Modern Approaches to Choice of Law
Modern Approaches to Choice of Law
A. Introduction
1. The “Choice-of-Law Revolution”: Critical Foundations
In a remarkable series of essays beginning in the 1920s and eventually collected in book form in The Logical and Legal Bases of the Conflict of Laws, Professor Walter Wheeler Cook undertook an examination of the foundations of Conflicts. Much of the book attacked the position of the First Restatement. One of the main themes of the book is that the Restatement is logically inconsistent in its “jurisdictional” approach, derived from fundamental principles. The theoretical basis for the Restatement, Cook said, is that a sovereign has the right to control events within its territory, and that other sovereigns ought to recognize that right. In some simple cases that principle is violated. He used the example of a fire set in State A that escapes, without any negligence on the part of the defendant, and spreads across the nearby border into State B, where it destroys a building owned by the plaintiff. The law of State A does not impose liability in domestic cases for such an occurrence. The domestic law of State B does impose liability, on a strict-liability theory. If an action is brought in State A, and that state follows thelast act approach of the Restatement, it will be referred to the “law” of State B. But what is the “law” of State B with respect to this case? It must be how State B would decide this particular case—not a domestic case. That, however, was clearly not what the drafters of the Restatement had in mind. They meant to refer to the internal law of State B. Cook’s argument was not with the imprecise wording of the Restatement, nor with the result, since he did not favor the complications caused by renvoi. He pointed out, however, that the reference to the internal law of State B was inconsistent with the right of State B, as a sovereign, to control the effects of the events which took place within its borders. State B “controls” such effects only if other states’ courts will reach the same decision reached by the courts of B. The territorial principle, purportedly derived fairly directly from fundamentals such as sovereignty, was being rejected in application by its chief proponents.
The other half of Cook’s attack was broader and deeper. He rejected the entire notion of determining legal principles by deduction from fundamentals. Instead, he suggested that the methodology of science be used, whereby (1) observations are made; (2) a tentative principle is formed and matched against observations already made; and (3) if successful so far, the tentative principle is used to make predictions about future observations, against which it is also tested. The “observations” for the lawyer are case decisions (and not necessarily the reasons that judges give for their decisions). Thus the idea was to look at the cases to find out what the real rules were, instead of looking for a priori rules to decide the cases. Once rules were arrived at, they could be used to assist (but only assist) in the decision of new cases. Whether the facts of a new case brought it within the old rule would be determined by the same process one would use to determine whether, for example, a new tort case should fall within the usual rule, or be distinguished on the basis of different facts.
The intellectual power of Cook’s work has been widely recognized. Professor Brainerd Currie, for example, said that it “discredited the vested-rights theory as thoroughly as the intellect of one man can ever discredit the intellectual product of another.” Currie, Selected Essays on the Conflict of Laws 6 (1963). Yet Cook’s efforts did not have immediate effect. The first real cracks in the theoretical monopoly of the territorialists in the courts did not occur until the early 1950s.
Although most states have departed from the First Restatement rules, at least in the torts and contracts contexts, no alternative approach has established itself as categorically superior to the rest. Part of the reason lies in the nature of the choice-of-law problem. The issue arises for courts as part of a busy pretrial procedure, and, although an individual judge might find the First Restatement rules to be problematic as applied, the judge has little time or patience to think systematically about the correct approach to choice of law. Historically, judges typically instead applied one of the escape devices to the First Restatement rules when their instincts told them that a straightforward application of the rules should be avoided. To add to the confusion, some courts profess adherence to more than one approach, not recognizing the differences (and sometimes they are few in terms of actual decisions) or wishing to use the time-honored technique of covering one’s derrière by invoking multiple justifications for the same conclusion.*
2. The Choice-of-Law Revolution in the Courts: The New York Experience
The difficulty that courts have had in formulating choice-of-law theories to replace the discredited First Restatement approach is well illustrated by the experience of the New York Court of Appeals. Starting in the 1950s, the New York Court of Appeals, led by Chief Judge Fuld, set aside the First Restatement rules in search of a more satisfying approach to choice of law. See Reese, Chief Judge Fuld and Choice of Law, 71 Colum. L. Rev. 548 (1971). The New York Court of Appeals embarked upon this journey through the common law case method, and, as a result, the court simultaneously struggled with providing just results in individual cases while developing a workable method for choosing law in future cases. As will become clearer in this chapter, the ideas expressed in the court’s opinions during this journey illustrate both the goals and the tensions underlying the competing approaches to choice of law.
Auten v. Auten and Haag v. Barnes
The New York Court of Appeals signaled its move away from the First Restatement contracts rules in Auten v. Auten, 308 N.Y. 155 (1954). The case involved a couple, Margarite and Harold Auten, who married in and resided together in England for 14 years, at which point Harold left Margarite and their two children, obtained an ex parte divorce in Mexico, and resettled in New York. Margarite traveled to New York to find Harold, and they signed a separation agreement under which he promised to pay monthly support to her and she promised not to contest the divorce (or his subsequent remarriage). Later Harold failed to make the promised payments, and Margarite brought suit in England where she obtained a judgment giving her a right to alimony. When he still failed to send her money, she sued him in New York to collect the amounts promised under the support agreement. Harold argued that the English suit violated the separation agreement and thereby terminated his payment obligations. This defense would be successful under New York but not English law. The court applied English law to allow Margarite to recover. Judge Fuld noted that the application of English law was consistent with the First Restatement place-of-performance rule, because Margarite arguably failed to perform her promise in England. However, Judge Fuld stated that a better ground for decision was to abandon the First Restatement’s distinction between obligation and performance and instead to apply the “law of the place with the most significant contacts” to resolve the matter. Fuld reasoned:
Although this ‘grouping of contacts’ theory may, perhaps, afford less certainty and predictability than the rigid general rules, the merit of its approach is that it gives to the place ‘having the most interest in the problem’ paramount control over the legal issues arising out of a particular factual context, thus allowing the forum to apply the policy of the jurisdiction ‘most intimately concerned with the outcome of [the] particular litigation.’ Moreover, by stressing the significant contacts, it enables the court, not only to reflect the relative interests of the several jurisdictions involved, but also to give effect to the probable intention of the parties and consideration to ‘whether one rule or the other produces the best practical result.’
Turning to the case before us, … England … has all the truly significant contacts, while this state’s sole nexus with the matter in dispute—entirely fortuitous, at that—is that it is the place where the agreement was made and where the trustee, to whom the moneys were in the first instance to be paid, had his office. The agreement effected a separation between British subjects, who had been married in England, had children there and lived there as a family for fourteen years. It involved a husband who, according to the papers before us, had willfully deserted and abandoned his wife and children in England and was in the United States, when the agreement was signed, merely on a temporary visa. And it concerned an English wife who came to this country at that time because it was the only way she could see her husband to discuss their differences. The sole purpose of her trip to New York was to get defendant to agree to the support of his family, and she returned to England immediately after the agreement was executed. While the moneys were to be paid through the medium of a New York trustee, such payments were ‘for account of’ the wife and children, who, it was thoroughly understood, were to live in England. The agreement is instinct with that understanding; not only does it speak in terms of English currency in providing for payments to the wife, not only does it recite that the first payment be made to her ‘immediately before sailing for England,’ but it specifies that the husband may visit the children ‘if he should go to England.’
Nor could the parties have expected or believed that any law other than England’s would govern the effect of the wife’s institution of a separation action. It is most unlikely that the wife could have intended to subject her rights under English law to the law of a jurisdiction several thousand miles distant, with which she had not the slightest familiarity. On the contrary, since it was known that she was returning to England to live, both parties necessarily realized that any action which she took, whether in accordance with the agreement or in violation of it, would have to occur in England. If any thought was given to the matter at all, it was that the law of the place where she and the children would be should determine the effect of acts performed by her.
Id. at 161-163 (citations omitted).
Seven years later, Judge Fuld authored another choice-of-law opinion in Haag v. Barnes, 9 N.Y.2d 554 (1961). In 1954, Haag, a legal secretary residing in New York, was hired by Barnes, an Illinois lawyer, to perform temporary work for him while he was in New York. The two entered a romantic relationship in New York, where she became pregnant. During the pregnancy, Haag went to Chicago at Barnes’s request, and the baby was born in a Chicago hospital. Barnes paid for the expenses of the birth, and, with the assistance of an attorney, Haag signed an agreement under which Barnes promised to pay specified sums for the support of the child. In return, Haag agreed to release him from further support obligations. A choice-of-law clause in the agreement stated that their agreement would be governed by Illinois law. For three years Barnes paid substantially more than he promised to pay, but Haag sued him seeking further support. Under Illinois law this subsequent suit would be barred by the previous agreement, but under New York law the suit could proceed because the prior agreement was not court approved. Judge Fuld reasoned that Illinois law should apply under a “most significant contacts” test:
The agreement, in so many words, recites that it “shall in all respects be interpreted, construed and governed by the laws of the State of Illinois” and, since it was also drawn and signed by the complainant in Illinois, the traditional conflicts rule would, without doubt, treat these factors as conclusive and result in applying Illinois law. But, even if the parties’ intention and the place of the making of the contract are not given decisive effect, they are nevertheless to be given heavy weight in determining which jurisdiction “has the most significant contacts with the matter in dispute.” Auten v. Auten.… And, when these important factors are taken together with other of the “significant contacts” in the case, they likewise point to Illinois law. Among these other Illinois contacts are the following: (1) both parties are designated in the agreement as being “of Chicago, Illinois,” and the defendant’s place of business is and always has been in Illinois; (2) the child was born in Illinois; (3) the persons designated to act as agents for the principals (except for a third alternate) are Illinois residents, as are the attorneys for both parties who drew the agreement; and (4) all contributions for support always have been, and still are being, made from Chicago.
Contrasted with these Illinois contacts, the New York contacts are of far less weight and significance. Chief among these is the fact that child and mother presently live in New York and that part of the “liaison” took place in New York. When these contacts are measured against the parties’ clearly expressed intention to have their agreement governed by Illinois law and the more numerous and more substantial Illinois contacts, it may not be gainsaid that the “center of gravity” of this agreement is Illinois and that, absent compelling public policy to the contrary Illinois law should apply.
Id. at 559-560. One might wonder why Illinois is the state with the most significant contacts in Haag. First, it is not at all clear why it matters that payments were sent from Illinois or that the lawyers representing the parties were from Illinois. And one might think that when defendant goes to New York, where he hires and subsequently impregnates plaintiff, and where she and her child currently reside, that New York is the state with the most significant contacts with the matter in dispute. Further, one might think that applying New York law is more consistent with the result the court reached in Auten. Why does the court nevertheless conclude that Illinois law should apply?
The reception to Haag v. Barnes was not particularly warm. Professor Brainerd Currie, for example, noted one obvious point about the methodology of the “grouping of contacts” approach:
The “grouping of contacts” theory provides no standard for determining what “contacts” are significant, or for appraising the relative significance of the respective groups of “contacts.” … The process of “grouping contacts” … deals in broad generalities about the “interest” of a state in applying its law without inquiry into how the “contacts” in question relate to the policies expressed in specific laws. One “contact” seems to be about as good as another for almost any purpose. The “contacts” are totted up and a highly subjective fiat is issued to the effect that one group of contacts or the other is more significant. The reasons for the conclusion are too elusive for objective evaluation. State interests are quite likely to be thwarted in the confusion.
Currie, Selected Essays on the Conflict of Laws 727-728 (1963).
The Guest Statute Cases
Two years later Judge Fuld authored an opinion in the first of a trilogy of choice-of-law cases dealing with the applicability of guest statutes, which are laws that limit the liability of drivers who injure passengers in their vehicles. In Babcock v. Jackson, 12 N.Y.2d 473 (1963), plaintiff, defendant, and defendant’s wife, all residents of Rochester, New York, went on a weekend trip to Canada in defendant’s car. Defendant lost control of the car while driving in Ontario, and plaintiff was severely injured in the resulting crash. An Ontario statute in force at the time of the accident immunized drivers from liability for injuries sustained by their passengers, but under New York law drivers could be held liable for negligently injuring their passengers. The court rejected strict application of the place-of-injury rule for all issues that arise in torts cases. Instead, Judge Fuld engaged in an analysis of state interests:
Comparison of the relative “contacts” and “interests” of New York and Ontario in this litigation, vis-à-vis the issue here presented, makes it clear that the concern of New York is unquestionably the greater and more direct and that the interest of Ontario is at best minimal. The present action involves injuries sustained by a New York guest as the result of the negligence of a New York host in the operation of an automobile, garaged, licensed and undoubtedly insured in New York, in the course of a weekend journey which began and was to end there. In sharp contrast, Ontario’s sole relationship with the occurrence is the purely adventitious circumstance that the accident occurred there.
New York’s policy of requiring a tortfeasor to compensate his guest for injuries caused by his negligence cannot be doubted—as attested by the fact that the Legislature of this State has repeatedly refused to enact a statute denying or limiting recovery in such cases … and our courts have neither reason nor warrant for departing from that policy simply because the accident, solely affecting New York residents and arising out of the operation of a New York based automobile, happened beyond its borders. Per contra, Ontario has no conceivable interest in denying a remedy to a New York guest against his New York host for injuries suffered in Ontario by reason of conduct which was tortious under Ontario law. The object of Ontario’s guest statute, it has been said, is “to prevent the fraudulent assertion of claims by passengers, in collusion with the drivers, against insurance companies,” and, quite obviously, the fraudulent claims intended to be prevented by the statute are those asserted against Ontario defendants and their insurance carriers. Whether New York defendants are imposed upon or their insurers defrauded by a New York plaintiff is scarcely a valid legislative concern of Ontario simply because the accident occurred there, any more so than if the accident had happened in some other jurisdiction.
… Ontario’s interest is quite different from what it would have been had the issue related to the manner in which the defendant had been driving his car at the time of the accident. Where the defendant’s exercise of due care in the operation of his automobile is in issue, the jurisdiction in which the allegedly wrongful conduct occurred will usually have a predominant, if not exclusive, concern. In such a case, it is appropriate to look to the law of the place of the tort so as to give effect to that jurisdiction’s interest in regulating conduct within its borders, and it would be almost unthinkable to seek the applicable rule in the law of some other place.
… Although the rightness or wrongness of defendant’s conduct may depend upon the law of the particular jurisdiction through which the automobile passes, the rights and liabilities of the parties which stem from their guest-host relationship should remain constant and not vary and shift as the automobile proceeds from place to place. Indeed, such a result, we note, accords with “the interests of the host in procuring liability insurance adequate under the applicable law, and the interests of his insurer in reasonable calculability of the premium.” …
Id. at 482-484.
