CONFLICT OF LAWS
CONFLICT OF LAWS
I. INTRODUCTION:
1. Conflict of laws entails jurisdiction, judgments and choice of law (or conflicts)
2. Legislative or proscriptive jurisdiction – outer limit of a state’s or country’s power to apply its own law whether statutory or judge made
3. Judicial Jurisdiction – the power or ability of a court to hear a dispute and render a valid judgment (recognized by other courts; requires:
a. Personal jurisdiction, and
b. Subject matter jurisdiction
4. Purpose of conflicts of law rules
a. Mitigate forum shopping
b. Notions of fairness
DOMICILE:
1. A person has one domicile at any one time and does not lose it until he actually acquires a new one
a. Being without a domicile anywhere is a legal impossibility
b. Restatement 2nd – a person can have different domiciles for different purposes at the same time
c. Headquarters of the persons personal and professional life
d. Domicile is determined by the law of the forum
2. Domicile of origin – a person is presumed to have the domicile of his parents
3. Domicile by operation of law – imputed by law regardless of party’s intentions (e.g. parent / child)
a. An infant lacks the capacity to choose
b. Spouses – under the common law a husband’s domicile was imputed to his wife but under modern law it is only a presumption
4. Domicile of choice – establishment of a new domicile requires legal capacity, physical presence and state of mind
a. A person retains his old domicile until a new one is perfected
b. A mere intention to relinquish the old domicile without being present in the new one is insufficient
c. English rule – one who gives up their domicile of choice regains their domicile of origin until a new one is actually attained
d. American rule – one retains his domicile until he acquires a new one
5. Physical presence:
a. The person must actually be present, even if it is for a very brief period
6. Intent:
a. Common law – must intend to remain indefinitely
b. Restatement 2nd and modern cases require an intent to make the place home for the time at least (not indefinitely)
c. Motive is irrelevant when determining establishment of a new domicile except that it may supply evidence of intent
d. Declarations of intent are not dispositive
7. A ∆ is always amenable to the general jurisdiction of a court of his domicile (nexus to government benefits – taxes, legal protection etc)
8. Residence is not synonymous with domicile
9. Hague Convention – “domicile” is defined in terms of a persons habitual residence
a. Objective standard – it does not focus on the party’s intent
b. Problematic since some people cannot fairly be said to have a habitual residence (e.g. college students)
10. § 17 Restatement of Conflicts 2nd “Presence Under Compulsion” – people compelled to reside in a location retain their domicile unless they intend to make the residence their domicile (e.g. prisoners, military personnel, etc)
11. Intestate succession to personal property is determined by the domicile
a. Decedent is most familiar with the laws of his domicile
b. Attorney consultations would most likely be conducted in the domicile
c. The domicile state bears the burden of intestate distribution
12. Intestate succession to real property is determined by the law of the situs
13. Conflicting determinations of domicile – the states apply their own standards for determining domicile and may separately rule that a party was domiciled in their respective state (a legal impossibility)
a. Dorrence cases – two states imposed estate taxes after each decided that the decedent was domiciled in their respective state
b. Imposition of multiple state estate taxes violates the due process clause only if the taxes exceed the value of the estate
c. To avoid the problem an intent to change domiciles should be done completely and quickly
14. Diversity actions – the parties must have different domiciles at the time the action is filed
a. A change in domicile may not be recognized by the courts if it was done so to create diversity, gain a tax advantage, etc (only an artificial change; no real intent)
b. Aim of diversity jurisdiction is to protect non-resident ∆s from forum prejudice (a person who has artificially changed domiciles is not prejudiced)
15. Judicial jurisdiction:
a. The definition of domicile may depend upon the purpose for which it is used in a particular case (In a statute, etc)
b. Consider if the results achieved under traditional rules of domicile are equitable and in accord with the intent of the statute or other action
c. Illegal immigrants acquire a new domicile for the purpose of government benefits but not necessarily for family law matters (e.g. divorce)
II. JURISDICTION OF COURTS:
PERSONAL JURISDICTION:
1. A ∆’s contacts with the forum are such that the court may render a personal judgment against the ∆ creating a judgment debt that may be enforced by other states under full faith and credit
a. Lack of personal jurisdiction is the classic form of collateral attack
2. The “Due Process” clause (5th and 14th Amendments) mandates that the exercise of personal jurisdiction meet the requirements of due process (Pennoyer v. Neff – service by publication was ineffective since the action was to determine the personal rights and obligations of the parties)
3. Due Process requires:
a. Substantive due process (jurisdiction)– power over the person or property in order to subject to liability, and
b. Procedural due process (notice)– notice and an opportunity to be heard
4. Privileges and Immunities clause – citizens of each state are entitled to all the privileges and immunities afforded the citizens of the several states
5. Full Faith and Credit – the judgement of one court will be honored by the courts of other states
6. Absent Congressional creation of nationwide jurisdiction (very limited, admiralty, etc), a federal court will be limited to the jurisdictional reach of the state court where it sits
7. Each court has the power to decide if it has jurisdiction over the parties & subject matter
TRADITIONAL METHODS BY WHICH THE COURTS ESTABLISH PERSONAL JURISDICTION:
1. The defendant is personally served in the forum state
a. Defendant is voluntarily present in the state (purposely availing himself of the benefits of the forum)
b. No minimum contacts with the forum are required (transient jurisdiction – Burnham v. Superior Court)
c. “Tag Jurisdiction” encourages forum shopping and could result in unfairness
2. The defendant is domiciled in the forum state
a. Rationale for jurisdiction - defendant avails himself of the benefits of the forum state
3. The defendant consents to the court’s exercise of personal jurisdiction
a. A plaintiff consents to counterclaims by filing an action
b. Forum selection clauses bind the parties to litigate in a particular forum (must be reasonable)
c. Consent to jurisdiction clause – vests a court with jurisdiction
4. Waiver – the defendant fails to challenge jurisdiction
a. ∆ appears specially but then argues the merits – waives any jurisdictional challenge
MODERN REQUIREMENTS FOR PERSONAL JURISDICTION:
Minimum Contacts – the defendant must have minimum contacts with the forum state – International Shoe:
a. Foreseeability – the defendant should foresee being haled into court in the forum
b. Purposeful Contacts or actions directed toward the forum
1) Initiation – the defendant initiated the contact with the forum
2) The greater the ∆’s forum activities the lower the need for relatedness of the claim to the forum
c. The defendant adjusted his primary conduct in light of the forum’s laws (usually applies to insurance cases)
d. The defendant derived benefits from the forum
1. Fair Play and Substantial Justice – subjecting the defendant to jurisdiction within the forum must meet with traditional notions of fair play and substantial justice:
a. Interest of the forum state in hearing the case (involving its’ citizens, etc.)
1) Contrast Asahi Metals where the controversy was an indemnification action between two Japanese companies
b. Overall fairness and reasonableness of exercising jurisdiction in the forum (defendant’s burden of defending in forum, etc.)
c. The plaintiff’s interest in having the litigation in the forum (difficulty in bring suit elsewhere, availability of evidence, witnesses etc.)
