second, in Holzer, this is a foreign country, and the States within the United States has even more respect for foreign law.

Penal Laws

First Restatement of Conflicts §§ 610-11, no action can be maintained to recover a penalty enforced in another state.

Paper Products Co. v. Doggrell

If a law is penal in nature (instituting a penalty), then it will not be upheld in another state.

The entire purpose of the Arkansas statute is to punish individuals who fail to fully complete the incorporation process (a penalty to enforce compliance). For this reason alone, Tennessee is unwilling to enforce the law, being penal in nature. Additionally, the court argues that the incorporation process is complete at the time when the articles of incorporation are filed with the Secretary of State office. At that point, stockholders obtain their liability shield, thus barring recovery.

At the same time Paper Products Co. was pending, another case was heard under the same issue and determined that the statute was not penal. So, The plaintiffs filed a petition to rehear. However, the court upheld that the judgment stands for public policy reasons in addition to the penal aspect.

Huntington defines penal as “a punishment of an offense against the public.”

Proof of Foreign Law

Tidewater Oil Co. v. Waller

Waller was employed in Oklahoma but sent oversees to Turkey to repair mobile homes in Tidewater’s oil field. Tidewater provided a plane for Waller, which crashed upon landing and caused injuries for which this lawsuit is filed.

There is no doubt that the law governing would be Turkish law. However, there is no knowledge of what that law is or how it would be enforced.

Thus, the court assumes that Turkey would also say that a person who does a wrong to another would be liable for those damages. Using this assumption, it is reasonable for a jury to find that there was negligence in maintaining the landing strip that caused the injury.

When we do not know what the foreign law is, there are three options: (1) dismiss the claim, (2) apply the law of the forum, or (3) assume what the foreign law is.

There are two issues with this wrinkle. First, how do you prove what the foreign law is? This is resolved by providing a copy of the law, affidavits, etc. Second, what are the consequences of incorporating that law? This may be answered by presuming the foreign law is the same as the forum, presume common law, presume fundamental principles are applied the same everywhere, etc.

Modern Theories

Introduction to Modern Theories

Development through New York Case Law

Due to the inconsistencies and associated dissatisfaction of the First Restatement of Conflicts, New York began on a journey to develop a newer approach. However, they did so through the common law method, meaning their early decisions may seem odd until the court figured out what it was doing in search of a more just approach. The following cases illustrate this journey.

Most Significant Contacts

Auten v. Auten

The law that will be applied is the location where the most significant contacts are.

Had this case been resolved under the First Restatement approach, the law to be applied would be New York. However, the court said that there should be no distinction between the obligation and the performance. Instead, they should apply the law where the most contacts are located. In the present case, that place is England. The wife and children are from England, the husband was originally from England, the marriage was formed in England, payments were to be made in England. Literally everything is in England except for the signing of the contract and where the payments were to be made from.

Haag v. Barnes

This presents a situation where the court is balancing the contacts. In New York, the parties first engaged and it is the location of the mother and child. In Illinois, it is the location where the contract was formed, where the birth took place, where the parties obtained representation, and where the money was being paid from. All these factors tend to show that the most significant contacts were Illinois and thus the contract is valid and the lawsuit may not continue.

It is interesting to compare the above two cases which ultimately leads to questioning how the court determines which contacts are more substantial and have more weight than other contacts.

Most Significant Interest

Babock v. Jackson

Not only will the courts consider where the most significant contacts are, but also the state’s interest in governing over it’s citizens (when compared to the burden on the other state).

Had the First Restatement been applied, the place of the wrong was Ontario and Ontario law would apply. However, the court sees it more fit to see (1) where the most significant contracts were, and (2) which state has more interest in governing the litigation.

Clearly, the most significant contacts were in New York because all the parties were domiciled in New York and their travel into Ontario was incidental to a longer roadtrip set to complete back in New York. Second, New York also has more interest because the cause of action occurred between all parties who are New York residents. Had one of the parties been a resident of Ontario, that may have been a different story. Ontario has an interest in maintaining the safety of their highway, but New York has an interest in making sure the parties are held accountable. In this instance, the New York interests win.

This case is an example of a “false conflict.” That is, there are not two jurisdictions who have a conflict. Instead, only one state has an interest.

Tooker v. Lopez

In New York, the interest or purpose of the lack of a guest statute is so that the victim can be compensated. Michigan’s interest is to protect the drivers in Michigan.

Once again, this is a false conflict case because the driver was domiciled in New York so Michigan does not actually have an interest.

Had the above two cases utilized the “significant contacts” test, the outcome would likely be the same, applying New York law. The nice thing about the interest test is that it helps give good clarity about which jurisdiction is going to apply and why (for policy reasons).

Had both the cases above utilized the First Restatement, the law would have been Ontario or Michigan respectfully.

Neumeier v. Kuehner

1. When the parties are both domiciled in the same state, use the rules of the domicile state. – False conflict, no split domicile
2. If the parties are from different states, and the driver’s conduct occurred in the state of his domicile where there is no liability, no liability should be imposed from a different state. Some goes for the guest, if injured in their state where recovery is permitted, recovery should be allowed. – True conflict, split domicile
3. If the parties are domiciled in different states, go with the law where the accident occurred unless if it displaces a relevant substantial purpose of the other State without impairing the smooth working of the multi-state system. – Split domicile

This case presents a distinction between Babock. Specifically, the parties are domiciled in different states. The accident occurred in Ontario, where the person seeking recovery was located. Thus, it makes sense that Ontario would have a much stronger interest in adjudicating this case because it directly affects its citizens.

However, the dissent argues that this distinction is unfair to parties, to allow recovery in one situation but not another seems discriminatory.

Conduct-regulating or Loss-allocating

Schultz v. Boy Scouts

The court looks at each party individually, first the Boy Scouts then Brothers.

For the Boy Scouts, it is easy for the court to adopt the first rule articulated in Neumeier because the parties were domiciled in New Jersey at the time of the incident. As such, the only interest New York has in applying New York law is that it was the place of the wrong. Because everything else is centered around New Jersey, New Jersey has the most interest in resolving the issue.

As for Brothers, the parties are from different domiciles but neither have a need for applying New York law (other than for biased recovery reasons). In that situation, the law of the wrong would usually apply unless there is a substantial interest in another state. Here, the substantial interest resides in New Jersey, being where the hiring occurred and where the majority of the parties involved are located.

Padula v. Lilarn Properties Corp.

When the law in question is conduct-regulating, go to where the tort occurred. However, if the law in question is loss-allocating (such as it was in Schultz) go to the place where the parties have a common domicile (Neumeier Rules).

The statute in question has both a conduct-regulating element and loss-allocating element. However, the statute is primarily conduct-regulating. As such, the law will be applied where the tort occurred. This is because that state has the greatest interest in regulating conduct within the state. The result in this case is that Massachusetts law applies.

Governmental Interest Analysis

Foundations

The First Restatement of Conflicts proved be leave several considerations out of contention. As such, new theories developed, interest analysis being one of the first. The analysis appears straightforward: Interpret the statutes to determine the policy interests of the conflicting states. This will determine whether there is a true conflict, apparent conflict, or no interest. If there is a true conflict or no other interest, it is best to apply the rule of the forum state. However, if there is an apparent conflict, it is best to apply the law of the state (being only one state) that has an interest.

In other words:

1. The initial premise is that the forum law governs and the person choosing otherwise has the burden of proof that another jurisdiction should apply.
2. Determine the domestic policies of the forum law (what is the law meant to accomplish)
3. Does the forum have an interest in having its law applied?
4. Repeat steps 2 and 3 for other potentially interested states.

Application in True Conflicts

When both states have an interest in applying the local laws, apply the law of the forum.

