Chapter 3: Modern Approaches to Choice of Law

Question 1

§6 R2 Choice of Law Principles

Answer 1

When there is no such directive, the factors relevant to the choice of the applicable rule of law include
- The needs of the interstate and international systems
- The relevant policies of the forum
- The relevant policies of other interested states and the relative interests of those states in the determination of the issue,
- The protection of justified expectations
- The basic policies underlying the field of law
- Certainty, predictability, and uniformity of result, and
- Ease in the determination and application of the law to be applied

Question 2

Guest Statutes: IL has a guest statute which prohibits tort claims for negligence by passengers against drivers. IN does not have such a statute. Presumably it believes all losses from negligence should be compensated. Accident in IL, driver from IN, injured passenger from IL. True or False Conflict?

Answer 2

Probably a false conflict. Since this is a loss-allocating rule, IN’s policy of compensation isn’t relevant to the IL passenger. IL’s policy is relevant if we assume it is aimed at admonishing passengers not to be ungrateful guests, not just protecting drivers

Question 3

Guest Statutes: IL has a guest statute which prohibits tort claims for negligence by passengers against drivers. IN does not have such a statute. Presumably it believes all losses from negligence should be compensated. Accident in IL, driver from IN, injured passenger from IL. What would make this a true conflict?

Answer 3

For a true conflict, a court would need to find that IN has an interest in holding its domiciliary tortfeasor liable and compensating an out of state plaintiff, even when the plaintiff’s home state would deny the plaintiff’s claim

Question 4

True Conflicts: Lilienthal v. Kaufman

Answer 4

Facts: Plaintiff Lilienthal brought an action against Defendant to collect on two promissory notes. Kaufman argued that he had previously been declared a spendthrift by an Oregon court and placed under a guardianship. The guardian declared that the obligations under the notes were void. Lilienthal contended that the notes were executed and delivered in California, which did not recognize the disability of a spendthrift, and that the Oregon court was bound to apply the law of the location where the contract was made. The trial court rejected Lilienthal’s argument and entered a judgment in favor of Kaufman. Lilienthal sought appellate review.

Rule: A court may decide whether the public policy of the forum is so strong that the law of the forum must prevail although another jurisdiction, with different laws, has more and closer contacts with the transaction. A court must consider the economic and social interests of the forum state. The choice-of-law rules should rationally advance the policies or interests of the several states.

Question 5

Apparent Conflicts: Bernkrant v. Fowler

Answer 5

Facts: The buyers purchased an apartment complex in Nevada. By agreement of the parties, the buyers refinanced their obligations and paid a substantial part of their indebtedness to the seller in exchange for the seller’s promise that he would provide in his will that upon his death all their indebtedness to him would be canceled. When the seller died in California, he did not provide for the cancellation of the buyers’ balance and the buyers continued to make regular payments under protest. The buyers brought an action against the executrix to have the note cancelled and the property reconveyed to them. The trial court concluded that the action was barred by both the Nevada and the California statute of frauds; that to remove the bar of the statutes, the action must be one for quasi-specific performance in which an heir or beneficiary under the will would be an indispensable party; and that defendant was not estopped to rely on the statutes of frauds.

Rule: In determining whether a contract entered in another state is subject to the California statute of frauds, the court must consider both the policy to protect the reasonable expectations of the parties and the policy of the statute of frauds.

Question 6

Unprovided for Case: Hurtado v. Superior Court

Answer 6

• A law regulating conduct applies to anyone present in the state, or whose acts cause harm in the state, regardless of domicile
• But where law covers distinct questions of compensation or loss-allocation, these are assumed primarily to create rights for, or protect, the state’s domiciliary
• A state has no interest in projecting such laws outside its own borders, or in applying them to out of state domiciliary
• In this case…
  o Mexico had no interest in applying its damages cap to the CA defendants
  o And despite the fact a tort occurred in CA, CA had no interest in creating a compensation right for a Mexican plaintiff widow and her children
• With no government interests in play, forum law still governs. CA still has an adequate contacts with the matter to apply its law and not violate Constitutional due process
• However, the court goes on to theorize an interest in CA – and justify use of its law – by defining wrongful-death law as not merely about compensation, but also about deterring wrongful conduct

