Conflict of Laws -- Sample Chapter
A. IN GENERAL.
[§113]
Courts have used a variety of approaches to select the law to apply to
an interstate dispute. However, three rather different approaches have
historically dominated American court decisions in this field. They are:
the "territorial" (or "vested rights") approach; the "most significant
relationship" (or "center of gravity") approach; and the "governmental
interest analysis" approach. These are discussed below, in the order in
which they evolved in American legal history.
B. THE TERRITORIAL
(OR VESTED RIGHTS)
APPROACH. [§114]
In its earliest days, American choice-of-law theory borrowed heavily from
continental systems. One theory followed the logic of a Dutchman, Huber,
who argued that predictability and certainty are the main goals of choice
of laws. Hence, the proper choice-of-law in a given situation turned on
a particular event that was critical to the transaction. The law of that
place ought to control the rights and liabilities flowing from the event
or transaction.
Huber's ideas influenced Justice Story, the first American expert in this
field, who wrote his Commentaries on the Conflict of Laws in 1834. The
ideas of both men contributed to the thinking of Harvard Professor Joseph
Henry Beale, who served as reporter for the First Restatement of Conflict
of Laws, published in 1934.
The approach championed by Beale and the First Restatement was that a court,
faced with a conflict of laws situation, should first characterize the
cause of action (or the issue) needing to be resolved. That characterization
would reveal what critical event in the transaction, occurring at some
definite time and place, would determine the rights of the parties. It
was his theory that only the law of that place ("territory") could determine,
according to its laws, what rights and liabilities flowed from the transaction
or event (that is, what rights "vest" in the parties). This theory held
that only the state in which this "last act" occurred had the authority
to determine what, if any, liability was created thereby. For example:
There are two "vested right" choice-of-law rules in contract. Issues concerning
the formation of a valid contract, including capacity and its terms, are
generally governed by the "law of the place of making". That is, the law
of the place in which the last act necessary to create a binding contract
occurs. Matters regarding the adequacy of performance, discharge or excuse
for nonperformance, and damages resulting therefrom, are said to be governed
by the law of the "place of performance." (See §133, below.)
However, the place of the critical event (and hence the rule chosen) varied
according to the "characterization" of the cause of action or issue confronting
the court. It is not always easy to determine whether the legal issue to
be decided is one of making or performance. It is equally difficult to
determine what specific "act" was the "last" one contemplated by the rule
(and hence the place whose law will govern). In Milliken v. Pratt (See
Case Squibs section), for example, the court decided that the "last act"
necessary to bind a wife as surety for her husband's contractual indebtedness
was not her signing of the contract (in Massachusetts, where she would
not have been bound), but the delivery of goods in reliance on her surety
(occurring in Maine, where such contracts bound wives).
The vested rights (or territorial) choice-of-law rule in tort is generally
said to be the law of the place where the "last act necessary to create
liability" occurred. This is sometimes bastardized as "the law of the place
of the tort," although the difference between the two rules is rarely great.
Therefore, in Alabama Great Southern Railway Co. v. Caroll (See Case Squibs
section), the Court held that the applicable law was that of the place
where the rail cars uncoupled and the railway worker was injured (Mississippi)
and not Alabama, where plaintiff alleged that: 1) his fellow servants failed
in their duty to inspect the coupling; and 2) his employer had a contractual
duty under the Alabama Employer's Liability Act.
C. "ESCAPE DEVICES."
[§115]
A good deal of rigidity was involved in the territorial approach to choice
of law. The state in which the significant "event" occurred might have
little or no relationship to the parties or their transaction, or its law
might offend important legal policies of the forum. Nonetheless, the quest
for certainty (the hallmark of the territorial system) required that the
law of that state be applied.
In time, American jurists grew uncomfortable with the quest for certainty
at the expense of justice, and began to develop techniques to avoid the
application of these "hard and fast" territorial rules. These techniques
were called "escape devices," because the court used them to escape the
otherwise-applicable territorial choice-of-law rule. The devices themselves,
and variations on them, are too numerous to mention here. Suffice it that
most of them maintained the pretense of being faithful to the territorial
choice-of-law system, while escaping its literal application. Several of
the more frequently used "escapes" are listed below.
NOTE: Although these devices were developed during the territorial period,
they are equally applicable (although less necessary) to later-developed
choice approaches (i.e., most significant relationship and governmental
interest analysis).
1. CLASSIFICATION. [§116]
One method of "escaping" the application of a foreign state's law, is to
"classify" it (or features of it) as procedural, therefore not part of
the foreign substantive law rules that the forum court's choice of law
rule has directed be adopted. Since the forum court is in control of the
process of classifying foreign law, it may decide what in that law is "substantive"
(rules to adopt) and what is "procedural" (rules to ignore).