Lilienthal v. Kaufman

When one state has a prevailing interest, the law of that state will apply. However, if both states have equally strong interests, then the law of the forum should be the governing rule.

Application in Apparent Conflicts

When only one state has an interest in applying the local laws, we apply the law of the state that has an interest.

Bernkrant v. Fowler

When only one state has an interest, the law of that state will govern.

It appears that there is a conflict, but there really isn’t. California has minimal interest in this case. Although California has an interest in protecting estates from fraud (hence requiring the statute of frauds), this is inapplicable because the creditor could have moved anywhere during his life. Thus, when the contract was made in Nevada, the plaintiff would have to be aware that they could be subject to anywhere the creditor moved. This is a burden the court is unwilling to place on the plaintiff. Instead, because every other aspect of the contract was formed in Nevada, Nevada’s interest in upholding the validity of contracts (also a California interest) is the only interest that matters.

Unprovided-for Cases

When neither state has an interest in applying the local laws, the law of the forum will apply.

Hurtado v. Superior Court

When the other state has no interest, the law of the forum will apply.

Mexico’s cap on damages is not to limit the recovery of plaintiffs but to protect resident defendants from excessive damages. Because the defendants here are in California, Mexico has no interest. Thus, California law, being the forum, will apply.

Despite the simple answer, the court goes into the analysis further. There is a distinction between creating a cause of action and limiting the damages associated with that cause of action. Additionally, California has an interest in deterring drivers from driving negligently. Because the defendants acted negligently in California, the policy directly creates an interest in applying the forum laws.

Comparative Impairment

Comparative impairment is a slight modification to the end of the governmental interest analysis approach. As a reminder, the governmental interest analysis follows:

1. Determine the interests of the states and determine whether there is an apparent, true, or false conflict.
2. If the conflict is true, reevaluate the interests to see if it leads to a false conflict.
3. [Comparative Impairment Modification] Determine which interest would be most severely harmed if the law of the other state was applied.

Step three used to be “if the conflict persists apply the forum law.” Note that the modification is not a weighing of the interests, but instead weighing the harm caused by using one interest over an other. Essentially, the modification hopes to be result based, rather than policy based.

Bernhard v. Harrah’s Club

Follow the standard interest analysis except the modification comes when evaluating any other potential interests (step 2 above is replaced by step 3).

Under the first restatement, this case would be resolved under California law (place where the injury occurred).

With interest analysis, this case would be resolved under California law (true conflict and the tie breaker is the forum state).

Here, the court is using comparative impairment. Using the analysis, this case would be resolved under California law (application of Nevada law would harm California policies more than the harm caused if California applied its law).

California is one of the only states that uses comparative impairment and there are some significant disadvantages. First, all of the Nevada policy interests are negated, giving the plaintiff an additional opportunity for recovery.

Kearney v. Salomon Smith Barney, Inc.

Interest: California has an interest in protecting consumers privacy while Georgia has an interest in protecting companies’ who rely on the protections of Georgia law.

Comparative impairment: California would be much more harmed applying Georgia’s laws because it would undermine the policy interest of protecting consumers because the law was current and enforced routinely. Conversely, Georgia is not undermined because application of California law is still within compliance of Georgia law.

The “Better Rule”

This rule is more of a methodology (here are what the courts are doing). Essentially, it’s an honest evaluation of what the courts are considering. There are five factors being utilized:

• Predictability of —uniformity of what laws are going to apply.
• Maintenance of Interstate and International Order—minimum interference of claims with foreign states.
• Simplification of the Judicial Task—how complicated would it be for the court to apply the law.
• Advancement of the Forum’s Governmental Interests—even though the law could apply, does the other state have a legitimate interest in applying their law.
• Application of the Better Rule of Law

Milkovich v. Saari

Interests: Minnesota is hoping to compensate the injured party while Ontario is hoping to protect the driver and insurance from liability.

• Predictability of Results—in an unintentional tort context, there is no need for predictability because there is no expectation of forum.
• Maintenance of Interstate and International Order—each state has a connection to the case, so it could be covered under Minnesota law.
• Simplification of the Judicial Task—either applying simple negligence or gross negligence is easy to apply.
• Advancement of the Forum’s Governmental Interests—Minnesota does have a legitimate concern, stop collusion by parties of coming into Minnesota and getting into an accident to sue insurance companies.
• Application of the Better Rule of Law—Minnesota has a much better rule of law. It is better to have liability so the person can recover than not.

The dissent argues the court should not be deciding which law is “better.”

First restatement: Where the accident occurred (Minnesota)

Interest Analysis: Loss-allocating with a common domicile (Ontario)

Governmental Interest Analysis: False conflict – apply the law where the interest is located (Ontario)

Comparative impairment: Which state would suffer the most harm? (Points to Ontario)

Groupings of Contacts: Where are the most contacts? (Ontario)

Better law: Five factors (point to Ontario)

Restatement Second of Conflicts

“The most significant relationship.”

The Second Restatement of Conflicts focuses on the location where the parties have the most significant relationships. For torts, this relationship can be determined based on where the accident occurred, where the parties are from, etc. For contracts, this can be where the contract was negotiated, signed, or meant to be performed. These appear as blind rules, but the Second Restatement also considers policy factors which could cause confusion to the courts. Consequently, many states have used combined versions of other modern approaches to Conflicts that appear consistent with the Second Restatement.

In summary, there are three main considerations made by the Restatement:

• Grouping of Contacts (see §§ 145 and 188)
• Policy considerations (based on § 6)
• Specific rebutting rules (for specific kinds of cases)

According to § 6, the court will follow the statutory directives of its own state, but if there is no directive, the court will consider the following considerations:

• Needs of the interstate and international system.
• The policies of the forum interested states.
• Justified expectations.
• Basic policies underlying particular field of law.
• Certainty, predictability, uniformity, and ease.

§ 145 addresses the contacts within torts while 188 focuses on the contacts within contracts. Procedural, property, and intestate based issues remain similar to the First Restatement approach.

Phillips v. General Motors Corp.

Consider the contacts in § 145 to determine that Montana law makes more sense. However, they do want to work through the factors of § 6:

• Needs of the interstate and international system. The present facts indicate the state with the most significant relationship will best influence the interstate system.
• The policies of the forum interested states. This factor is the most significant in the analysis. When the court considers: the place of injury, place of conduct, residence of the parties, and any centered relationships, the court determines that Montana is the best state to use. This is because (1) Montana’s policy interest of protecting residents and holding manufactures liable would be furthered, (2) Kansas has limited interest because those injured were not residents (and the law is designed to protect Kansas products and residents), (3) Michigan has minimal interest as only being the designer, (4) North Carolina has limited interest because it would only apply the place of the wrong anyways (not North Carolina law).
• Justified expectations. None here because this is a negligence claim. Also, vehicles are inherently mobile.
• Basic policies underlying particular field of law. This factor comes into play if the differences in law is minor. However, the differences here are major, so this factor has a minimal role.
• Certainty, predictability, uniformity, and ease. Using the place of injury will result in arbitrary results, so it makes sense to use Montana’s because it will be just as easy.

Finally, the court will not conduct any “public policy exceptions” if the law to be applied was one other than the forum. This is because the analysis already considers public policy and to consider it again would be redundant.

America Online, Inc. v. National Health Care Discount, Inc.

America Online, Inc (AOL) ran an email service for its subscribers. The servers for the service was located in Virginia. National Health Care Discount, Inc (NHCD) is a corporation headquartered in Iowa, but ran most of its business elsewhere. NHCD had engaged in bulk marketing using AOL’s servers. In other words, NHCD was engaging in spamming AOL subscribers at the cost to AOL server capacity and subscriber count. When NHCD refused to stop engaging in the spam, AOL sued.