Question 7

Comparative Impairment: Bernhard v. Harrah’s Club

Answer 7

Facts: Defendant Harrah’s Club, a Nevada corporation, owned and operated gambling establishments in the State of Nevada in which intoxicating liquors were sold, furnished to the public and given away for consumption on the premises. Partially in response to defendant’s advertisements and solicitations in California, a married couple drove from their California residence to defendant’s gambling and drinking club in Nevada. During their stay, they were served numerous alcoholic beverages by Harrah’s employees, and while still in an intoxicated state, the couple attempted to drive their car back to California. However, the car drifted across the center line into the lane of oncoming traffic and collided head-on with plaintiff Richard A. Bernhard, a resident of California, who was then driving his motorcycle. As a result of the collision Bernhard suffered severe injuries. Berhard filed a complaint, alleging that Harrah’’s sale and furnishing of alcoholic beverages to the married couple was negligent and was the proximate cause of the plaintiff’s injuries in the ensuing automobile accident in California for which plaintiff prayed $100,000 in damages. The trial court after finding that that the law of Defendant’s state (Nevada) was applicable and that the law precluded recovery against Harrah for injuries sustained in California that were proximately caused by the selling of alcohol to an intoxicated person, sustained Harrah’s general demurrer to the first amended complaint. Bernhard appealed.

Rule: Generally, a forum will apply its own rule of decision unless a party litigant timely invokes the law of a foreign state. In such event he must demonstrate that the latter rule of decision will further the interest of the foreign state and therefore that it is an appropriate one for the forum to apply to the case before it.

Question 8

Comparative Impairment: Kearney v. Salomon Smith Barney Inc

Answer 8

Facts: The clients, who resided in California, alleged that the company had a continuing practice of recording telephone conversations made to a branch office in Georgia without the callers’ knowledge or consent. The trial court sustained a demurrer asserting that the alleged practice was permissible under Georgia law.

Rule: In a choice of law analysis, it is proper to accommodate the reasonable expectations of persons who act in another state in reasonable reliance on the other state’s law.

Question 9

The “Better Rule”: Leflar’s Choice-Influencing Considerations

Answer 9

• Predictability of results
• Maintenance of interstate and international order
• Simplification of the judicial task
• Advancement of the forum’s governmental interest
• Application of the better rule of law

Question 10

“Better Rule of Law”

Answer 10

The inclination of any reasonable court will be to prefer rules of law which make good socio-economic sense for the time when the court speaks, whether they be its own or another state’s rules

Question 11

The “Better Rule”: Keeton v. Hustler Magazine

Answer 11

• Acton is filed in State A for libel. State A’s only connection with the matter is that the allegedly libelous material was distributed there
• Conflict: State As applicable statute of limitations is 6 years. Three other states with more significant contacts have 1-year SOLs
• Publication was 4 years ago
• After this suit was filed but before the decision, State. A’s legislature changed its SOL to 3 years

Question 12

§146 Personal Injuries

Answer 12

In an action for a personal injury, the local law of testate where the injury occurred determines the rights and liabilities of the parties, unless, with respect to the issue, some other state has more significant relationship under the principles in §6 to the occurrence and the parties, in which event the local law of the other state will be applied

Question 13

§175 Right of Action for Death

Answer 13

In an action for wrongful death, the local law of the state where the injury occurred determines the rights and liabilities of the parties unless, with respect to the issue, some other state has a more significant relationship under the principles stated in §6 to the occurrence and the parties, in which event the local law of the other state be applied

Question 14

The “Better Rule”: Milkovich v. Saari

Answer 14

Facts: The car owner, the driver, and the passenger all were residents of Ontario, Canada. The car accident occurred in Minnesota. The car owner and the driver claimed that the law of Ontario should have applied and that their motion to dismiss should have been granted because Ontario had a guest statute that required proof of gross negligence, which was not alleged. The car owner and the driver also claimed that their affirmative defense that the law of Ontario should have applied was erroneously stricken by the district court.

Rule: Five basic “choice-influencing considerations” apply in conflict of laws cases. They are: (1) Predictability of results, (2) maintenance of interstate and international order, (3) simplification of the judicial task, (4) advancement of the forum’s governmental interests, and (5) application of the better rule of law. In selecting the law of a particular case, the last two considerations carry most weight.

Question 15

The R2 and the Most Significant Relationship: What are the most relevant contacts for products liability law?

