Conflict of Laws – Spring 2001, U of Iowa – Prof. Bohannon

I.         Traditional Approach to Choice of Law

A.     Introduction

1.                  Territoriality is important.  Sovereign state must have the power to govern people and events within its own state.

2.                  Issues

a)                 Fairness to D

b)                 Predictibility

3.                  Reasons for applying foreign law

a)                 Comity – states respect each other’s rights to govern events within themselves

b)                 Vested rights – plaintiffs can expect claims to hold water

c)                  Local law theory – rights don’t exist until a court makes them.  So we must ask “what would the foreign court do?”

B.     Single-Aspect Rules

1.                  In a tort action, the applicable substantive law is that of the jurisdiction where the event inflicting the injury itself occurs, not where the acts took place (Carroll – negligent acts took place in Alabama but injury occurred in Mississippi, so Mississippi law applies).

a)                 There are exceptions to this general rule.  i.e., toxic torts

b)                 Restatement applies standard of care for state where act took place and prohibits liability for actors whose acts are justified under the law of the state where the act took place, even if injuries occur elsewhere (CB 15)

2.                  In contract cases, the law of the “place of contracting” controls.

a)                 Place of contracting determined by finding out where last act that bound parties occurred (Milliken). 

b)                 Restatement uses “principle event” test (CB 20-21).  Forum might apply general contracting principles rather than its own specific law ?????

c)                  Parties need to be sure of what law applies to K

d)                 Forum law determines the place of contracting

e)                 Place of performance will govern the performance, so long as it doesn’t affect substance of K (CB 25).

3.                  For property disputes

a)                 Law of the decedent’s domicile will govern matters concerning succession of movable goods

(1)               Everyone has one and only one domcile, determined by

(a)               Actual prescence, which is absolutely necessary (White)

(b)               Intent to remain indefinetely

(2)               Last domicile remains domicile until new one is established

b)                 Situs at time of transfer will determine law governing movable goods for inter vivos transfer

c)                  Law of Situs applies to immobile property (Barrie’s Estate – will no good in Illinois but land affected is in Iowa where will provision is valid so testators disposition is given effect).

C.    Characterization

1.                  Categorizing case affects choice of law (e.g., K, tort, property).

2.                  A statute might change the characterization of a case (i.e. Levy, liability clause in rental agreement converted negligence case to contract case)

3.                  Ask if the reason for a foreign statute would be furthered by applying it to the case (i.e. Haumschild – Wisc. Decided that since CA law limiting capacity to sue husband served only CA policy of protecting families, suit could be allowed in Wisc.).

4.                  Place of injury does not necessarily control capacity to sue/be sued (Id.).

D.    Substance v. Procedure

1.                  Law should be characterized as substantive or procedural with an eye toward the purpose of the characterization (Grant).

2.                  Purely administrative matters should be handled by forum law.  Id.

3.                  Remedy is a procedural matter (CB 52). Public policy of forum must be considered

4.                  Beale felt that if adopting foreign law was of no great inconvenience to forum and the effect on the rights of the parties was great, foreign law should be used.  Id.

5.                  If a foreign statute of limitations simply bars the remedy, then forum can apply its own statute.  But if foreign right of action is actually conditioned on time, then foreign statute must be applied to bar action.  Test is whether limitation was directed at the right specifically as a qualification (Bournias).

6.                  If law has to be pleaded, it is more likely to be substantive.

7.                  Look to whether foreign jurisdiction considers its law substantive or procedural

8.                  Examine substantive goals of foreign law that may be procedural.

E.     Renvoi

1.                  Court should seek to effect analysis that would consistent with foreign proceedings (Schnieder – foreign rights in land would be controlled by domicile law due to foreign choice-of-law rules, so forum should apply domicile law)

2.                  One “loop” may be made to show deference to foreign choice-of-law rules.

3.                  Beale felt that foreign law’s only purpose was to vest rights, not to control choice-of-law.  Cook and Lorenzen felt that forum should apply foreign choice rule if it dictated important rights.

4.                  A “remission” is a referral back to the law of the forum; A “transmission” in a referral to the law of a third state.

F.     Proving Foreign Law

1.                  Burden is on P to plead and prove foreign law, which is treated as a fact (Walton).  Ct. cannot be burdened with determining foreign law.

2.                  Alternatives to treating foreign law as fact include

a)                 Taking judicial notice

b)                 Assuming foreign law is same as forums

c)                  Certifying question to foreign court.