d. Interest of the interstate judicial system in obtaining the most efficient resolution to controversies and public policy
2. Domestic Corporations – a corporation is a resident of the forum if:
a. It is incorporated in the forum, or
b. It has its’ principal place of business in the forum
c. Foreign corporations are subject to the jurisdictional requirements above
d. The legal fiction that corporate stock is present in the state of incorporation is an insufficient basis for asserting jurisdiction over officers of the corporation (Shaffer v. Heitner)
3. Due process and federalism – the only restriction on personal jurisdiction is the due process clause and its protection of individuals
a. The sovereignty and rights of states outside the forum do not place limits on personal jurisdiction
b. If federalism were an independent restriction, then a ∆ could never waive jurisdiction since individuals can not waive the rights of states
c. Failure to comply with discovery orders aimed at a jurisdictional issue may be a waiver of jurisdiction
4. Defamation – publication meets minimum contacts if the publisher avails itself of the market in a state (includes writers and editors)
5. Minimum contacts are evaluated in terms of specific or general jurisdiction
SPECIFIC JURISDICTION:
1. The non-resident defendant has sufficient contacts with the forum and those contacts are substantially related to the controversy (the cause of action arises out of the defendant’s contact with the forum)
2. Injury within the forum alone is insufficient to establish jurisdiction over a non-resident defendant unless the defendant directed acts toward the forum and could reasonably expect to be haled into court there (World-Wide Volkswagen v. Woodson)
3. All of the defendant’s contacts with the controversy do not have to be with the forum state so long as a sufficient number of contacts are with the forum (Burger King Corp. v. Rudzewicz)
4. Merely placing a product into the stream of commerce may be insufficient unless the defendant has purposefully availed himself of the market (Asahi Metal Co. v. Sup. Ct. of CA – the court was fractured 4/4 on this issue and the unfairness of requiring the ∆ to defend in California was determinative)
a. Brussels Convention – tort jurisdiction is at the place of acting or the place of injury
GENERAL JURISDICTION:
1. The non-resident defendant has extensive contacts with the forum justifying jurisdiction and there are no contacts related to the controversy between the defendant and the forum
a. The cause of action does not arise out of contacts with the forum state
b. Exercise of state court jurisdiction is discretionary and based upon local court rules or statutes
2. The minimum contacts threshold is significantly higher than specific jurisdiction
3. Contacts must be continuous, systematic and substantial
a. Helicopteros Nationales de Columbia v. Hall – purchasing equipment, using a bank account for those purchases and training pilots were insufficient forum activities to maintain a cause of action arising out of an accident in Columbia (court did not consider specific jurisdiction)
b. Brussels Convention – general jurisdiction exists only where a ∆ is domiciled, incorporated or has its corporate HQ
4. Individuals are subject to general jurisdiction in their domicile jurisdiction
5. Piercing the corporate veil – asserting jurisdiction over a parent corporation requires a very close relationship with the subsidiary, e.g. agency (board of directors overlap, direct involvement, etc)
a. Alternatively – requires misuse of the corporate identity
b. Service of process is complete when served upon the subsidiary
c. Partnerships – service on one partner, officer, etc does not impute jurisdiction over property outside the state
JURISDICTION OVER THINGS:
1. “In Rem”: The subject of an action is some item of property (“res”) located in the forum and the action determines one’s interests in the res against all the world
a. Adjudicate questions concerning the ownership and control of the property (value of the judgment is limited to the “res”)
b. Acts upon the thing itself rather than the rights of the individual (artificial distinction)
c. Minimum contacts established by presence in the forum and notice
2. “Quasi In Rem”: ( asserts a preexisting interest in a particular thing against certain named individuals only and the judgment affects only those parties
a. Value of the judgment cannot exceed the value of the “res”
3. Land – a forum has jurisdiction over land located within the situs and in rem judgments rendered will be subject to full faith and credit
a. However, if a court only has in rem jurisdiction and issues a personal judgment (personal obligations, etc) the judgment will be invalid
b. Combs v. Combs – Debtor gets a judgment in F-2 discharging a lien on a parcel of land and then defends an action on the debt by the creditor in F-1 on the grounds of claim preclusion. The debt was not discharged by the F-2 action since the F-2 court lacked personal jurisdiction over the creditor
4. Intangibles – the situs of an intangible determines jurisdiction
a. The obligation of a debtor accompanies him wherever he goes and is subject to attachment provided there are minimum contacts
b. Minimum contacts must be established to assert personal jurisdiction based upon attachment and the mere presence of unrelated property alone will not provide jurisdiction over persons (Shaffer v. Heitner - shareholder derivative action failed to meet minimum contacts)
COMPETENCE OF THE COURT:
1. Subject matter jurisdiction refers to a court’s competence to hear and decide a particular issue
2. Subject matter jurisdiction cannot be waived by the parties
a. Lack of competence must be addressed by the court on its own motion (even if a challenge is not raised by the parties)
b. Parties cannot confer subject matter jurisdiction upon a court by agreement
3. Full faith and credit does not apply to judgments rendered by courts that lack competence
4. § 105 Restatement 2nd, Conflict of Laws – Lack of competence in F-1 is grounds for a collateral attack in F-2
a. Thompson v. Whitman – a NJ court lacked jurisdiction lacked jurisdiction over a boat seized in NY waters, therefore its judgment was invalid
5. More faith and credit than entitled to – F-2 should not be obligated to give a judgment more credit than F-1 would give it
6. Continuing jurisdiction – once a court has jurisdiction over a ∆ or his property, it retains that jurisdiction for all proceedings which arise out of the original cause of action
a. ( may not add new claims without a jurisdictional basis
b. Irrelevant if the original basis for jurisdiction no longer exists
c. Domestic relations cases – court may refuse to hear case if the parties have moved elsewhere and a convenient forum has jurisdiction over the ∆
III. LIMITATIONS ON THE EXERCISE OF JURISDICTION:
1. Limitations imposed by contract – forum selection and consent to jurisdiction clauses
a. Prima facie valid and should be enforced unless unreasonable or unjust, procured by fraud, violative of public policy or seriously inconvenient
1) Agreement denied effect when the parties and the incident were domestic and the forum was a foreign country
b. Clauses permit sophisticated parties to select the forum for the resolution of their disputes and the courts show great deference to freedom of contracts in jurisdiction matters
c. Bremen v. Zapata (offshore towing contract / forum selected = London) – influential factors included: international contract freely negotiated at arm’s length, sophisticated parties, forum selected was neutral
d. Carnival Cruise Lines v. Shutes upheld an adhesion contract with a non-sophisticated consumer; rationale:
1) Cruise ships carry people from many different states and nations
2) Save the courts and the parties time and expense
3) Savings incurred from forum selection clauses are passed on to consumers
e. Some courts have interpreted Zapata as creating a federal common law standard in diversity cases regardless of state standards
f. Brussels’ Convention – forum selection clauses vest exclusive jurisdiction in a court of a member nation (one of the contracting parties must be from a member nation)
2. Fraud, Force and Privilege:
a. A court will not exercise jurisdiction nor grant full faith and credit over a ∆ or his property if jurisdiction has been obtained by force or fraud
b. Service of process achieved by tricking the ∆ to enter the forum will be invalid
c. Privilege – immunity from service applies to foreign sovereigns, ∆s appearing specially and ∆s who enter the forum to participate in civil litigation
d. These limitations do not apply to a criminal ∆ who will also be subject to jurisdiction in the forum on civil matters once there
3. Forum Non Conveniens dismissal permits a court to refuse to exercise jurisdiction if it is a seriously inconvenient forum for the action and another more convenient forum is available to the (
a. Procedurally – motion is only available to the ∆
b. Application depends upon the sound discretion of the trial judge who must consider the interests of the litigant and the public
c. Litigant’s interests – proximity & accessibility of evidence, availability of compulsory process for unwilling witnesses, travel costs, possibility of viewing the scene and enforceability of a judgment
d. Public’s interests – caseload pressures if litigation is shifted to popular forums, burden of jury duty and the local interests of having cases decided where they arose
e. The dismissal may be conditioned on submission to jurisdiction or waiver of the SOL but may not be conditioned on unilateral submission to U.S. discovery rules or supervision of a foreign action by a U.S. court
f. A due process challenge against a foreign country judgment may be made when the ( brings an enforcement action in a U.S. court
g. Unfavorable change in the law is not grounds for denial unless the remedy provided in the alternative forum is so inadequate that it is no remedy at all
h. Presumption in favor of (’s forum is greater when the ( is an American and the alternative forum is a foreign country
4. Race to judgement – a ∆ may initiate parallel litigation as a preemptive strike in a competent forum to prevent full faith and credit from binding him
a. Most federal circuits follow the “first filed rule” to decide which judgment has effect
b. State court or federal court w/ diversity jurisdiction – state law determines if the second forum action will be dismissed or stayed
c. State injunction against parallel litigation – penalties available in the first state but recognition and enforcement is not required in the second state
5. Federal Transfer – for the convenience of the parties and witnesses, in the interests of justice a district court may transfer any civil action to any other district where it may have been brought
a. A district court may not dismiss under forum non conveniens when there is an available district to transfer to
b. The district court has broader discretion to transfer than under a forum non conveniens dismissal
c. Court where suit “may have been brought” refers to the suability of the ∆ and not the capacity of the ( (transferee court must have personal and subject matter jurisdiction)
d. The transferee district court must apply the state law of the transferor court (Klaxon rule)
OTHER LIMITS IMPOSED BY THE FORUM:
1. § 53 Restatement 2nd of Conflicts – A person will be ordered to do an act in another state when … required by the demands of justice and convenience. [D]efendant will not … be ordered to do an act which violates the law of another state.