Answer 15

• Products that are potentially dangerous are distributed and sold nationwide. A defective product could come from anywhere
• States want to prevent dangerous products from passing to consumers
• Thus, it is efficient to focus on the point of sale, where the defective product passed to the injured consumer. This is a highly relevant contact
• States govern 1) their own domiciliary and 2) conduct on their territory
• But the focus of PLL is on the dangers of the product itself, not in any dangerous in state conduct
• Thus, the place of injury has a weak claim of interest in a product liability matter. It may be fortuitous
• The most effective way for states to protect their domiciliary against dangerous products is to set high levels of compensation, impose punitive damages, and reduce the burdens for seeking compensation
• Thus, the plaintiff’s domicile is also a highly relevant contact

Question 16

Significant Relationship/Products Liability Law: Phillips v. General Motor Corp

Answer 16

Facts: In 1995, the decedent, Darrell Byrd, purchased a pick-up truck manufactured by defendant General Motors Corporation (“GMC”); the purchase took place in North Carolina, and Mr. Byrd provided the dealership with a North Carolina address. Sometime thereafter, apparently, Mr. Byrd and his family moved to Montana. In 1997, while driving from their Montana home to North Carolina, the Byrds’ truck was involved in a collision with a tractor-trailer. Mr. Byrd, his wife, Angela Byrd, and their minor son, T.B., died as result of the collision and ensuing fire. Another minor son, S.B., was injured in the accident. It was undisputed that the Byrds were residents of Montana at the time of the accident. Plaintiff Alvin K. Phillips, as personal representative of the decedents’ estates and as guardian of S.B., filed a products liability action against GMC in federal district court in Montana. Observing that the case raised significant policy questions involving Montana’s choice of law rules, the district court certified three questions to the Supreme Court of Montana.

Rule: The Supreme Court of Montana adopts the “most significant relationship” approach to determine the applicable substantive law for issues of tort.

Question 17

Most Significant Relationship: America Online, Inc v. National Health Care Discount

Answer 17

Contract e-mailers worked to generate leads for defendant, a business selling discount optical and dental service plans. Plaintiff internet provider filed suit against defendant, asserting numerous claims concerning allegations that defendant’s contract e-mailers had sent unsolicited bulk e-mail advertisements to plaintiff’s members through plaintiff’s computer system without authorization. The court denied plaintiff’s motion for partial summary judgment on the issue of liability. Summary judgment was not appropriate for plaintiff’s claim under the Computer Fraud and Abuse Act, 18 U.S.C.S. § 1030 et seq., because a disputed issue of material fact existed as to damages. Regarding plaintiff’s claims of trespass to chattel and a violation of the Virginia Computer Crimes Act, Va. Code Ann. § 18.2-152.1 et seq., the court determined that the contract e-mailers violated the statute and committed the tort, but the court could not determine whether defendant was liable for the e-mailers’ actions. The court applied Virginia law to plaintiff’s non-statutory claims because it was the only locale in which plaintiff’s alleged injury was clearly demonstrable.

Outcome: Plaintiff’s motion for partial summary judgment on the issue of liability was denied because summary judgment was inappropriate for determining damages under the federal computer fraud statute and for determining whether defendant was liable for the contract e-mailers’ actions. Defendant’s motion to amend its answer and counterclaim was granted.

Question 18

Most Significant Relationship: McPeek v. McCardle

Answer 18

• Couple obtained (but apparently never filed) an IN-marriage license then had the ceremony in Ohio
• Both before and after the marriage, couple lived in IN
• Wife dies intestate. Her daughters by a previous marriage challenged the validity of the second marriage, seeking to prevent surviving husband from inheriting the family farm
• The Second Restatement advises: “The validity of a marriage will be determined by the local law of the state which, with respect to the particular issue, has the most significant relationship to the spouses and marriage…”
• It appears that the only contact the parties had with Ohio is that the ceremony was conducted in that state
• In essence, any interest Ohio may have in the McCardles’ marriage is overcome by the more substantial interest this state has in recognizing the marriage of the parties who, after all, obviously anticipated that their marriage would be valid

Question 19

Domicile under Modern Approach: Reich v. Purcell

Answer 19

Facts: This wrongful death action arose out of a head-on collision of two automobiles in Missouri. One of the automobiles was owned and operated by defendant Joseph Purcell, a resident and domiciliary of California who was on his way to a vacation in Illinois. The other automobile was owned and operated by Mrs. Reich, the wife of plaintiff Lee Reich. The Reichs then resided in Ohio and Mrs. Reich and the Reichs’ two children, Jay, and Jeffry, were on their way to California, where the Reichs were contemplating settling. Mrs. Reich and Jay were killed in the collision, and Jeffry was injured. Missouri limited wrongful death damages under Mo. Ann. Stat. § 537.090, yet California and Ohio did not. The trial court held that the Missouri statute applied where the wrong occurred.

Rule: In a complex situation involving multi-state contacts no single state alone can be deemed to create exclusively governing rights. The forum must search to find the proper law to apply based upon the interests of the litigants and the involved states. A choice of law resulting from a hopeless search for a governing foreign law to create a foreign vested right may defeat the legitimate interests of the litigants and the states involved.