In the famous case, Grant v. McAuliffe (See Case Squibs section), a California
court confronted the question whether or not the right to recover for an
automobile tort survived the death of the tortfeasor. The accident occurred
in Arizona, but the parties to the accident and the suit were from California,
the forum. The California court "classified" the issue of survivability
as involving what claims could be brought against the decedent's estate,
hence a procedural issue, governed by forum law, which allowed for survival.
In fact, the issue of survivability of tort actions is generally viewed
as substantive; does the injured party have a "right" to sue the tortfeasor's
estate as well as the tortfeasor? That "right," which is separate and distinct
from the right to recover from the tortfeasor, was unknown at common law,
and is conferred only by statute. It would have been just as sensible to
treat the Arizona rule (which forbade survival) as a substantive law rule
of the place of the tort, dictating the rights of the parties. However,
the California forum, given its interest in applying its law, sought to
"escape" Arizona's rule.
2. RE-CHARACTERIZATION AND ISSUE SPLITTING. [§117]
Sometimes the forum court will examine a particular cause of action, consider
the choice of law ordinarily made, and discover that it would not produce
the end that seems just in the case. Without revealing this original thought
process, the court may alter its "characterization" of the cause of action
(define it in a different way) in order to apply a different law to the
case. In Levy v. Daniels' U-Drive Auto Renting Co., 108 Conn. 333, 143
A. 163, 61 A.L.R. 646 (1928), the court might have chosen Massachusetts
law (the site of the accident) to determine whether a Connecticut automobile
rental agency was liable to an auto guest injured by the rental car operator
in that accident. Under Massachusetts law, there was no liability on the
part of the rental agency, except for negligence in renting the car. The
place of the tort would ordinarily be the territorial choice of law to
determine liability in tort. Instead, the Connecticut court decided to
"characterize" (or re-characterize) the issue as one of contract. Accordingly,
vested rights doctrine would refer to the law of the place of contracting
(Connecticut), where the agent would be liable to the third-party beneficiary
of the lease contract for the subsequent tort. Thus, by using re-characterization
as an "escape device" the situs of the applicable law is shifted from the
place of the tort (Massachusetts) to the place of the contract (Connecticut).
A different type of re-characterization device was used in Haumschild v.
Continental Casualty Co. (See Case Squibs section.) In that case, a Wisconsin
husband injured his wife through his negligent driving in California. Under
California law, husbands were immunized from spousal suits in tort. Under
Wisconsin law, however, there was no such immunity. The Wisconsin court
found that there were two substantive issues to be settled; one, the question
of tort liability, to be governed by the law of the place of the tort (California).
The second issue, spousal immunity, was to be determined by the domestic
law of the spouse's domicile (Wisconsin). Hence, the court's characterization
(or re-characterization) of the issue in the case resulted in splitting
it into two substantive issues. Each issue was settled according to a different
jurisdiction's substantive law; the jurisdiction most interested in resolving
that particular issue. Thus, the application of California law (the place
of the tort) was "escaped" through the process of issue-splitting.
3. RENVOI. [§118]
"Renvoi" is a French word that can be translated as "send back" or to "return
unopened." Used as an "escape device" it means that the forum court has
used its reference to foreign law with the express hope that the foreign
law would refer to yet another body of law (usually the forum's).
This is possible insofar as it is rarely evident that the forum's reference
to foreign law is a reference to its substantive (internal) law only and
not to its choice-of-law rules (whole law). If the reference to foreign
law by the forum is interpreted to be a reference to foreign internal law,
the inquiry ends there, because internal law does not contain references
to other bodies of law. The case is settled according to the substantive
(internal) law of the foreign state.
Occasionally, however, the forum's reference to foreign law is interpreted
as a reference to its "whole" law, including its conflict of laws rules.
Normally, this occurs only in matters involving immovable property and
certain domestic relations matters (discussed later). However, it is for
the forum court to decide whether its choice-of-law rules refer to the
conflict rules of a foreign state or whether they refer to its internal
law. If it is the former, then a renvoi is possible. Usually, when a forum
refers to foreign whole law (aside from the limited type of cases cited
above) it is for the express purpose of creating a renvoi situation, and
thus "escaping" the otherwise- applicable rule. (See Case Squibs section,
University of Chicago v. Dater.)
4. PUBLIC POLICY. [§119]
Public policy is a factor in any choice of laws decision. However, it is
rarely the sole reason for a choice of one law over another, particularly
if the vested rights approach to choice is being used. When all other approaches
to "escape" the choice of the otherwise-applicable rule appear unavailing,
however, then "public policy" reasons might be asserted as a reason for
another choice.
