Flyover 1: Choice of Law

Welcome back, everyone. The topic conflict of laws generally encompasses three overarching issues. First, jurisdiction, which you'll talk about in your civil procedure lessons. Second, choice of law. That's really the bar examiners' focus and what we're going to be discussing right now and over the next several lessons. And third, judgment recognition. We're going to have one lesson on the nuts and bolts of that.

So, we're going to be spending some time in this lesson digging a bit more deeply into choice-of-law questions. I want to say a bit more about the mechanics of choice of law, as always with an eye toward how it comes up on the bar exam. And then we're going to cover a few black-letter rules about how this operates in federal court. The rules are pretty straightforward, and precisely for that reason, bar examiners love to test this stuff.

Basic Mechanics

Remember that each state has its own choice-of-law rules, that is to say, the rules that will select which substantive law is going to govern a dispute. The first thing to remember is that each state applies its own choice-of-law rules.

Let's begin with a pretty straightforward hypothetical. Two New Yorkers negotiate and sign a contract in Rhode Island, and the contract is to be performed back in New York. If there's a disagreement between the parties, it's possible that the lawsuit could be brought in either New York or in Rhode Island.

If the forum is a New York state court, the court is going to apply New York's choice-of-law rules. If the forum is a Rhode Island state court, that court is going to apply Rhode Island's choice-of-law rules. That's pretty much as straightforward as it sounds. The difficulty lies in determining the content of those rules, for example, what New York's choice-of-law rules are, again, if we're in a New York state court.

And remember that those rules might call for the court to apply either New York substantive contract law or Rhode Island contract law. In the real world, that's where the hard work happens: learning what the forum's choice-of-law methodology is, and then working through the steps to figure out which substantive law is going to apply.

But the good news for you is that the bar examiners don't expect you to know the ins and outs of the various methodologies. They don't expect you to do the hard work that the real world is really going to require.

Instead, the bar examiners are interested in whether you understand the mechanics, and then whether you know some important rules that more or less all states have in common. In the next couple of lessons, we're going to be talking about those specific rules that tend to come up on the bar exam; for example, how to deal with things like marriages, wills, and certain contractual provisions.

For now, though, remember simply that if the forum is a state court, that court will apply its own state's choice-of-law rules. Don't worry about which substantive law is going to be chosen. We'll get there.

Federal Court (Klaxon)

Let's shift gears just a little bit and talk about how these mechanics operate in federal court. The rule here is pretty straightforward. If we're talking about a case that's in federal court based on diversity jurisdiction, the federal court will apply the choice-of-law rules of the state in which it sits. For those of you who like case names, this is the rule from Klaxon v. Stentor.

Some people like case names because it helps them remember the rule more easily. But if the case name doesn't help you, don't worry about it. The bar examiners do not expect you to regurgitate case names, and that's pretty much true across the board. You'll get all of the available points as long as you correctly articulate and apply the rule.

All right, let's imagine a simple hypothetical. I'm from State X and you're from State Y. We get into a car wreck near my home in State X, and I sue you in federal court for negligence. Now, just a little bit of an aside, if you remember your civil procedure lessons, you probably know that to get into federal court under diversity jurisdiction, you and I need to be completely diverse. Again, we are: I'm from State X, you're from State Y.

But we also need to make sure that there is more than $75,000 in controversy. Easy enough. When I cover this in class, I always ask my students to give me an expensive hypothetical car because my 10-year-old Toyota Prius is not worth anywhere close to $75,000. So we're going to imagine that you crashed into my hypothetical brand-new Maybach.

So if I sue you in federal court in State X, that court is going to apply the rule that we just discussed. It's going to apply State X's choice-of-law rules. If I sue you in federal court in State Y where you live, then the court is going to apply State Y's choice-of-law rules.

Again, this is as easy as it sounds, and when the bar examiners test this rule, there are lots of points available. So just remember the rule. Again, a federal court sitting in diversity applies the choice-of-law rules of the state in which it sits. You articulate that rule, you apply the rule, and don't overcomplicate things.

Federal Court (Van Dusen)

There's a variation on this rule that also can come up on the bar exam, and it can get tested, although not quite as frequently. Let's stick with this hypothetical that we've just been discussing, the car crash in State X. Imagine that I initially sue you in federal court, in your home state of State Y. And then imagine that the case is transferred to a federal court in State X, where I'm at home and where the wreck happened.

If you're transferring a case from one federal court where venue is properly laid to another federal court where venue also would be properly laid, then the choice-of-law rules are going to travel with the case. Now, this doesn't apply when venue was not proper in the first place, and this makes sense. We don't want plaintiffs to shop for the best choice-of-law rules, even if they're in a place that has no connection to the case, and then try to bring those choice-of-law rules with them.

All right, in the hypothetical, the case started in federal court in State Y. That federal court is going to follow the choice-of-law rules of the state in which it sits, so, obviously, State Y choice-of-law rules. If the case gets transferred to federal court in State X, we are going to bring the State Y choice-of-law rules with us. So the federal court in State X, the court to which the case has been transferred, is going to apply State Y's choice-of-law rules.

If case names help you remember and differentiate the rules, this is the rule that we get from the Van Dusen case. Again, you don't need to cite case names. Just remember the rule: when a case is transferred from one federal court to another, again, assuming that venue is properly laid in both places, the choice-of-law rules from the court where the action was initially filed are going to be applied. In other words, those choice-of-law rules are going to travel with the case.

That's really it. That's going to do it for now. In the next lesson, we're going to be talking about some of the more substance-specific rules that the bar examiners like to test.