Judge Van Voorhis dissented; he thought more respect should be paid to the governing law at the place of injury:
Auten v. Auten dealt with contracts, the agreement was held to be governed by the law of the country where it was mainly to be performed, which had previously been the law, and the salient expression “center of gravity,” “grouping of contacts,” and similar catchwords were employed as a shorthand reference to the reconciliation of such rigid concepts in the conflict of laws as the formulae making applicable the place where the contract was signed or where it was to be performed—rules which themselves were occasionally in conflict with one another.… The difference between the present case and Auten v. Auten is that Auten did not materially change the law, but sought to formulate what had previously been decided. The present case makes substantial changes in the law of torts. The expressions “center of gravity,” “grouping of contacts,” and “significant contacts” and catchwords which were not employed to define and are inadequate to define a principle of law, were neither applied to nor are they applicable in the realm of torts.
… Attempts to make the law or public policy of New York State prevail over the laws and policies of other States where citizens of New York State are concerned are simply a form of extraterritoriality which can be turned against us wherever actions are brought in the courts of New York which involve citizens of other States.… Undoubtedly ease of travel and communication, and the increase in inter-state business have rendered more awkward discrepancies between the laws of the States in many respects. But this is not a condition to be cured by introducing or extending principles of extraterritoriality, as though we were living in the days of the Roman or British Empire, when the concepts were formed that the rights of a Roman or an Englishman were so significant that they must be enforced throughout the world even where they were otherwise unlikely to be honored by “lesser breeds without the law.”
Id. at 485-486.
In the court’s second guest statute case, Tooker v. Lopez, 24 N.Y.2d 569 (1969), Catharina Tooker was killed in an accident while a passenger in a car driven by Marcia Lopez, who was also killed. Tooker, Lopez, and a second passenger, Susan Silk, were all classmates at Michigan State University, and the accident occurred while the three students were on a weekend trip from the University to Detroit, Michigan. Tooker and Lopez were both New York domiciliaries, and Silk (not a party to this action) was domiciled in Michigan. The car was owned by Lopez’s father and was registered and insured in New York. In this wrongful death action, the defendant argued that suit was barred by Michigan’s guest statute, which barred recovery by guests except in cases of willful misconduct or gross negligence of the driver. Judge Keating, writing for the court, decided that New York law should apply. The court didn’t seem interested in any interest that Michigan might have in the outcome of this case (although a footnote surmised that Michigan’s guest statute was intended to protect the owner of the vehicle). Instead, the court focused on a New York State legislative declaration accompanying the state’s compulsory insurance law which stated that:
The legislature determines that it is a matter of grave concern that motorists shall be financially able to respond in damages for their negligent acts, so that innocent victims of motor vehicle accidents may be recompensed for the injury and financial loss inflicted upon them.
Despite the fact that this declaration referred to insurance coverage rather than guest statute liabilities and nowhere indicated that the legislature was worried about compensation for injuries sustained outside the state, the court stated:
[I]t is clear that New York has the only real interest in whether recovery should be granted and that the application of Michigan law “would defeat a legitimate interest of the forum State without serving a legitimate interest of any other State.” …
New York’s “grave concern” in affording recovery for the injuries suffered by Catharina Tooker, a New York domiciliary, and the loss suffered by her family as a result of her wrongful death, is evident merely in stating the policy which our law reflects. On the other hand, Michigan has no interest in whether a New York plaintiff is denied recovery against a New York defendant where the car is insured here. The fact that the deceased guest and driver were in Michigan for an extended period of time is plainly irrelevant. Indeed, the Legislature, in requiring that insurance policies cover liabilities for injuries regardless of where the accident takes place (Vehicle & Traffic Law, §311, subd. 4) has evinced commendable concern not only for residents of this State, but residents of other States who may be injured as a result of the activities of New York residents. Under these circumstances we cannot be concerned with whether Miss Tooker or Miss Lopez were [sic] in Michigan for a summer session or for a full college education.
Id. at 576-577. The court rejected the relevance of party expectations arguments on the grounds that (1) people don’t take into account differing laws when acting, especially in the area of torts; (2) New York wishes to impose its policy preferences in favor of compensation regardless of what the parties expect; and (3) in any event, New York policyholders might well expect that their purchase of insurance guarantees that their victims would receive New York levels of compensation.
Judge Breitel dissented, arguing that the issue should be resolved according to Michigan law because Michigan was the seat of the relationship of these students. One consequence of applying New York law was that the two passengers, Silk and Tooker, would have differing rights to recovery in the same accident, a result he found unjustified. Judge Keating responded:
[I]t is not an “implicit consequence” that the Michigan passenger injured along with Miss Lopez should be denied recovery. Under the reasoning adopted here, it is not at all clear that Michigan law would govern. We do not, however, find it necessary or desirable to conclusively resolve a question which is not now before us. It suffices to note that any anomaly resulting from the application of Michigan law to bar an action brought by Miss Silk is “the implicit consequence” of a Federal system which, at a time when we have truly become one nation, permits a citizen of one State to recover for injuries sustained in an automobile accident and denies a citizen of another State the right to recover for injuries sustained in a similar accident. The anomaly does not arise from any choice-of-law rule.…
Id. at 580. Are New Yorkers now equivalent to the Romans and the Englishmen, as charged by Judge Van Voorhis in his dissent in Babcock? Do they also turn everyone they travel with into Romans and Englishmen? The answer to this latter question came in Neumeier.
Before we turn to that case, note that the “center of gravity” and “most significant contacts” inquiries from Auten and Haag were replaced by a focus on “policies” and “interests” in Babcock and Tooker. Which approach makes more sense? Do the differing approaches turn at all on the fact that Auten and Haag involved contracts and family support while Babcock and Tooker involved tort actions? Which is easier for a court—determining the center of gravity of a case or determining the policy interests? Is the New York court saying that the center of gravity is the state which has a contact that triggers important policy interests? And how does a forum ascertain the policies of other states?
Neumeier v. Kuehner, 31 N.Y.2d 121 (1972) was the third case of the guest statute trilogy. Kuehner, a resident of Buffalo, New York, drove his car, which was registered and insured in New York, into Ontario to pick up Neumeier, at his home in Fort Erie, Ontario. The two were to take a trip to Long Beach, Ontario, but the car was struck by a train on the way and both were killed instantly. By this point Ontario had amended its guest statute to protect drivers from liability to their guests except when they are guilty of gross negligence, and defendant asserted that the statute applied to plaintiff’s wrongful death action. Writing for the majority, Chief Judge Fuld reexamined the policy behind Ontario’s guest statute:
[A]lthough our court originally considered that the sole purpose of the Ontario statute was to protect Ontario defendants and their insurers against collusive claims …, “[f]urther research … has revealed the distinct possibility that one purpose, and perhaps the only purpose, of the statute was to protect owners and drivers against ungrateful guests.” …
Id. at 124. In addition, these locational facts differed from those presented in Tooker:
[A]lthough the host was a domiciliary of New York, the guest, for whose death recovery is sought, was domiciled in Ontario, the place of the accident and the very jurisdiction which had enacted the statute designed to protect the host from liability for ordinary negligence. It is clear that although New York has a deep interest in protecting its own residents, injured in a foreign state, against unfair or anachronistic statutes of that state, it has no legitimate interest in ignoring the public policy of a foreign jurisdiction—such as Ontario—and in protecting the plaintiff guest domiciled and injured there from legislation obviously addressed, at the very least, to a resident riding in a vehicle traveling within its borders.
Id. at 125-126.
Judge Bergen, in his dissent, argued that this distinction was “impermissible”:
There is a difference of fundamental character between justifying a departure from lex loci delictus because the court will not, as a matter of policy, permit a New York owner of a car licensed and insured in New York to escape a liability that would be imposed on him here; and a departure based on the fact a New York resident makes the claim for injury. The first ground of departure is justifiable as sound policy; the second is justifiable only if one is willing to treat the rights of a stranger permitted to sue in New York differently from the way a resident is treated. Neither because of “interest” or “contact” nor any other defensible ground is it proper to say in a court of law that the rights of one man whose suit is accepted shall be adjudged differently on the merits on the basis of where he happens to live.…
Id. at 132-133. Chief Judge Fuld defended the distinction:
To distinguish Tooker on such a basis is not improperly discriminatory. It is quite true that, in applying the Ontario guest statute to the Ontario-domiciled passenger, we, in a sense, extend a right less generous than New York extends to a New York passenger in a New York vehicle with New York insurance. That, though, is not a consequence of invidious discrimination; it is, rather, the result of the existence of disparate rules of law in jurisdictions that have diverse and important connections with the litigants and the litigated issue.
The fact that insurance policies issued in this State on New York-based vehicles cover liability, regardless of the place of the accident … certainly does not call for the application of internal New York law in this case. The compulsory insurance requirement is designed to cover a car owner’s liability, not create it; in other words, the applicable statute was not intended to impose liability where none would otherwise exist. This being so, we may not properly look to the New York insurance requirement to dictate a choice-of-law rule which would invariably impose liability.… While New York may be a proper forum for actions involving its own domiciliaries, regardless of where the accident happened, it does not follow that we should apply New York law simply because some may think it is a better rule, where doing so does not advance any New York interest, nor the interest of any New York State domiciliary.
Id. at 126-127.
Looking to the future, Chief Judge Fuld advocated rules for guest statute cases:
When in Babcock v. Jackson we rejected the mechanical place of injury rule in personal injury cases because it failed to take account of underlying policy considerations, we were willing to sacrifice the certainty provided by the old rule for the more just, fair and practical result that may best be achieved by giving controlling effect to the law of the jurisdiction which has the greatest concern with, or interest in, the specific issue raised in the litigation.… In consequence of the change effected—and this was to be anticipated—our decisions in multi-state highway accident cases, particularly in those involving guest-host controversies, have, it must be acknowledged, lacked consistency. This stemmed, in part, from the circumstance that it is frequently difficult to discover the purposes or policies underlying the relevant local law rules of the respective jurisdictions involved. It is even more difficult, assuming that these purposes or policies are found to conflict, to determine on some principled basis which should be given effect at the expense of the others.
The single all-encompassing rule which called, inexorably, for selection of the law of the place of injury was discarded, and wisely, because it was too broad to prove satisfactory in application. There is, however, no reason why choice-of-law rules, more narrow than those previously devised, should not be successfully developed, in order to assure a greater degree of predictability and uniformity, on the basis of our present knowledge and experience.… Babcock and its progeny enable us to formulate a set of basic principles that may be profitably utilized [in guest-host conflicts], for they have helped us uncover the underlying values and policies which are operative in this area of law. Although it was recognized that no rule may be formulated to guarantee a satisfactory result in every case, the following principles were proposed as sound for situations involving guest statutes in conflicts settings:
1. When the guest-passenger and the host-driver are domiciled in the same state, and the car is there registered, the law of the state should control and determine the standard of care which the host owes to his guest.
2. When the driver’s conduct occurred in the state of his domicile and that state does not cast him in liability for that conduct, he should not be held liable by reason of the fact that liability would be imposed upon him under the tort law of the state of the victim’s domicile. Conversely, when the guest was injured in the state of his own domicile and its law permits recovery, the driver who has come into that state should not—in the absence of special circumstances—be permitted to interpose the law of his state as a defense.
3. In other situations, when the passenger and the driver are domiciled in different states, the rule is necessarily less categorical. Normally, the applicable rule of decision will be that of the state where the accident occurred but not if it can be shown that displacing that normally applicable rule will advance the relevant substantive law purposes without impairing the smooth working of the multi-state system or producing great uncertainty for litigants. (Cf. Restatement, 2d, Conflict of Laws, P.O.D., pt. II, §§146, 159 [later adopted and promulgated May 23, 1969.])
Id. at 127-128. Rule 3 applied here, and the court concluded that New York’s connection to the case provided insufficient reason to displace the law of the place of injury.
More Recent Developments
The Neumeier rules continue to inform choice-of-law decisions in New York, and they have been extended beyond the guest statute context with some added nuance. Consider, for example, Schultz v. Boy Scouts of America, 65 N.Y.2d 189 (1985). Plaintiffs, domiciled in New Jersey, sued Edmund Coakeley, Boy Scouts of America, and Franciscan Brothers of the Poor, Inc., after their two sons were sexually abused by Coakeley and one committed suicide. Coakeley, a brother in the Franciscan order, was the boys’ school teacher and scout leader. Coakeley apparently sexually assaulted both boys at a boy scout camp in New York, and continued to abuse at least one son after returning to New Jersey. The Boy Scouts and Franciscan Brothers were sued for negligent hiring and supervision. Plaintiffs claimed that these latter defendants had actual or constructive notice that Coakeley had previously been dismissed from another boy scout camp for similar misconduct. The Boy Scouts maintained their headquarters in New Jersey until 1979, after the abuse occurred, when they moved their headquarters to Texas. Franciscan Brothers was incorporated and headquartered in Ohio. Under New Jersey but not New York (or Texas or Ohio) law, the doctrine of charitable immunity prevents the suits against Boy Scouts and Franciscan Brothers from going forward.
After discussing the significance of Babcock, Tooker, and Neumeier to choice-of-law analysis in New York, the court introduced a distinction between conduct-regulating and loss-allocating rules:
These decisions also establish that the relative interests of the domicile and locus jurisdictions in having their laws apply will depend on the particular tort issue in conflict with the case. Thus, when the conflicting rules involve the appropriate standards of conduct, rules of the road, for example, the law of the place of the tort “will usually have a predominant, if not exclusive, concern” … because the locus jurisdiction’s interests in protecting the reasonable expectations of the parties who relied on it to govern their primary conduct and in the admonitory effect that applying its law will have on similar conduct in the future assume critical importance and outweigh any interests of the common-domicile jurisdiction.…
… Conversely, when the jurisdictions’ conflicting rules relate to allocating losses that result from admittedly tortious conduct, as they do here, rules such as those limiting damages in wrongful death actions, vicarious liability rules, or immunities from suit, considerations of the State’s admonitory interest and party reliance are less important. Under those circumstances, the locus jurisdiction has at best a minimal interest in determining the right of recovery or the extent of the remedy in an action by a foreign domiciliary for injuries resulting from the conduct of a codomiciliary that was tortious under the laws of both jurisdictions.… Analysis then favors the jurisdiction of common domicile because of its interest in enforcing the decisions of both parties to accept both the benefits and the burdens of identifying with that jurisdiction and to submit themselves to its authority.…
As to defendant Boy Scouts, this case … presents … a “reverse” Babcock case because New York is the place of the tort rather than the jurisdiction of the parties’ common domicile.