2. A courts can exercise its discretion and not require an action it otherwise has jurisdiction over if it will cause the party to violate the laws of a foreign forum
a. Requires a balancing of interests
b. Includes criminal laws, substantial sanctions equivalent to criminal penalties or public policy as expressed in legislation
c. Prospective civil liability is insufficient
d. Foreign countries concerned with liberal U.S. discovery policy have enacted blocking statutes however a U.S. court w/ jurisdiction does not have to recognize such a statute
3. Inability to grant relief – when relief is sought outside the framework of the local court system, the suit must be dismissed
a. Slater v. Mexican National Railroad - ( was seeking a type of relief under Mexican law (revisable judgment for damages similar to a pension) which the local was unable to grant
4. Commerce Clause – dismissal is mandatory when an action in a local court would impose an unreasonable burden on interstate commerce
a. Statutes requiring a general consent to jurisdiction before doing business in a state or consent to service by assignment of one ticket agent in a state are undue burdens on commerce
b. The burden must be clearly unreasonable since every transitory cause of action against a foreign corporation imposes some burden on trade
c. Most of these cases can be decided on personal jurisdiction or forum non conveniens grounds without resort to the commerce clause
5. A federal cause of action, created by a constitutional act, is paramount to and supersedes state law
a. States cannot dismiss causes of action because the federal law is against the public policy of the state (increases liabilities, etc)
b. Principle applies when state and federal courts have concurrent jurisdiction
LIMITATIONS IMPOSED BY THE STATE OF THE TRANSACTION:
1. Each state determines the competency of its own courts and is not bound by any limitations on jurisdiction imposed by the law of a sister state
2. State statutes that localize a transitory cause of action and grant exclusive jurisdiction to its local courts do not prohibit a sister state court from asserting jurisdiction
a. The judgment from the sister state is then entitled to full faith and credit
b. Similarly, anti-suit injunctions based upon such a statute are not entitled to full faith and credit
3. A forum is not compelled to accept jurisdiction of a cause of action created under the laws of a sister state
IV. FOREIGN JUDGMENTS:
1. Full Faith and Credit – application to all courts:
a. U.S. Constitution Article IV § 1 – Full faith and credit shall be given in each state to the public acts, records, and judicial proceedings of every other state.
b. 28 U.S.C. § 1738 – extends application to territories and possessions and requires federal courts to give full faith and credit to state court judgments
c. Supreme Court has consistently required state courts to grant full faith and credit to federal court judgments
2. A final judgment (res judicata) in F-1 is entitled to full faith and credit (preclusion) in F-2
a. The F-1 judgment must be valid (due process / personal jurisdiction)
b. The F-1 judgment must be final (provisions for adjustment of alimony, etc are not final)
1) Some states permit modifications of foreign alimony judgments by statute / judicial creation for public policy reasons (prevent one from eluding obligation, state will have to care for wife, etc)
2) Foreign courts can adjudicate such a proceeding by simply applying F-1 law (convenience of the parties)
c. The F-1 judgment must have been decided on the merits
1) Judgment involves the substance of the (’s claim
2) Dismissal for lack of jurisdiction, improper venue, forum non-conveniens are not on the merits
3) Majority view – dismissals based upon laches and running of the SOL are likewise not on the merits
d. The doctrine promotes judicial economy and justice
3. Enforcing a claim in a foreign jurisdiction historically required a final judgment in F-1 and an action to enforce it in F-2
a. In federal court a judgment can be “registered” in any other district making it enforceable there and alleviating the need for a separate suit
b. Most states have adopted similar provisions
4. Federal common law considerations weighing heavily in favor of enforcing a foreign nation judgment (Hilton v. Guyot)
a. ( & ∆ are citizens of the foreign state
b. ∆ is a citizen of the foreign state
c. ( is a citizen of the foreign state and judgment is for ∆
d. Reciprocity
5. Reciprocity – federal courts should recognize and enforce judgments of a foreign country if that country would subject an American judgment to similar treatment (Hilton v. Guyot)
a. Most states tend to recognize foreign country judgments subject to the usual defenses and reject reciprocity (doctrine explicitly rejected by NY)
b. To avoid the majority rule bring an action in a state that requires reciprocity and then bring an enforcement action under full faith and credit
c. The doctrine is part of the federal common law and does not apply in diversity cases since the Court was not deciding a federal question
d. Can be confined to a narrow holding – Only applicable when foreign national sues a U.S. citizen and wins
6. Comity is the recognition one nation allows to the legislative, executive or judicial acts of another nation based upon mutual respect and cooperation among sovereign nations
a. Full faith and credit does not apply to foreign nation judgments
b. The recognizing state determines whether the foreign nation court had jurisdiction and employed fair procedures
7. Defenses against a foreign nation judgment include:
a. Lack of jurisdiction
b. Violative of due process
c. Legal system is not compatible with the U.S. legal system (no impartial tribunals, etc.)
d. Public policy – broader application than in domestic matters (aspects of foreign law that an American court cannot recognize e.g. slavery, de jure racism, etc.)
8. State law determines the effect of foreign nation judgments on American courts
RES JUDICATA:
1. Claim preclusion prohibits a second suit on a claim or cause of action which was asserted in a prior suit and resulted in a valid, final judgment on the merits
a. Precludes all questions actually litigated and those that might have been litigated
b. Second suit is precluded even if new issues are raised
c. Compulsory counterclaim provisions preclude a ∆ from bringing a later claim in another jurisdiction
2. Issue preclusion prohibits re-litigation of factual issues actually decided in a prior proceeding regardless of whether the second proceeding is based upon the same cause of action
a. In a second suit on a different cause of action, issues actually litigated and decided are precluded from re-litigation
b. If a ∆ makes a limited appearance for an in rem / quasi in rem proceeding (e.g. foreclose a mortgage, etc) in F-1 and the parties litigate the merits, the F-1 court’s findings on issues actually litigated will preclude subsequent re-litigation of those issues in F-2 even though the F-1 lacked personal jurisdiction over the ∆ (Harnischfeger Sales Corp. v. Sternberg Dredging Co. - ∆ specially appeared in F-1 foreclosure action raising a warranty defense and then raised a fraud defense, based upon the same issue, in the F-2 action for personal judgment)
3. State law determines what constitutes a claim or cause of action for preclusion purposes:
a. Primary right theory – each violation of a primary right (e.g. assault, battery, negligence, etc) yields a separate cause of action
b. Transactional theory – a single transaction or interlocked series of transactions / occurrences yields one cause of action
4. State law determines the preclusive effect of a litigated claim or issue
a. F-2 must use F-1’s law of judgments when that law is more preclusive
b. When F-2 gives greater preclusive effect to judgments than F-1, it must apply F-1 law otherwise it will be giving the judgment greater effect than it would receive in F-1’s own courts (doctrine applies at least when F-2 is a federal court)
5. Exclusive jurisdiction over a federal cause of action granted by statute may partially repeal full faith and credit under 28 U.S.C. § 1738 (federal court recognition of a state court judgment
a. Problem arises when a ( brings a state cause of action in state court but cannot also assert his federal cause of action since Congress has granted the federal courts exclusive jurisdiction (typically anti-trust cases)
b. Marrese v. American Academy of Orthopedic Surgeons (Sup. Ct.) two step analysis:
1) Examine state preclusion law and determine if it would preclude the claim that could not have been asserted in the prior state proceeding because of the exclusive jurisdiction statute
2) If state law would preclude the claim, determine if the exclusive jurisdiction statute partially repeals § 1738 and permit the federal court to hear the claim
c. Examine congressional intent to determine if § 1738 is partially repealed
d. Applicable to settlements as well as judgments in F-1
e. Applies to issue preclusion as well as claim preclusion
6. Title VII cases do not provide an exception to full faith and credit preclusive requirements when state agency action has been judicially reviewed
a. State administrative agency determinations that have not been judicially reviewed are not given issue preclusion effect
7. Federal law controls the preclusive effects of all federal court judgments (federal court is F-1) regardless of whether the court was exercising federal question or diversity jurisdiction (majority view)
8. Full faith and credit must be given to wrongly decided cases as well since the proper remedy is appeal through the state’s appellate process culminating with a writ of certiorari to the Supreme Court
9. Persons bound by res judicata – parties to the action and those in privity with them:
a. Privity – a person who is so closely related to a party that it is fair to bind him to the results of the litigation (e.g. trustee and beneficiary of trust, successive owners of property regarding an easement, etc)
b. Local law determines who is bound
10. Mutuality of Estoppel – claim and issue preclusion will not be applied to the detriment of strangers to the litigation since they were not provided notice and given the opportunity to be heard
11. If an F-1 court with only property based jurisdiction exceeds its limited powers and purports to issue a personal judgment against a ∆, that judgment is not entitled to full faith and credit
a. Unless it has personal jurisdiction over a debtor, the court cannot issue a deficiency judgment
b. An F-1 jurisdiction with in rem jurisdiction is limited to issuing preclusive judgments regarding the res only
12. Class suits: an F-1 judgment will be binding on all members of the class whenever they may later bring suit on the same cause of action, if:
a. Absent members of the class were adequately represented in the F-1 suit, and
b. A reasonable number of the class were given adequate notice of the suit and had an opportunity to be heard
LIMITATIONS ON FULL FAITH AND CREDIT:
1. Restatement 2nd of Conflicts § 103 Limitations on Full Faith and Credit: A judgment rendered in one state need not be recognized and enforced in a sister state if … it would involve an improper interference with important state interests….