Looking at the parties, there is no clear relationship with any one state. Consequently, the place of the wrong, where the damage was most concentrated, should be the law applied. Here, that is Virginia, the place where the servers were damaged by the overuse.

Wrinkles in Modern Theories

Domicile

Reich v. Purcell

The Reichs were traveling from their home in Ohio to California to look for a home. The Purcells were traveling from California to vacation in Missouri. As they were traveling, the parties collided in Missouri resulting in the death of Mrs. Reich and one of their sons. The other son was injured. As heirs of the estate, Mr. Reich and his son sued the Purcells. Although at the time of the accident the Reichs were domiciled in Ohio, they have since moved to California.

California has no interest because the Reichs were not domicilaries at the time of the crash. So, the question is really whether we apply Missouri or Ohio law. Here the court determines that Ohio law is better because presumably Ohio would have more interest in protecting former domicilaries.

The problem of after-acquired (after the injury occurred) domicile generally is resolved by saying that the new domicile has no impact on resolving the issue (to avoid forum shopping). However, this may become difficult to follow if the individual involved moves frequently throughout the process or if the new state applies law more strict than the former state.

Whether the court considers the after-acquired domicile is typically going to be case specific and will depend more on whether the party who had a new domicile is the defendant.

Renvoi

Pfau v. Trent Aluminum Co.

Plaintiff and defendant were college friends in Iowa. The plaintiff was from Connecticut while the defendant was from New Jersey. While traveling to Missouri for a trip, but still in Iowa, the parties were involved in a car accident.

The defendant is arguing that the plaintiff cannot succeed because recovery is not allowed in Iowa and if the court considers the plaintiff’s domicile in Connecticut, recovery there would not occur because Connecticut applies the law of the wrong (here Iowa). Here, however, the court disagrees saying that analysis is completely contrary to the purposes of conducting interest analysis. Thus, the court will only consider the substantive law of Connecticut. Because Iowa has no interest, and the substantive law of Connecticut and New Jersey are the same, we have a false conflict, thus recovery can be made by applying the laws of the interested state.

Richards v. United States

A plane left from Oklahoma and was destined for New York. Unfortunately, due to negligence within Oklahoma, the plane crashed in Missouri. Now, there are several plaintiffs bringing suit against the United States as authorized by a statute. The statute states that recovery can be based out of the state where the wrong occurs. Oklahoma would not limit recovery but its choice of law statutes apply the state where the injury was felt. In Missouri, recovery is limited. So, the question becomes, do we apply the whole law or only substantive law of Oklahoma.

This court determines the whole law of Oklahoma should be considered. Because Oklahoma uses the First restatement, the place of the wrong controls. Therefore, Missouri law will be applied.

Pfau is an example of how the court does not like to use renvoi with these modern approaches.

However, Richards is used for the

Substance v. Procedure

Just as in the First Restatement, procedural issues are governed by the law of the forum. Substantive issues are those that attempt to affect the behavior or liability of a party and will utilize whichever approach the state utilizes to resolve the issue.

Statute of Limitations

According to the Second Restatement § 142 the forum state will (1) apply their own statute of limitations barring a claim (excepting exceptional circumstances) and (2) will apply their own limitations permitting the claim unless (a) the forum has no substantial interest in the claim and (b) the claim would be barred by another state that has a more significant relationship with the parties.

Ledesma v. Jack Stewart Produce, Inc.

The plaintiff is a resident of California while the defendant is a resident of Arizona and the accident occurred there (other parties involved are residents of Oklahoma and Arkansas). California has a statute of limitations for personal injury of 1 year. Arizona (and the other states) have a statute of limitations for 2 years.

Using the governmental interest approach, the court determines that California has minimal interest in the case because the statute of limitations was designed to help resident defendants. The defendant here is not a resident of California. Conversely, Arizona’s statute of limitations are designed to protect highway safety (thus the longer period). If Arizona’s laws are not enforced, their interest would be greatly diminished. Thus, the court sees fit that California statutes should not apply.

However, the dissent argues that the Restatement (Second) of Conflicts states that no action can be brought if the statute of limitations has run within the forum state.

Global Financial Corp. v. Triarc Corp.

The plaintiff (incorporated in Delaware and having a principal place of business in Pennsylvania) offered consulting services for another company and contractually agreed to be paid commissions for investments obtained through that service. When the defendant refused to pay nearly 9 million in commissions, the plaintiff sued just before the New York statute of limitations period.

All of the contract negotiation took place in New York.

First, the plaintiffs wanted to use a groupings of contacts analysis because all the contacts were in New York. However, the court determines the cause of action accrues at the place of injury because of New York’s borrowing statute. Because the plaintiffs were economically injured where they are either incorporated or have their principal place of business, New York will apply the lesser period of those states. Thus, the statute of limitations had expired.

Public Policy

Each jurisdiction handles public policy differently. For instance, public policy in the modern approaches already consider public policy and therefore there is no need to conduct an additional analysis.

Postscript

Paul v. National Life

The decedents were traveling from West Virginia to Indiana when they were involved in a crash in Indiana which cost both women their lives. The estate of Ms. Paul is bringing this lawsuit against the estate of the driver and National Life.

Here, the court recognizes the inadequacies of the First Restatement (sometimes resulting in unfair results) but also criticizes the modern approaches as an excuse for the courts to do whatever they want. Rather than have the uncertainty, this court continued to utilize the first restatement approach which says “apply the place of injury unless application would be a violation of the forum’s public policy.”

Presently, the court says that applying Indiana’s law would be a violation of West Virginia public policy because West Virginia has never had a guest statute. Thus, West Virginia has a strong public policy to allow those who are injured to recover, regardless of the situation.

Statutory Problems

Only two states use statutory resolutions of choice of law problems: Louisiana and Oregon

Salavarria v. National Car Rental System, Inc.

Plaintiffs are in Louisiana, it is the forum, and it is where the accident occurred. However, the defendant is in Florida which is also where the contract was signed. The contract prevents unauthorized drivers from driving the car. Here, the plaintiffs had an unauthorized driver when the accident occurred.

Constitutional Limits

Due Process and Full Faith and Credit

Constitutional limitations on choice of law are primarily found in the Due Process clause and the full faith and credit clauses of the Constitution. Other relevant clauses also include the Equal Protections clause, privileges and immunities clause, and the commerce clause. Below are examples (primarily of Due Process) where these limitations become relevant.

Typically, the courts looking at constitutional issues will follow the law applied by the forum. Essentially, we are asking if there are any other constitutional factors that prevent the forum from applying its law after they have conducted their choice of law analysis.

For due process, we ask: “When may a forum apply its own law to a case with interstate connections?” Is it fair to apply the forum law?

For full faith and credit, we ask: “When must a forum apply another state’s law to an interstate case?” Don’t want to offend or infringe on a sister state’s sovereignty.

So, our analysis will determine:

1. What law will apply by conducting a choice of law analysis?
2. Is the result constitutional?

Foundations of Modern Approach

Home Ins. Co. v. Dick

Dick uses a dual analysis, addressing first Due Process and determining there was no need to address the Full Faith and Credit Clause. Essentially, Texas only had one contact, the permanent residence of the plaintiff. Therefore, it violates Due Process to use Texas law as the forum. Had the defendant had more significant contacts with Texas or the contract was made (or performed) in Texas, the probability of finding due process would have been more significant.

1930’s New Deal

Pacific Employers Ins. Co. v. Industrial Accident Commission

The challenge here is that both states have a relationship with the injured employee and employer. So, due process is not an issue. This leaves the court to evaluate the full faith and credit clause.

Because California has a legitimate interest here, Massachusetts cannot project its statute onto California, thus writing the legislation for California.