… [I]f this were a straight Babcock fact pattern, rather than the reverse, we would have no reason to depart from the first Neumeier rule and would apply the law of the parties’ common domicile. Because this case presents the first case for our review in which New York is the forum-locus rather than the parties’ common domicile, however, we consider the reasons most often advanced for applying the law of the forum-locus and those supporting application of the law of the common domicile.
The three reasons most often urged in support of applying the law of the forum-locus in cases such as this are: (1) to protect medical creditors who provided services to injured parties in the locus State, (2) to prevent injured tort victims from becoming public wards in the locus State, and (3) the deterrent effect application of locus law has on future tortfeasors in the locus State.… The first two reasons share common weaknesses. First, in the abstract, neither reason necessarily requires application of the locus jurisdiction’s law, but rather invariably mandates application of the law of the jurisdiction that would either allow recovery or allow the greater recovery.… They are subject to criticism, therefore, as being biased in favor of recovery. Second, … the record contains no evidence that there are New York medical creditors or that plaintiffs are or will likely become wards of this State. Finally, although it is conceivable that application of New York’s law in this case would have some deterrent effect on future tortious conduct in this State, New York’s deterrent interest is considerably less because none of the parties is a resident and the rule in conflict is loss-allocating rather than conduct-regulating.
Conversely, there are persuasive reasons for consistently applying the law of the parties’ common domicile. First, it significantly reduces forum-shopping opportunities, because the same law will be applied by the common-domicile and locus jurisdictions, the two most likely forums. Second, it rebuts charges that the forum-locus is biased in favor of its own laws and in favor of rules permitting recovery. Third, the concepts of mutuality and reciprocity support consistent application of the common-domicile law. In any given case, one person could be either plaintiff or defendant and one State could be either the parties’ common domicile or the locus, and yet the applicable law would not change depending on their status. Finally, it produces a rule that is easy to apply and brings a modicum of predictability and certainty to an area of the law needing both.
As to defendant Franciscan Brothers, this action requires an application of the third of the rules set forth in Neumeier because the parties are domiciled in different jurisdictions with conflicting loss-distribution rules and the locus of the tort is New York, a separate jurisdiction. In that situation the law of the place of the tort will normally apply, unless displacing it “will advance the relevant substantive law purposes without impairing the smooth working of the multi-state system or producing great uncertainty for litigants.” For the same reasons stated in our analysis of the action against defendant Boy Scouts, application of the law of New Jersey in plaintiffs’ action against defendant Franciscan Brothers would further that State’s interest in enforcing the decision of its domiciliaries to accept the burdens as well as the benefits of that State’s loss-distribution tort rules and its interest in promoting the continuation and expansion of defendant’s charitable activities in that State. Conversely, although application of New Jersey’s law may not affirmatively advance the substantive law purposes of New York, it will not frustrate those interests because New York has no significant interest in applying its own law to this dispute. Finally, application of New Jersey law will enhance “the smooth working of the multistate system” by actually reducing the incentive for forum shopping and it will provide certainty for the litigants whose only reasonable expectation surely would have been that the law of the jurisdiction where plaintiffs are domiciled and defendant sends its teachers would apply, not the law of New York where the parties had only isolated and infrequent contacts as a result of Coakeley’s position as Boy Scout leader. Thus, we conclude that defendant Franciscan Brothers has met its burden of demonstrating that the law of New Jersey, rather than the law of New York, should govern plaintiffs’ action against it.
Id. at 198-202.
Note that the Schultz court lists three reasons sometimes advanced for applying the law of the forum locus. The first two—protecting local medical creditors and preventing injured parties from becoming public wards of the state—are rejected as reasons for applying New York law in part because they are “biased in favor of recovery.” But aren’t all underlying policies biased in this sense, either favoring recovery (if pro-plaintiff) or denying it (if pro-defendant)? What is left of the new methodology once we discard such “biased” policies? And with regard to the third reason—deterrence—why is New York’s interest less where the parties are not residents? Are nonresidents supposed to be immune from local conduct-regulating rules while in New York? Regarding the Franciscan Brothers, why would New Jersey have an interest in forcing its domiciliaries to bear the costs as well as the benefits of local law? Does a state have an interest generally in applying its disadvantageous rules to locals?
The New York Court of Appeals returned to the distinction between conduct-regulating and loss-allocating rules in Padula v. Lilarn Properties Corp., 644 N.E.2d 1001 (1994). In Padula, plaintiff, a resident of New York, sued defendant, a New York corporation, after suffering injuries when he fell from a scaffold while working on defendant’s Massachusetts property under a subcontracting agreement. Plaintiff’s claim was based on alleged violations of the New York Labor Law, but the court concluded that New York’s law does not apply because New York was not the situs of this accident:
Conduct-regulating rules have the prophylactic effect of governing conduct to prevent injuries from occurring. “If conflicting conduct-regulating laws are at issue, the law of the jurisdiction where the tort occurred will generally apply because that jurisdiction has the greatest interest in regulating behavior within its borders.” …
Loss allocating rules, on the other hand, are those which prohibit, assign, or limit liability after the tort occurs, such as charitable immunity statutes, guest statutes, wrongful death statutes, vicarious liability statutes, and contribution rules. Where the conflicting rules at issue are loss allocating and the parties to the lawsuit share a common domicile, the loss allocation rule of the common domicile will apply.
Thus, the fundamental question in this case, where the parties share a common domicile, is whether Labor Law §§240 and 241 are primarily conduct-regulating or loss-allocating. The relevant Labor Law provisions, sections 240 and 241, embody both conduct-regulating and loss-allocating functions requiring worksites be made safe (conduct-regulating) and failure to do so results in strict and vicarious liability of the owner of the property or the general contractor. We hold however, that sections 240 and 241 of the Labor Law are primarily conduct-regulating rules, requiring that adequate safety measures be instituted at the worksite and should not be applied to the resolution of this tort dispute arising in Massachusetts.
Id. at 1002-1003.
Is the distinction between conduct-regulating and loss-distributing rules useful? Won’t most laws, as Padula put it, “embody both conduct-regulating and loss-allocating functions”? Are you convinced by Padula’s conclusion that sections 240-241 of New York’s Labor Law are “primarily conduct regulating”? Doesn’t the conduct-regulation/loss-allocation distinction raise a new and intractable characterization problem?
Scholars disagree about the validity and usefulness of the distinction. Professor Symeonides applauds it. Symeonides, The Need for a Third Conflicts Restatement (And a Proposal for Tort Conflicts), 75 Ind. L.J. 437, 452-453 (2000); see also Borchers, The Return of Territorialism to New York’s Conflicts Law: Padula v. Lilarn Properties Corp., 58 Alb. L. Rev. 775 (1995) (suggesting that the distinction, though not always easy to draw, is essential and serviceable). Others are critical of the distinction. O’Hara & Ribstein, From Politics to Efficiency in Choice of Law, 67 U. Chi. L. Rev. 1151 (2000); see also Perdue, A Reexamination of the Distinction Between “Loss-Allocating” and “Conduct-Regulating Rules,” 60 La. L. Rev. 1251, 1252 (2000) (arguing that “most tort rules are both and that the compensation and deterrence goals ascribed to the tort system cannot be separated”) (citation and internal quotations removed); Hay & Ellis, Bridging the Gap Between Rules and Approaches in Tort Choice of Law in the United States: A Survey of Current Case Law, 27 Intl. Law 369, 382 (1993) (“distinction creates more trouble than it’s worth”).
After reading these and other New York cases, one might conclude that New York’s choice-of-law rule for torts boils down to: Apply the law of the place of injury unless the issue involves a loss-allocation dispute between common domiciliaries, in which case apply the law of the domicile. If this is correct, then the New York “revolution” amounts to nothing more than the First Restatement with a narrow exception for common domicile cases involving loss-allocation issues. Was it necessary to walk the tortured path from Haag to Padula to reach this destination? Does Padula suggest that the New York approach is as wooden, jurisdiction selecting, and “blind” as the traditional approach? Is there perhaps virtue in these qualities? Professor Hill has argued that the choice-of-law revolution is virtually unique in its willingness to discard the common sense of centuries and blaze new trails on a case-by-case basis. He points out that there was much more to traditional thinking than Beale’s dogma and that some traditional thinking might be worth consulting. Hill, The Judicial Function in Choice of Law, 85 Colum. L. Rev. 1585 (1985). Does the line of cases from Haag to Padula support Hill’s view? What does this line of cases suggest about the capacities of courts to view choice of law as about the pursuit of “state interests”?
New York’s choice-of-law journey likely will continue. Lower appellate courts in the state view New York’s approach as more complex than the simplistic rule suggested above. See K.T. v. Dash, 37 A.3d 107 (2006) (New York tort law applies when New York defendant is accused of raping New York plaintiff while on vacation in Brazil; law of common domicile can apply to conduct-regulating rules too); Begley v. City of New York, 878 N.Y.S.2d 770 (2009) (New York law applies to case involving New York boy sent to school in New Jersey where he died; notwithstanding Neumeier’s second rule, New York’s public policy favors compensation).
B. Interest Analysis: In Theory and in Practice
With the First Restatement thoroughly discredited, and with the common law in disarray, the problem of choosing the applicable law fell mainly into the hands of academics. The most creative and influential of these was Brainerd Currie, the author of the theory known as governmental interest analysis.
1. Theoretical Foundations of Interest Analysis
Currie, Notes on Methods and Objectives in the Conflict of Laws
Selected Essays on the Conflict of Laws 177, 183-187 (1963)
We would be better off without choice-of-law rules. We would be better off if Congress were to give some attention to problems of private law, and were to legislate concerning the choice between conflicting state interests in some of the specific areas in which the need for solutions is serious. In the meantime, we would be better off if we would admit the teachings of sociological jurisprudence into the conceptualistic precincts of conflict of laws. This would imply a basic method along the following lines:
1. Normally, even in cases involving foreign elements, the court should be expected, as a matter of course, to apply the rule of decision found in the law of the forum.
2. When it is suggested that the law of a foreign state should furnish the rule of decision, the court should, first of all, determine the governmental policy expressed in the law of the forum. It should then inquire whether the relation of the forum to the case is such as to provide a legitimate basis for the assertion of an interest in the application of that policy. This process is essentially the familiar one of construction or interpretation. Just as we determine by that process how a statute applies in time, and how it applies to marginal domestic situations, so we may determine how it should be applied to cases involving foreign elements in order to effectuate the legislative purpose.
3. If necessary, the court should similarly determine the policy expressed by the foreign law, and whether the foreign state has an interest in the application of its policy.
4. If the court finds that the forum state has no interest in the application of its policy, but that the foreign state has, it should apply the foreign law.
5. If the court finds that the forum state has an interest in the application of its policy, it should apply the law of the forum, even though the foreign state also has an interest in the application of its contrary policy, and, a fortiori, it should apply the law of the forum if the foreign state has no such interest.
A probable by-product of such a method is the elimination of certain classical problems that are wholly artificial, being raised merely by the form of choice-of-law rules. The problem of characterization is ubiquitous in the law and can never be wholly avoided. Without choice-of-law rules, however, there would be no occasion for the specialized function of characterization as the mode of discriminating among the available prefabricated solutions of a problem.… And, though I make this suggestion with some trepidation, it seems clear that the problem of the renvoi would have no place at all in the analysis that has been suggested. Foreign law would be applied only when the court has determined that the foreign state has a legitimate interest in the application of its law and policy to the case at bar and that the forum has none. Hence, there can be no question of applying anything other than the internal law of the foreign state. The closest approximation to the renvoi problem that will be encountered under the suggested method is the case in which neither state has an interest in the application of its law and policy; in that event, the forum would apply its own law simply on the ground that that is the more convenient disposition. Is it possible that this is, in fact, all that is involved in the typical renvoi situation?
It will be said that it is no great trick to dispose of the characteristic problems of a system by destroying the system itself. But my basic point is that the system itself is at fault. We have invented an apparatus for the solution of problems of conflicting interest that obscures the real problems, deals with them blindly and badly, and creates problems of its own which, in their way, are as troublesome as the ones we originally set out to solve. Professor Yntema has suggested that Walter Wheeler Cook, instead of attempting to eliminate the weeds of dogma from the garden of conflict of laws, might have been well advised to reduce the whole garden to ashes, from which a phoenix might in time arise. If I may vary this classic metaphor, we would indeed do well to scrap the system of choice-of-law rules for determining the rule of decision, though without entertaining vain hopes that a new “system” will arise to take its place. We shall have to go back to the original problems, and to the hard task of dealing with them realistically by ordinary judicial methods, such as construction and interpretation, and by neglected political methods.
The suggested analysis does not imply the ruthless pursuit of self-interest by the states.
In the first place, the states of the Union are significantly restrained in the pursuit of their respective interests by the Privileges and Immunities Clause of article IV and by the Equal Protection Clause.…
In the second place, there is no need to exclude the possibility of rational altruism: for example, when a state has determined upon the policy of placing upon local industry all the social costs of the enterprise, it may well decide to adhere to this policy regardless of where the harm occurs and who the victim is.
In the third place, there is room for restraint and enlightenment in the determination of what state policy is and where state interests lie. An excellent example is furnished by Nebraska’s experience with small-loan contracts. After first taking a position consistent with a rather rigid interpretation of its policy, denying effect to a foreign contract providing for somewhat higher interest rates than were permitted by local law, Nebraska reversed itself and conceded validity to such contracts where the law of the foreign state was “similar in principle” to the Nebraska small-loan act. The policy of Nebraska was not to protect its residents against any exaction of interest in excess of a particular rate, but to protect them against exactions in excess of a reasonable range of rates, based upon the common principle underlying such acts. This sensible approach to the delineation of policy could find wide application, especially to laws relating to formalities. It is, in fact, this kind of thinking that supports such legislation as section 7 of the Model Execution of Wills Act. This is not so much a rule of alternative reference to the law of the state of execution, or of domicile, as it is a recognition that the policies of all the states are substantially the same and may be fulfilled by compliance with any—not just a particular one—of the formal requirements. Similar analysis may be expected to yield satisfactory results in the handling of the problem of consideration in the conflict of laws concerning contracts.