In Kilberg v. Northeast Airlines Inc., 9 N.Y.2d 34, 172 N.E.2d 526 (1961),
the New York Court of Appeals acknowledged the applicability of a Massachusetts
wrongful death statute to the defendant airline's liability for a plane
crash in that state, but the court refused to apply Massachusetts' recovery
limit. The New York court suggested that the Massachusetts limitation was
"anachronistic" and violated the strong public policy of New York against
such limitations; a policy contained in its constitution. (The court also
suggested that the recovery limit could be treated as a "measure of damages"
rule (procedural), and hence the New York (forum) rule would apply.)
This so-called "public policy override" has been much criticized, because
it allows the court to reject the lex loci delectus rule (the law of the
place of the tort), otherwise applicable, by using the forum's "public
policy" as a rationale. At the time of the Kilberg decision, this was hardly
viewed as predictable or principled.
Despite its disapproval among more liberal courts and scholars, the vested
rights approach to choice of laws (and associated "escapes") continues
to be used by a minority of courts today, precisely because it appears
objective and is easily applied.
D. THE TRANSITION
TO NEW APPROACHES
TO CHOOSE THE
APPROPRIATE
LAW. [§120]
Two cases are often cited as those that began the transition from vested
rights to more modern approaches to choice of law. They are Auten v. Auten,
308 N.Y. 155, 124 N.E.2d 99 (1954) and Schmidt v. Driscoll Hotel, Inc.,
249 Minn. 376, 82 N.W.2d 365 (1957).
In Schmidt, a Minnesota dram shop operator was held liable for an automobile
injury (in Wisconsin) to the passenger of a tavern patron who had drunk
too much in the defendant's tavern. Under Minnesota law (the place of service)
the tavern owner would be held responsible, but under Wisconsin law (the
place of the accident) he would not. The orthodox territorial choice-of-law
rule in tort is to apply the lex loci delectus (the law of the place of
the event, in this case, the tort) to determine the rights and liabilities
of the parties. That would be Wisconsin. To "escape" this outcome, and
still appear to remain faithful to vested rights principles, the Minnesota
court fashioned a two-tort theory; suggesting that the tort of the tavern
owner was serving too many drinks to the errant driver. That tort occurred
in Minnesota. The other tort (the driver's negligence and injury to his
guest) occurred in Wisconsin. Thus, the liability of the tavern owner (under
Minnesota law) was triggered by any subsequent injury, whether that act
was actionable where it occurred or not.
Only in its concluding remarks did the Schmidt court indicate that "equity
and justice" (due to the abundance of contacts) also argued for the application
of Minnesota law to this situation. (In addition to being the situs of
the tavern and the place where the drinks were consumed, Minnesota was
the domicile of both the driver and the injured party).
In Auten v. Auten, 308 N.Y. 155, 124 N.E.2d 99 (1954), an English divorcee
sought to enforce a separation agreement against her former husband, who
had fled to New York State, remarried, and settled there. The separation
agreement, negotiated in New York, provided that neither party would sue
in "any action relating to their separation." She brought an enforcement
action in an English court, after the former husband failed to make payments
pursuant to the agreement. The New York court might have applied its local
law (which would have invalidated the separation agreement, due to the
wife's breach in bringing the action in England), but it chose to apply
English law instead. The usual rule was that, while the issue of the validity
of the agreement ought to be controlled by New York law (the place of making),
the issue before the court — the legal consequences of the wife's failure
to honor the separation agreement's terms (a performance issue) — ought
to be governed by English law, the place of her performance. Accordingly,
the New York court remanded the case to be decided according to English
law.
The court concluded that the effect of the wife's breach, if any, should
be determined by the law having the most "significant contacts" with the
parties and their transaction, and that was the law of England not New
York. Whereas the first reason given for the court's decision is classic
territorial choice-of-law analysis, the alternate rationale adopts the
more-modern approach of Restatement Second of Conflicts.
E. MODERN
APPROACHES TO
CHOICE OF LAWS.
[§121]
Due to these artful avoidances of the orthodox application of territorial
(or vested rights) choice of laws, it became evident that the principal
objectives of the vested rights system (certainty and predictability) were
not being realized.
In fact, a number of conflicts scholars, including Walter Wheeler Cook,
Ernest Lorenzen, and David Cavers, had already persuasively argued that
the mechanical rigidity of the vested rights approach was often unjust,
and provoked courts to adopt "escape devices" in the interest of fair results.