a. Advanced by Justice Stone’s dissent in Yarborough v. Yarborough which advocated placing a state’s interest in the welfare of its children above full faith and credit in F-1’s final child support decree
b. Most common in domestic relations, criminal and workman’s comp cases
2. Workman’s compensation issues arise when the employee recovers under the statute where the injury occurs and then attempts additional recovery in the state of his usual employment
a. Normally an award in one state should be entitled to full faith and credit barring a second recovery in F-2
b. McCartin rule - Awards that are “not intended” to preclude any other rights of the worker will not prevent a second, even higher, award
c. Thomas v. Washington Gas Light Co. (plurality opinion) – The Court upheld a supplemental award in F-2 after considering:
1) F-1’s interest in placing limits on the liability of employers and insurers
2) The interests of both jurisdictions in compensating injured workers
3) F-1’s interest in the integrity of its administrative proceedings (claim preclusion effect is not the same as a judicial proceeding)
d. Plurality decision basically applies the § 103 exception to full faith and credit based upon the important interests of F-2
3. Land taboo – a judgment rendered by F-1 that directly affects title to land located in F-2 need not be respected by F-2
a. A divorce decree issued in F-1 that vests title to property located in F-2 does not have to be recognized in F-2 in a quiet title action
b. However, if the wife brought an action to enforce the F-1 judgment in F-2 the outcome would likely be different since there is no reason not to enforce an equity decree
4. Contempt – an F-2 court may deny full faith and credit to a ( who has been held in contempt of the F-2 court (highly criticized opinion)
5. Baker v. General Motors (Supreme Court 1998) – exceptions to full faith and credit:
a. F-1 judgments that purport to accomplish an official act within the exclusive province of F-2 (possibly the deeding of land in F-2)
b. Injunctions interfering with litigation over which the ordering state has no authority
DEFENSES – NATURE OF THE ORIGINAL PROCEEDINGS:
1. Lack of personal or subject matter jurisdiction makes a judgment void and not entitled to full faith and credit
a. If a ∆ appears specially and the court determines that it has personal jurisdiction, the ∆ cannot claim lack of jurisdiction in F-1 to prevent full faith and credit in F-2
b. Similarly, subject matter jurisdiction issues are precluded if fully and fairly litigated in F-1
c. Opportunity to litigate jurisdiction not pursued by the ∆ – cases are unclear
2. Challenges to jurisdictional determinations are to be made in the rendering state’s appellate process and eventually by writ to the Supreme Court
3. By bringing an action or counterclaim in a court, the ( is submitting to the jurisdiction of the court therefore the judgment will have preclusive effect against the ( in an action in F-2
a. Affects the rights of the (’s successors as well
4. A mere recital of jurisdiction is conclusory and insufficient
a. Recital of jurisdictional facts upon which jurisdiction was based is not enough to preclude the issue
5. Inconsistent judgments – Full faith and credit must be accorded to a court judgment even if that judgment fails to give full faith and credit to a prior court judgment
a. Creates a last in time rule for applicability of judgments
b. Conflict when F-3 is also F-1 – Supreme Court requires recognition of the F-2 judgment
6. Lack of finality (common in domestic relations cases) – not entitled to full faith and credit
a. Final judgments such as for payment of past alimony must be given effect if F-2
b. Accrued alimony not yet reduced to a judgment:
1) If F-1 modifies alimony awards prospectively then accrued alimony is not modifiable and subject to enforcement in F-2
2) If F-1 retrospectively modifies alimony awards then it is a modifiable award and not final
c. Modifiable judgments are not final but the F-2 court can exercise its discretion whether or not to enforce
1) ∆ is not disadvantaged as long as he is accorded due process
2) Eliminate undue burden on ( of having to periodically return to F-1 to obtain a final judgment
7. Fraud:
a. Intrinsic Fraud – collateral attack is not generally available regarding fraud that the resisting party had an opportunity to litigate in F-1 (But, if F-1’s law allows collateral attack then F-2 may address the issue applying its procedural rules)
b. Extrinsic Fraud – The ∆ was deprived of the opportunity to litigate and F-2 does not have to grant full faith and credit to an F-1 judgment obtained by fraud
DEFENSES – NATURE OF THE ORIGINAL CAUSE OF ACTION:
1. Penal judgments are not entitled to full faith and credit; penal is narrowly defined:
a. Purpose is to punish rather than recompose, and
b. Recovery is in favor of the state
2. Penal damages do not include:
a. Punitive damages as long as recovery is in favor of an individual
b. Wrongful death awards even where ∆’s fault is the measure of recovery
c. A tort judgment in favor of a state’s proprietary interests
d. Judgments for taxes since the purpose is generation of revenue
3. Judgments based upon mistake of fact or law are nonetheless entitled to full faith and credit
a. F-2 must recognize the F-1 judgment even if F-1 erroneously interpreted F-2 law and F-2 has an interest in the activity (Fauntleroy v. Lum – judgment enforced a “futures” trading agreement made and illegal in F-2)
4. The forum can apply its own statute of limitations barring an action to enforce a judgment even though shorter than F-1’s SOL (exception to rule applying at least as much credit to a judgment that F-1 would give it)
a. The SOL on enforcing foreign judgments can be shorter than the SOL for domestic judgments if the foreign judgment can be revived by an action in the foreign state (time limit begins on the date of the last foreign transaction)
5. A state cannot refuse to enforce a sister state judgment on the ground that the original action could not have been brought in the state in which enforcement is sought (e.g. lacked subject matter jurisdiction over the original cause of action)
a. F-2 is merely enforcing a judgment and it is irrelevant that the claim could not have been brought there is the first place
6. Foreign Country Judgments - § 4 Uniform Foreign Money Judgments Act:
a. Mandatory – judgment will not be enforced:
1) Rendered under a system without impartial tribunals or due process
2) Lack of personal jurisdiction
3) Lack of subject matter jurisdiction
b. Discretionary – judgment may be enforced:
1) ∆ did not have sufficient time to defend
2) Judgment obtained by fraud
3) The cause of action violates public policy of this state
4) Judgment conflicts with another judgment
5) The proceeding was contrary to a forum selection clause
6) Jurisdiction based solely on personal service and the forum is seriously inconvenient
V. THE IMPACT OF THE CONSTITUTION:
ON THE OBLIGATION PROVIDE OR REFUSE A FORUM:
1. A court must entertain a transitory cause of action that arises elsewhere
a. Refusal to hear a case because it arose under the law of a different state threatens interstate harmony (goal of full faith and credit)
b. The interests of the law-giving state should be regarded unless the forum has substantive law to the contrary
2. A forum is entitled to apply its own SOL to a transitory cause of action provided it is not discriminatory (state interest in not hearing stale claims)
ON THE CHOICE OF LAW:
1. It is a violation of the due process clause for a forum to apply its own law to a controversy when the only contact it has with the problem is that it is the forum
a. Home Insurance Co v. Dick – the action involved an insurance contract on a tugboat where all of the contacts were in Mexico yet the Texas court applied its contract law (Sup. Ct. reversed)
b. If all contacts are with another state, the forum cannot constitutionally refuse to make reference to the foreign law
c. Only a true conflict involves constitutional issues and it is ultimately for the Supreme Court to decide what is procedural and what is substantive regardless of forum applied labels
d. Presumption that the law of the place of making determines the validity of a contract
2. A forum must have sufficient contact with, and interest in, the dispute so the application of its laws is neither arbitrary nor patently unfair
a. De minimus contacts are not sufficient (Phillips Petroleum v. Shutts – small percentage of (s and gas leaseholds in the forum were insufficient for a nationwide class action)
b. Multi-state transactions – the forum will not be prevented from applying its own law even though it conflicts with the other involved states provided it has a relation ship to the action (e.g. injury to a domiciliary in the forum)
c. Foreseeability that an insured may end up in another state justified application of F-2 law to the contract
3. Restatement 2nd of Conflicts § 9 Choice of Law – A court may not apply the local law of its own state … unless … reasonable in light of the relationship of the state and of other states to the person, thing or occurrence involved
4. Fraternal organization internal affairs doctrine – the strong public policy of uniform application of laws governing a fraternal organization necessitates recognition of the law of the forum of incorporation
5. Full faith and credit does not permit a state to legislate across state lines and any state with a substantial interest in the matter can apply its law constitutionally
6. Public acts that must be afforded full faith and credit include both statutes and case law of sister states
VI. THRESHOLD PROBLEMS - FORUM CHOICE OF LAW:
ADMITTING OR REJECTING THE ACTION OR DEFENSE:
1. Local public policy – a forum could refuse to enforce foreign law if it would violate some fundamental principle of justice , good morals or deep rooted tradition in the local jurisdiction
a. Public policy may favor application of foreign law if states’ interests are similar
b. A strong local inter-spousal immunity policy may require application of local law even though foreign law controls other aspects of the claim (interest in marital status, etc)
c. Refusal to recognize a recovery limitation imposed by the foreign law may be in a forum’s interest of protecting its residents even though the cause of action arose in the foreign forum
2. Forum courts generally permit recovery on debts arising from gambling activities that were legal where performed even though they would have been illegal in the forum
a. Courts examine the attitudes and trends in the forum, the possibility of spill-over effects and the mechanism in the F-1 law to guard against unconscionable debt accumulation)
3. Resort to the public policy doctrine is only necessary where courts employ rigid choice of law rules
4. Foreign law may be different (such as a Mexican restriction on ownership of land) however that does not mean it violates public policy
5. A cause of action will be dismissed if the ∆ was compelled to act by operation of foreign law unless the forum invokes public policy
a. Dismissal of Jewish ( was mandated by German law so there was no breach of contract
b. If the court had invoked public policy and entered a judgment for the (, would ∆ have a due process claim under Dick?)