I have been told that I give insufficient recognition to governmental policies other than those that are expressed in specific statutes and rules: the policy of promoting a general legal order, that of fostering amicable relations with other states, that of vindicating reasonable expectations, and so on. If this is so, it is not, I hope, because of a provincial lack of appreciation of the worth of those ideals, but because of a felt necessity to emphasize the obstacles that the present system interposes to any intelligent approach to the problem. Let us first clear away the apparatus that creates false problems and obscures the nature of the real ones. Only then can we effectively set about ameliorating the ills that arise from a diversity of laws by bringing to bear all of the resources of jurisprudence, politics, and humanism—each in its appropriate way.
Currie later restated his principles and added provisions dealing with the “disinterested forum” and objections that had been raised by others. In Currie, Comments on Babcock v. Jackson, 63 Colum. L. Rev. 1233, 1242-1243 (1963), he said:
If I were asked to restate the law of conflict of laws I would decline the honor. A descriptive restatement with any sort of internal consistency is impossible. Much of the existing law, or pseudo law, of the subject is irrational; profound changes destructive of the fundamental tenets of the traditional system are gathering momentum. On the assumption that the project admits of a statement of what is reasonable in existing law and what may reasonably be desired for the future, however, I volunteer the following as a substitute for all that part of the Restatement dealing with choice of law (for the purpose of finding the rule of decision):
§1. When a court is asked to apply the law of a foreign state different from the law of the forum, it should inquire into the policies expressed in the respective laws, and into the circumstances in which it is reasonable for the respective states to assert an interest in the application of those policies. In making these determinations the court should employ the ordinary processes of construction and interpretation.
§2. If the court finds that one state has an interest in the application of its policy in the circumstances of the case and the other has none, it should apply the law of the only interested state.
§3. If the court finds an apparent conflict between the interests of the two states it should reconsider. A more moderate and restrained interpretation of the policy or interest of one state or the other may avoid conflict.
§4. If, upon reconsideration, the court finds that a conflict between the legitimate interests of the two states is unavoidable, it should apply the law of the forum.
§5. If the forum is disinterested, but an unavoidable conflict exists between the laws of the two other states, and the court cannot with justice decline to adjudicate the case, it should apply the law of the forum—until someone comes along with a better idea.
§6. The conflict of interest between states will result in different dispositions of the same problem, depending on where the action is brought. If with respect to a particular problem this appears seriously to infringe a strong national interest in uniformity of decision, the court should not attempt to improvise a solution sacrificing the legitimate interest of its own state, but should leave to Congress, exercising its powers under the full faith and credit clause, the determination of which interest shall be required to yield.
The explanatory note might run a little longer. [Footnotes omitted.]
This restatement is notable for, among other things, Currie’s suggestion that the forum should not automatically apply its law when it had an interest but should reconsider whether a more moderate interpretation of its law might not be feasible. Principle 3 of his “Restatement” thus represents a change from rule 5 of his earlier outline.
Currie’s analysis has been enormously influential. If nothing else, it has led to a whole new terminology. Instead of determining the parties’ “vested rights” under a set of specified territorial rules, the court was supposed to determine which states had “interests” through an application of the various state policies. Courts were supposed to do this by construing the statutes vying for application just as they would in a domestic case. Once they had ascertained the relevant policies or interests, the case would be seen to be either a false conflict, a true conflict, or an unprovided-for case.
Babcock and Tooker are generally conceded to be false conflicts because only one state had an interest. New York was interested in providing recovery for its domiciliary, while Ontario and Michigan had no interest in denying recovery simply because the accident occurred there. Currie’s method requires application of the law of the only interested state.
True conflicts and unprovided-for cases involve disputes where two states and no states, respectively, have an interest in application of local law. Here, Currie’s solution of applying forum law seems less than irresistible. Neumeier was probably an unprovided-for case because Ontario had no interest in protecting a New York defendant, while there was no reason to apply New York law to the benefit of an Ontario plaintiff. The court solved the problem through the special rules it developed. See generally Twerski, Neumeier v. Kuehner: Where Are the Emperor’s Clothes? 1 Hofstra L. Rev. 104 (1973). Currie’s solution—to apply forum law—was adopted in Erwin v. Thomas, 264 Or. 454, 506 P.2d 494 (1973).
The next three cases illustrate the tribulations of courts dealing with true conflicts and unprovided-for cases.
2. Judicial Applications
a. True Conflicts
Lilienthal v. Kaufman
239 Or. 1, 395 P.2d 543 (1964)
DENECKE, J.
This is an action to collect two promissory notes. The defense is that the defendant maker has previously been declared a spendthrift by an Oregon court and placed under a guardianship and that the guardian has declared the obligations void. The plaintiff’s counter is that the notes were executed and delivered in California, that the law of California does not recognize the disability of a spendthrift, and that the Oregon court is bound to apply the law of the place of the making of the contract. The trial court rejected plaintiff’s argument and held for the defendant.
This same defendant spendthrift was the prevailing party in our recent decision in Olshen v. Kaufman, 235 Or. 423, 385 P.2d 161 (1963). In that case the spendthrift and the plaintiff, an Oregon resident, had gone into a joint venture to purchase binoculars for resale. For this purpose plaintiff had advanced moneys to the spendthrift. The spendthrift had repaid plaintiff by his personal check for the amount advanced and for plaintiff’s share of the profits of such venture. The check had not been paid because the spendthrift had had insufficient funds in his account. The action was for the unpaid balance of the check.
The evidence in that case showed that the plaintiff had been unaware that Kaufman was under a spendthrift guardianship. The guardian testified that he knew Kaufman was engaging in some business and had bank accounts and that he had admonished him to cease these practices; but he could not control the spendthrift.
The statute applicable in that case and in this one is ORS 126.335:
After the appointment of a guardian for the spendthrift, all contracts, except for necessaries, and all gifts, sales and transfers of real or personal estate made by such spendthrift thereafter and before the termination of the guardianship are voidable.
We held in that case that the voiding of the contract by the guardian precluded recovery by the plaintiff and that the spendthrift and the guardian were not estopped to deny the validity of plaintiff’s claim. Plaintiff does not seek to overturn the principle of that decision but contends it has no application because the law of California governs, and under California law the plaintiff’s claims are valid.
The facts here are identical to those in Olshen v. Kaufman, supra, except for the California locale for portions of the transaction. The notes were for the repayment of advances to finance another joint venture to sell binoculars. The plaintiff was unaware that defendant had been declared a spend-thrift and placed under guardianship. The guardian, upon demand for payment by the plaintiff, declared the notes void. The issue is solely one involving the principles of conflict of laws.…
Before entering the choice-of-law area of the general field of conflict of laws, we must determine whether the laws of the states having a connection with the controversy are in conflict. Defendant did not expressly concede that under the law of California the defendant’s obligation would be enforceable, but his counsel did state that if this proceeding were in the courts of California, the plaintiff probably would recover. We agree.
At common law a spendthrift was not considered incapable of contracting. Incapacity of a spendthrift to contract is a disability created by the legislature. California has no such legislation. In addition, the Civil Code of California provides that all persons are capable of contracting except minors, persons judicially determined to be of unsound mind, and persons deprived of civil rights. §1556. Furthermore, §1913 of the California Code of Civil Procedure provides: “ … that the authority of a guardian … does not extend beyond the jurisdiction of the Government under which he was invested with his authority.”
Plaintiff contends that the substantive issue of whether or not an obligation is valid and binding is governed by the law of the place of making, California. This court has repeatedly stated that the law of the place of contract “must govern as to the validity, interpretation, and construction of the contract.… ” Restatement 408, Conflict of Laws, §332, so announced and specifically stated that “capacity to make the contract” was to be determined by the law of the place of contract.…
There is no need to decide that our previous statements that the law of the place of contract governs were in error. Our purpose is to state that this portion of our decision is not founded upon that principle because of our doubt that it is correct if the only connection of the state whose law would govern is that it was the place of making.
In this case California has more connection with the transaction than being merely the place where the contract was executed. The defendant went to San Francisco to ask the plaintiff, a California resident, for money for the defendant’s venture. The money was loaned to defendant in San Francisco, and by the terms of the note, it was to be repaid to plaintiff in San Francisco.
On these facts, apart from lex loci contractus, other accepted principles of conflict of laws lead to the conclusion that the law of California should be applied. Sterrett v. Stoddard Lumber Co. rests, at least in part, on the proposition that the validity of a note is determined by the law of the place of payment. Tentative Draft No. 6, p. 30, Restatement (Second), Conflict of Laws, §332b(a) states:
If the place of contracting and the place of performance are in the same state, the local law of this state determines the validity of the contract.…
… The place of payment, unlike the place of making, is usually not determined fortuitously. The place is usually selected by the payee and the payee normally selects his place of business or the location of his bank. The parties at the time of contract normally do not have in mind the problem of what law should govern. If they did, it is our belief that the payee would intend the law of the place of payment to be governing.
There is another conflict principle calling for the application of California law. Ehrenzweig calls it the “Rule of Validation.” Ehrenzweig, Conflict of Laws 353 (1962).… The “rule” is that, if the contract is valid under the law of any jurisdiction having significant connection with the contract, i.e., place of making, place of performance, etc., the law of that jurisdiction validating the contract will be applied. This would also agree with the intention of the parties, if they had any intentions in this regard. They must have intended their agreement to be valid.
Thus far all signs have pointed to applying the law of California and holding the contract enforceable. There is, however, an obstacle to cross before this end can be logically reached. In Olshen v. Kaufman, supra, we decided that the law of Oregon, at least as applied to persons domiciled in Oregon contracting in Oregon for performance in Oregon, is that spendthrifts’ contracts are voidable. Are the choice-of-law principles of conflict of laws so superior that they overcome this principle of Oregon law?
To answer this question we must determine, upon some basis, whether the interests of Oregon are so basic and important that we should not apply California law despite its several intimate connections with the transaction. The traditional method used by this court and most others is framed in the terminology of “public policy.” The court decides whether or not 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. Included in “public policy” we must consider the economic and social interests of Oregon. When these factors are included in a consideration of whether the law of the forum should be applied this traditional approach is very similar to that advocated by many legal scholars. This latter theory is “that choice-of-law rules should rationally advance the policies or interests of the several states (or of the nations in the world community).”
The traditional test this court and many others have used in determining whether the public policy of the forum prevents the application of otherwise applicable conflict of laws principles is stated in the oft-quoted opinion of Mr. Justice Cardozo in Loucks v. Standard Oil Co. of New York. Foreign law will not be applied if it “ … would violate some fundamental principle of justice, some prevalent conception of good morals, some deep-rooted tradition of the common weal.” …
How “deep rooted [the] tradition of the common weal,” particularly regarding spendthrifts, is illustrated by our decisions on foreign marriages. This court has decided that Oregon’s policy voiding spendthrifts’ contracts is not so strong as to void an Oregon spendthrift’s marriage contract made in Washington. Sturgis v. Sturgis … was a suit for divorce and alimony. Defendant had been declared a spendthrift by an Oregon court. The guardian refused to consent to the spendthrift’s marriage. The spendthrift got married in Washington. The marriage was held valid. Although the case involved a spend-thrift’s contract, and therefore, is persuasive in this case, it should not be considered determinative since marriage contracts are unique and the law applicable to marriage contracts does not necessarily apply to other types of contracts.…
However, as previously stated, if we include in our search for the public policy of the forum a consideration of the various interests that the forum has in this litigation, we are guided by more definite criteria. In addition to the interests of the forum, we should consider the interests of the other jurisdictions which have some connection with the transaction.
Some of the interests of Oregon in this litigation are set forth in Olshen v. Kaufman, supra. The spendthrift’s family which is to be protected by the establishment of the guardianship is presumably an Oregon family. The public authority which may be charged with the expense of supporting the spend-thrift or his family, if he is permitted to go unrestrained upon his wasteful way, will probably be an Oregon public authority. These, obviously, are interests of some substance.
Oregon has other interests and policies regarding this matter which were not necessary to discuss in Olshen. As previously stated, Oregon, as well as all other states, has a strong policy favoring the validity and enforceability of contracts. This policy applies whether the contract is made and to be performed in Oregon or elsewhere.
The defendant’s conduct—borrowing money with the belief that the repayment of such loan could be avoided—is a species of fraud. Oregon and all other states have a strong policy of protecting innocent persons from fraud. “The law … is intended as a protection to even the foolishly credulous, as against the machinations of the designedly wicked.” …
It is in Oregon’s commercial interest to encourage citizens of other states to conduct business with Oregonians. If Oregonians acquire a reputation for not honoring their agreements, commercial intercourse with Oregonians will be discouraged. If there are Oregon laws, somewhat unique to Oregon, which permit an Oregonian to escape his otherwise binding obligations, persons may well avoid commercial dealings with Oregonians.
The substance of these commercial considerations, however, is deflated by the recollection that the Oregon Legislature has determined, despite the weight of these considerations, that a spendthrift’s contracts are voidable.
California’s most direct interest in this transaction is having its citizen creditor paid. As previously noted, California’s policy is that any creditor, in California or otherwise, should be paid even though the debtor is a spendthrift. California probably has another, although more intangible, interest involved. It is presumably to every state’s benefit to have the reputation of being a jurisdiction in which contracts can be made and performance be promised with the certain knowledge that such contracts will be enforced. Both of these interests, particularly the former, are also of substance.
We have, then, two jurisdictions, each with several close connections with the transaction, and each with a substantial interest, which will be served or thwarted, depending upon which law is applied. The interests of neither jurisdiction are clearly more important than those of the other. We are of the opinion that in such a case the public policy of Oregon should prevail and the law of Oregon should be applied; we should apply that choice-of-law rule which will “advance the policies or interests of” Oregon.…
Courts are instruments of state policy. The Oregon legislature has adopted a policy to avoid possible hardship to an Oregon family of a spend-thrift and to avoid possible expenditure of Oregon public funds which might occur if the spendthrift is required to pay his obligations. In litigation Oregon courts are the appropriate instrument to enforce this policy. The mechanical application of choice-of-law rules would be the only apparent reason for an Oregon court not advancing the interests of Oregon. The present principles of conflict of laws are not favorable to such mechanical application.
We hold that the spendthrift law of Oregon is applicable and the plaintiff cannot recover.
Judgment affirmed. [There were also a dissent and a concurring opinion.]
b. True Conflicts vs. Apparent Conflicts
Bernkrant v. Fowler
55 Cal. 2d 588, 360 P.2d 906, 12 Cal. Rptr. 266 (1961)
TRAYNOR, J.