They reasoned that a more-sensitive approach to choosing the law to govern
a situation would produce more candor and more justice. In due course,
they were joined by scholars that did not just criticize the territorial
system, but suggested alternative systems of choice. Among them were: Willis
Reese (reporter for Restatement Second) favoring a "most significant relationship"
approach; Albert Ehrenzweig ("lex fori" (law of the forum) preference);
Brainerd Currie's "governmental interest analysis"; Cavers' "principles
of preference"; Robert Leflar's ("choice-influencing considerations");
and Arthur von Mehren and Donald Trautman and, in a separate work, Russell
Weintraub, all favoring a "functional approach" to choice. Each scholar,
in his own way, argued for a more interest-sensitive approach to choosing
the law to govern a conflict situation.
The two systems which commanded the most attention and greatest acceptance
so far are the "most significant relationship" approach of Willis Reese,
which dominates the Second Restatement of Conflict of Laws, and the "governmental
interest analysis" approach, championed by the late Professor Brainerd
Currie, which has especially influenced judicial thinking in California.
F. "GOALS" OF THE
NEW APPROACHES.
[§122]
At least two authors, Reese (together with his mentor, Elliott Cheatham)
and Leflar, have attempted to list the "goals" of their proposed choice-of-law
systems. Both lists have a good deal in common, although the Reese list
looked more toward a "center of gravity" approach (listed in order of importance),
while the Leflar list (in no particular order) favored a governmental interest
approach.
The lists are as follows:
Cheatham and Reese
1. The needs of the interstate and international systems;
2. A court should apply its own local law unless there is good reason for
not doing so;
3. A court should seek to effectuate the purpose of its relevant local
law rule in determining a question of choice of law;
4. Certainty, predictability, uniformity of result;
5. Protection of justified expectations;
6. Application of the law of the state of dominant interest;
7. Ease in determination of applicable law; convenience of the court;
8. The fundamental policy underlying the broad local law field involved;
9. Justice in the individual case. (Cheatham & Reese, 52 Colum. L. Rev.
959 (1952)).
A tenth principle was added by Professor Reese in a 1963 article: The court
must follow the dictates of its own legislature, provided these dictates
are constitutional.
Leflar:
A. Predictability of results;
B. Maintenance of interstate and international order;
C. Simplification of the judicial task;
D. Advancement of the forum's governmental interests; and
E. Application of the "better rule of law" (defined in terms of its modernity
or importance, not which party wins!). (Leflar, McDougal & Felix, American
Conflicts Law, 4th Ed., §95; p. 279.)
G. THE "MOST
SIGNIFICANT
RELATIONSHIP"
(OR "CENTER OF
GRAVITY")
APPROACH
TO
CHOICE OF
LAWS/TORT.
[§123]
In general, Restatement Second, Conflict of Laws, approved by the American
Law Institute in 1971, asserts that the law chosen to govern any transaction
should be that which has the "most significant relationship" to the transaction
and the parties to it. This general principle appears in §6 of Restatement
Second. It has also been referred to as seeking the law of the place which
is the "center of gravity" in the situation. The cases that most fully
developed this approach to choice of laws are a group of New York cases
that considered the liability of an automobile driver-host to his injured
passenger- guest. The first, and probably easiest, is Babcock v. Jackson
(See Case Squibs section).
In Babcock, a New York couple invited a friend (also a New Yorker) to accompany
them on a short automobile trip from New York to Ontario, Canada, and back.
During their trip, an accident occurred in Ontario in which the guest-passenger
(Babcock) was injured. According to vested rights doctrine, the law of
the place of the accident (Ontario) would have applied. However, the Babcock
court reasoned, the parties had no substantial relationship with Ontario.
It would be unfair to apply its law (denying recovery). The court weighed
the "contacts" between the parties, their transaction, and the respective
jurisdictions. It then decided that the place of the negligent act and
the injury was fortuitous, whereas the domicile of the parties, the place
where their relationship was centered, and the origin and anticipated conclusion
of their trip (New York) had more significant "contacts" with them and
their transaction. Hence, New York had the "most significant" contacts
with respect to this legal relationship, and accordingly, its law (granting
recovery) should govern.
The principles of the Babcock case are captured in Restatement Second,
Section 145, which identifies the contacts generally considered in a tort
case to locate its "center of gravity" for choice-of-laws purposes as:
1. The domicile, residence, etc., of the parties to the action;
2. The place where the harmful act or omission occurred;
3. The place where the injury occurred; and
4. The place where the relationship between the parties, if any, was centered.
In Babcock it is clear that the quantitative contacts with New York (domicile
of both parties and place where their relationship was centered), were
more numerous, as well as more qualitatively significant, than the place
of the negligent act and injury (Ontario). Accordingly, New York was the
"center of gravity."