3.                  If foreign state has no law on point or law that is inadequate, forum might choose law of state that has closest connection to the case (Walton).

G.    Public Policy Escape/Penal Laws/Tax Laws

1.                  If right of action is forbidden in forum by public policy, it may be rejected (Loucks).

2.                  Generally, rights of action are “transitory” as they resemble a property right that can be asserted anywhere. Id.

3.                  A mere difference in remedy will not bar a foreign law from applying (Id. – although Mass. allowed greater damages than NY, NY applied Mass. law since it was not inconsistent w/ NY policy).

4.                  Similarity test is rejected but remains helpful to P in the even laws are comparable.

5.                  Exceptional circumstances should exist to invoke the public policy exception, and it would be best to dismiss case w/o prejudice so another forum can try it.

6.                  Public Policy is embodied in law, not morality (Mertz)

7.                  If case is recharacterized due to territoriality, public policy could end up dispositing of a case w/ predjudice (i.e. Mertz) ????

8.                  Using foreign law for a defense is less likely to invoke public policy exception (CB 77) (e.g. Holzer – Norembourg laws created an illegality defense on K, which was upheld).

9.                  Courts generally should not accept cases dealing with foreign penal laws, due to foreign states interest in enforcement of those laws.

a)                 Statute is penal if it awards penalty to state, either directly or through member of the public (CB 79-80).  Does this include puntive damages ?????

b)                 For a law to get maximum enforcement, it should not be penal

10.             Courts will not enforce foreign tax laws (CB 82-83).

II.       Modern Approaches to Choice of Law

A.     Public or Private Specification

1.                  UCC –

a)                 If Parties include a COL clause in K, it is valid if

(1)               Law chosen bears reas. Relation to K, and

(2)               There’s no contrary UCC provision

b)                 Forum law applies if there’s an “appropriate relation” to the K.

c)                  If no appropriate relation, default to traditional rules.

2.                  Borrowing statutes direct forum to dismiss claims under foreign statutes of limitation in appropriate circumstances

a)                 SOL is carried in w/ substantive law

b)                 Tolling statutes also incorporated

c)                  Shorter SOL usually chosen.

3.                  Parties agree to contract in view of a particular states law. Default rule is place of K.

a)                 Presumption of place of K rebuttable (Pritchard)

b)                 Parties will not be presumed to have entered into an invalid K.  (Pritchard).

4.                  If parties designate applicable law, it must

a)                 Be a bona fide choice

b)                 Be of a place that has some relation to the agreement.

B.     Choice of law clauses in Contracts

1.                  General presumption is that place of performance will govern K. (CB 102-03).

2.                  Restatement (Second) §187(1) allows incorporation by reference of things that could have been dealt w/ by incorporation (e.g., definitional terms).

3.                  Restatement (Second) §187(2) deals with validity issues.  Renvoi is rejected.  Choice allowed unless:

a)                 There is no substantial relationship or reas. Basis for the choice

(1)               If conditions are such that there is uncertainty, law should not be chosen

b)                 Choice violates “fundamental” public policy of a state w/ greater interest than chosen state or default state

4.                  Restatement (Second) §188 makes default law that of state w/ most significant relationship to parties and transaction.

5.                  Removal of property to a state may indicate intent to have that states laws govern (Wyatt).

6.                  UCC does not expressly provide for public policy exception

7.                  UCC requires reas. Relationship for matters of interpretation

C.    The Second Restatement (Intro)

1.                  Second Restatement is the most widely adopted choice-of-law approach. General two-step approach

a)                 Choose presumtively applicable law under appropriate jurisdiction-selection rule; and

b)                 Test this choice against §6 principles.

2.                  §6 lays out the presumptive rules:

a)                 statutory directive of forum will be followed

b)                 If no directive, then consider (these factors not exclusive, and should be weighed in light of the given problem)

(1)               Needs of interstate/international system

(2)               Relevent forum policies

(3)               Relative policies and issues pertaining to other states

(4)               Protection of justified expectations

(5)               Basic policies underlying particular field of law

(6)               Certainty, predictibility, uniformity of result

(7)               Ease of determining and applying the law

3.                  §145 explains the factors that determine choice of law in tort cases

4.                  §§ 186 and 188 determine choice of law in contract cases

5.                  The nature of an interest may determine its weight (Woods Bros.)

6.                  Each issue should be determined according to the law of the state with which it has the most significant relationship (Id.).

7.                  Presumption in K cases is that place of performance will govern, but another state w/ a more significant relationship can trump. (Id.)