Plaintiffs appeal on the clerk’s transcript from a judgment for defendant as executrix of the estate of John Granrud. They contend that the findings of fact do not support the judgment.
Some time before 1954 plaintiffs purchased the Granrud Garden Apartments in Las Vegas, Nevada. In 1954 the property was encumbered by a first deed of trust given to secure an installment note payable to Granrud at $200 per month plus interest. Granrud’s note and deed of trust provided for subordination to a deed of trust plaintiffs might execute to secure a construction loan. In July 1954, there remained unpaid approximately $11,000 on the note secured by the first deed of trust and approximately $24,000 on the note payable to Granrud. At that time Granrud wished to buy a trailer park and asked plaintiffs to refinance their obligations and pay a substantial part of their indebtedness to him. At a meeting in Las Vegas he stated that if plaintiffs would do so, he would provide by will that any debt that remained on the purchase price at the time of his death would be canceled and forgiven. Plaintiffs then arranged for a new loan of $25,000, the most they could obtain on the property, secured by a new first deed of trust. They used the proceeds to pay the balance of the loan secured by the existing first deed of trust and $13,114.20 of their indebtedness to Granrud. They executed a new note for the balance of $9,227 owing Granrud, payable in installments of $175 per month secured by a new second deed of trust. This deed of trust contained no subordination provision. The $13,114.20 was deposited in Granrud’s bank account in Covina, California and subsequently used by him to buy a trailer park. Plaintiffs incurred expenses of $800.90 in refinancing their obligations.
Granrud died testate on March 4, 1956, a resident of Los Angeles County. His will, dated January 23, 1956, was admitted to probate, and defendant was appointed executrix of his estate. His will made no provision for cancelling the balance of $6,425 due on the note at the time of his death. Plaintiffs have continued to make regular payments of principal and interest to defendant under protest.
Plaintiffs brought this action to have the note cancelled and discharged and the property reconveyed to them and to recover the amounts paid defendant after Granrud’s death. The trial court concluded that the action was barred by both the Nevada and the California statute of frauds; …
… Subdivision 6 of section 1624 of the Civil Code provides that “An agreement which by its terms is not to be performed during the lifetime of the promisor, or an agreement to devise or bequeath any property, or to make any provision for any person by will” is “invalid, unless the same, or some note or memorandum thereof, is in writing, and subscribed by the party to be charged or by his agent.” See also Code Civ. Proc. §1973, subd. 6. Plaintiffs concede that in the absence of an estoppel, the contract in this case would be invalid under this provision if it is subject thereto. They contend, however, that only the Nevada statute of frauds is applicable and point out that the Nevada statute has no counterpart to subdivision 6. Defendant contends that the California statute of frauds is applicable, and that if it is not, the Nevada statute of frauds covering real property transactions invalidates the contract.
We have found no Nevada case in point. We believe, however, that Nevada would follow the general rule in other jurisdictions, that an oral agreement providing for the discharge of an obligation to pay money secured by an interest in real property is not within the real property provision of the statute of frauds, on the ground that the termination of the security interest is merely incidental to and follows by operation of law from the discharge of the principal obligation.…
We are therefore confronted with a contract that is valid under the law of Nevada but invalid under the California statute of frauds if that statute is applicable. We have no doubt that California’s interest in protecting estates being probated here from false claims based on alleged oral contracts to make wills is constitutionally sufficient to justify the Legislature’s making our statute of frauds applicable to all such contracts sought to be enforced against such estates.… The Legislature, however, is ordinarily concerned with enacting laws to govern purely local transactions, and it has not spelled out the extent to which the statute of frauds is to apply to a contract having substantial contacts with another state. Accordingly, we must determine its scope in the light of applicable principles of the law of conflict of laws.…
In the present case plaintiffs were residents of Nevada, the contract was made in Nevada, and plaintiffs performed it there. If Granrud was a resident of Nevada at the time the contract was made, the California statute of frauds, in the absence of a plain legislative direction to the contrary, could not reasonably be interpreted as applying to the contract even though Granrud subsequently moved to California and died there.… The basic policy of upholding the expectations of the parties by enforcing contracts valid under the only law apparently applicable would preclude an interpretation of our statute of frauds that would make it apply to and thus invalidate the contract because Granrud moved to California and died here. Such a case would be analogous to People v. One 1953 Ford Victoria … where we held that a Texas mortgagee of an automobile mortgaged in Texas did not forfeit his interest when the automobile was subsequently used to transport narcotics in California although he failed to make the character investigation of the mortgagor required by California law. A mortgagee entering into a purely local transaction in another state could not reasonably be expected to take cognizance of the law of all the other jurisdictions where the property might possibly be taken, and accordingly, the California statute requiring an investigation to protect his interest could not reasonably be interpreted to apply to such out of state mortgagees. Another analogy is found in the holding that the statute of frauds did not apply to contracts to make wills entered into before the statute was enacted.… Just as parties to local transactions cannot be expected to take cognizance of the law of other jurisdictions, they cannot be expected to anticipate a change in the local statute of frauds. Protection of rights growing out of valid contracts precludes interpreting the general language of the statute of frauds to destroy such rights whether the possible applicability of the statute arises from the movement of one or more of the parties across state lines or subsequent enactment of the statute.…
In the present case, however, there is no finding as to where Granrud was domiciled at the time the contract was made. Since he had a bank account in California at that time and died a resident here less than two years later it may be that he was domiciled here when the contract was made. Even if he was, the result should be the same. The contract was made in Nevada and performed by plaintiffs there, and it involved the refinancing of obligation arising from the sale of Nevada land and secured by interests therein. Nevada has a substantial interest in the contract and in protecting the rights of its residents who are parties thereto, and its policy is that the contract is valid and enforceable. California’s policy is also to enforce lawful contracts. That policy, however, must be subordinated in the case of any contract that does not meet the requirements of an applicable statute of frauds. In determining whether the contract herein is subject to the California statute of frauds, we must consider both the policy to protect the reasonable expectations of the parties and the policy of the statute of frauds.… It is true that if Granrud was domiciled here at the time the contract was made, plaintiffs may have been alerted to the possibility that the California statute of frauds might apply. Since California, however, would have no interest in applying its own statute of frauds unless Granrud remained here until his death, plaintiffs were not bound to know that California’s statute might ultimately be invoked against them. Unless they could rely on their own law, they would have to look to the laws of all the jurisdictions to which Granrud might move regardless of where he was domiciled when the contract was made. We conclude, therefore, that the contract herein does not fall within our statute of frauds.… Since there is thus no conflict between the law of California and the law of Nevada, we can give effect to the common policy of both states to enforce lawful contracts and sustain Nevada’s interest in protecting its residents and their reasonable expectations growing out of a transaction substantially related to that state without subordinating any legitimate interest of this state.
The judgment is reversed.
(1) Is it clear that Lilienthal is a true conflict case? Would Currie have concurred because the Oregon court followed section 4 of his “Restatement” or would he have dissented because the court failed to follow section 3 by looking for some accommodation of the interests of Oregon and California?
(2) Is the dividing line between true and false conflict cases becoming more or less clear? Consider Gutride Safier LLP v. Reese, 2013 WL 4104462 (N.D. Cal. 2013), in which the court found a false conflict and applied the law of the forum. According to Reese, the California-based law firm recruited him as a partner in 2005, allowing the firm to “maintain a legal practice in New York, New York; file cases in New York; and triple its size by adding a number of New York lawyers to its practice.” As partner, Reese was entitled to “receive an equal share with all other partners in the firm’s net recovery from all cases litigated by the firm.” Id. at *1. In February 2008, the firm received payments on two cases that Reese had worked on. Gutride and Saphier, two other partners of the firm, invited Reese to California “under the pretense that they would be celebrating the recent settlements.” Id. Upon his arrival, Gutride and Saphier told Reese that they would not pay him what was owed under the partnership agreement and threatened him with bankruptcy if he did not leave the firm. At that same meeting, Reese signed a withdrawal agreement that, among other things, bound him “not to interfere with any of the Gutride Safier cases.” Id. Approximately five years after Reese’s resignation, Gutride Safier sued him for violating the withdrawal agreement, against which Reese counterclaimed that he signed the agreement under duress and the firm failed to pay him for his work. Id. Ruling that the case presented a false conflict, the court applied California law and dismissed those counterclaims as time-barred. Id. at *4 & *10.
Does this case really present a “false conflict … within the meaning of choice-of-law analysis,” id. at *5, as the Court believes? The Court contends that, even if the strength of each state’s interest was a factor to consider, California would prevail over New York because “Mr. Reese does not make any allegation in his counterclaims that he exclusively performed services in New York.” Id. at *6. Considering that, as the court acknowledges, Reese was “brought into the firm in order to establish a New York presence,” id. at *4, are New York’s interests so trivial as to justify the court’s conclusion?
(3) Is there any less danger in the Bernkrant case than in a purely domestic California case of fraud on the estate of the deceased? If not, what justification is there for submerging the apparent California policy against enforcement of alleged oral agreements?
(4) One of the greatest points of attack on Currie’s theory involved the principle contained in section 4 of his “Restatement,” since it disallowed a weighing of state interests. Currie’s rationale was that the judge, as an appointed or elected official of a given state, had no right to declare the policy of another state to be more important. On the other hand, yielding somewhat to his critics, Currie added section 3 of his “Restatement” to encourage judges to take a second look at the interests of the forum when an “apparent” conflict was found. But Currie was not altogether clear as to how far a court should go in being altruistic or in softening the interests of the forum when measured against the interests of other states.
Is there a difference between weighing and being altruistic or avoiding “ruthlessness”? Does Currie’s position melt down to the self-evident proposition that a court faced with a conflicts problem should not go further in yielding on state interests than the legislature would want, but that it should not assume a totally provincial legislature? (That is self-evident, isn’t it?) Under Currie’s approach, is it possible (or likely) that reinspection of a state interest could produce the conviction that a weak state interest was in fact present—an interest that Currie would have the forum apply, even in the face of a strong interest of another state?
Regardless of Currie’s attitude, most others have engaged in some sort of weighing. As the late Professor Ehrenzweig put it: “As far as I can see, all courts and writers who have professed acceptance of Currie’s interest language have transformed it by indulging in that very weighing and balancing of interests from which Currie refrained.” Ehrenzweig, A Counter-Revolution in Conflicts Laws? From Beale to Cavers, 80 Harv. L. Rev. 377, 389 (1966). Is this true of the Lilienthal case?
(5) Are you satisfied that the Lilienthal court did an adequate job of determining the interests of Oregon when it invoked the proposition that the legislature had already balanced the competing factors by passing the spendthrift law? Assuming, as we have since Alabama Great Southern Railroad v. Carroll, page 15 supra, that legislatures usually pass statutes with only domestic cases in mind, doesn’t the court’s reasoning in effect deny that the factors involved in a domestic spendthrift case are identical to those in an interstate conflicts case? Won’t the court’s approach mean that the forum will always apply its own statute if there is any basis at all for doing so?
c. Unprovided-for Cases
Hurtado v. Superior Court
11 Cal. 3d 574, 522 P.2d 666, 114 Cal. Rptr. 106 (1974)
SULLIVAN, J.
In this proceeding, petitioner Manuel Cid Hurtado seeks a writ of mandate directing respondent superior court to vacate its ruling that the applicable measure of damages in the underlying action for wrongful death was that prescribed by California law without any maximum limitation, rather than that prescribed by the law of Mexico which limits the amount of recovery. We have concluded that the trial court correctly chose the law of California. We deny the writ.
Real parties in interest, the widow and children of Antonio Hurtado (hereinafter plaintiffs) commenced against Manuel Hurtado and Jack Rexius (hereafter defendants) the underlying action for damages for wrongful death, arising out of an automobile accident occurring in Sacramento County on January 19, 1969. Plaintiffs’ decedent was riding in an automobile owned and operated by his cousin, defendant Manuel Hurtado. Defendant Hurtado’s vehicle, while being driven along a two-lane paved road, collided with a pickup truck, owned and operated by defendant Rexius, which was parked partially on the side of the road and partially on the pavement on which defendant Hurtado was driving. Upon impact, the truck in turn collided with an automobile parked in front of it, owned by Rexius and occupied by his son. Decedent died as a result of the collision.
At all material times plaintiffs were, and now are residents and domiciliaries of the State of Zacatecas, Mexico. Decedent, at the time of the accident, was also a resident and domiciliary of the same place and was in California temporarily and only as a visitor. All three vehicles involved in the accident were registered in California; Manuel Hurtado, Jack Rexius and the latter’s son were all residents of California. Both defendants denied liability.
Defendant Hurtado moved respondent court for a separate trial of the issue whether the measure of damages was to be applied according to the law of California or the law of Mexico. The motion was granted and at the ensuing trial of this issue the court took judicial notice (Evid. Code, §§452, 453) of the relevant Mexican law prescribing a maximum limitation of damages for wrongful death. As a result it was established that the maximum amount recoverable under Mexican law would be 24,334 pesos or $1,946.72 at the applicable exchange rate of 12.5 pesos to the dollar. After submission of the issue on briefs, the trial court announced its intended decision and filed a memorandum opinion, ruling in substance that it would apply a measure of damages in accordance with California law and not Mexican law. Defendant Hurtado then sought a writ of mandate in the Court of Appeal to compel the trial court to vacate its ruling and to issue a ruling that Mexico’s limitation of damages for wrongful death be applied. The Court of Appeal granted an alternative writ and thereafter issued a peremptory writ of mandate so directing the trial court. We granted a hearing in this court upon the petition of plaintiffs.…
In the landmark opinion authored by former Chief Justice Traynor for a unanimous court in Reich v. Purcell (1967) 67 Cal. 2d 551, 63 Cal. Rptr. 31, 432 P.2d 727 (see Symposium, Comments on Reich v. Purcell (1968) 15 U.C.L.A. L. Rev. 551-654), we renounced the prior rule, adhered to by courts for many years, that in tort actions the law of the place of the wrong was the applicable law in a California forum regardless of the issues before the court. We adopted in its place a rule requiring an analysis of the respective interests of the states involved (governmental interest approach) the objective of which is “to determine the law that most appropriately applies to the issue involved.” …
The issue involved in the matter before us is the measure of damages in the underlying action for wrongful death. Two states or governments are implicated: (1) California—the place of the wrong, the place of defendants’ domicile and residence, and the forum; and (2) Mexico—the domicile and residence of both plaintiffs and their decedent.…
In the case at bench, California as the forum should apply its own measure of damages for wrongful death, unless Mexico has an interest in having its measure of damages applied. Since, as we have previously explained, Mexico has no interest whatsoever in the application of its limitation of damages rule to the instant case, we conclude that the trial court correctly chose California law.