NOTICE AND PROOF OF FOREIGN LAW:
1. Judicial notice statutes require the parties to give timely notice of their reliance on foreign law
2. Traditionally the content of foreign law has been a question of fact that the asserting party needed to prove
a. In modern practice, U.S. courts are empowered to take judicial notice of the laws of sister states
b. Forum law determines the procedure for finding foreign law
3. Some states require that the party relying on foreign nation law plead and prove it as well
a. Generally, these courts will not take judicial notice of the foreign law even if it is applicable
b. NY Court of Appeals decided that foreign law governed the alleged fraudulent transfer of real property since it was the law of the situs, even though the parties assumed NY law applied (James v. Powell)
4. Consequences of failing to prove foreign nation law:
a. Dismissal of the suit, or
b. Assume that the foreign law is similar to forum law with regard to rudimentary principles of justice, or
c. Apply forum law on the theory that the parties have acquiesced by failing to prove foreign law
5. The whole law of the forum determines the need and applicability of foreign law and local law determines the need and manner of notice & proof of the foreign law
USE OF THE FORUM’S PROCEDURAL RULES:
1. Procedural issues – all issues dealing with the process of the litigation
a. Procedural issues are governed by forum law and should not determine the outcome
b. Protects forum interest in its scarce judicial resources by insuring that the law of another state will not have to be considered at every point in the trial
c. Forum interest and convenience dictate the classification of an issue as procedural
d. Retroactivity is permissible for procedural issues
e. Foreign procedural rules may be applied:
1) Reasonable expectation of the parties
2) Discourage forum shopping
3) Reciprocity
2. Substantive issues – all issues that might materially affect the outcome of the case, e.g. causes of action, rights of parties, etc
a. Substantive issues are governed by the applicable foreign law
b. Involve causes of action and the rights of a party
3. The forum classifies the issues as procedural or substantive according to its own standards but generally considers:
a. Likelihood that the foreign rule will change the outcome
b. Burden on the court in discovering the foreign law (burdensome then probably procedural)
c. Reliance by the parties
4. Burden of proof (merely presenting evidence) – may be procedural if the standard does not modify a fundamental or substantive right
a. Proving comparative negligence as opposed to contributory negligence is substantive since it directly affects the (’s right of recovery
b. Generally rules of evidence are procedural
5. Presumptions are deemed as procedural and substantive in the same manner as burden of proof questions
6. Privileged testimony – traditionally it was considered a procedural issue and forum rules of evidence controlled (but may involve substance)
a. All communications occurred in the forum state, then the forum rules apply
b. FRCP 501 – substantive for Erie purposes
c. If the communication is not privileged where made it is generally admissible (the forum may treat it as privileged if in the interests of the forum’s public policy)
d. Communication privileged under foreign law should be protected because of party expectations unless there is a compelling reason otherwise (significant forum contacts, content relatively immaterial, etc)
e. Restatement 2nd of Conflicts – the law of the state with the most significant relationship with the communication should be applied to determine if the communication is privileged
7. Time limitations are procedural for conflicts purposes and the forum applies its own SOL
a. The running of the limitations period affects the remedy and not the right
b. The forum controls all aspects of the SOL including characterization of the action (e.g. tort or contract) since each may have a different time limit
c. Forum law also governs time limits on suits to enforce foreign judgments
8. A forum court does not violate due process nor full faith and credit by applying its own SOL to cases governed by another states substantive law
9. Criticisms of the SOL rule:
a. Encourages forum shopping
b. Unfair to a ∆ since it eliminates a defense he would have in the forum where the cause of action arose
10. Exceptions to the SOL rule permitting application of the foreign law:
a. Borrowing statutes typically incorporate the limitations period of the location where the cause of action arose or the home of the parties
b. Characterize the SOL as substantive when it is specifically directed to the right created in the cause of action and not merely the remedy (common w/ wrongful death statutes)
1) Requires interplay between the period and the substantive right
2) The “substantive” limitation does not have to be established in the statute creating the cause of action as long as it limits the cause of action in question
c. UCC provides for a prospective 4 year SOL for transactions involving goods
11. Modern approach to time limitations – reject the substance versus procedure dichotomy and determine which state has the most significant relationship or interest concerning the issue
a. Apply the foreign SOL when the forum state has little or no interests, apply local SOL when the action involves a domiciliary, etc
b. Some courts have achieved the same result by classifying an SOL as substantive
VII. CHOOSING THE RULE OF DECISION:
TRADITIONAL RULES:
1. The traditional system for choice of law was based upon the vested rights theory contained in the 1st Restatement of Conflicts
a. Vested rights – the forum is to apply the law of the state in which the rights of the parties vest (where they are created)
b. The forum must first characterize the cause of action (e.g. torts, contracts, property)
c. Approximately 1/3 of the states still use traditional rules
2. Under the 1st Restatement, the forum does not consider the scope or policy of the substantive rule of law until after the state is chosen
3. Torts (lex loci delicti) – the law of the place of the wrong controls
a. Lex loci applies even though all of the significant contacts including the negligent act occurred in another state
b. Vicarious liability is determined by the place of the wrong only if the ∆ authorized the tortfeasor to act for him in the state
c. Lex loci also determines the character & measure of the damages, standard of care, causation, contributory negligence, fellow servant rule, defenses and survival of actions
4. Contracts (lex loci contractus) – contract issues are determined by the law of the place of the making
a. Questions concerning issues of performance are governed by the law of the place of performance
b. The forum decides where the contract was made
c. The state whose law is applied to the dispute may have no interests at stake (other than being the place of contracting)
d. Where the contract is made is subject to interpretation based upon the nature of the modern commercial transaction
e. Likewise the issue may be characterized as one of performance in order to apply different law and achieve the desired result (Louis-Dreyfus v. Paterson Steamships, Ltd. both states involved favored limiting liability but the lex loci rule did not – to advance the interests of the involved states the court characterized the dispute as performance)
5. Contracts – party expectations may determine choice of law
a. A court may ignore the lex loci law and apply the law of the place of performance to resolve a contract dispute if it determines that the parties entered into their obligation in view of that law (K invalid under lex loci law but enforceable in place of performance)
b. An adhesion contract (steamship ticket) may designate the law to be applied regardless of lex loci as long as the forum selected has some connection to the agreement
6. Usury – courts tend to apply whichever law would uphold the validity of the contract if there is a reasonable relationship to the transaction and the parties were in equal bargaining positions
a. Restatement 2nd of Conflicts § 203 Usury – A contract is enforceable if its interest rate is permitted in a state that has a substantial relationship to the contract and does not greatly exceed the rate permitted by an interested state
b. The presumption of validity is necessary to promote the free flow of commerce (otherwise lenders may be reluctant to loan money)
7. Real Property – the disposition and succession of real property is determined by the law of the situs
a. Necessary to administer and insure the accuracy of title records
b. Only courts of the situs can directly affect title to land in that state
c. States have a strong interest in the land within their borders
d. Hague Convention & civil law countries apply the law of the possessor’s domicile and not the situs
8. Forum law is traditionally applied to domestic, workman’s comp and criminal matters regardless of choice of law rules
ESCAPE DEVICES:
1. Procedural / substantive characterization – re-characterize the issue as procedural and apply forum law (e.g. classify a survival statue as procedural if foreign law would bar suit against a tortfeasor’s estate)
2. Characterization – factual situations are classified to fit established legal categories (e.g. torts, contracts, etc) in order to change the applicable law
a. Reclassify a tort action as a family law issue since it involves the question of interspousal immunity
b. In lieu of a tort claim, assert third party beneficiary status under a contract for services, etc
3. Renvoi – the forum doesn’t like the choice of law result so it looks at the foreign court’s whole law (choice of law rules) to determine the applicable law
a. Remission – the foreign choice of law rules refer back to the forum’s law
b. Transmission – the foreign choice of law rules refers to the law of a third state
4. Application of Renvoi:
a. Accept the renvoi:
1) Partial acceptance – the forum applies only the local law of the state that renvoi refers to
2) Total renvoi – the forum applies the whole law of the state that the renvoi refers to
b. Reject the renvoi – the forum declines to follow the law that the renvoi refers to
5. Uses of Renvoi (Restatement 2nd):
a. The forum is disinterested and the courts of the interested states would reach the same conclusion, or
b. The objective of the forum’s choice of law rule is that the forum reach the same result as would the courts of another state (other state has the dominant interest or there is a need for uniformity)
c. Restatement 1st limited application to real property and divorce matters
6. Criticisms of renvoi:
a. The court will be caught in a circle of endless references (but court can apply its local law or use modern choice of law theories to end the deadlock)
b. Difficulty in determining the choice of law rules of another state (but, if they are that hard to figure out then it probably serves no purpose referring to them)
7. Public policy invoked by the court to apply its own law, in lieu of the traditional rules, and achieve the desired result
a. Kilberg v. Northeast Airlines, Inc. – NY applied its recovery rules to an action under the MA wrongful death statute (plane crash in MA) which contained a recovery limitation (NY had a strong interest in its (s and against recovery caps)
8. Equitable Conversion of real property – a court re-characterizes real property as personal property
a. Allows the court to apply the law of the domicile in an estate matter
b. Issue arises when a decedent leaves instructions by will to sell the real property and distribute the proceeds to the legatees
c. Restatement 1st – occurrence of equitable conversion is determined by application of the law of the situs
NEW APPROACHES:
1. Center of gravity or grouping of contacts test – emphasizes the law of the place where the significant contacts with the controversy are grouped
a. A ( can benefit from a foreign law that was designed to regulate the ∆ in another state (e.g. F-1’s dram shop law applies even though an accident occurs in F-2 – classifying place of wrong as the place where the law was violated)
b. A mere fortuitous nexus is insufficient (e.g. domestic relations matter where all events occurred in F-1 and the ∆ now lives in F-2)
2. Interest Analysis – focus on and respect the states’ interest in the policies behind their laws
a. A forum should apply its own law if it has a legitimate interest in doing so, otherwise it should apply the law of a state that has an interest in the matter
b. The burden is on the party seeking to displace forum law to show that it would be proper to do
c. The forum examines the substance of the state laws at issue and ascertains their underlying policy
1) False conflict – underlying policies are the same or one state has no policy even though their rules may be different. A false conflict is resolved by applying the law of the only interested state
2) True conflict – the policies of each state would be furthered by the application of its law to the case.