The choice-of-laws problem in Dym v. Gordon, 16 N.Y.2d 120, 262 N.Y.S.2d
463, 209 N.E.2d 792 (1965) was more subtle. In Dym, two New York students
(who did not know one another in New York) met while attending summer school
at the University of Colorado in Boulder. Some time later, they embarked
on an all-Colorado automobile trip, during which the negligent operation
of the vehicle by the host-driver injured the guest-passenger. Under New
York law, recovery was possible based on ordinary negligence, but, under
Colorado law, recovery was granted only in cases involving "willful and
wanton" behavior. The New York court reasoned that, although these students
were New York domiciliaries, their relationship was centered, and the act
and accident occurred, in Colorado. Hence, Colorado had the "most significant
relationship" with the parties and the event, and its law should be applied.
As an aside, the New York court observed that the Colorado policy of giving
higher priority to claims of innocent third-party victims (it was a two-car
accident), was an additional reason to apply Colorado law.
H. HARDER CASES, AND A BLURRING OF "CENTER OF GRAVITY" PRINCIPLES/TORT. [§124]
The outcomes in Babcock v. Jackson and Dym v. Gordon are fairly predictable,
if one applies the four criteria of Restatement Second, Section 145, (see
§123) to the "contacts" in the cases. Greater qualitative weight is given
to more-significant contacts such as domicile and the center of a personal
relationship, and less given to more-fortuitous circumstances, such as
the place of an act or accident. Not all cases are so factually simple,
however.
In Tooker v. Lopez, 24 N.Y.2d 569, 301 N.Y.S.2d 519, 249 N.E.2d 394 (1969),
three Michigan State University coeds departed from their college dormitory
in East Lansing on a trip to Detroit. In the course of the trip, Ms. Lopez
lost control of her sports car and both she and one of her guests, Ms.
Tooker, were killed in the resulting accident. Applying the standards of
Restatement Second, Section 145, the act and accident occurred in Michigan
and the coeds' relationship was centered there, since the two New Yorkers
met at college. Thus, the volume of the contacts and their probable weight
pointed toward Michigan law. In this case, however, the New York court
weighed other contacts than those listed in Section 145; such as the place
where the automobile was garaged, registered and insured (all New York).
In doing so, they added "weight" to the New York contacts. This process
resulted in tipping the balance in favor of New York, whose law was chosen.
To cement their decision, the court observed that the policy behind New
York's compulsory-insurance statute and its ordinary negligence rule favored
recovery by an auto guest (Tooker) from her host (Lopez), at least when
a New York driver/host injures a New York passenger/guest. This last rationale
for the decision sounds more like a "public policy" approach to choice,
however, than one based on most significant "contacts."
In a still later case, Neumeier v. Kuehner, 31 N.Y.2d 121, 335 N.Y.S.2d
64, 286 N.E.2d 454 (1972), the Court of Appeals finally sought to make
some sense of the various choice rules they had fashioned for auto-guest
cases. The result, the so-called "Neumeier rules," embraced all three choice
methodologies: vested rights, center of gravity, and governmental interest
analysis. The first rule, following Tooker, dictates that the center of
gravity in an auto-guest case is the domicile of the two parties, if common,
and if the automobile is registered there. The second rule favors the domiciliary
party, whether plaintiff or defendant, if the accident occurs in their
domicile and the local rule is favorable to them. Thus, if the plaintiff-guest
is injured in his domicile and that law grants recovery, it applies; and,
if the defendant-driver causes an accident in his domicile, but there is
no liability, then that rule applies. Both choices seem to be based on
a center of gravity notion. The third rule dictates that where the plaintiff
and defendant have different domiciles, and the accident occurs in neither
domicile, or the local rule is unfavorable to the domiciliary, then ordinarily
the lex loci delectus (law of the tort) will be chosen, unless some other
jurisdiction has a greater interest in the outcome of the case. Hence,
the third Neumeier rule allows for a governmental interest "escape" from
what is otherwise a vested rights rule. In Neumeier, an Ontario guest,
killed in Ontario by his New York host, could not recover under Ontario
law, absent proof of "gross negligence." Neumeier rule number two was applied
in Cooney v. Osgood Machinery (81 N.Y. 2d 66, 1993) because the New York
court felt that a defendant-employer who acted locally (in Missouri), and
conformed his behavior to the local workers' compensation law, could not
expect to be governed by the tort- contribution statute of the distantly-related
sales agent's New York domicile.
I. GOVERNMENTAL INTEREST ANALYSIS/TORT. [§125]
The primary exponent of "governmental interest analysis" as an approach
to choice-of-laws was the late Professor Brainerd Currie of the University
of Chicago. His ideas were embraced by late Chief Justice Traynor of the
California Supreme Court, who applied them in a series of court decisions
and a law review article; Is This Conflict Really Necessary? (37 Tex. L.