8.                  When a state has a statute addressing issue and another state doesn’t, that may indicate that statutory state has a greater interest (e.g. Id.- NM had statute to protect against faulty contruction, CO only had common law K rights).

9.                  Significance of contacts determined by quality, not quantity.  Factors to weigh:

a)                 Strength of each state’s interest

(1)               Specificity

(2)               Nature

(3)               Statute v. common law

(4)               Criminal v. Civil law

b)                 relevance these interests to present case

D.    Interest Analysis

1.                  Purpose, not words, of legislation should be looked to (Marek).

a)                 Ascertain purpose that led to adoption of law for wholly domestic cases

b)                 Determine which contacts bring a multistate case within that purpose

2.                  True conflict exists where the combination of both a policy and a relevant contact can be found in multiple states

3.                  False conflicts should be weeded out so that states w/ true interest can govern.

4.                  Interest analysis is meant to  take place prior to 2^nd restatement analysis ?????

E.     False Conflcts

1.                  Guest statute cases frequently illustrate interest analysis.  When both driver and passenger are from out of state, a guest statute existing in the place of injury will not govern (e.g. Tooker).

2.                  Distinction should be made between conduct-regulating laws (in which lex loci has an interest) and loss-allocating laws (lex loci has no interest if P & D are both foreigners) (Shultz – NY’s lack of charitable immunity not implicated when abuser and victim came from New Jersey for weekend trip, on theory that the law was intended to spread loss, not impede abuse).

a)                 When both parties are domiciled in same state, loss allocation is relevent only to that state

3.                  Fairness of applying a law outside the lex loci must be taken into consideration (Tooker – issue whether D’s behavior was patterned by reliance on local law).

4.                  When law deals only with remedy and not whether conduct itself is unlawful, reliance on lex loci law is less likely (shultz).

5.                  Issues arise over whether courts have capacity to interpret what the policies behind laws are.

6.                  An “unprovided-for” case is one in which neither state has an interest (policy+contact). 

a)                 5 approaches

(1)               Default rule is to use forum law

(2)               Allow judge discretion to apply better law

(3)               Apply law that aids local resident

(4)               Treat foreign claiments as they would be treated in their home states.

(5)               Search for common policy

b)                 Look at all relevent state laws to see if there’s a hidden interest

F.     True Conflicts

1.                  Public policy may permit a court to apply forum law even when foreign interests are stronger (Lillienthal)

2.                  When interests are equally compelling, apply forum law when forum is one of the interested states (Id. – spendthrift law protects D from California K).

3.                  Courts should restrain interpretation of local interests.

4.                  Expectations of parties likely to be upheld in contract cases (e.g. Bernkrant – oral K good in NV will not be invalidated by CA statute of frauds where one party had no reason to know other was a CA resident, and K was made in NV concerning NV realty).

5.                  Relative strength of conflicting policies should be taken into account (e.g. Id. – reas. Expectations vs. statute of frauds)

G.    Comparative Impairment

1.                  Only CA has adopted comparative impairment

2.                  Forum should restrain interpretation -  see whether it has a “real” interest as compaired to a hypothetical interest (see Bernhard)

3.                  Law of state whose interest would be more impaired by nonapplication of its law should receive deference.  Interests are not weighed against each other (e.g. Id. – CA could not reasonably effectuate its policy against serving alcohol to drivers if neighboring states allow such service; NV policy in protecting defendants not so frustrated).

4.                  Pertinence of state interest measured by how much interest is furthered/impaired by application/nonapplication

5.                  Substance should prevail over procedure

6.                  Two branches of comparative impairment:

a)                 Theoretical

(1)               Conduct regulation, e.g. 1953 Ford, Bernkrant

(2)               Modern restrained interpretation

(3)               Attempt to meet common policy, perhaps

b)                 Practical

(1)               Loss-allocating, eg. Bernhard Schultz

H.     Principles of Preference

1.                  Cavers principles

a)                 The law of the place of injury should apply if more protective of P than law of place where D resides or acted; if not

b)                 The law of the state where D acted and caused injury should apply if less protective of P than law of P’s home state

2.                  In conduct-regulating cases, law of jurisdiction where tort occurred has greatest interest; if remedial rules are being decided, parties domiciles are the chief factors (Cooney)

3.                  Neumeier rules address loss-allocation (Cooney):

a)                 Common domicile requires domocile law to apply

b)                 When domicile is not shared, and lex loci is P’s domicile, that law applies.  If lex loci is in D’s domicile, law of D’s state applies.

c)                  If injury occurs in state where neither party is domiciled, lex loci applies.

