TESTING AREA TWO: CHOICE OF LAW Flashcards
THE BASICS
A choice of law question may arise when two conditions are
satisfied:
* The lawsuit involves factual connections with multiple
states; and
* The multiple states will have different laws leading to
different results.
The core question is: “Which state’s law will govern?” The
core answer is: The governing law is the law selected by
the forum court according to its choice of law approach
(assuming no applicable constitutional or statutory restrictions).
Exceptions
There are exceptions to the core answer when the case is
in federal court based on diversity of citizenship jurisdiction.
Where venue is proper is covered in the Federal Civil
Procedure lecture and materials, along with the choice of law
effects based on the transfer of venue.
Diversity Cases Filed in Federal Court
A federal court sitting in diversity applies the choice of law
approach of the state in which it sits.
Transferred Diversity Cases
When a diversity case is filed in a proper venue, and the case
is transferred within the federal system, the federal court
applies the choice of law approach of the original (transferor)
court. When the case is filed in an improper venue,
or filed in a venue in defiance of a forum selection clause,
the law of the transferee court (that is, the court to which the
case is transferred) will apply.
Restrictions on Choice of Law
There are restrictions that occasionally limit the forum court’s
choice of law.
Constitutional
Rule:
The Constitution imposes a limit only if a state’s law is
chosen that has no significant contact with and/or legitimate
interest in the litigation.
Statutory
Rule:
If the forum state has a statute that directs a choice of
law, then the forum court should apply that statute instead
of the usual choice of law approach. A common example is
a borrowing statute, which requires the court to apply the
statute of limitation of another state regardless of the choice
of law approach that the state uses. We’ll cover those later.
OVERVIEW OF THE ANALYTICAL
APPROACHES
There are three main analytical approaches: (1) the
vested rights approach of the First Restatement, (2) the
most significant relationship approach of the Second
Restatement, and (3) the interest analysis (governmental
interest) approach.
Vested Rights Approach of the First
Restatement
In the vested rights approach (the traditional approach), the
following three analytical steps are taken: (1) characterizing
the area of substantive law, (2) determining the particular
choice of law rule, and (3) localizing the rule to be applied.
Note: The forum will generally apply its own law in characterizing
an issue, even if the state where the issue arose would
apply a different characterization.
Most Significant Relationship Approach of the
Second Restatement
The most significant relationship approach seeks to identify
the state having the most significant relationship with respect
to the issue at hand and then apply that state’s law on that
issue. To do this, you consider the connecting facts in a given
case and whether the policy-oriented principles should be
considered as in the chart below.
Interest Analysis (Governmental Interest)
Approach
In the interest analysis approach, you start from the assumption
that the forum will apply its own law. Then, you consider
whether the forum has any interest in the litigation; if not, it is
a “false conflict” situation and the forum will apply the law of
the second state. A question arises when both the forum and
the second state have interests; this is a “true conflict” situation.
(See chart below.)
BASIC STRUCTURE OF A CHOICE OF LAW
ANSWER
There are three basic paragraphs to a choice of law answer.
* In paragraph 1, you state the issue and identify the
choice of law approach.
Ex: “The issue presented is which state’s law will govern the outcome
of this litigation. The governing law will be selected by the
forum court using the (fill in applicable choice of law approach).”
This is the “I understand choice of law” paragraph, and it
is always the same.
* In paragraph 2, you describe the choice of law approach.
Here, you will plug in a stock paragraph depending on
which of the three tested approaches is being applied.
The three approaches are (1) the vested rights (First Restatement);
(2) interest analysis; or (3) the most significant
relationship (Second Restatement). All of these will be
covered below in more detail.
* In paragraph 3, you apply the choice of law approach.
Here, you will consider the facts presented, apply the
approach, and provide a conclusion. (Important: This
conclusion should include both the governing law and
the result.
APPROACH #1: VESTED RIGHTS (FIRST
RESTATEMENT)
- Stock Language for Paragraph 2
- Ex. “Under this approach the court will apply the law of that state
mandated by the applicable vesting rule. That rule is selected
according to the relevant substantive area of law.”
Structure of Paragraph 3
In the first sentence of paragraph 3, you categorize the
substantive area of law. In the second sentence, you
state the applicable vesting rule. In the third sentence,
you apply the vesting rule to determine the governing
law. - Ex: “This is a torts case. Therefore, the applicable vesting rule is the
place of injury. Here, the injury occurred in Michigan and thus
Michigan law applies. Under Michigan law, a non-paying passenger
cannot recover against the driver, and so the claim is barred.
In the fourth and last sentence, you apply the governing
law to determine the result.
APPROACH #2: INTEREST ANALYSIS
- Stock Language for Paragraph 2
EXAMPLE
“Under this approach the court will consider which states have
a legitimate interest in the outcome of the litigation. The forum
court will apply its own law as long as it has a legitimate interest.
If the forum state has no legitimate interest, it will apply the law
of another interested state.” - Structure of Paragraph 3
Step #1: Discuss which states have legitimate interests.
CONFLICT OF LAWS
NOTES
15
Step #2: Characterize the type of conflict.
A false conflict arises when only one state has a legitimate
interest, and a true conflict arises when two or
more states have a legitimate interest.
Step #3: Choose the governing law based on the type of
conflict.
If a false conflict has arisen, you apply the law of the interested
state. If a true conflict has arisen and the forum
state is interested, you apply forum law.
Step #4: You apply the governing law to determine the
result.
EXAMPLE
“In this case, only Illinois has a legitimate interest. It is interested
in permitting recovery to compensate its injured resident (the
plaintiff). Michigan is not interested in applying its restriction
against recovery simply because the accident occurred there.
Rather, it would be interested in applying its restriction only if
the defendant were a Michigan resident. But the defendant in
this case is from Illinois, so Michigan is not interested. This case
is therefore a false conflict, and Illinois law should apply. Under
Illinois law, the plaintiff may recover.”
APPROACH #3: MOST SIGNIFICANT
RELATIONSHIP (SECOND RESTATEMENT)
- Stock Language for Paragraph 2
“Under this approach the court will apply the law of the
state which is most significantly related to the outcome
of the litigation. To determine this, the court will consider
connecting facts and policy principles.” - Structure of Paragraph 3
Step #1: Discuss connecting facts.
CONFLICT OF LAWS
NOTES
16
Step #2: Discuss policy principles.
Step #3: Choose governing law based on most significant
relationship.
Step #4: Apply the governing law to determine result.
EXAMPLE
“In this case, the factual connections are split. The accident
occurred in Michigan, and the injury was sustained there. But
both the plaintiff and the defendant are from Illinois. As a matter
of policy, Illinois seems to have the greater interest because the
law at issue is a loss distribution rule and both parties share an
Illinois domicile. As a result, Illinois appears to have the most
significant relationship to the dispute and its law should apply.
Under Illinois law, the plaintiff may recover.”