To recapitulate, we hold that whereas here in a California action both this state as the forum and a foreign state (or country) are potentially concerned in a question of choice of law with respect to an issue in tort and it appears that the foreign state (or country) has no interest whatsoever in having its own law applied, California as the forum should apply California law. Since this was done, we deny the writ.
Nevertheless, although our holding disposes of the mandamus proceeding before us, we deem it advisable to consider the argument addressed by defendant to the interest of California in applying its measure of damages for wrongful death. We do this because the argument reflects a serious misreading of Reich which apparently has not been confined to the parties before us.
First, defendant contends that California has no interest in applying its measure of damages in this case because Reich v. Purcell determined that the interest of a state in the law governing damages in wrongful death actions is “in determining the distribution of proceeds to the beneficiaries and that interest extends only to local decedents and beneficiaries.” Decedent and plaintiffs were residents of Mexico and not “local decedents and beneficiaries” in California. Therefore, so the argument runs, California has no interest whatever in how plaintiff survivors, residents of Mexico, should be compensated for the wrongful death of their decedent, also a resident of Mexico, and conversely Mexico does have an interest.
Defendant’s reading of Reich is inaccurate. It confuses two completely independent state interests: (1) the state interest involved in creating a cause of action for wrongful death so as to provide some recovery; and (2) the state interest involved in limiting the amount of that recovery. In Reich this court carefully separated these two state interests, although it referred to them in the same paragraph. The state interest in creating a cause of action for wrongful death is in “determining the distribution of proceeds to the beneficiaries”; the state interest in limiting damage is “to avoid the imposition of excessive financial burdens on them [defendants].”
In the case at bench, the entire controversy revolves about the choice of an appropriate rule of decision on the issue of the proper measure of damages; there is no contention that plaintiffs are not entitled under the applicable rules of decision to some recovery in wrongful death. The Mexican rule is a rule limiting damages. Thus, the interest of Mexico at stake is one aimed at protecting resident defendants in wrongful death actions and, as previously explained, is inapplicable to this case, because defendants are not Mexican residents. Mexico’s interest in limiting damages is not concerned with providing compensation for decedent’s beneficiaries. It is Mexico’s interest in creating wrongful death actions which is concerned with distributing proceeds to the beneficiaries and that issue has not been raised in the case at bench.
The creation of wrongful death actions “insofar as plaintiffs are concerned” is directed toward compensating decedent’s beneficiaries. California does not have this interest in applying its wrongful death statute here because plaintiffs are residents of Mexico. However, the creation of wrongful death actions is not concerned solely with plaintiffs. As to defendants the state interest in creating wrongful death actions is to deter conduct. We made this clear in Reich: “Missouri [as the place of wrong] is concerned with conduct within her borders and as to such conduct she has the predominant interest of the states involved.” We went on to observe that the predominant interest of the state of the place of the wrong in conduct was not in rules concerning the limitation of damages: “Limitations of damages for wrongful death, however, have little or nothing to do with conduct. They are concerned not with how people should behave but with how survivors should be compensated.” Since it was not involved in Reich, we left implicit in our conclusion the proposition that the predominant interest of the state of the place of the wrong in conduct is in the creation of a cause of action for wrongful death.
It is manifest that one of the primary purposes of a state in creating a cause of action in the heirs for the wrongful death of the decedent is to deter the kind of conduct within its borders which wrongfully takes life. It is also abundantly clear that a cause of action for wrongful death without any limitation as to the amount of recoverable damages strengthens the deterrent aspect of the civil sanction: “the sting of unlimited recovery … more effectively penalize[s] the culpable defendant and deter[s] it and others similarly situated from such future conduct.” Therefore when the defendant is a resident of California and the tortious conduct giving rise to the wrongful death action occurs here, California’s deterrent policy of full compensation is clearly advanced by application of its own law. This is precisely the situation in the case at bench. California has a decided interest in applying its own law to California defendants who allegedly caused wrongful death within its borders. On the other hand, a state which prescribes a limitation on the measure of damages modifies the sanction imposed by a countervailing concern to protect local defendants against excessive financial burdens for the conduct sought to be deterred.
It is important, therefore, to recognize the three distinct aspects of a cause of action for wrongful death: (1) compensation for survivors, (2) deterrence of conduct and (3) limitation, or lack thereof, upon the damages recoverable. Reich v. Purcell recognizes that all three aspects are primarily local in character. The first aspect, insofar as plaintiffs are concerned, reflects the state’s interest in providing for compensation and in determining the distribution of the proceeds, said interest extending only to local decedents and local beneficiaries; the second, insofar as defendants are concerned, reflects the state’s interest in deterring conduct, said interest extending to all persons present within its border; the third, insofar as defendants are concerned, reflects the state’s interest in protecting resident defendants from excessive financial burdens. In making a choice of law, these three aspects of wrongful death must be carefully separated. The key step in this process is delineating the issue to be decided.…
Defendant’s final contention is that California has no interest in extending to out-of-state residents greater rights than are afforded by the state of residence, citing Ryan v. Clark Equipment Co., supra. Defendant urges seemingly as an absolute choice of law principle that plaintiffs in wrongful death actions are not entitled to recover more than they would have recovered under the law of the state of their residence. In effect defendant argues that the state of plaintiffs’ residence has an overriding interest in denying their own residents unlimited recovery.
Limitations of damages express no such state interest. A policy of limiting recovery in wrongful death actions “does not reflect a preference that widows and orphans should be denied full recovery.” …
Because Mexico has no interest in applying its limitation of damages in wrongful death actions to nonresident defendants or in denying full recovery to its resident plaintiffs, the trial court both as the forum, and as an interested state, correctly looked to its own law.
The alternative writ of mandate is discharged and the petition for a peremptory writ is denied.
(1) Is there any way to take seriously the court’s contention that California’s refusal to place a limitation on wrongful death liability represented an affirmative policy of deterrence? Is someone likely to be (a) aware of the law and (b) insufficiently aware of the dangerousness of his own behavior to be deterred by application of the law when he is not also deterred by the danger to his own life? Even if the California refusal to place a limitation on wrongful death recoveries serves some deterrent purpose, is that deterrence likely to be diminished when the rule is not applied to victims from states with limitations? That is, is the driver-to-be-deterred likely to determine the domicile of his victim before making a decision on how careful to be?
(2) The clue to “solving” both true conflicts and unprovided-for cases would seem to be to turn them into false conflicts, a food that interest analysis can easily digest. With true conflicts, this means making one of the interests go away (as in Bernkrant); the artificiality of some courts’ ingenious efforts to turn true conflicts into false ones is dissected in Singer, Facing Real Conflicts, 24 Cornell Intl. L.J. 197 (1991). With unprovided-for cases this means uncovering a new interest to fill the void. Two likely sources of interests are territorially-triggered conduct-regulating interests (as in Hurtado) and interests in burdening locals even when they are acting outside the territory. Recall, for example, the “interest,” alluded to in Schultz v. Boy Scouts of America, page 184 supra, that New Jersey was said to have in imposing the burden of its no-recovery rule even though the New Jersey plaintiff was injured in New York.
Such interests are convenient when they turn unprovided-for cases into false conflicts. But won’t recognizing them risk turning some false conflicts into true conflicts? If two Ontario residents are driving in New York when an accident occurs, is this a true conflict because New York has an interest in deterring unsafe driving by allowing recovery by a guest against a host? Doesn’t the Hurtado analysis suggest as much?
(3) Another possible approach to unprovided-for cases is based upon Professor Robert Sedler’s discussion of Neumeier. Sedler says that while neither state has an interest in applying its law on the issue of guest-host immunity, the two states have a common policy of compensating the victims of negligence. That makes Neumeier an “easy case.” Whether the policy of the guest statute is to protect drivers from ungrateful guests, to protect insurance companies from fraud, or to keep insurance rates down, neither state has an interest in applying such a policy in favor of this particular defendant. Thus, the common policy of compensation should be applied. Sedler, Interstate Accidents and the Unprovided for Case: Reflections on Neumeier v. Kuehner, 1 Hofstra L. Rev. 125, 137-139 (1973). In Hurtado, one might discern a similar shared policy of allowing compensation.
Isn’t Sedler getting off the hook a bit too easily? If the “ingratitude” policy is the right one, doesn’t it reflect a desire not only to protect the defendant but also to keep the plaintiff from recovery on the grounds that one should not bite the hand that feeds? Dean Ely’s criticism of Sedler’s argument is that Ontario had no policy (shared or otherwise) for allowing a New Yorker to recover under a cause of action that it refused to recognize, while New York policy simply did not extend to Ontario plaintiffs at all. Ely, Choice of Law and the State’s Interest in Protecting Its Own, 23 Wm. & Mary L. Rev. 173, 202-203 (1981). Does this theory of “common policies” make any sense?
3. Recent Theoretical Criticisms of Interest Analysis
Since Currie’s writings, interest analysis has garnered both strong supporters and harsh critics in the academy. Some find the whole debate of little consequence, see Sterk, The Marginal Relevance of Choice of Law Theory, 142 U. Pa. L. Rev. 949 (1994), but the debate nevertheless continues. Critics tend to attack along three lines. The first we have already seen: namely, that interest analysis has no good resolution of true conflicts. This is probably the least fundamental, because it accepts Currie’s basic definition of interests and his identification of false conflicts. We have outlined his solution to true conflicts above, and our discussion below of other modern theories will describe the resolution that other authors have proposed.
The second criticism acknowledges the role that “policies” might play in choice-of-law analysis, but denies that Currie’s methods for identifying interests are appropriate. In particular, a number of authors disagree with Currie’s suggestion that a state has an interest in applying its law when doing so would protect a local defendant or compensate a local plaintiff. See, e.g., Corr, Interest Analysis and Choice of Law: The Dubious Dominance of Domicile, 4 Utah L. Rev. 651 (1983). Dean Ely has been an especially forceful proponent of the idea that it is wrong to define a state’s interests this way. Ely, supra. For one thing, this definition of “interests” seems somewhat discriminatory—a problem that we will return to in our discussion of constitutional doctrine in Chapter 4; for another, defining interests this way has certain surprising consequences. As Ely notes, this definition of interests turns all common domicile cases into false conflicts (as it does all cases where the parties are from different states with identical laws). Id. at 206-207. The reason is that if only domiciliary factors can trigger interests and if the parties share a domicile, there is only one state that can have an interest. False conflicts are easy to resolve because once a court decides to disregard all connecting variables other than domicile, and if all remaining variables point toward the same state, the answer is obvious.
When the parties are from states with different laws, then the case is either a true conflict or an unprovided-for case, depending on whether each party prefers home-state law (as in Lilienthal) or each party prefers the law of the other party’s home state (as in Hurtado). Currie’s original solution was to apply forum law, and his whole method can therefore be summarized in a single sentence: In cases of shared domicile, apply that jurisdiction’s law, but otherwise apply forum law. If one starts with a presumption that local law is designed to benefit local people, then one does not need to investigate policies at length, or even to know the content of the competing laws. One can select which jurisdiction’s law to apply based on only one fact: whether the litigants come from states with the identical legal rule. Brilmayer, Rights, Fairness, and Choice of Law, 99 Yale L.J. 1277, 1315 (1989).
Allowing greater flexibility in the definition of interests presents its own problems, however. The result is that the method may be so amorphous that almost any contact can be used to explain why forum law applies. One European author who started with an initial inclination in favor of interest analysis concluded after surveying numerous tort cases that the method was unworkable. The legislation itself gives no clue as to issues of territorial scope, and the policies that courts uncover in their attempts to interpret statutes are often designed simply to further preconceived results. de Boer, Beyond Lex Loci Delicti (1987). “Due to the lack of objective criteria for interest identification,” de Boer concludes, “ … interest analysis can never be the ‘rational’ choice of law method it aspires to be.” Id. at 478. See also Maier, Finding the Trees in Spite of the Metaphorist: The Problem of State Interests in Choice of Law, 56 Alb. L. Rev. 753 (1993).
Obviously, much of the work in analyzing governmental interests is done by making such assumptions about what factors give rise to interests in the first place. Professor Robert Sedler denies that interest analysis defines “interests” in terms of whether the benefiting party is a local resident, but then adds that “[i]n the typical accident case, the relevant interests are compensatory and protective ones, and a state’s interest in applying its law in order to implement those policies indeed depends on a party’s residence in that state, since the consequences of the accident and of imposing or denying liability will be felt by the parties and the insurer in the parties’ home state.” Sedler, Interest Analysis and Forum Preference in the Conflict of Laws: A Response to the “New Critics,” 34 Mercer L. Rev. 593, 620 (1983) (emphasis in the original). Does this adequately rebut the complaint? Of course, this analysis ignores a state’s interest in deterring accidents, which does not depend on the residence of either party.
The third line of criticism of interest analysis goes beyond the argument that the definition of interests incorporates a preference for local residents. It attacks the notion that the goal of modern choice-of-law theory is, and ought to be, the effectuation of legislative policy. On the question of whether the method actually effectuates legislative policy, it has been argued that, as carried out, Currie’s notion of interests did not reflect legislative policy but, rather, Currie’s own peculiar normative vision about how far legislation ought to reach. Brilmayer, Interest Analysis and the Myth of Legislative Intent, 78 Mich. L. Rev. 392 (1980). See also Borchers, Professor Brilmayer and the Holy Grail, 1991 Wis. L. Rev. 465, 473 (1991). One scholar has even argued that “the movement sparked by Brainerd Currie has worked to defeat states’ abilities to promote their policies.” O’Hara O’Connor, How Modern Choice of Law Helped to Kill the Private Attorney General, 64 Mercer L. Rev. 1023, 1045 (2013). Sedler responds by explaining the idea of legislative policy as follows:
One reason that the critics of interest analysis have seen such difficulty in determining the policies behind the laws of the involved states is their failure to distinguish between legislative purpose and legislative motivation. Legislative purpose refers to the objectives a law is designed to accomplish, while legislative motivation may be defined as factors stimulating enactment of a law. For example, if the legislature imposes a limit on the amount recoverable for wrongful death, its purpose obviously is to limit damages awards in such cases, and the policy reflected in such a law is to protect defendants and insurers from what the legislature considers to be excessive liability. Motivation, however, may vary from one legislator to the next. Some may have feared excessive verdicts in wrongful death cases and believed that such verdicts would be unjust. Others may have been concerned about rising insurance premiums. Others simply may have responded to the pressures of the insurance lobby.