Compare this case with Alaska Packers Association v. Industrial Accident Comm’n, where the injury occured in Alaska but the employee, employer, employment contract, and forum were based in California. Which worker’s compensation act applies? Again, California was not constitutionally required to apply Alaska law because it had a legitimate interest in applying its law.

More than one place may have an interest in having their law applied. In those situations, the forum law will govern.

Expansion of Permissive Approach

Watson v. Employers Liability Assurance Corp.

Due Process: Toni was doing business in Louisiana. Louisiana also has a provision where companies have to agree to the law to conduct business there.

Full Faith and Credit: Louisiana has an interest in having this problem solved there. First, those who are going to be injured are Louisiana residents. Second, there are medical creditors in Louisiana to cover the hospital expenses of those injured in that state. Third, Louisiana has an interest in compensating those injured there (as defined by Louisiana) and making it easier for injured citizens to obtain personal jurisdiction over the manufacturer.

Much of the analysis between due process and full faith and credit is similar (although addressed separately).

This case is distinguishable from Dick because Louisiana had much more interest in the litigation because there were several more contacts in Louisiana.

Clay v. Sun Ins. Office, Ltd.

Due process: There are several contacts in Florida (where there were minimal contacts in Dick). For instance, the property covered was in Florida, the loss occurred in Florida, and the insurance company was licensed to do business in Florida.

Full faith and credit: Although the court does not distinguish the due process and full faith and credit analysis, it is easy to tell that Florida would have a legitimate interest here. These are similar reasons to those in Watson, allowing Florida residents to recover when the company would be expected to experience litigation there.

The Modern Test

Allstate Ins. Co. v. Hague

This case established the Allstate test, which reads:

“For a State’s substantive law to be selected in a constitutionally permissible manner, that State must have a significant contact or significant aggregation of contacts [with the parties and the transaction or occurrence], creating state interests, such that choice of its law is neither arbitrary nor fundamentally unfair.”

This means that you could have enough contacts to find personal jurisdiction but not due process.

Additionally, according to footnote 10, the due process and full faith and credit analysis are no longer separate analysis.

Phillips Petroleum Co. v. Shutts

This is a class action lawsuit. Essentially the Court says those class members within Kansas have a relationship sufficient enough to apply Kansas law. However, everyone else needs to have other state laws applied (which could be a difference of millions of dollars for Phillips). This is due to the lack of connection they have with Kansas.

This case may be difficult to reconcile with Allstate. Essentially, the saving grace is that this is a class action. So, the test modifies to address the fairness with each plaintiff class member.

Sun Oil Co. v. Wortman

Very similar facts as Phillips, same interest rate issue, regulatory issue, etc. This is still in Kansas court. Everything now is dealing with the statute of limitations.

The argument for applying Kansas law is that because statute of limitations are considered procedural, the forum state can apply their statute of limitations.

However, the defendant argues that the modern understanding of statute of limitations are considered substantive. The Court rejects this analysis because the statute of limitations of substance do not apply to conflict of laws analysis. In other words, states are free to determine whether their laws are procedural or substantive. Because the statute of limitations were deemed procedural by Kansas, it is not a violation of the Full Faith and Credit Clause to apply a procedural limitation.

The dissent, however, notes the difficulty in saying the statute of limitations are purely procedural or substantive. With this understanding, it makes sense to apply an Allstate analysis.

Providing a Forum and Other Constitutional Limitations

Constitutional Obligation to Provide a Forum

Hughes v. Fetter

Whether the Full Faith and Credit Clause of the Constitution overcomes Wisconsin’s policy.

Wisconsin only allows wrongful death claims if the cause of the death occurred in Wisconsin.

Wisconsin doesn’t have an aversion to wrongful death claims, just claims that arise outside of their state. This is an unjustified expectation, Additionally, everything besides the accident was based in Wisconsin, yet the policy would prevent the accident from being adjudicated in Wisconsin. Due to the potential difficulty that may arise from resolving the case elsewhere, the Court says that Wisconsin policy must give way to protect its citizens.

However, the dissent argues there is a rational reason for the policy and it is not responsibility of the Court to determine which policy is better. Additionally, Illinois has the same policy (wrongful deaths out of state are not considered). Thus, if the situation was reversed, Illinois would have had the same result.

There are two other cases: Tennessee Coal, Iron & R. Co. v. George, 233 U.S. 354 (1914); Crider v. Zurich Ins. Co., 380 U.S. 39 (1965). In each of these cases, there was a localizing rule. That is, there is a cause of action, but it can only be resolved in the local court. The question is whether a foreign forum can adjudicate the case, despite the localized rule. According to the U.S. Supreme Court, the answer is “yes.” A jurisdiction is not allowed to create a cause of action then limit it to only being resolved in its jurisdiction. Other courts can choose to abide by the rule, but they are not required to.

Wells v. Simonds Abrasive Co.

Whether the Full Faith and Credit clause required Pennsylvania to adopt Alabama’s statute of limitations period.

For the cause of action, Alabama had a two-year limitations period while Pennsylvania had a one-year limitation period.

The general principle is that the forum may use its statute of limitations unless there is a good reason not to. Here, the forum treats all claims the same, regardless of whether the claimant is from the forum or elsewhere. Thus, the rule is not unfair to out of state parties.

However, the dissent says application of the majority’s rule is not uniform and allows the plaintiff to forum shop.

Additional Notes on Sister State Instrumentalities

Consider Nevada v. Hall, 440 U.S. 410 (1979); Franchise Tax Bd. of California v. Hyatt, 538 U.S. 488 (2003); Hyatt, 136 US. Ct. 1277 (2016); Hyatt, 139 S. Ct. 1485 (2019).

Essentially, these cases say that if the state interest of the forum is sufficient, then the immunity of another state may not apply. However, if you fail to recognize the immunity of another state, then you also must limit the damages.

Jurisdictional Requirements for Enforcing Judgments

Just as important as starting a case is the ability to finalize a case. Sometimes, however, finalizing a case can be quite difficult. Those who lost at trial have the opportunity to directly or collaterally attack the judgment. This article explores one such attack:

Whether Court B can refuse to enforce the judgment in Court A because there were jurisdictional defaults within Court A’s judgment.

Issue and Claim Preclusion

The concepts associated with this ideas of claim preclusion (res judicata) and issue preclusion (collateral estoppel).

Claim preclusion is associated with the concept of merger and bar. Bar means that you argued the claim in forum 1 and you cannot re-litigate the claim in forum 2. Merger means that you should have argued the claim in forum 1 so you cannot bring the claim in forum 2. Importantly, it must be the “same claim.” According to the 2nd Restatement, the same claim is defined as a claim deriving from the same transaction or occurrence.

Issue preclusion limits litigating issues in another forum if the issue was previously litigated in the first forum.

Direct and Collateral Attack

Direct attacks on the judgment tend to be motions for new trial, motion to vacate the judgment and appeals. A direct attack occurs in forum 1 against the judgment of forum 1.

A collateral attack is an attack on the judgment made in forum 1 by attempting to re-litigate the claim or issue in forum 2. Consequently, the full faith and credit clause becomes highly important, because it a question of whether the judgment in forum 1 has to be upheld by the court in forum 2.

Collateral attack of personal jurisdiction

Typically a collateral attack occurs when there is a lack of personal jurisdiction in forum 1, the defendant defaults in forum 1, and argues the personal jurisdiction when the claim is sought to be enforced in forum 2. However, if the defendant engages in this activity and forum 2 determines that forum 1 did have personal jurisdiction, the defendant’s arguments of the merits are waived (do not do this). Conversely, defendants can make a special appearance or a 12(b)(2) motion to dismiss for lack of personal jurisdiction (no collateral attack, but at least you still get to argue the merits). If the defendant voluntarily appears, however, and does not contest personal jurisdiction, then any personal jurisdiction defenses are waived.