Rev. 657, 1959). The Currie approach assumed (quite rightly) that some
public policy lies behind every statute or judicial interpretation. The
first step for any court, then, was to determine what policy lay behind
apparently-conflicting laws. The second step was to determine whether that
policy, once identified, was meant to apply to the situation before the
court. Currie reasoned that if the state's policy was not meant to apply
to the situation at hand, then the law of another, interested jurisdiction
could be applied without creating a conflict. Hence, the principal objective
of Currie's "governmental interest analysis" approach to choice of laws
was to avoid conflicts. He hoped to achieve this by finding that only one
state of the two (or more) whose laws conflicted was interested (as a matter
of policy) in applying its law to the case. The court then applied the
law of the only interested state.
In Reich v. Purcell (See Case Squibs section), for example, the California
court found that California was not an interested jurisdiction, even though
the plaintiff (formerly an Ohio native) had become a California domiciliary
subsequent to the Missouri automobile accident at issue in the case. California
also had no interest in protecting the California defendant from liability
in the case, since California law set no limit on damages. Likewise, Missouri,
the site of the accident, did not intend its limit on damages to apply,
since it was meant to govern local beneficiaries, or protect local defendants
and their insurers. Since none of the parties were Missouri natives, and
the insurance was not issued there, the California court rationalized that
Missouri was not "interested" in having its law (and policy) apply. Accordingly,
only Ohio, the residence of the parties killed in the accident, and the
place where their estates were being probated, had interest in the outcome
of the case. Ohio's laws (and policies) were applied.
When, under Currie's approach, only one state was interested in having
its laws applied, the situation was labelled a "false conflict," and the
law of the only truly-interested state was chosen. Where, however, more
than one state had an interest in applying its laws (and policies), then
there was a "true conflict," and some "principled" basis must be found
by which to determine which of the "interested" jurisdictions should prevail.
Currie's first suggestion was that the laws of the respective jurisdictions
should be given a "more moderate and restrained interpretation," in order
to reduce (or eliminate) the issue in conflict, and apply the law of the
more-substantially-interested state. Currie also tended to call this a
"false conflict," but it is better viewed as a real conflict, although
an "easy" one to settle. In cases of "true" (hard) conflict situations,
Currie favored the law of the forum (lex fori), on the theory that the
court owes greatest allegiance to the law (and policy) of the sovereign
it serves. The courts of New York and California, both frequently cited
for their use of governmental interest analysis as a choice methodology,
have differed in their application of it.
1. THE NEW YORK EXPERIENCE. [§126]
New York courts have lately turned to a governmental interest analysis
approach to choice of law, particularly when a center of gravity approach
would seem to produce results not to their liking. See, e.g., Kell v. Henderson,
26 A.D.2d 595, 270 N.Y.S.2d 552 (3d Dep't 1966), reversed on other grounds.
Thus, in Rosenthal v. Warren, 475 F.2d 428 (2d Cir. 1973), the court thought
that both Massachusetts law and New York law were intended to apply to
an alleged medical malpractice suit precipitated by the death of a New
Yorker who traveled to Massachusetts to undergo an operation by a local
surgeon. The Massachusetts rule would have limited damages in these circumstances
(protecting the local surgeon, the hospital and their insurers). Conversely,
the widow, the estate, and the forum were in New York, which recognized
no such limitation. Selecting New York law over that of Massachusetts,
the court simply stated that New York's interest in full recovery was greater
than Massachusetts', since New York's policy was incorporated in its constitution;
whereas damage limitations were antiquated and represented a minority rule
in the United States. Moreover, they asserted that Massachusetts' malpractice
insurance rates (one-quarter of New York's) did not rely heavily on the
statute's terms, since recovery was not limited for malpractice injuries
not resulting in death.
In a more modern New York case, O'Connor v. Lee Hy Paving Corp., 579 F.2d
194 (2d Cir. 1978), the court applied New York law to find a local (Virginia)
paving contractor liable for the death of a New York construction supervisor
at a Virginia job site, although the "contacts" clearly pointed to the
choice of Virginia law. The court's theory was that the New York law should
be applied whenever there was a "fair basis for doing so."
It is hard to imagine why the Virginia law, limiting damages to workers'
compensation, would not be more interested in a local contractor and accident,
especially when the New York native had voluntarily exposed himself to
the risk. Perhaps it is just because New York had jurisdiction, and it
would not be unconstitutional to apply its law.