In determining, both in the conflicts and non-conflicts situation, the policy behind a rule of substantive law, what is relevant is legislative purpose, not legislative motivation. That purpose can be determined from the provisions of the law itself, viewed functionally and in relation to other laws of the state dealing with the same subject. As the example above indicates, a collective motivation cannot be ascribed to the legislature, but a collective purpose can. That purpose must be found in the provisions of the law that the legislature has enacted. It is this collective purpose that determines the policy behind a rule of substantive law under interest analysis.
Sedler, The Governmental Interest Approach to Choice of Law: An Analysis and Reformulation, 25 UCLA L. Rev. 181, 197 (1977). Does this mean that any actual legislative preferences about the intended territorial scope of a statute are irrelevant in determining whether an interest exists? See Weintraub, Interest Analysis in the Conflict of Laws as an Application of Sound Legal Reasoning, 35 Mercer L. Rev. 629, 631 (1984); Posnak, Choice of Law: Interest Analysis and Its “New Crits,” 36 Am. J. Comp. L. 681, 687 n.42 (1988). If so, then how is the process of ascertaining “interests” simply the usual domestic process of statutory construction, as Currie asserted? Professor Brilmayer has argued that “[under interest analysis, t]he ultimate irony is that the closer one looks, the more one finds that the so-called policy analysts do not care at all about what policy making institutions, the legislatures and common law courts, would prefer the territorial reach of their substantive decisions to be.” Brilmayer, Governmental Interest Analysis: A House Without Foundations, 46 Ohio St. L.J. 459, 461-62 (1985).
The most articulate attempt to reformulate governmental interest analysis is found in the prolific writings of Professor (and Dean) Larry Kramer. Kramer begins with one of Currie’s central assumptions: that determining the proper territorial scope of a statute is not an essentially different enterprise from determining the statute’s scope in domestic controversies. From this assumption follow the usual categories of false conflict, true conflict, and unprovided-for case (or, as he puts it, cases where one law provides a right, two laws provide a right, or no law provides a right). See generally Kramer, Rethinking Choice of Law, 90 Colum. L. Rev. 277 (1990). His analysis departs from Currie’s in that he takes a much broader and more open-minded view about which connecting factors might give rise to a reason for applying local law. In particular, as will be discussed at page 265 infra, he advises the court to defer to another state’s definition of its own interests, even when that state defines its interests in old-fashioned territorial terms. Kramer is therefore not bound to rigid notions about statutory application being tied to providing benefits for locals. He also rejects Currie’s argument that forum law should presumptively apply, unless affirmative arguments can be given for displacing it. Interest Analysis and the Presumption of Forum Law, 56 U. Chi. L. Rev. 1301 (1989). His suggestions have not yet found widespread acceptance among interest analysts.
We will return to the problems of domicile and of ascertaining interests, for these problems are common to other modern choice-of-law theory as well. See page 257 infra. On the jurisprudential issue of whether choice of law ought simply to address the implementation of legislative substantive policy, see Dane, Vested Rights, Vestedness, and Choice of Law, 96 Yale L.J. 1191 (1987); Brilmayer, Rights, Fairness, and Choice of Law, 99 Yale L.J. 1277 (1989). For a defense that modern choice of law should, and does, concern itself with which state will experience the consequences of the judgment, see Weintraub, An Approach to Choice of Law that Focuses on Consequences, 56 Alb. L. Rev. 701 (1993).
4. A Short Note on Interest Analysis in Other Nations
Other countries have choice-of-law problems, of course, to at least as great a degree as the United States, although the problems mainly concern choice between the laws of different nations rather than the laws of different states. In many countries, there is keen academic and judicial attention to developments in choice-of-law theory, and the events of the last few decades in the United States have provoked a fair amount of controversy.
While generalizations are made at one’s peril, it is fair to say that most European countries (and many countries in other parts of the world) start with a substantial fundamental commitment to what Americans would view as traditional choice-of-law rules. The reason has nothing to do with protection of “vested rights,” for European countries are more likely to have been influenced philosophically by Savigny’s theory of “seat of the relationship.”1 Instead, it has, in part, to do with the fact that many conflicts problems in other countries are dealt with through treaty or convention; the process of drafting a treaty or convention encourages its authors to identify specific factors in advance and to specify how they should be taken into account—to formulate rules, in other words. In addition, the civil law system on which many European legal institutions are grounded is said to be more suspicious of assigning a judge the flexibility and discretion to set policy in what might be thought an essentially ad hoc manner. Moreover, the European Union’s strong push to form a single market has fueled a push to harmonize member nation choice-of-law rules to provide more predictability for cross-border activities. See Convention on the Law Applicable to Contractual Obligations (1980) (Rome I); Regulation (EC) No. 864/2007 of the European Parliament and the Council of 11 July 2007 on the Law Applicable to Non-Contractual Obligations (“Rome II”). Some states have also codified detailed choice-of-law rules that bear some resemblance to governmental interest analysis. For example, under Italian Law No.218 of May 31, 1995, “the judge [must] ask whether the object and purpose (in other words, the policy) of the domestic rule imposes its application in the particular case”; under French law, “a foreign law may … be set aside … because it is incompatible with the French legislative policy on the matter.” Simona Grossi, Rethinking the Harmonization of Jurisdictional Rules, 86 Tul. L. Rev. 623, 640-43 (2012). Finally, European legal systems are less likely to rely on legislative history, a tool that might prove particularly useful in applying modern policy theory. See generally Jayme, The American Conflicts Revolution and Its Impact on European Private International Law, in de Boer (ed.), Forty Years On: The Evolution of Postwar Private International Law in Europe (1990).
The new methods have nonetheless provoked considerable interest around the world. A Canadian author, Professor William Maslechko, concedes that the new methods are relatively foreign to Canadian jurisprudence, but believes that Canadian courts are increasingly approaching choice-of-law problems in a functional manner, and he applauds this development. Revolution and Counter-Revolution: An Examination of the Continuing Debate over “Interest Analysis” in the United States and Its Relevance to Canadian Conflict of Laws, 44 U. Toronto L. Rev. 57 (1986). Another enthusiast is Professor Strikwerda of the Netherlands. “Interest analysis,” he writes, “is a well-founded and rational approach to the choice-of-law problem.” Interest Analysis: No More than a ‘Protest Song’? in Mathilde Sumampouw, Law and Reality: Essays on National and International Procedural Law 301 (1992). “Clearly, the interest approach to choice of law has been the catalyst of the renovation in this field of law, even in Europe. And in my view benefits can still be reaped from interest analysis in present-day choice-of-law problems.” Id. at 313. This is not to say that the Dutch view is uniformly positive; Professor Ted de Boer’s exhaustive study of choice of law, Beyond Lex Loci Delicti (1987), which studied American practice in great detail, was noticeably less positive.
A French author states that the influence of American choice-of-law theory is “incontestable.” Hanotiau, The American Conflicts Revolution and European Tort Choice of Law Thinking, 30 Am. J. Comp. L. 1, 73 (1982). He includes the Restatement of Conflicts Second and other modern theories in this assessment.
The new American approach to tort choice of law has raised great interest in most European countries. Various courses and monographs have been devoted at least in part to the subject. Many scholars have found in the new theories the necessary inspiration to criticize their own conflicts provisions and to propose a more flexible approach. The lex loci remains the general rule, but its displacement is advocated in cases where the consequences of the wrongful act belong to the legal sphere of another country, for instance, where the parties share a common nationality and/or there was a special relation between them before the accident took place.
Id. at 88. Yet his conclusion is not shared universally. Another author, also French, concludes that the inroads modern American choice-of-law methods have made on traditional Continental thinking is “more limited than may generally be believed.” Audit, A Continental Lawyer Looks at Contemporary American Choice-of-Law Principles, 27 Am. J. Comp. L. 589, 589 (1979). His reasoning is that modern methods were quite a change in the United States, where theory had been dominated by Beale; but on the Continent, the theories of Savigny were considerably closer to the modern methods from the very beginning, so that no revolution was necessary.
Perhaps not surprisingly, several authors have concluded that the modern methodology works better in torts than in other areas of the law. Professor Fawcett states that it is “only in tort choice of law that it has found favour in England.” Is American Governmental Interest Analysis the Solution to English Tort Choice of Law Problems? 31 Intl. & Comp. L.Q. 150, 150 (1982). Other authors also express caution about how widely useful interest analysis can be.
Unlike the more extreme proponents of interest analysis, such as Brainerd Currie himself, the present writer would not favour its adoption by way of total replacement of the traditional system of ‘mechanical’ choice-of-law rules which select a particular country whose law is to govern, more or less regardless of the content of the chosen law. Rather, it is submitted that interest analysis should be used as a corrective device, in order to prevent overboard or unduly single-minded mechanical choice of law rules from producing particularly unwelcome results.
Lasok & Stone, Conflict of Laws in the European Community 392 (1987). Since modern methods first found acceptance in tort cases in this country, and continue to be somewhat less influential outside that area to this day, these outside observers seem to share the same reservations that motivate American judges and academics.
Yet some foreign authors seem to feel that what works in the United States is simply not likely to work for the rest of the world. One South African writer states flatly that the modern methods are “not for export elsewhere.” Forsyth, Private International Law 50 (1990). Another writes,
As far as the conflict of laws of contracts is concerned, it has not been possible for me to trace any influential or significant follower in Europe of the new American theories. I have not found any writer of renown who in this field has seriously advocated replacement of the traditional structure of the conflict-of-law rule with the new structures proposed by Cavers, Currie and other Americans of the same schools. Why have these ideas had so little impact upon European thinking? Although a number of European jurists may think in grooves, they are not all incapable of accepting new ideas.
The explanation is probably that the new theories have been difficult to apply to the European situation.
Lando, New American Choice-of-Law Principles and the European Conflict of Laws of Contracts, 30 Am. J. Comp. L. 19, 25 (1982). He points to the familiar difficulties: the inability to determine the underlying policies and to attribute to them a territorial scope, the failure to take multistate and international policies into account, and the like. Another European author agrees:
The difficulties about all this are formidable. The search for the ‘just solution’ on these lines may be entirely chimerical. There may be no particular policies behind, say, some of the rules of the law of tort of a country, and no legislation either.… The fairly predictable result of such a search is that the lex fori would most probably be applied.… It may not be too difficult for a court in the United States to proceed on the lines suggested by these American writers.… [But] it is obvious that the task of an English court in following these doctrines would be very much more difficult, if not impossible.
In any event, the House of Lords, when pressed to adopt the ‘new’ tort conflict rules as propounded in the United States, proved singularly unwilling to do so.
Collier, Conflict of Laws 356-358 (1987).
Two Australian authors have, perhaps, the ultimate put-down:
The need for [modernizing choice of law] has led to a welter of views from American writers among which are to be found emphasis on policy comparisons and evaluations, on ‘governmental interests,’ on the reconciliation of conflicts interests within a framework of ‘conflicts justice,’ on ‘most significant contact,’ on ‘principles of preference’ and so on. Many writers are fond of the word ‘functional’ and many seem to feel the job of solution is done once they have used this magic word and verbally discarded ‘conceptual thinking’ and ‘mechanistic processes.’ One is disposed to think that some kind of jumping on the band-wagon is involved.
Sykes & Prykes, Australian Private International Law 203 (3d ed. 1991).
C. Comparative Impairment
Because Currie’s concept and resolution of false conflicts is generally accepted by interest analysts, academics since Currie have concentrated on finding more satisfactory solutions to the true conflict case. Currie initially said the law of the forum should be applied in a true conflict. An element of game theory seems implicit in Currie’s thinking: If someone could propose a solution to the true conflict case which would, in the long run, advance the interests of all states, that solution would be desirable. But in the absence of such a solution, the only proper thing for a judge to do is to be “true to his or her state.” Normative evaluations of competing state laws must be rejected because they would elevate the judge above the local legislature. Similarly, approaches that weigh the relative importance of state laws are rejected because such decisions were political and therefore best left to the legislature.
Professor William Baxter proposed a modification of interest analysis called “comparative impairment.”* It directs a court in the true conflict situation to apply the law of the state whose policies would be most impaired (if such is determinable) by rejection of its rules. Weighing of the interests is rejected; but weighing of the harm that would be caused by refusing to carry out interests in particular cases is not. In the long run, such an approach, if engaged in by all jurisdictions, should result in benefit to each, since each will have “given in” in cases where the harm to its own interests was minimal, and “won” in cases where the harm would have been greater. In game theory terms, comparative impairment produced a positive sum game whereas, under Currie’s analysis, true conflicts were treated as zero-sum games.
Several scholars have focused on the possibility that all states might be made better off if courts, through mutual cooperation, resolved true conflicts by applying the law of the state with a greater concern. See, e.g., Brilmayer, Conflict of Laws: Foundations and Future Directions, chapter 4 (1991); Kramer, Rethinking Choice of Law, 90 Colum. L. Rev. 277, 315 (1990). Others doubt that the game theory analogy is appropriate; see, e.g., Borchers, Professor Brilmayer and the Holy Grail, 1991 Wis. L. Rev. 465, 479 (1991); Weinberg, Against Comity, 80 Geo. L.J. 53, 55 (1991).
16 Cal. 3d 313, 546 P.2d 719, 128 Cal. Rptr. 215 (1976)
SULLIVAN, J.
Plaintiff’s complaint, containing only one count, alleged in substance the following: 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. Defendant advertised for and solicited in California the business of California residents at such establishments knowing and expecting that many California residents would use the public highways in going to and from defendant’s drinking and gambling establishments.
On July 24, 1971, Fern and Philip Myers, in response to defendant’s advertisements and solicitations, drove from their California residence to defendant’s gambling and drinking club in Nevada, where they stayed until the early morning hours of July 25, 1971. During their stay, the Myers were served numerous alcoholic beverages by defendant’s employees, progressively reaching a point of intoxication rendering them incapable of safely driving a car. Nonetheless defendant continued to serve and furnish the Myers alcoholic beverages.
While still in this intoxicated state, the Myers drove their car back to California. Proceeding in a northeasterly direction on Highway 49, near Nevada City, California, the Myers’ car, driven negligently by a still intoxicated Fern Myers, 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 along said highway. As a result of the collision, plaintiff suffered severe injuries. Defendant’s sale and furnishing of alcoholic beverages to the Myers, who were intoxicated to the point of being unable to drive safely, was negligent and was the proximate cause of the plaintiff’s injuries in the ensuing automobile accident in California for which plaintiff payed $100,000 in damages.