Collateral attack of subject matter jurisdiction

Collateral attack on subject matter jurisdiction is more difficult to understand. Ultimately, we are asking whether (1) there was actual litigation over subject matter jurisdiction, or (2) the opportunity to litigate subject matter jurisdiction.

Durfee v. Duke – Missouri or Nebraska land

Jurisdictional questions can be raised in a different forum. However, if the jurisdiction had the opportunity and was fully litigated in the first forum, the second jurisdiction cannot revisit the issue.

The defendant in the first case had the full opportunity to litigate the issue of jurisdiction. They came to Nebraska, subjected themselves to the court, and argued that there was no subject matter jurisdiction. Having fully litigated the issue, the Missouri court cannot revisit it due to the principle of res judicata.

Consider Chicot County Drainage District. v. Baster State Bank, the opportunity to litigate and the failure to do so in forum 1 may preclude the ability to litigate the issue in forum 2.

Restatement (2nd) of Conflicts § 451(2) defines whether subject matter jurisdiction was actually litigated in a previous forum.

Fall v. Eastin – Washington or Missouri

A decree from State A does not need to be enforced in State B if the subject of the decree is real property located in State B.

The plaintiff is arguing that the decree in Washington acts the same was as if she was a valid purchaser of the land. The defendant is arguing a judgment made against real property in another state has no effect whatsoever.

Considering these options, the Court is tempted by the facts of the case to rule in favor of the plaintiff. Specifically, the husband’s act of fraud in the conveyance as an attempt to bypass the decree is frustrating. Despite this behavior, the doctrine expressly says that a decree in a state cannot be binding in another state if the subject of the decree is real property.

If the Washington court had executed a judgment for money or an injunction against the husband, the judgment probably would have been upheld in Nebraska. However, because the judgment was for the land (in rem), questioning the subject matter jurisdiction (the location of the land) was not possible.

Kalb v. Feuerstein

Congress has the authority to limit the jurisdiction of state courts. The bankruptcy act limits state courts, other than bankruptcy courts, from acting on farmer’s assets once bankruptcy is pending.

The purpose of the bankruptcy act was to protect farmers who were pending and in bankruptcy. Essentially, the act limits the jurisdiction of courts outside of bankruptcy courts from acting against the assets of farmers while bankruptcy is pending. There is no need for a farmer to raise the issue of jurisdiction. Therefore, the court, mortgagee, and sheriff were wrong and acting against the bankruptcy act when foreclosure and ejectment proceedings took place.

In this case, the federal bankruptcy court had exclusive subject matter jurisdiction over bankruptcy actions. Therefore, the failure to litigate subject matter jurisdiction, despite having the opportunity to, does not foreclose on the ability to collaterally attack subject matter jurisdiction.

Other rules: Parties are not allowed to collaterally attack for lack of case or controversy. Additionally, parties are not allowed to collaterally attack for diversity after a judgment becomes final.

V. L. v. E. L.

A State is not required, however, to afford full faith and credit to a judgment rendered by a court that “did not have jurisdiction over the subject matter or the relevant parties.”

First, the first statute gives jurisdiction. Second, the second statute resolves the claim based upon the merits. Just because a statute is mandatory and should be read such does not mean it bars the court’s ability to hear the case. These mandatory provisions instead limit the remedy.

Substantive Interests of the Enforcing State

Essentially, is there a policy interest that overcomes the Full Faith and Credit Clause?

Fauntleroy v. Lum

The judgment made in Missouri was valid (there was jurisdiction and the case was resolved on the merits). Thus, the Full Faith and Credit Clause requires Mississippi to enforce the judgment, even though Missouri made a mistake in interpreting Mississippi law.

In other words, there is no public policy exception to the Full Faith and Credit Clause.

However, the dissent argues this holding goes too far, limiting the ability of the states to overcome judgments when there is a severe public policy violation.

Baker v. General Motors Corp.

First, the Court says that the injunction does not preclude Elwell’s testimony in Missouri (injunction exception applied). Additionally, the injunction attempted to curtail Missouri’s ability to obtain the testimony it wishes to hear. This is a violation of the Full Faith and Credit Clause. This case is not presenting a policy exception to the Full Faith and Credit clause, just stating that parties cannot limit the ability of another state to gather testimony.

There are three exceptions to the Full Faith and Credit Clause:

1. Time and manner mechanisms (procedure)
2. Official acts of the sister state
3. Interference with litigation (ordering a party to not commence legal action in another jurisdiction).

The Scalia concurrence agues the majority opinion was unnecessarily broad (without going into the Full Faith and Credit Clause) because the injunction can’t bind the Bakers, only Elwell.

Additionally, the Kennedy concurrence agrees with Scalia and is concerned the majority’s exception could lead further exceptions.

Takeaways:

• There is no roving public policy exception to the Full Faith and Credit Clause
• The Full Faith and Credit Clause applied equally to all types of judgments
• The only exceptions to Full Faith and Credit are outlined in the three principles above.

Wamsley v. Kodak Mut. Ins. Co.

There was an accident in Montana and the litigation was filed in North Dakota. Wamsley is suing the insurance company and the insurance company sought a declaratory action in North Dakota to say that the plaintiffs could not stack insurance claims to achieve a greater recovery. This was granted in North Dakota.

Compare Tenas v. Progressive Preferred Ins. Co., 238 P.3d 860 (Nev. 2008).

Thomas v. Washington Gas Light Co.

Whether the Full Faith and Credit Clause prohibits a second state from giving additional workers compensation for the same injury when some compensation has already been obtained in another state.

Plurality

Initially, the plurality gives an overview of Magnolia (addition compensation denied) and McCartin (additional compensation granted), and discusses how McCartin carved out Magnolia because there was no “unmistakable language” from the legislature limiting recovery. The Court says this language runs afoul of the Full Faith and Credit Clause, so they need to revisit the doctrine.

Thus, there are three state interests:

1. Virginia limiting company liability (not controlling).
2. Both jurisdictions in the injured employee.
3. Virginia has an interest in having its decisions protected (not infringed because both states had an independent right to decide the issue and both would only apply its law).

For these reasons, the court would reverse.

Concurrence

Although the concurrence agrees with the outcome, the reasoning is faulty because it would allow multiple recoveries outside of workers compensation claims.

Dissent

The dissent would rely on Magnolia and argues that there is no need to evaluate state interest when considering judgments (rather than the merits) of cases. Basically, this allows a party two opportunities of recovery.

Foreign Judgments and Enforcing State’s Law of Judgments

Foreign (Country) Judgments

Judgments from foreign countries tend to be given full force in the United States but are evaluated at a stricter level than sister state judgments. Most states have adopted a version of the Uniform Foreign Money Judgments Recognition Act or the Uniform Foreign-Country Money Judgments Recognition Act to help outline the standard of foreign judgments.

Essentially, the Acts authorize judgments that are final and conclusive and enforceable where rendered are conclusive on the parties regarding a sum of money and is enforceable in sister states as long as there is no violation of the Full Faith and Credit clause. To be considered conclusive, the rendering judgment must be made in a system of impartial tribunals and procedures compatible with due process (lack of personal or subject matter jurisdiction). Additionally, foreign judgments “need not be recognized” if (1) there was a lack of notice to the defendant, (2) fraud, (3) a violation of repugnant public policy, (4) conflicts of judgments, (5) a forum selection clause was not followed, or (6) the forum was seriously inconvenient for the cause of action.

The procedure is as follows:

1. File the suit for recognition in the enforcing state.
2. If the suit is within the scope of the Act, the burden is on the party resisting enforcement.
3. States are to examine the mandatory and discretionary rules outlined in the paragraph above.

Enforcing State’s Law of Judgments

Union National Bank v. Lamb

Whether Missouri could deny enforcement of a Colorado judgment due to a statute that prohibited revival of judgments that had been rendered 10 years previously.