d. In a true conflict there is a presumption in favor of forum law since it is not displaced when the forum has an interest (but case will have a different result depending upon where it is brought)
e. Reconsideration of interests – if a court finds a true conflict, it should reconsider the state interests in the event that a more restrained and moderate interpretation of the competing interests will reveal a common policy of both states
f. Disinterested forum (true conflict between the laws of two other states) – apply forum law or resolve the conflict the way an impartial legislature would
g. Unprovided for case: the policy of no state would be advanced by application of its law – apply forum law since there is no important policy reason to displace the normal presumption in favor of the forum
h. Characterization of state rules as loss allocating rather than conduct regulation may define the state interest
3. Most significant relationship (Restatement 2nd)– look separately at each issue raised and apply the law of the state that has the most significant relationship (not the state’s interest in the matter) to that issue
a. The focus is primarily on the needs of the interstate and international system (desire to harmonize relations)
b. Justice in the particular case comes last
4. Choice-influencing considerations:
a. Predictability of results
b. Maintenance of interstate / international order
c. Simplification of the judicial task
d. Advancement of the forum’s interests
e. Application of the better rule of law – requires application of the rule that promotes societal goals (not anachronistic, etc)
5. The functional analysis – the forum locates concerned jurisdictions, identifies the predominantly concerned (aggregate concerns outweigh) jurisdiction and apply the law of that state to the particular issue
a. No predominantly concerned jurisdiction – forum considers the policies of the conflicting laws in terms of their effectiveness and modern trends
b. True conflict tie breakers – apply the law of the forum (or situs for real property)
6. Principles of preference – find a false conflict wherever possible and for the true conflicts cases establish a set of guidelines to predetermine the application of law in a variety of circumstances
7. Pragmatic approach:
a. False conflicts – apply the law of the interested forum
b. True conflicts – apply the law that favors the (, unless
1) That law is anachronistic or aberrational
2) Unreasonable to apply since the state lacks sufficient contact with the ∆ or his conduct
c. No interest cases – none of the states having contacts with the issue will have its policies advanced – apply the law favorable to the ( (unless the exceptions in “b” apply)
8. Lex Fori – forum substantive law (statutory or common law) determines the application of foreign law, otherwise forum law is applied
9. None of the scholarly camps are dominant yet they are cited and invoked at different times
THE NEW ERA:
1. False conflicts: in Babcock v. Johnson a NY ( sues NY ∆ for an auto accident in Ontario (forum = NY)
a. Ontario has a guest statute that bars (’s recovery while NY does not
b. The court applies interest analysis, finds a false conflict and applies NY law
c. NY’s interest was its protection of tort victims while Ontario’s interest was the prevention of collusive suits (not a conflict here because the car was not insured in Ontario)
2. Neumeier v. Kuhner – rules for selecting the appropriate choice of law (general applicability):
1) When guest passenger and host driver are domiciled in the same state and the car is registered there, the law of that state applies (false conflict e.g. Babcock)
2) Driver and passenger are from different states:
a) ∆’s conduct occurs in his domicile state – the ( does not bring his law with him
b) ( passenger is injured in his domicile – the ∆ driver does not bring his law with him
3) Other situations where ( and ∆ are from different states – apply the law of the place of occurrence unless a strong interest elsewhere (lex loci is also a tie breaker for equal interests)
3. Restatement 2nd of Conflicts § 6 Choice of Law Principles
(1) A court, subject to constitutional limits, will follow a statutory directive of its own state on choice of law.
(2) When there is no such directive, the factors relevant to the choice of law include
a) the needs of the interstate and international systems
b) the relevant policies of the forum
c) the relevant policies of other interested states and the relative interests of those states in the issue
d) the protection of justified expectations
e) the basic policies underlying the particular field of law
f) certainty, predictability and uniformity of result
g) ease in determination and application of the law to be applied
4. Restatement 2nd of Conflicts § 145 The General Principle
(1) The rights and liabilities of the parties with respect to an issue in torts are determined by the local law of the state which, with respect to that issue, has the most significant relationship to the occurrence and the parties under the principles stated in § 6
(2) Contacts taken into account in applying the principles of § 6 to determine the law applicable to an issue include
a) the place where the injury occurred
b) the place where the conduct causing the injury occurred
c) the domicile, residence, nationality, place of incorporation and place of business of the parties
d) the place where the relationship, if any, between the parties is centered
These contacts are to be evaluated according to their relative importance with respect to the particular issue
5. Taken together, the restatement creates a presumption in favor of forum law, it is heavily sited and very influential
a. Lex loci serves as a tie breaker when the parties are from different states and no state has more significant interests than another
b. Determining “significant” contacts – weigh the quality of the contacts not merely the quantity
c. The most significant contacts may be interpreted differently leading to inconsistent and unpredictable results in the same forum
6. Generally, the law of the situs continues to govern dispositions of real property, however a forum may analyze the interests involved and determine that it has a paramount interest in the domestic obligations of its domiciliaries
7. Forum selection:
a. Restatement 2nd of Conflicts § 187 Law of the State Chosen by the Parties
(2)(a) The chosen state must have a substantial relationship to the parties or transaction or there is some other reasonable basis (neutral forum, etc)
(2)(b) The law chosen is not contrary to the policy of a state with a greater interest and that state’s policy will not be contravened by the selection
b. Policy is not violated merely because forum law is different
c. UCC § 1-105 – parties may choose the law of a state with no substantial relationship to the contract
d. European Community Convention – applies the law of characteristic performance (law of country that provides goods / services not where payment is made) and is only binding on members of the union
8. Comparative impairment approach to true conflicts cases – the forum applies the law of the state whose underlying policies would be most impaired if its laws were not applied
9. Statute of frauds – traditional approach was to define it as substantive (foreign law) or procedural (forum law) and largely depended on the wording of the SOF
a. Substantive if the SOF went to the essential validity of a contract (e.g. “no contract shall be valid…”)
b. Procedural if the SOF only concerns applicability, enforcement, etc (“no action shall be brought”)
c. A court can determine that the SOF is procedural in one state, substantive in the other and therefore the contract is enforceable since not illegal anywhere (false conflict)
d. Modern approach – apply choice of law rules applicable to contracts
e. Restatement 2nd Contracts § 199 SOF – the law of the place where the parties execute the contract will usually be acceptable
10. When a forum applies foreign substantive law it may include mandatory procedures not normally required in the forum (e.g. submission of malpractice claims to arbitration prior to a trial)
a. Application depends upon the forum’s choice of law rules
11. Policy clashes:
a. True Conflict - if the competing state interests are relatively equal, then the balance probably tips in favor of the forum (spendthrift case – OR interest in protecting families, furthering legislative policy etc equaled CA interests in contract enforcement and in commercial transactions)
b. Unprovided for case – WA ( sues OR ∆ for loss of consortium (accident in WA) in OR; neither state has an interest since WA had a ∆ protecting policy but ∆ is from OR and OR’s wife protecting policy not involved since ( is from WA – therefore, the forum applied its own law
c. Comparative impairment - CA interest in protecting its motorists exceeded NA interest in protecting its tavern owners from dram shop actions and would be significantly impaired (NA less impaired since it only affected taverns that solicited in CA)
12. Changes in circumstance – if a ( moves into the forum after the cause of action arose elsewhere, the forum probably does not have an important interest
a. Parties may have reasonable expectations or may have adjusted their conduct in light of the law of their domicile and a post hoc change should not affect that
b. However expectations may not suffice if the law in question, of the former domicile, is not conduct regulating (e.g. wrongful death limits since insurance policy is not limited to the state and travel is foreseeable even though it is also the lex loci)
13. Fairness – application of forum law is not unfair if it is unlikely that the ∆ acted out of reliance on local law (e.g. insurance specifically for state, operate only locally, reputation, etc)
14. Disinterested forum (no interest cases) – the forum has no interests of its own to advance
