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Conflicts of Law
John Marshall Law School, Chicago
Green, Sonia Bychkov

CONFLICTS OF LAW – Professor Green – Fall 2012

Part One: Choice of Law Approaches, and Related Issues

TRADITIONAL APPROACH TO CHOICE OF LAW

I. Traditional Theory & the Vested Rights Approach/1st Restatement Approach:

A. In General: The “vested rights” approach to choice of law – the First Restatement, directs the forum to apply the law of the State in which the rights of the parties vested (came into being). This approach is very territorial – focused on where critical events occurred. Rights are deemed to vest in the place where they are “created” – i.e., the state in which the particular act occurred or particular relationship was created.

Benefits: (1) Promotes uniformity of result; (2) Enhances predictability – offers predictability of results and ease of administration; (3) Discourages forum shopping – doesn’t matter where you sue because the same law will apply; and (4) It’s symmetrical – all parties involved in a given transaction would have their rights adjudicated by the same court.

Draw Backs: (1) Application may result in applying the law of a State that has no interest in the resolution of the case; (2) It is blind to the content of and policies of the competing State laws; and (3) Rigid approach.

B. Analysis of Vested Rights Approach: THREE STEPS

1. Characterize: two steps

First, is the rule/law substantive or procedural?

Procedural: Court will apply its own law. STOP here! (this applies to all four approaches)

Substantive: we have to go on to the rest of the steps – the court may use another law (Federal Court – substantive rule – apply state rule in which the federal court hearing the case sits)

Second, what area of law is it? (primary & secondary characterization)

Primary: Torts, contracts, or property

Secondary: Contracts – validity or performance; Property – real or personal

2. Determine the Rule of Law for that Area: Rules come from the 1st Restatement of Conflicts.

Torts: Apply the law of the place where the injury occurred.

Contracts: Two rules

(1) Whether there is a valid contract in the first place?

Validity: Apply the law of the place where the contract was made.

(2) Whether the contract was performed the way it was suppose to be performed?

Performance: Apply the law of the place where the contract was to be performed.

Property: Two rules

Real Property: Apply the law of the place where the property is located.

Personal Property: Apply the law of the place where the property was at the time of the transaction in question. (Disposition of property in a will, but not including real property à law of domicile of testator)

3. Localize: Apply the law of the place where the key event was supposed to occur, as per the rules above. Note that the courts will use their OWN rules to make these determinations.

Exceptions: RENVOI and PUBLIC POLICY are the main exceptions to this approach.

C. CHARACTERIZATION: A very important step b/c it determines very much of the law that will be applied. Moreover, in this process, it is possible to make a lot of different arguments b/c the traditional theory has little to say about characterization, there are no specific rules. This opens some holes in the Vested Rights theory. Courts were justifying conclusions by altering the characterization. Many cases are not clear and overlap areas of law. Therefore, there is no much predictability or fairness.

1. Substance v. Procedure: Decide whether the dispute concerns an issue of substantive law or procedural law.

A. Three Tests to Decide: (on exam, say that there are 3 tests, but choose 1)

Outcome determinative and purpose test are used more often now.

1. Right v. Remedy Test: Does the dispute concern a right or a remedy?

Under this test, procedure category is very big.

Substantive: à Right (ex: survival statutes b/c there is an issue around a fundamental “right” to sue as opposed to a “remedy” to sue)

Procedural: à Remedy – remedy had to do with how much you recovered and statute of limitations and how you went about pursing your remedy (ex: rules governing pleading, discovery, interrogatories, joinder of parties, service of process, remedies, order of liability, rules governing evidence, and burden of proof)

2. Outcome Determinative Test: Look at the outcome under the rule.

Under this test, substantive category is very big; few things go under procedure.

Substantive: If the law or rule is going to determine the outcome of the particular issue involved – the particular issue involved could affect the outcome of the case à reference to the laws of some other state might then be justified.

Procedural: If the issue is not outcome determinative à then governed by the forum’s own rules – regardless of the out-of-state nature of the litigation (If a party wants forum law to apply, argue its procedural).

3. Purpose Test: Look at the purpose for which the rule was adopted.

Under this test, procedure category is very big.

Substantive: If the purpose of the law was to effect something substantive then it falls under substantive.

Procedural: If the purpose is to make the courts work efficiently or if the purpose is to regulate procedure.

2. Area of Law – Primary and Secondary Characterization:

A. Primary: Is this a tort, property, contracts, or some other kind of case?

B. Secondary: What kind of contract or property case is this?

1. Contract Case: Is it about performance or validity?

Validity: Applies to issues involving formalities of the contract – i.e., was it properly signed; were parties able to enter into it; sufficiency of consideration; parties’ capacity; fraud, illegality or other defenses making a contract voidable; nature and extent of duty, and the like.