A statute may impose a statute of limitations on judgment enforcement, but only after considering revival of the foreign state.

The whole purpose of the Full Faith and Credit clause is to resolve conflicts between the states by requiring sister states to uphold the validity of a judgment rendered in another state. If the court set aside this rule, essentially nothing would be protected by the clause. Instead, the 1945 revival is to be considered as a new judgment and the countdown can begin from there.

Watkins v. Conway

Whether a Georgia statute barring judgments rendered five years previously (but allowing revivals in the rendering state) is a violation of the full faith and credit clause.

A statute may impose a statute of limitations on judgment enforcement, but only after considering revival of the foreign state.

This was not a denial of the full faith and credit clause because the Georgia statute considers whether the judgment could have been revived in Florida. Here, Florida would not have revived and so Georgia does not need to revive. Had the plaintiff revived the statute in Florida then come back to Georgia, the statute would have allowed enforcement.

The enforcing state gets to use its statute of limitations.

Chapman v. Aetna Finance

Forum 1 had a compulsory counterclaim requirement for the claim and in Forum 2, the claim was permissive. Essentially, the holding in Migra v. Warren City School District. Bd. of Ed., 465 U.S. 75 (1984), says that the enforcing state needs to apply the same law as the rendering state.

Hart v. American Airlines

A plane crashed and a lawsuit was filed in Texas where Plaintiff 1 won there. Texas had a complete mutuality requirement (parties need to be the same in each litigation). Additional Plaintiffs in New York wanted to use the Texas holding in New York. New York was much more permissive regarding mutuality (one party could be different) and would have allowed the lawsuit. So, do we use New York or Texas mutuality requirements?

In this case, collateral estoppel applied, New York’s law was used. This is because New York had a superior interest in collateral estoppel and Texas had minimal interest in applying its rule to New York plaintiffs.

Treinies v. Sunshine Mining Co. – Three Courts over Stock

The last judgment rendered (as long as there is jurisdiction) is the judgment to be enforced.

Choosing Legal Regimes

Contractual Choice of Law

Restatement (Second) Of Conflicts selected sections

Section 186–188 outline contractual choice of law. 186 simply says that the law chosen by the parties will govern. 187 outlines how this works. Basically, the courts will be very differential to choice of law provisions, following them unless the chosen state has no substantial relationship with the parties, or another state’s (that has more than half a material interest) fundamental public policy is violated.

Nedlloyd Lines B.V. v. Superior Court of San Mateo County Seawinds Ltd.

The Restatement test follows a procedure of questions:

1. If either (1) does the chosen state have a  substantial relationship to the parties or (2) is there a reasonable basis for the choice of law, then move to step to. If neither condition is satisfied, there is no need to enforce the provision.
2. Then determine whether enforcement is against a fundamental public policy (move to step three). If there is no violation of a fundamental public policy, enforce the provision.
3. Does the state with a violation of fundamental public policy have a larger material interest in the issue than the chosen state? If so, the provision is not enforced.

First, the parties have a substantial relationship with Hong Kong (the chosen law), at least two being incorporated there. Second, Seawinds did not point to any provision where California’s fundamental public policy is violated. Third, Seawinds argued that breach of duty is a tort separate from the contract; this argument is flawed because the scope of the clause extends to all claims arising out of the contract.

Although the dissent agrees with the rule, they believe the majority incorrectly applied the scope when it covered all claims, contractual or otherwise, with a contract choice of law clause that extended only to the contractual text.

Banek, Inc. v. Yogurt Ventures U.S.A., Inc.

First, is this a valid choice of law clause or is it a waiver of rights which is prohibited under the [Michigan Franchise Investment Law]? Second, if the clause is valid, is this choice of law provision enforceable under Michigan choice of law rules? Third, if this provision is valid and enforceable, does Georgia law govern all claims between the parties or only contract claims?

First, the choice of law clause is not a waiver of the Michigan laws. The Michigan laws expressly prohibited choice of forum clauses—stating that would be a waiver—but declined to adopt choice of law clauses.

Second, the clause is enforceable under Michigan’s choice of law rules. Michigan allows forum selection clauses in accordance with the Second Restatement of Conflicts. Here, there is no violation of a Michigan public policy because the laws are not substantially different.

Third, the scope of the clause extends to all claims, contractual or otherwise, made by the plaintiff. This is plain in the language of the clause.

Consider Kipin Industries, Inc. v. Van Deilen International, Inc., 182 F.3d 490 (6th Cir. 1999). If the choice of law clause would invalidate the contract, then the court will assume the choice was a mistake, then the court will look at § 188 to determine which applicable law would govern. If the better jurisdiction based on § 188 is the same as the law selection clause, then the contract will remain invalidated.

Cook Sign Co. v. Combs

If Minnesota has a substantial interest in the litigation (considering the following factors), then the choice of law clause will stand:

1. Predictability of result
2. Maintenance of interstate and international order (most important here)
3. Simplification of the judicial task
4. Advancement of the Forum’s governmental interest
5. Application of the better rule of law

This is the “better law” approach.

Combs argues the two separate agreements show forum shopping. The court runs through the factors above. First, a choice of law clause enhances the predictability of result because the parties agreed to the law to be applied. Second, enforcing the choice of law provision would not show disrespect to North Dakota law because the parties negotiated together and agreed that Minnesota choice of law would apply. Third, either state could apply the law equally well. Fourth, Minnesota is the forum so Minnesota’s interest would be served by applying its laws. Finally, the fifth factor is not important here because the other factors are determinative.

The problem with this kind of case it that it incentivizes each party to seek a judgment first. For instance, if Comb wanted the noncompete clause to be unenforceable, he would have sought for a judgment in North Dakota before Cook could have received a judgment enforcing the agreement.

Hall v. Sprint Spectrum L.P.

Using the Second Restatement of Conflicts § 187, Kansas law should apply. First, § 187(2)(a), Sprint has a substantial relationship with the chosen law (being the headquarters) and thus there is also a reasonable basis to apply Kansas law. Second, applying § 187(2)(b), application of Kansas law would not violate a fundamental policy of Illinois law. Because Sprint sought Kansas law in an adhesive contract, and all the claims were tied to contract law (even statutory fraud), enforcement would not violate due process.

One final note is that choice of law clauses will not bind state attorney generals.

Contractual Choice of Forum

The Bremen v. Zapata Off-Shore Co.

Carnival Cruise Lines, Inc. v. Shute

America Online, Inc. v. Superior Court of Alameda County

Whether the forum selection clause designating Virginia to be the forum is enforceable. Virginia has less consumer and class action protections than California does.

California favors contractual forum selection clauses as long as they are “freely and voluntarily, and their enforcement would not be unreasonable” as determine by suitableness, availability, and the ability to accomplish substantial justice. These factors may be evaluated in connection with determining whether enforcement would result in a violation of strong public policy in California.

Strong public policy would be violated if the provision is enforced, affirmed.

AOL continued to charge debit cards after subscriptions had been cancelled. The litigation here was filed in California as a class action in California. AOL then filed a motion to dismiss because the terms and conditions signed by the parties stated that the choice of law and forum would be in Virginia. At trial, the court denied this motion because it was clear the plaintiff had not exercised their free will when accepting the terms (being long and in cramped text).

California has a CLRA which favors consumers protection and prohibits waiver of their rights. By requiring the plaintiffs to file in Virginia, it would effectively waive their rights under CLRA. This alone is a violation of strong California public policy. Considering other factors, Virginia’s law is must less protective of consumers and disfavors class actions. Adding together the many protective deficiencies, enforcement of the provision would also be a violation of strong California public policy.

Additionally, the court did not that convenience and the cost of travel to the forum is not enough to determine whether enforcement of the provision is reasonable.