4.                  Public policy only applied when applicable substantive law is not forum law and local nexus with case is strong enough to threaten public policy (Id.).

I.         Better Law

1.                  Leflar summarized the 5 considerations as follows (in rank order)

a)                 Predictability of results

(1)               Dispositive in K cases

b)                 Maintanance of interstate & international order

(1)               This is maintained if forum applies its own law having significant contacts with the case (Milkovich)

(2)               Not implicated in a false conflict

c)                  Simplification of the judicial task

d)                 Advancement of the forums governmental interest

(1)               Tied to “better law” factor

e)                 Application of the better rule of law

(1)               “Better law” is one which best reflects reason and justice (Milkovich)

2.                  First 3 principles more applicable to contract cases than to torts.

3.                  Question of substance v. procedure leans towards choosing procedure

4.                  Obsolete laws are “worse” than modern laws (e.g. Id. – guest statute ill serves modern age of car pooling)

5.                  Rationales of laws must be taken into account

J.      Depecage and Renvoi revisited

1.                  Depecage is the concept of applying different laws to different issues.

a)                 Currie believed that uncontemplated results should not result (e.g. Adams – P would have no cause of action if negligance and immunity laws of one state governed, but can create one by mixing and matching between states)

b)                 Legislatures don’t seem to consider multistate cases.

c)                  If laws are obviously meant to go together, depecage is inappropriate

2.                  Renvoi question dissappears in interest analysis according to most commentators

a)                 Foreign choice of law rules still useful in resolving difficult cases

b)                 Some argue that foreign choice-of-law rules reflect foreign state’s policy and should be considered

c)                  May helpful to reveal “true intent” in a false conflict case

III.      Constitutional Aspects of Choice of Law

A.     Due Process

1.                  To the extent that the law interferes w/ the rights of out-of-staters to be treated like state citizens, there is a federal due process issue

2.                  State “procedural” laws can be challenged as a violation of substantive due process (Dick -  remedy not shielded from due process analysis)

3.                  Unfair surprise is an important factor (id. – parties contracted for one-year period of limitation, TX statute could not supercede since K was not made or to be performed in TX).

4.                  Forum cannot abrogate rights of parties whose activities are unrelated to the forum (id.).(quid pro quo – if D not benefited by state, D should not be burdened by state).

5.                  Place of making K probably more important than place of performance, since forum cannot modify rights and obligations through its own statutes even when a party to K resides in forum (Hartford Acc. – slight connection not enough to invoke forum policy limiting time within which to file claim).

B.     Full Faith & Credit

1.                  A forum may consider its own policies in denying rights created by foreign law, but must recognize those rights if its own policy is not seriously compromised (Clapper – substantive defense to worker’s compensation act could not be denied where only forum contact was place of injury and law was loss-allocating).

2.                  Place of K is apparently a good enough contact to warrant an application of forum law (Alaska Packers – place of performance and place of injury in AK, but K was made in CA so CA can apply its Worker’s compensation statue over AK exclusive remedy rule), as is place of injury (Pacific Employers)

3.                  Applicablity of forum law may be presumed, and challenger assumes burden of showing that foreign interests are so superior that they must be honored (Id.).

4.                  Even if a foreign statute would control in a foreign court, forum is not compelled to apply foreign statute where its own policy is applicable to persons and events within forum (Pacific Employers)

5.                  Keep in mind that a sufficient “interest” to warrant application of forum law is not necessarily  the same type of “interest” needed for interest analysis.

C.    Convergence of Due Process with Full Faith & Credit

1.                  If a state has only an insignificant contact with the parties and the occurance/transaction, application of its law is unconstitutional (Allstate, citing Dick, Yates).

2.                  Test for whether application of a states law is constitutional is whether state has a significant contact or a significant aggregation of contacts, creating state interests, such that choice of its law is neither arbitrary or fundamentally unfair (unfair surprise remains a separate test???.  Dispute between plurality/concurrance, perhaps). (Allstate -  place of employment, business conducted there by D, P moved there after event occurred).

a)                 Expectation of parties  an important factor

3.                  Administrative interests are not alone sufficient to justify application of forum law (Allstate, Stevens, concurring) (Shutts).

4.                  Application of law that is fair as to some claims of a class-action suit may not be fair as to other claims (Shutts – oil leases that did not involve KS land or KS investors wouldn’t be governed by KS law, even though D did business in KS).