Another recent New York case, Schultz v. Boy Scouts of America, Inc. (See
Case Squibs section) suggests that New York is beginning to analyze competing
legal rules and policies with less partiality to its own. In Schultz, the
New York court applied its tort rule to find child molestation (which occurred
both in New York and in New Jersey), but stated that the principal issue
in the case was not tort liability, but charitable immunity. Immunity was
given to the Boy Scouts and the Franciscan Order (sponsors of the scout
troop) under New Jersey law, where both organizations operated. New Jersey
was also the domicile of the two molested boys and their molester (a troop
leader). The New York court also rejected the application of Texas law
(where Boy Scouts subsequently reincorporated) and Ohio law (where the
Franciscans were incorporated), on the theory that the government with
the greatest interest in applying its law and policy was not the place
of the incorporation, but where the two charities acted and the victims
domiciled (New Jersey). In so deciding, the New York court relied to a
degree on the Neumeier rules.
2. THE CALIFORNIA APPROACH. [§127]
California is the American jurisdiction best known for governmental interest
analysis as a choice-of-law methodology. Its development there is attributable
to two individuals, Professor Brainerd Currie, and Justice Roger J. Traynor.
Currie first articulated the governmental interest analysis approach to
choice of laws in his article, The Constitution and Choice of Law: Governmental
Interests and the Judicial Function (26 U. Chi. L. Rev. 9, 1958), and he
continued to develop his basic idea throughout his scholarly career. Traynor,
as a Justice and later Chief Justice of the California Supreme Court, applied
policy considerations like Currie's in a variety of California cases.
In its most refined form, the California approach to governmental interest
(or "public policy") analysis involved four distinct steps:
a. Identify the policy that lies behind the conflicting statutes (or judicial
holdings) of the respective, apparently-interested jurisdictions. Presumably,
some policy objective lies behind every statute or judicial decision. Currie
believed that they should not be applied blindly, but used only when public
policy intended it.
For example, a statute limiting the host-driver's liability to his passenger-guest
for an automobile accident promotes Good Samaritanism, limits the potential
for fraud, and helps contain automobile insurance premiums; all at the
expense of the injured passenger (a "policy" choice). Common law negligence
rules applied to the same situation promote full recovery for injured guests,
but at some expense to other parties and to policy considerations.
A short statute of limitation prevents stale claims from being pursued,
while a longer statute promotes recovery for injured parties.
The list could go on, but these examples indicate the public policy choices
behind any legal rule.
b. Does the policy that each state seeks to promote apply in this situation?
Some policies are meant to have broad application, whereas others are directed
at local actions and actors. Thus, a law (policy) concerning spousal immunity
from suit probably was meant to apply only to spouses domiciled in the
state that adopted it, and not to non-domiciliary spouses who just happen
to have an accident there. Likewise, the policy behind a statute of limitations
may be meant to condition legal "rights" wherever they are pursued, or
it may simply stipulate a period of time during which the local court is
authorized to entertain the action. In the former case, the statute would
apply regardless of where the action is brought; in the latter, it is a
procedural rule applied only in the forum.
(1) Identify "false" conflicts. If, after analyzing the competing policies
of the apparently-interested state, it is found that only one state has
a policy meant to apply to the situation, then there is no genuine conflict
of laws. The conflict is said to be "false", and the law of the only interested
jurisdiction is applied. (See Case Squibs section, Reich v. Purcell.)
(2) Resolve "true" conflicts. If, after analysis, two or more states appear
to be interested in having their law (and policy) applied to the case,
then a "true" conflict exists, and a choice must be made between the competing
laws. This is done in one of the following two ways:
c. Choose the law that would be most impaired if not applied. This so-called
"comparative impairment" approach to choosing between competing laws is
best evidenced by Bernhard v. Harrah's Club, 16 Cal.3d 313, 429 Cal.Rptr.
215, 546 P.2d 719, cert. denied 132 U.S. 859 (1976), from which the nomenclature
derives. Although the case was decided after Traynor's retirement in 1970,
the "policy weighing" or "balancing" approach owes much to his thinking
and decisions, as well as to several scholars who differed with Currie
on this point. (Currie felt that balancing "policies" was a legislative,
not judicial, function and that forum law should be chosen in all "true
conflicts" situations).
"Comparative impairment" dictates that, when a court is faced with a "true"
conflict, it should determine which of the competing laws (and policies)
would be "most impaired" if not chosen and applied. Often that is the more
modern rule, or the majority rule, or the one that is the more vigorously
enforced of the two. The forum court should apply the law that would be
more impaired if not chosen. Often that is the forum rule.