Performance: Applies to issues involving disputes about performance – i.e., you did not give me the $30. When determining a performance problem include: sufficiency of performance, manner of performance, excuses for non-performance, existence and materiality of breach, questions relating to damages, and the right to rescind.

2. Property Case:

Real: Immovable property – land, houses, leaseholds, proceeds from sale or rental of land, right to income and profits from land, even a fence.

Personal: Movables – personal chattels

D. DETERMINE RULE OF LAW FOR THE AREA: Traditional Rules

1. Torts: “Place of Wrong Rule” – apply the law of the place where the injury occurred. The existence and extent of tort liability is to be determined according to the law of the place of the “wrong” – the place where P’s injuries were sustained.

Rationale: Because tort claims are transitory (i.e., a D may be held liable in any state where the P catches her), it’s only fair that the D be judged according to the standards in effect where he acted rather than the standards where he was sued.

If D’s acted in and P received injuries in several states à Last Event Test: Apply the law of the place where the “last act necessary to create liability” occurred (the last event necessary to make the actor liable took place).

Arbitrary: The last event test is arbitrary b/c there is no claim unless all the elements are established. A tort may be consummated where the last act occurs, but it is being committed from the first to the last act and thus ‘occurs’ at all these places.

Wrongful Death Cases: Apply the wrongful death statute of the place in which the fatal injuries were sustained, even where the decedent actually died elsewhere – this is substantive, not procedural in majority.

How to Avoid Application of Tort Rule:

Characterization as “procedural” – could avoid the problem

Characterization as “non-tort” – to avoid unfavorable law at the place of injury, courts might characterize a problem as “non-tort”

Example à Levy v. Daniels – the D negligently breached a duty of care arising from a contractual relationship – the court chose to apply contracts choice of law rules rather than torts.

Example à Inter-spousal Immunity – characterized as a family law problem rather than torts – look at the law of the spouses’ domicile rather than place of injury.

2. Contracts: (NOTE: Under VRA, cannot put in a choice of law clause.)

A. Validity Issues – “Place of Making” Rule: Apply the law of the place where the contract

me purpose. If domicile has once existed, mere temporary absence will not destroy it, however long continued. Once domiciled, it cannot be lost or extinguished until another is acquired. When one domicile is definitely abandoned, and a new one selected and entered upon, length of time is not important; one day will be sufficient, provided the animus exists. Even when the point of destination is not reached, domicile may shift in itinere, if the abandonment of the old domicile, and the setting out for the new, are plainly shown.

3. Children: A legitimate child took his FATHER’s domicile at birth. An illegitimate child took his mother’s domicile.

4. Wife: A wife took her husband’s domicile, but she could acquire a separate domicile by living apart from him if she was not guilty of desertion.

5. Significance: Domicile is significant for both jurisdictional & choice of law purposes.

Jurisdictional Basis: Domicile is an accepted basis for PJ over an individual.

Example: Suit in WY against somebody who was a domiciliary of WY, but at this point of time the person had temporarily moved to CO. They got a default judgment in WY, and sought to enforce the judgment in CO. Myer argued that there was no J b/c he was not in WY. Mere fact that he was domiciled in WY was enough for PJ, even if temporarily absent – sufficient to bring him w/in the reach of the court.

Choice of Law Problems: Where the issue is the law to be applied to a particular transaction that has “contacts” with various states, the party’s domicile may be deemed the most important contact.

Example: If a person is domiciled in State X, its laws will normally govern the inheritance of his chattels even though he dies in State Y, and the chattels are located at all times in State Z. This is true whether the matter is litigated in State X, Y, or Z.

G. MISCELLANEOUS TRADITIONAL RULES:

II. Traditional Practice: A Survey of Escape Devices – Escape devices are used by the courts to escape rigid application of the 1st Restatement. (NOTE: Although these devices were developed during the territorial period, they are equally applicable (although less necessary) to later-developed choice approaches (i.e., the most significant relationship and governmental interest analysis.)

A. Characterization: Sometimes the forum court will examine a particular COA, consider the choice of law ordinarily made, and discovery that it would not produce the end that seems just in the case. When the result of the obvious rule would be contrary to the party’s interest, sometimes the court will use re-characterization as an “escape device”.

Re-characterization: Without revealing this original thought process, the court may alter its “characterization” of the COA (define it in a different way) in order to apply a different law to the case. The court will look for the answer that is most just, intellectually honest.

Focuses on FAIRNESS of results – re-characterization occurs when the results seem unjust.

B. Substance or Procedure: Another 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.

Classification: 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).