Question 20

Statutes of Limitation

Answer 20

• SOLs have traditionally been regarded in state choice of law as procedural, and thus law of the forum, but a good number of states treat them as substantive
• 2d Restatement, though it generally avoids the substantive v. procedure distinction, prescribes forum law as the default, but leaves some room for interest analysis and the more significant relationship
• For Eerie purposes in diversity, SOLs are substantive, since they are part of a state’s choice of law rules which the federal court is obligated to apply

Question 21

SOL: Ledesma v. Jack Stewart Produce, Inc

Answer 21

• CA’s government interest in its shorter, 1 year SOL is not implicated or impaired, because the defendant is not domiciled in CA, and moreover, CA has shown some flexibility in its SOL in favor of plaintiffs
• By contrast, applying AZ’s 2-year SOL would protect AZ’s interest in promoting recovery for highway injuries suffered on its territory
• The interests of OK (domicile of the defendant), which also has a 2-year SOL, are served by applying AZ law. No true conflict

Question 22

SOL: Global Financial Corp v. Triarc Corp

Answer 22

• Defendant retained plaintiff to perform certain consulting services. Plaintiff sued defendant to recover its commission and fees. The trial court granted defendant’s motion to dismiss the action based on N.Y. C.P.L.R. 202 for failure to comply with the statute of limitations of either Delaware, where plaintiff was incorporated, or Pennsylvania, where plaintiff had its principal place of business. On appeal, the court affirmed because when a nonresident sued on a cause of action accruing outside of New York, N.Y. C.P.L.R. 202 required the cause of action to be timely under the limitation periods of both New York and the jurisdiction where the cause of action accrued. When an injury was purely economic, the place of injury was where plaintiff resided and sustained the economic impact of the loss. Thus, the shorter out-of-state statute of limitations applied.
• The court affirmed the appellate division’s grant of defendant’s motion to dismiss plaintiff’s action to recover its commission under a consulting contract because the out-of-state statute of limitations applied. When an injury was purely economic, the place of injury was where the plaintiff resided and sustained the economic impact.

Question 23

Contracts (Modern Approach): Dillard v. Shaughnessy

Answer 23

• The court found that Kansas law governed the interpretation of the subcontract and that under Kansas law contractor was not entitled to indemnification of its attorney fees under the provision requiring subcontractor to indemnify it for any liability, loss, cost, or expenses. Under the “most significant relationship” test, Kansas substantive law applied to the interpretation of the indemnity provision of the subcontract. Any ambiguities in the subcontract’s coverage of attorney’s fees were construed against contractor which drafted the indemnity agreement. Because attorney fees were not specifically listed under the indemnity provision, the court held that the subcontract did not provide for indemnity for contractor’s own attorney’s fees incurred in defending the worker’s claims. Although contractor could not be reimbursed for its own attorney fees, it was entitled to indemnification for all expenses, including attorney fees expended on behalf of engineer, architect, and owner under the broad terms of the indemnification clause.
• The court affirmed the determination that Kansas law governed the interpretation of this subcontract and that contractor’s own attorney’s fees were not included in the indemnification provision, but it reversed the decision which granted summary judgment on the request for indemnification for moneys paid to defend architect, engineer, and property owner.

Question 24

Guest Statutes/Comity: Paul v. National Life

Answer 24

Facts: In September of 1977 Eliza Vickers and Aloha Jane Paul, both West Virginia residents, took a weekend trip to Indiana. The two women were involved in a one-car collision on 65 in Indiana when Mrs. Vickers lost control of the car. That collision took both women’s lives. The administrator of Mrs. Paul’s estate brought a wrongful death action against Ms. Vickers’ estate and the National Life Accident Company in the Circuit Court of Kanawha County. Upon completion of discovery, the defendants moved for summary judgment. Defendants’ motion contended that: (1) the Indiana guest statute, which grants to a gratuitous host immunity from liability for the injury or death of a passenger unless that host was guilty of willful and wanton misconduct at the time of the accident, was applicable; and (2) that the record was devoid of any evidence of willful or wanton misconduct on the part of Ms. Vickers. By order dated 29 October 1984, the Circuit Court of Kanawha County entered summary judgment for the defendants. The order of the circuit court held that our conflicts doctrine of lex loci delicti required that the law of the place of the injury, namely, Indiana, apply to the case, and that the record contained no evidence of willful or wanton misconduct on the part of Ms. Vickers. It is from this order that the plaintiffs appealed.

Rule: Comity does not require the application of the substantive law of a foreign state when that law contravenes the public policy of West Virginia.