Wong v. Party Gaming Ltd.

Whether a forum selection clause designating Gibraltar as the forum is enforceable and whether the court was right to sua sponte raise the issue of forum non conveniens.

“A forum selection clause should be upheld absent a strong showing that it should be set aside.” The court considers whether the clause was fraudulent, whether the forum would be ill suited to handle the suit, and whether the forum would be seriously inconvenient.

Forum non conveniens requires the court to consider public and private factors to determine whether the case should be dismissed.

The clause is enforceable and forum non conveniens applies. Thus, the trial court did not error, affirmed.

Party Gaming is an online poker company where it allowed users to gamble on the site for winnings. When users register, they are obligated to sign the terms of services which indicate the choice of forum is Gibraltar (who would apply English law). Here, the plaintiffs sought certification as a class and brought suit against Party Gaming claiming fraudulent misrepresentations and inducement because Party Gaming had indicated that no collusion would appear on the site (and it had), and would not solicit the participation of minors (which it did).

Analysis

First, the court determines that the applicable law for discussing enforcement of the clause is federal law because this is in federal court focusing on a forum selection clause (mostly procedural).

Next, the court says the forum selection clause is enforceable because there was no fraud in inducing the clause (only general fraud), Gibraltar would not be ill-suited to handle the suit (because the defendant would likely want all the lawsuits to occur in one location), and it is not seriously inconvenient for the plaintiff to litigate in Gibraltar.

Finally, the court was not wrong to sua sponte dismiss for forum non conveniens. The public factors lead to application of Gibraltar law because most of the evidence and witnesses related to the misconduct would be located there, and Gibraltar is the home of the defendant. Additionally, the private factors lead to Gibraltar because the parties agreed to the forum within the contract. On another note, the plaintiff’s choice of forum is not deterministic.

Interestingly, the concurrence agrees simply because it would be illogical to litigate the issue in Ohio. Gambling in this manner is criminal in Ohio so it makes no sense to seek enforcement of a gambling contract for monetary damages when the contract itself was illegal.

Atlantic Marine Construction Co. v. U.S. Dist. Ct. for the Western Dist. of Texas

A forum selection clause works in the method of a transfer (for litigation arising only in the United States) under 28 USC § 1404(a). When considering whether the case should transfer, the court must:

1. Give weight to the forum selection clause (rather than the plaintiff’s choice of forum), requiring the dissenting party to show the burden of why the clause should not be enforced.
2. Private interests are not to be considered because the forum selection clause is an agreement that those private interests had already been considered and decided on between the parties. Public interests may be considered but are quite unlikely to alter the outcome.
3. Finally, in the case of a transfer, the choice of law rules of the original forum does not also transfer. This is different than Van Dusan where a valid venue choice of law will also transfer under a 1404(a) analysis. In other words, Van Dusan does not apply.

The court was correct in saying the correct analysis was 1404(a), but they incorrectly applied that analysis. Reversed and remanded.

Atlantic Marine had a contract to construct a child-development center and hired J-Crew Management as a subcontractor on the project. During negotiations, the parties agreed that Virginia would be the choice of law and forum. After a dispute regarding payment arose between the parties, J-Crew sued Atlantic Marine in a federal district court in Texas. In response, Atlantic Marine sought dismissal under 1406(a) and Rule 12(b)(3) for improper venue. In the alternative, Atlantic Marine sought transfer to Virginia under 1404(a) and the forum selection clause.

Analysis

Applying the three principles outlined above: (1) The trial court was incorrect to require Atlantic Marine to show why the forum selection clause was enforceable; instead that burden should have been on the plaintiff with the presumption that the clause was enforceable. (2) Also, the trial court improperly considered private interest factors related to the plaintiff’s witness; at the time of contracting, the plaintiff knew the witnesses and could have negotiated accordingly. (3) Finally, the trial court incorrectly applied Texas choice of laws because the forum selection clause requires Virginia’s choice of laws to apply (regarding enforcement of the clause); a plaintiff cannot circumvent the forum selection clause by simply making an original filing in a forum they deem more favorable.

GreatAmerica Financial Services Corp. v. Carlos F. Concepcion, P.A.

Whether there is personal jurisdiction under the choice of forum and law provisions in the contract.

Where a forum selection clause is contained, the court should consider the contacts of the defendant has with the forum state to determine whether there is personal jurisdiction.

There is personal jurisdiction so the case is not dismissed.

Concepcion is a Florida based company that made an agreement with H&G to lease certain equipment for their business. As part of the lease, both parties agreed that any disputes would be resolved in the forum where H&G resided, or if they assigned to lease to another, the forum was to be the principal place of business of the assignee.

Later, H&G assigned the lease to GreatAmerica, an Iowa based company. Under the lease, Concepcion paid GreatAmerica consistently for 22 months but then failed to make the next 17 payments. This lawsuit was instituted by GreatAmerica to recover the missed payments. In response, Concepcion argues there was no authority for the agent to enter the agreement and there is no personal jurisdiction.

Analysis

First, the petition was deficient of any claim about the authority of the agent to enter the agreement, so the court fails to dismiss on those grounds.

Second, after outlining the several rules for personal jurisdiction (long-arm statutes, sufficient minimum contacts, jurisdiction by consent, etc.), the court determines that personal jurisdiction exists here. In this case, the contract contained a choice of law and forum clause that designated the principal place of business of the assignee would govern. Here, GreatAmerica is a business located in Iowa where the defendant made several payments to the plaintiff within the jurisdiction. This is sufficient to establish personal jurisdiction and enforce the choice of forum clause.

Arbitration Clauses

The Federal Arbitration Act

There are several different kinds of arbitration clauses. These clauses can be drafted to include arbitration pre-dispute, as part of the transaction phase; post dispute, as part of enforcing the contract; or binding or nonbonding, binding acting as a preclusion against all other court judgments.

In addition to the several methods of application, there are several benefits to the clauses. In theory, arbitration is cheaper and quicker than going to court, parties have a choice of law that is typically always enforced, arbitration awards are more likely to be enforced by courts over state lines, parties have the freedom to outline certain qualities the arbitrator should have, etc. The main issue with arbitration agreements arises if one party has all the bargaining power—the arbitrator is likely to be heavily biased towards the party with all the power.

At one point, courts were opposed to arbitration, claiming it usurped court jurisdiction. The Federal Arbitration Act (FAA) changed this. According to the FAA, courts were to enforce arbitration clauses and awards unless the contract was revocable, stay any court proceedings that were to be resolved by arbitration, and make orders to arbitrate if the parties failed to do so. With development, the FAA applied to both federal and state laws and employment agreements (even though the FAA declined to say employment arbitration clauses were enforceable).

Policing Arbitration Clauses

As mentioned, arbitration agreements are subject to contract law; if the contract is revocable, then so are arbitration clauses. Currently, the primary method of policing the clauses is by rendering them unenforceable if they are unconscionable. Typically, courts will consider the bargaining power, whether there was meaningful choice, whether the contract was boilerplate, and whether the contract was an adhesion contract.

AT&T Mobility LLC v. Concepcion

Whether an arbitration clause with a class action waiver is preempted by the FAA.

Arbitration agreements are unenforceable when they are unconscionable. A class action waiver is not unconscionable and thus preempted by the FAA.

Facts

Concepcion had purchased phones from AT&T. As part of a promotion the phones were free. However, AT&T still charged sales tax on the sale based on the retail value of the phones (about $30). For this reason, Concepcion filed a complaint against AT&T.

AT&T has several forms on how to handle a complaint. First, complainants are to complete a form outlining their dispute. If the dispute is not resolved within a specified period of time, then arbitration may be requested by completing another form. If the complainant is awarded more than they were initially offered, AT&T would not only cover costs, but pay the complainant double those costs plus an additional $7,500. However, the procedure did require the complainant to file their complaint individually, rather than as a class.