In Bernhard, California had a statute holding "dram shop" owners liable
for the torts of their inebriated patrons. The California court interpreted
that policy to apply not just to California tavern owners, but to those
operating proximate to California's borders as well. Nevada, where Harrah's
Club operated, had no similar civil liability statute, although it had
a criminal statute under which dramshop owners might be prosecuted. The
California court found that the California policy, at least as applied
to an accident in California involving Californians, would be more impaired
if not applied to Harrah's Club, which had solicited California business.
The court reasoned that the criminal statute indicated that Nevada had
no absolute policy objection to liability on the part of the dramshop owner.
Accordingly, the more impaired law (that of California) was applied in
this case. (But cf. Cable v. Sahara Tahoe Corp., 93 Cal.App. 384, 155 Cal.Rptr.
770 (1979)).
A more recent case, Offshore Rental Co. Inc. v. Continental Oil Co., 22
Cal.3d 157, 148 Cal.Rptr. 867, 583 P.2d 721 (1978), reached a different
outcome. The suit tested the right of a California corporation to recover
(under a dated California statute) for injuries to a "key" employee that
occurred in Louisiana. Louisiana law did not recognize "key employee" liability.
Because the Louisiana accident, caused by a local firm, was clearly meant
to be governed by Louisiana law (which also reflected the majority rule),
the older, seldom-used California law was found to be less impaired if
not applied. Accordingly, the "more impaired" Louisiana law was chosen.
d. In cases of equal impairment, choose the forum law. Occasionally, the
competing laws (and policies) of the respective states will be equally
strong. Both would be substantially impaired if not chosen and applied
to the situation. In such circumstances, most scholars and courts agree
that the law chosen should be that of the forum. The reason is that the
forum court ultimately owes allegiance to the government that created it,
and to the laws, precedents, and policies of its legislature and judiciary.
That might be labeled the "best" choice of laws in cases of equal impairment,
and it is the one that courts usually choose.
It should be evident from the foregoing that any "interest weighing" approach
to choice-of-laws focuses dominantly on the forum's policy interests; those
of other interested states; and the parties' expectations, probably in
that order.
J. DEPECAGE. [§128]
The term "depecage" is used to describe the combining, by the forum court,
of its own laws and those of another state, or other states, according
to the methodologies described above, to achieve certain outcomes. Depecage
has at least three meanings in conflict of laws. Some scholars use it to
describe every situation in which the laws of two or more states are chosen
to resolve a single legal dispute. This would include, however, all situations
in which a forum court applied its own procedure while choosing the substantive
law of another state. By that standard, every case involving a choice of
foreign law would be a depecage.
Another school of thought holds that any time the substantive law of two
or more jurisdictions is applied to a single cause of action, that is a
depecage. Others call this process "issue splitting," such as occurred
in Haumschild v. Continental Casualty Co. (See Case Squibs section.) In
Haumschild, liability for negligent driving was determined by the law where
the accident occurred (California), but spousal immunity was established
by the law where the tortfeasor and his injured spouse were domiciled (Minnesota).
The final definition of depecage, and the most restrictive, is the combining
of the laws of two or more states, whether procedural or substantive, to
produce a result not possible under the laws of any of the connected jurisdictions.
Such a hybrid is generally used to create a liability that would not otherwise
exist. See, e.g., Lillegraven v. Tengs, 375 P.2d 139 (Alaska Sup.Ct. 1962),
in which an Alaska statute of limitations was applied to permit a suit,
time-barred where it "arose" (British Columbia), and British Columbian
law was used to hold an automobile owner liable for the negligence of the
driver/tortfeasor, when the forum's law (Alaska) would not. Under either
body of law, the suit could not succeed, but due to the depecage, it was
successful.
K. SYSTEM
COORDINATION.
[§129]
Previously mentioned was the command of the U.S. Constitution (Article
IV, §1) that "each State" shall give full faith and credit to the judicial
proceedings of "every other State." No equal command has been given with
respect to sister state laws, except, perhaps, with respect to "transitory"
sister state causes of action under certain circumstances.
Hence, in most cases it is assumed that, if a court has jurisdiction of
the parties and subject matter, it may apply its own law, relatively free
of constitutional restraints. Rarely will the U.S. Supreme Court find that
the choice of the forum's law would violate the due process clause, much
less the full faith and credit clause in these circumstances.
There are rare occasions, of course, in which the forum, with good jurisdiction,
cannot constitutionally apply its own substantive law. See, e.g., Phillips
Petroleum Co. v. Shutts (See Case Squibs section). This is because, at
some distant point, a court's preference for its own laws will be perceived
as overreaching, an intrusion on the rights of parties created under other
legal systems and, indeed, on those systems themselves.
NOTE: Having established the three dominant choice-of-law methodologies
in Chapter XI we will now proceed to discuss them in Contracts and other
fields of law.
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