a. Forum non conveniens dismissal may be appropriate if the action is not time barred in the interested forums
b. A change in the substantive law does not prevent dismissal
15. “Piggy-back” interests – applies when there is multi-state interest in an issue
|LAWS |CONTACTS OR INTERESTS |
|A = B ≠ C |C > B > A; A + B = C |
Restatement 2nd – apply the shared rule of states A and B because A and B combined have a greater interest than state C
16. Depecage - the treatment of an issue in a case by referring to the laws of more than one state (characterize or divide issues)
a. Under the vested rights approach, this dual reference was made to contract issues (e.g. place of making and place of performance)
b. Maryland Casualty Co. v. Jacek – A NJ couple has an accident in NY where suit is brought by the wife against the husband. NJ had interspousal immunity while NY permitted such suits if the insurance contract contained an express provision for them. The court held that the issue of immunity was a tort issue and controlled by NY law and the contract construction issue should be determined by NJ law (the place of the making)
1) By combining the law of two states, the court frustrated the policy of both (prevention of collusion) without advancing the interests of either
c. Depecage recognizes that a multi-state problem should not necessarily be decided the same way as a purely domestic case and can be used to accommodate the interests of several states
17. Admiralty – factors that influence the choice of law governing a tort claim
a. Place of the wrongful act (limited application aboard ship)
b. Law of the flag (most venerable and universal)
c. Allegiance or domicile of the injured (compare to nationality of the ship)
d. Allegiance of the ∆ ship owner (examine if flag of convenience)
e. Place of contract (location may be fortuitous and would subject the ∆ to a multiplicity of standards)
f. Inaccessibility of a foreign forum (not persuasive for selecting the appropriate law)
g. Law of the forum (nature of maritime business is such that there is no justification for altering the law of a controversy merely because of local jurisdiction over the parties)
18. Assignment of contractual rights:
a. Assignability of a contract is determined by the same choice of law rules used determine the validity of a contract
b. Rights of assignees – the law where the assignment takes place
c. Priority of assignees – the law where performance is due
19. Arbitration – clauses agreed to at arms length will be enforced even if they require submission to a panel in a foreign country (judicial review will be available in the event that the proceeding violates due process)
a. Federal Arbitration Act – a clause will not be enforced if it is against public policy or the subject is not capable of settlement by arbitration under the law of the forum
b. UN Convention on Recognition & Enforcement of Foreign Arbitrational Awards (“NY Convention”) – The U.S. is a signatory to this treaty which upholds the validity of most agreements, unless:
1) Enforcement violates U.S. public policy
2) Matter not appropriate for arbitration
3) Denial of adequate opportunity to present case
4) Resolution of the issue is outside the scope of the agreement
5) Award is in manifest disregard of the law (judicial creation in domestic cases)
PROPERTY:
1. Land – conveyance and interest in land are matters determined by the choice of law rules of the situs which usually applies its local law (Restatement 2nd of Conflicts § 223)
2. Succession on death – validity or construction of a will that conveys an interest in realty is controlled by the law of the situs
a. The situs rule applies even though the state where the decedent was domiciled already determined the validity of the will regarding land in that state
b. Since this can lead to contradictory results many states have enacted legislation that provide for alternative places of reference when determining the validity of a will
c. Courts can also use escape devices to avoid the outcome (e.g. renvoi – forum applies the whole law of the situs which in turn refers back to the situs)
3. Intestate succession to movables is determined by the law that would be applied by the courts of the state where decedent was domiciled at the time of his death(Restatement 2nd § 260)
a. Validity and effect of a will for movables is determined by the law of decedent’s domicile
4. Inter Vivos Transactions:
a. Restatement 1st – all questions are determined by reference to the law of the situs of the chattel at the time of the transaction
b. Restatement 2nd – all questions are determined by reference to the law of the place with the most significant contact or relationship to the transaction (presumed to be the situs)
5. Problems distinct from the question of title to the movable (e.g. vendor’s warranty of quality, etc) may be regarded as “contracts” problems and the choice of law rules for contracts would apply
6. Restatement 2nd of Conflicts § 270 – Inter vivos trusts of movables are valid if:
a. Valid in the state designated by the settlor to govern provided the state has a substantial relationship to the trust and it is not against public policy, or
b. Valid under the law of the state with the most significant relationship to the trust (if no designation)
c. Courts tend to uphold trusts and may refer to whatever state would uphold validity provided there are sufficient contacts with that state
7. Universal adoption of the UCC has eliminated most of the choice of law problems associated with movables
8. Negotiable instruments – validity is determined by the law of the place where each step was taken, e.g. drafting, etc (black letter rule protects expectations of the parties)
FAMILY LAW:
1. Marriage – the validity of a marriage is determined by the law of the place of celebration even if invalid in the parties’ domicile
a. When a marriage is not valid in the place of celebration but would be valid in their domicile, the forum will apply the law of the domicile
b. Significant contacts may be required to determine other issues such as capacity
c. Marriages that are grossly offensive to public policy may not be honored in the forum
2. A marriage that would be invalid in the forum on policy grounds (e.g. incestuous, etc) may be upheld if the court is not called upon to sanction the unnatural cohabitation
a. After the death of one of the parties, the court may recognize the marriage for the purpose of determining property or other such rights as incidents of the relationship
3. The court of a party’s domicile may invalidate a marriage celebrated elsewhere if the marriage is against the public policy of the domicile
VIII. CONFLICTS IN FEDERAL AND INTERNATIONAL SETTINGS:
ERIE DOCTRINE:
1. The Rules of Decision Act 28 USC §1652 states that in civil actions, the federal courts must apply the “law of the several states, except where the Constitution, or treaties of the US, or acts of congress otherwise require or provide”
2. Erie R.R. Co. v. Tompkins interpreted the Federal Rules of Decision Act to require federal courts, in diversity actions , to apply state statutory law as well as state common law to substantive issues when there is no federal statute on point and federal law to procedural issues
a. Under the Rules of Decision Act, the federal constitution, treaties and constitutional acts of congress always take precedence, where relevant, over all state provisions; this applies to proceedings in state and federal court
b. In the absence of a controlling federal provision, the federal courts in a diversity action, will be bound to follow state constitutions, statutes and common law
c. “Substantive” versus “Procedural” test – matters characterized as substantive would be governed by state law while procedural matters (concern the process by which the claims of rights are examined) would be governed by federal law
3. The Supreme Court rejected the concept of a federal common law in diversity actions
a. Federal common law survives in matters which are exclusively within the purview of the federal courts such as Admiralty, Maritime etc. (lawmaking power has not been granted to the states by the constitution and there has been no congressional action to the contrary), in which case, it is controlling because of the supremacy clause of the constitution
4. The court applied the following rationale in invoking the Erie doctrine:
a. Uniformity of law sought under Swift v. Tyson never materialized and yielded inequitable administration of the laws
b. Non-citizens gained a forum shopping advantage which allowed them to evade potentially unfavorable state common law rules (Black & White Taxicab – corporation re-incorporated in another to create diversity in order to avoid an adverse decision in state court)
c. Sovereignty – the authority of the states to regulate their own affairs was eroded by Swift v. Tyson
ASCERTAINING THE STATE LAW:
1. State constitutions and statutes are determinative
2. Holdings on point by the highest court in the state
3. No holding on point or holding is outdated and therefore not binding – the federal court must decide what the state’s highest court would do if confronted with the same issue
4. Certification: some states, including N.Y., permit, by statute, questions of law to be “certified” to the highest court in the state for a determination; other states only allow their courts to decide questions actually in controversy before them; considerations:
a. Time consuming
b. The state court is answering an abstract question removed from the case
5. Abstention: a federal court can suspend its’ inquiry and require a plaintiff to bring the case in state court first if:
a. The state law is unsettled, and
b. Interpretation will have serious public policy considerations for the state
c. Some states will not entertain a case originally brought in federal court
6. Conflicts of laws: The Klaxon rule requires the federal court to apply the “conflict of law” rules of the state where the federal court sits