At trial and initial appeal, the court determined that the clause was unconscionable because “AT&T had not shown that bilateral arbitration adequately substituted for the decent effects of class actions.”

Analysis

This case presents the perfect analysis of how the California statute does not protect the purpose of the arbitration and enhances the risk of the defendant (an error in bilateral arbitration may be minimal while an error in class action may be quite enormous, there is no way to amend that error).

Justice Thomas concurred and essentially says that public policy should not be the purpose of preempting the statute but instead should rely on the provision in § 2 considering factors that may cause a contract to be unconscionable.

On the other hand, the dissent argues that the case is arbitration neutral (no class action waivers regardless). Additionally, class action is still consistent with the purpose of arbitration and does not see the same concerns about class action as noted by the majority.

Brewer v. Missouri Title Loans

304 S.W.3d 486 (Mo. 2012).

Brewer had obtained a 2,200 loan from Missouri Title Loans with a 300 percent interest rate and secured by Brewer’s car. After making two 1,000 installments, the principal amount had reduced by only 6 cents.

As part of the loan, Brewer agreed to individually (not as a class) arbitrate any disputes. Within this agreement, parties were responsible for respective attorney fees, the borrower could not go to court but the lender could judicially enforce against the security, and there was no fee multiplier or guaranteed minimum guarantee (as there was in AT&T). Additionally, no consumer had ever successfully negotiated the arbitration terms or conducted a successful arbitration dispute.

Conflicts Within Federal Courts

This article considers how to resolve two issues when the litigation is in federal court: (1) when do we apply federal law instead of state law, and (2) when applying state law, how do we decide which substantive state laws to apply.

Erie Railroad v. Tompkins – Train door

Whether state or federal common law applies.

If the issue is substantive, then the courts are to apply the substantive law of the states (not federal law). Additionally, if the state has not resolved the issue, then the federal court is to predict how the state would resolve the issue (an Erie guess). This will be considered the state law until the state directly addressed the issue.

There is no such thing as federal common law for substantive issues. Because this is a substantive issue, the ruling is reversed and remanded to determine what the outcome would have been under state law.

On trial and initial appeal, the court determined that federal common law applied which allowed the plaintiff to recover.

There are constitutional issues with saying there is a federal common law to resolve substantive issues. First, Congress does not have the authority to create local law for the states so the court also does not have the ability to do so. Aside from the constitutional issues, there are policy reasons why there should be no federal common law for substantive issues. First, to avoid forum shopping; second, to avoid unequal remedies to diverse parties.

Erie Notes

The crux of the issue in Erie is to determine whether the issue is procedural or substantive. Most of the time, this is quite clear, but there are circumstances where the Court is trying to decide a gray area. In this kind of situation, the court is likely to find the federal rule applies, unless it substantially alters to the outcome of the case.

What do you do if there is a conflict between state and federal procedural law? First, determine whether there is a true conflict. If there is a true conflict, consider the sources of law:

• Federal Constitution – Will always win.
• Federal Statutes – Will win if the statute is constitutional. The statute is considered constitutional if it is arguably procedural (meaning congress had the authority to pass it on a rational basis).
• Rules of Civil Procedure, Evidence, or Appeal – Apply the rules if it is in accordance with the Rules Enabling Act and the Constitution. In other word, is this procedural? If so, then it will win.
• Federal Decisional Rules or Custom. This analysis is two-fold. First, consider the twin aims (does the federal rule incentivize forum shopping? and would application discriminate against non-diverse cases?). If a violation of the twin aims, apply the state law. Second, as an exception, you can balance the “affirmative countervailing considerations concerning an essential characteristic of federal court system and a strong federal policy.”

Erie and Choice of Law

Klaxon Co. v. Stentor Electric Manufacturing Co.

Whether federal district courts are to apply the choice of law rules of the state in which they sit.

Yes, federal district courts are to apply the choice of law rules of the state in which they sit. Delaware’s choice of law rules were not considered in making the decision, reversed to consider Delaware’s laws.

In this case, the respondent (domiciled in New York) had transferred its entire business to the petitioner (domiciled in Delaware), in return for a contract that the petitioner would use its best efforts to continue the manufacture and sale of parts originally built and designed by the respondent in New York. Ten years later, the respondent said the petitioner had failed to live up to this contract and filed a lawsuit in Delaware where they won $100,000. Seeking the to add interest to the judgment in accordance with a New York law, the respondent filed a motion for the interest, which was granted.

At federal court, the trial level applied the First Restatement and failed to consider the choice of law methodology of the states. Choice of law is substantive. Thus, applying Erie, substantive law needs to consider the state’s substantive law.

Erie and Choice of Forum

Choice of forum is often altered depending on the right to transfer and whether there is a choice of forum clause within a contract.

Ferens v. John Deere Co.

Whether the Van Dusan rule where a transfer from a proper forum (by a defendant) carries the choice of law principles from that forum, also applies to the plaintiff.

Yes, when there is a transfer from a proper forum the choice of law principles also transfers regardless of whether the motion was made by the defendant or plaintiff.

Ferens was injured in Pennsylvania by a piece of equipment purchased from John Deere. John Deere was incorporated in Delaware and the principal place of business is Illinois; however, the principal place of business at the time of the incident was Mississippi.

Ferens filed a lawsuit in the federal district court in Pennsylvania, but failed to bring any tort claims within the two year statute of limitations period. Instead, the lawsuit was based on contract and warranty claims which had a longer limitations period. Later, Ferens filed another lawsuit in the federal district court in Mississippi for tort, which had a six year statute of limitations period. Then, applying 28 U.S.C. 1404(a), Ferens transferred the case from Mississippi to Pennsylvania where the court then consolidated the cases. The purpose was clearly to apply Mississippi statute of limitations while keeping Pennsylvania law.

At trial and appeal, the cases were consolidated in Pennsylvania, but the court refused to apply the Mississippi statute of limitations.

Analysis

The purpose of Van Dusan was three-fold: (1) transfer from a proper forum “should not deprive parties of state-law advantages that exist absent diversity jurisdiction[;]” (2) limit forum shopping; and (3) decisions regarding transfer from a proper forum should be made based on convenience instead of a change of law. According to the majority, all three of these interests are supported by allowing the plaintiff to transfer and keep the choice of law.

However, the dissent argues that these interests are not supported by allowing the plaintiff to transfer. Most primarily, the dissent is concerned about the plaintiff picking and choosing several inconvenient forums then transferring them to a convenient forum with the intent to create a conglomerate of law most beneficial to the plaintiff.

Erie and Judgments

Semtex Int’l Inc. v. Lockheed Martin Corp.

“[W]hether the claim-preclusive effect of a federal judgment dismissing a diversity action on statute-of-limitations grounds is determined by the law of the State in which the federal court sits.”

Reversed and remanded for Maryland to hear the case.

The plaintiff filed in a California state court for breach of contract. Then the defendant removed to the federal court in California (based on diversity). This claim was then dismissed “on the merits” “with prejudice” because the statute of limitations had expired. Then the plaintiffs filed in Maryland state court  based on a longer statute of limitations. However, the Maryland court dismissed because the previous dismissal was on the merits with prejudice.

Here, the defendants are arguing the claim is precluded by Rule 41 (involuntary dismissal). However, Rule 41 never mentions that the claim is precluded, allowing the claim to be filed in a court other than the one that dismissed it. Having no guiding influence, the Court is free to make the rule.

Disclaimer

The content contained in this article may contain inaccuracies and is not intended to reflect the opinions, views, beliefs, or practices of any academic professor or publication. Instead, this content is a reflection on the author’s understanding of the law and legal practices.