5.                  Jurisdiction over a claim is not a factor to be weighed in considering forum interest (Shutts) (does this mean administration not a factor??).

6.                  Blanket rule prohibiting courts from entertaining certain types of suits is unconstitional (Hughes – WI cannot summarily refuse to hear wrongful death suits when all events occurred out-of-state).

a)                 Policy of FF&C clause has to be weighed against forum policy in each case

b)                 If a court has jurisdiction over a suit, it must enforce those claims protected by the FF&C clause (Broderick, CB 301)?????

7.                  In  summary, a state may not discriminate against foreign law unless

a)                 It has a sufficient justification, and

b)                 Tailors that discrimination to fit the justification (CB 303).

8.                  Interest analysis still constitutional where fundamental rights are not involved

D.    Priviledges and Immunities

1.                  Residents and non-residents may not be treated unequally if to do so would infringe on privleges and immunities that bear “on the vitality of the nation as a single entity” (Piper – nonresident has a right to practice law in NH), unless

a)                 There is a substantial reason for the difference in treatment, and

b)                 The discrimination has a substantial relationship to the objective.

2.                  If P&I clause won’t work, try EP clause (CB 317-18).

IV.   Recognition of Judgments

A.     Recognition of Judgments

1.                  Claim preclusion precludes further suits upon the same cause of action after a final judgment.  The original claim is said to be “barred” by a judgment for the defendant and “merged” in one for the plaintiff.

2.                  Issue preclusion deals with situations in which issues determined in previous litigation were:

a)                 Litigated by the parties

b)                 Determined by the tribunal

c)                  Necessarily so determined

3.                  Issues actually decided will be forclosed by “direct estoppel” if judgment was not issued “on the merits.”

4.                  Collateral estoppel gives preclusive effect to essential findings necessarily determined in an earlier litigation in a subsequent litigation on another cause of action between the same parties.

5.                  Common tests for defining the scope of a “claim” or “cause of action can be used:

a)                 Same principles of substantive/procedural law are applicable to both actions

b)                 Same right is alleged to be infringed by the same wrong

c)                  Judgment sought in second action would infringe rights established in first

d)                 Same evidence would support both actions

e)                 Operative facts same in both actions

6.                  Mutuality is no longer required in many courts, so a plaintiff in a new action can use a determination made in  a previous action to which P was not a party, even though P would not have been bound by a contrary finding.

7.                  Full Faith and Credit must be given to out-of-state judgments under the U.S. Constitution.  28 U.S.C. 1728 applies this requirement to the federal courts re state judgments, and to the state courts re federal judgments (CB 406-07).

8.                  Actions must be allowed on valid foreign judgments

a)                 “the judgment of a state court should have the same credit, validity, and effect in every other court in the United States, which it had in the state where it was pronounced, and that whatever pleas would be good to a suit thereon in such State, and none others, could be pleaded in any other court of the United States.” (Faunterloy, citing Hampton).

9.                  Even an out-of-state judgment that was rendered due to a mistaken application of local law must be enforced by the forum (Faunterloy – even though MS would not allow action on gambling debt, MO mistakenly did so, MS must enforce judgment).

10.             Degree of effect given to foreign judgment must be the same as that given to by rendering court (Yarborough – GA child alimony decree cannot be modified by subsequent SC decree, since GA decree fixed amt. owed).

a)                 Federal courts apparently must give same preclusive effect to lower ct. judgments???

b)                 Restatement suggests that in cases of extreme public policy violation, recognition need not be given to foreign judgments where local interests are primarily concerned.  But this is probably not allowable.

c)                  Decree that is modifiable in rendering state can be modified by forum if rendering state would have done so (Kovacs – custody changed by N.C. ct. where NY made original decree).

B.     Challenging Jurisdiction

1.                  States may determine extraterritorial effect of their own judgments only by prescribing the effect of its judgments within its own borders (Thomas, dissaproving of McMartin rule allowing states to explicitly state the extraterritorial effect).

2.                  Decsion by state administrative agency, as opposed to a court of general jurisdiction, is not necessarily entitled to the same res judicata effect that a true judgment would get, but factfindings are binding (Thomas – DC allowed to supplement worker’s compensation award granted in VA, since DC could have been first forum anyway). (Thomas was a plurality opinion).

a)                 Administrative awards and orders today are treated just like judgments from courts of general jurisdiction.

3.                  Jurisdiction of original forum cannot be questioned when jurisdictional issues where fully and fairly litigated there (Durfee – quiet title action in NE cannot be subsumed by subsequent action in M