a. Conflicts of law arise when the federal court is sitting in one state and the cause of action arose in another, each with different laws
b. When a case is transferred under § 1404 to another federal district court, the transferee court must apply the transferor court’s substantive law and its conflict of law rules
c. Ferens v. John Deere Co. – PA ( injured in PA brings suit in MS and then has case transferred to PA; the district court in PA has to apply the conflict of law rules of MS (SOL had run in PA but MS had a longer period and under MS rules the MS SOL was applied)
7. Appellate process – state statutes controlling the review of trial proceedings by appeals courts may have enough substance embedded in them that the federal courts should follow these rules (Gasperini v. Center for Humanities, Inc – the court applied the outcome determinative test:
a. The N.Y. statute, applying a “deviates materially from reasonable compensation” standard was designed to curtail unduly large jury verdicts and is thus manifestly substantive, therefore the state standard rather than the federal “shock the conscious” standard should apply at the trial court level (separate standards for review of damages will encourage forum shopping)
b. At the Court of Appeals level, the federal court should apply the “federal shock the conscience” test when evaluating the jury award – “balancing” test considering the strong countervailing federal interest under the 7th Amendment of re-examining jury decisions
c. The NY statute contained substantive elements because it was part of state tort reform
LIMITATION OF STATE POWER IN FEDERAL COURTS:
1. The “Outcome Determinative” test (Guarranty Trust Co. v. York – the S.C. applied the N.Y statute of limitations rather than the federal so as not to significantly affect the result of the litigation) – state rules are controlling if the choice between state or federal requirements could be outcome determinative in the case
a. Rationale: the outcome of a diversity case in a federal court should be substantially the same (so far as legal rules determine the outcome) as it would be in state court
b. Contrasting substance and procedure is inadequate; any matter outcome determinative would be substantive (dilemma: all procedural matters can be outcome determinative in a sense)
c. When considering outcome determination, evaluate the rationale under Erie: (1) avoidance of inequitable administration of the law, and (2) prevention of forum shopping
d. SOLs are outcome determinative for Erie purposes
2. The “Balancing Test” (Byrd v. Blue Ridge Rural Electric Cooperative, Inc.) – the court applied a balancing test between the competing federal and state interests advanced by their respective procedural rules (the court held that the federal interest of a jury trial under the 7th Amendment was an overriding interest when compared to the state’s workman’s comp. regulatory scheme); considerations:
a. State rights and obligations
b. Disrupts the federal system of distribution of functions
c. Outcome determinative
3. The “Modified Outcome Determinative” test (Hanna v. Plumer – the court held in favor of service of process under the federal rules which conflicted with service under state law)
a. Effectively builds a protective wall around the Federal Rules of Civil Procedure and removes them from the scope of the Erie doctrine
b. The Rules arise under the Rules Enabling Act and thus supersede any state procedural law which they are in conflict with (supremacy clause)
c. A conflict may be the result of (1) a direct collision between a federal rule and a state law, or (2) the federal rule may “occupy the same field” as the state law
d. The Rules supersede conflicting state law whenever they are on point and constitutional
e. If there is no conflict, then both federal and state rules may be applied
f. A Rule is constitutional if it arises under the Rules Enabling Act and is rationally capable of being classified as procedural (a Rule may only be invalidated if the advisory committee, Supreme Court or Congress erred in thinking it valid
g. No Federal Rule has ever been found invalid under the Act
h. If a Rule is on point and is in conflict with state law, then the Rule applies
4. Applications:
a. If a federal rule arises under the Enabling Act, is on point and is constitutional then it is binding
b. Aftermath – district courts apply both tests and coincidentally come out the same way
c. Hanna does not overrule Byrd since all references to Erie are only dicta
d. Pure Erie cases (arising under the Rules of Decision Act) require the application of the “outcome determinative” test or “balancing” test in light of the rationale behind the Erie doctrine:
1) Forum shopping, and
2) Inequitable application of the law
e. Privileges – under Rule 501, state created privileges are substantive and outcome determinative (there is no federal interest and state policy should not be thwarted by diversity)
5. Walker v. Armco Steel - Rule 3, which provides that a civil action is commenced by the filing of the complaint, does not effect the tolling of the statute of limitations
a. The purpose of Rule 3 is to provide time parameters for various federal procedural requirements (filing an answer, etc.), thus there is no conflict between Rule 3 and state statute of limitations requirements
b. The case turns on a narrow interpretation of the Rule (if a Rule is interpreted more broadly, then it will always supplant state law)
FED QUESTIONS IN RELATION TO STATE LAW:
1. Congress may specify the rule of decision to be applied, supplanting any contrary state rules
2. Federal courts have developed a specialized common law to decide cases where the subject matter is one that must be governed by federal law and there is no congressional enactment on the subject
a. Issue is within federal law making competence
b. Has not been specifically dealt with by Congress
c. Important federal interests and necessity of uniform national standard (federal interests may be inferred from related statutes, etc)
3. If federal common law applies to a matter there is no Erie problem because of the Supremacy Clause
a. If Congress subsequently addresses the issue, the statute supersedes the earlier federal common law rule
b. A case based on federal common law is a “federal question” and a state court hearing a claim must apply the federal rule
c. Similarly, a federal court sitting in diversity must also apply the federal common law
d. This rule also applies to claims where the underlying basis of the action lies within the scope of the federal common law (e.g. lawyer sues ∆ for inducing his client to fire him in a maritime case – this tort action is subject to federal common law since there is a need for uniformity in maritime cases and this is directly related)
4. Federal law governs questions involving the rights of the U.S. arising under nationwide federal programs
a. The rights and duties of the U.S. on commercial paper is included
b. State law governs disputes primarily between private parties concerning commercial paper (e.g. conversion of bonds guaranteed by the U.S.)
c. State law may be incorporated if there is little need for a special federal rule for uniformity (especially applicable in commercial transactions since all states have adopted the UCC and parties enter into such transactions in reliance on state law)
5. Foreign relations are within the authority of the executive branch of the federal government and judicial interference is likely to frustrate national goals
INTERNATIONAL CONFLICTS AND FOREIGN AFFAIRS:
1. Act of state doctrine precludes the courts from questioning the validity of the acts of a foreign sovereign effective within its own territory
a. Foreign affairs is governed by federal law only (even if a state has enacted the doctrine in terms identical to federal decisions)
b. The doctrine has its underpinnings in comity and constitutional separation of powers
c. The doctrine only applies where the court would have to determine the validity of a foreign government action (mere embarrassment of the foreign government is insufficient)
d. District courts typically define the question as jurisdictional or as a choice of law problem
2. Actions of foreign governments fall within the doctrine if:
a. Taking of property (could be other action)
b. Occurs within the sovereign’s own territory
c. The sovereign is recognized at the time of suit
d. There is no treaty or other unambiguous agreement on the subject
3. A state cannot condition conveyance of real property to citizens of a foreign country upon a reciprocal right to American citizens since such a law intrudes upon foreign affairs
a. A state law that is neutral on its face may result in a different outcome
b. State action in the field may encroach on federal authority or it may be meaningless since it has no effect
c. State statutes prohibiting state pension fund investment in companies doing business in certain countries may prevail since the state is a market participant although a lower court has struck down such a statute in Mass.
4. Any party to an action can invoke the act of state doctrine, but only a foreign sovereign can raise the defense of sovereign immunity (governed by statute)
5. Insurance policies – courts perform interest analysis, grouping of contacts, etc to determine which law applies (basically a private matter)
6. Monetary conversion is determined as of the judgment date (NY rule)
7. Avoidance of doctrine – characterization of the action or nature of the law involved
8. Treaties with foreign nations supersede all local laws
9. Cases with international scope – apply same choice of law rules applicable in interstate settings
a. Foreign sovereign compulsion does not create a conflict of law issue (rather it is a defense)
b. Insurance matters – generally apply the law of the insured risk to true conflicts
c. Legislative jurisdiction (jurisdiction to prescribe) is a consideration in international cases
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