… We face a problem in the choice of law governing a tort action. As we have made clear on other occasions, we no longer adhere to the rule that the law of the place of the wrong is applicable in California forum regardless of the issues before this court. Hurtado v. Superior Court. Rather we have adopted in its place a rule requiring an analysis of the respective interests of the states involved—the objective of which is “to determine the law that most appropriately applies to the issue involved.” Hurtado.
The issue involved in the case at bench is the civil liability of defendant tavern keeper to plaintiff, a third person, for injuries allegedly caused by the former by selling and furnishing alcoholic beverages in Nevada to intoxicated patrons who subsequently injured plaintiff in California. Two states are involved: (1) California—the place of plaintiff’s residence and domicile, the place where he was injured, and the forum; and (2) Nevada—the place of defendant’s residence and the place of the wrong.
We observe at the start that the laws of the two states—California and Nevada—applicable to the issue involved are not identical. California imposes liability on tavern keepers in this state for conduct such as here alleged. In Vesely v. Sager, supra, this court rejected the contention that
civil liability for tavern keepers should be left to future legislative action.… First, liability has been denied in cases such as the one before us solely because of the judicially created rule that the furnishing of alcoholic beverages is not the proximate cause of injuries resulting from intoxication. As demonstrated, supra, this rule is patently unsound and totally inconsistent with the principles of proximate cause established in other areas of negligence law.… Second, the Legislature has expressed its intention in this area with the adoption of Evidence Code section 669, and Business and Professions Code section 25602.… It is clear that Business and Professions Code section 25602 [making it a misdemeanor to sell to an obviously intoxicated person] is a statute to which this presumption [of negligence, Evidence Code section 669] applies and that the policy expressed in the statute is to promote safety of the people of California.…
Nevada on the other hand refuses to impose such liability. In Hamm v. Carson City Nuggett, Inc., the court held it would create neither common law liability nor liability based on the criminal statute banning sale of alcoholic beverages to a person who is drunk, because “if civil liability is to be imposed, it should be accomplished by legislative act after appropriate surveys, hearings, and investigations to ascertain the need for it and the expected consequences to follow.” It is noteworthy that in Hamm the Nevada court in relying on the common law rule denying liability cited our decision in Cole v. Rush, later overruled by us in Vesely to the extent that it was inconsistent with that decision.
Although California and Nevada, the two “involved states,” have different laws governing the issue presented in the case at bench, we encounter a problem in selecting the applicable rule of law only if both states have an interest in having their respective laws applied. “[G]enerally speaking the 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.” Hurtado, supra.
Defendant contends that Nevada has a definite interest in having its rule of decision applied in this case in order to protect its resident tavern keepers like defendant from being subjected to a civil liability which Nevada has not imposed either by legislative enactment or decisional law. It is urged that in Hamm, supra, the Supreme Court of Nevada clearly delineated the policy underlying denial of civil liability of tavern keepers who sell to obviously intoxicated patrons:
Those opposed to extending liability point out that to hold otherwise would subject the tavern owner to ruinous exposure every time he poured a drink and would multiply litigation endlessly in a claim-conscious society. Every liquor vendor visited by the patron who became intoxicated would be a likely defendant in subsequent litigation flowing from the patron’s wrongful conduct.… Judicial restraint is a worthwhile practice when the proposed new doctrine may have implications far beyond the perception of the court asked to declare it. They urge that if civil liability is to be imposed, it should be accomplished by legislative act after appropriate surveys, hearings, and investigations.… We prefer this point of view.
Accordingly defendant argues that the Nevada rule of decision is the appropriate one for the forum to apply.
Plaintiff on the other hand points out that California also has an interest in applying its own rule of decision to the case at bench. California imposes on tavern keepers civil liability to third parties injured by persons to whom the tavern keeper has sold alcoholic beverages when they are obviously intoxicated “for the purpose of protecting members of the general public from injuries to person and damage to property resulting from the excessive use of intoxicating liquor.” Vesely v. Sager, supra. California, it is urged, has a special interest in affording this protection to all California residents injured in California.
Thus, since the case at bench involves a California resident (plaintiff) injured in this state by intoxicated drivers and a Nevada resident tavern keeper (defendant) which served alcoholic beverages to them in Nevada, it is clear that each state has an interest in the application of its respective law of liability and nonliability. It goes without saying that these interests conflict. Therefore, unlike … Hurtado v. Superior Court, supra, where we were faced with “false conflicts,” in the instant case … we are confronted with a “true” conflicts case. We must therefore determine the appropriate rule of decision in a controversy where each of the states involved has a legitimate but conflicting interest in applying its own law in respect to the civil liability of tavern keepers.
The search for the proper resolution of a true conflicts case, while proceeding within orthodox parameters of governmental interest analysis, has generated much scholarly examination and discussion. The father of the governmental interest approach,2 Professor Brainerd Currie, originally took the position that in a true conflicts situation the law of the forum should always be applied. Currie, Selected Essays on Conflicts of Laws (1963), p. 184. However, upon further reflection, Currie suggested that when under the governmental interest approach a preliminary analysis reveals an apparent conflict of interest upon the forum’s assertion of its own rule of decision, the forum should reexamine its policy to determine if a more restrained interpretation of it is more appropriate.
To assert a conflict between the interests of the forum and the foreign state is a serious matter; the mere fact that a suggested broad conception of a local interest will conflict with that of a foreign state is a sound reason why the conception should be reexamined, with a view to a more moderate and restrained interpretation both of the policy and of the circumstances in which it must be applied to effectuate the forum’s legitimate purpose.… An analysis of this kind … was brilliantly performed by Justice Traynor in Bernkrant v. Fowler.
Currie, The Disinterested Third State (1963) 28 Law & Contemp. Prob., pp. 754, 757; see also Sedler in Symposium, Conflict of Laws Round Table, supra, 49 Texas L. Rev. 211, at pp. 224–225. This process of reexamination requires identification of a “real interest as opposed to a hypothetical interest” on the part of the forum Sedler, Value of Principled Preferences, 49 Texas L. Rev. 224 and can be approached under principles of “comparative impairment.” Baxter, supra, at 1-22.
Once this preliminary analysis has identified a true conflict of the governmental interests involved as applied to the parties under the particular circumstances of the case, the “comparative impairment” approach to the resolution of such conflict seeks to determine which state’s interest would be more impaired if its policy were subordinated to the policy of the other state. This analysis proceeds on the principle that true conflicts should be resolved by applying the law of the state whose interest would be the more impaired if its law were not applied. Exponents of this process of analysis emphasize that it is very different from a weighing process. The court does not
“weigh” the conflicting governmental interests in the sense of determining which conflicting law manifested the “better” or the “worthier” social policy on the specific issue. An attempted balancing of conflicting state policies in that sense … is difficult to justify in the context of a federal system in which, within constitutional limits, states are empowered to mold their polices as they wish.… [The process] can accurately be described as … accommodation of conflicting state policies, as a problem of allocating domains of lawmaking power in multi-state contexts—limitations on the reach of state policies as distinguished from evaluating wisdom of those policies.… [E]mphasis is placed on the appropriate scope of conflicting state policies rather than on the “quality of those policies.… ”
Horowitz, The Law of Choice of Law in California—A Restatement, 21 UCLA L. Rev. 719, 753; see also Baxter, supra, at 18-19. However, the true function of this methodology can probably be appreciated only casuistically in its application to an endless variety of choice of law problems.
Although the concept and nomenclature of this methodology may have received fuller recognition at a later time, it is noteworthy that the core of its rationale was applied by Justice Traynor in his opinion for this court in People v. One 1953 Ford Victoria (1957). There in a proceeding to forfeit an automobile for unlawful transportation of narcotics we dealt with the question whether a chattel mortgage of the vehicle given in Texas and, admittedly valid both in that state and this, succumbed to the forfeiture proceedings. The purchaser of the car, having executed a note and chattel mortgage for the unpaid purchase price, without the consent of the mortgagee drove the vehicle to California where he used it to transport marijuana. Applicable California statutes made it clear that they did not contemplate the forfeiture of the interest of an innocent mortgagee, that is a person whose “interest was created after a reasonable investigation of the moral responsibility, character, and reputation of the purchaser, and without any knowledge that the vehicle was being, or was to be, used for the purpose charged.… ” Texas had no similar statute; nor had the mortgagee, though proving that the mortgage was bona fide, also proved that he had made the above reasonable investigation of the mortgagor.
It was clear that Texas had an interest in seeing that valid security interests created upon the lawful purchase of automobiles in Texas be enforceable and recognized. California had an interest in controlling the transportation of narcotics. Each interest was at stake in the case, since the chattel mortgage had been validly created in Texas and the car was used to transport narcotics in California. The crucial question confronting the court was whether the “reasonable investigation” required by statute of a California mortgagee applied to the Texas mortgagee. Employing what was in substance a “comparative impairment” approach, the court answer the question in the negative.
It is contended that a holding that the “reasonable investigation” requirement is not applicable to respondent will subvert the enforcement of California’s narcotics laws. We are not persuaded that such dire consequences will ensue. The state may still forfeit the interest of the wrong-doer. It has done so in this case. Moreover, the Legislature has made plain its purpose not to forfeit the interests of innocent mortgagees. It has not made plain that “reasonable investigation” of the purchaser is such an essential element of innocence that it must be made even by an out-of-state mortgagee although such mortgagee could not reasonably be expected to make such investigation.
Mindful of the above principles governing our choice of law, we proceed to reexamine the California policy underlying the imposition of civil liability upon tavern keepers. At its broadest limits this policy would afford protection to all persons injured in California by intoxicated persons who have been sold or furnished alcoholic beverages while intoxicated regardless of where such beverages were sold or furnished. Such a broad policy would naturally embrace situations where the intoxicated actor had been provided with liquor by out-of-state tavern keepers. Although the State of Nevada does not impose such civil liability on its tavern keepers, nevertheless they are subject to criminal penalties under a statute making it unlawful to sell or give intoxicating liquor to any person who is drunk or known to be a habitual drunkard.
We need not, and accordingly do not here determine the outer limits to which California’s policy should be extended, for it appears clear to us that it must encompass defendant, who as alleged in the complaint,
advertis[es] for and otherwise solicit[s] in California the business of California residents at defendant Harrah’s Club Nevada drinking and gambling establishments, knowing and expecting said California residents, in response to said advertising and solicitation, to use the public highways of the State of California in going and coming from defendant Harrah’s Club Nevada drinking and gambling establishments.
Defendant by the course of its chosen commercial practice has put itself at the heart of California’s regulatory interest, namely to prevent tavern keepers from selling alcoholic beverages to obviously intoxicated persons who are likely to act in California in the intoxicated state. It seems clear that California cannot reasonably effectuate its policy if it does not extend its regulation to include out-of-state tavern keepers such as defendant who regularly and purposely sell intoxicating beverages to California residents in places and under conditions in which it is reasonably certain these residents will return to California and act therein while still in an intoxicated state. California’s interest would be very significantly impaired if its policy were not applied to defendant.
Since the act of selling alcoholic beverages to obviously intoxicated persons is already proscribed in Nevada, the application of California’s rule of civil liability would not impose an entirely new duty requiring the ability to distinguish between California residents and other patrons. Rather the imposition of such liability involves an increased economic exposure, which, at least for businesses which actively solicit extensive California patronage, is a foreseeable and coverable business expense. Moreover, Nevada’s interest in protecting its tavern keepers from civil liability of a boundless and unrestricted nature will not be significantly impaired when as in the instant case liability is imposed only on those tavern keepers who actively solicit California business.
Therefore, upon reexamining the policy underlying California’s rule of decision and giving such policy a more restrained interpretation for the purpose of this case pursuant to the principles of the law of choice of law discussed above, we conclude that California has an important and abiding interest in applying its rule of decision to the case at bench, that the policy of this state would be more significantly impaired if such rule were not applied and that the trial court erred in not applying California law.
Defendant argues, however, that even if California law is applied, the demurrer was nonetheless properly sustained because the tavern keeper’s duty stated in Vesely v. Sager, supra, is based on Business and Professions Code section 25602, which is a criminal statute and thus without extraterritorial effect. It is quite true, as defendant argues, that in Vesely we determined “that civil liability results when a vendor furnishes alcoholic beverages to a customer in violation of Business and Professions Code section 25602 and each of the conditions set forth in Evidence Code section 669, subdivision (a) is established.”
It is also clear, as defendant’s argument points out, that since, unlike the California vendor in Vesely, defendant was a Nevada resident which furnished the alcoholic beverage to the Myers in that state, the above California statute had no extraterritorial effect and that civil liability could not be posited on defendant’s violation of a California criminal law. We recognize, therefore, that we cannot make the same determination as quoted above with respect to defendant that we made with respect to the defendant vendor in Vesely.
However, our decision in Vesely was much broader than defendant would have it. There, at the very outset of our opinion, we declared that the traditional common law rule denying recovery on the ground that the furnishing of alcoholic beverage is not the proximate cause of the injuries inflicted on a third person by an intoxicated individual “is patently unsound.” 5 Cal. 3d at p.157. Observing that “[u]ntil fairly recently, it was uniformly held that [such] an action could not be maintained at common law,” id. at 158, and reviewing in detail the common law rule, we concluded that “the furnishing of an alcoholic beverage to an intoxicated person may be a proximate cause of injuries inflicted by that individual upon a third person.” We reasoned: “If such furnishing is a proximate cause, it is so because the consumption, resulting intoxication, and injury-producing conduct are foreseeable intervening causes, or at least the injury-producing conduct is one of the hazards which makes such furnishing negligent.”
Proceeding to the question of the tavern keeper’s duty in this respect and rejecting his contention that civil liability for tavern keepers should be left to future legislative action, we noted that
liability has been denied in cases such as the one before us solely because of the judicially created rule that the furnishing of alcoholic beverages is not the proximate cause of injuries resulting from intoxication. As demonstrated, this rule is patently unsound and totally inconsistent with the principles of proximate cause established in other areas of negligence law. Other common law tort rules which were determined to be lacking in validity have been abrogated by this court and there is no sound reason for retaining the common law rule presented in this case.
In sum, our opinion in Vesely struck down the old common law rule of nonliability constructed on the basis that the consumption, not the sale, of alcoholic beverages was the proximate cause of injuries inflicted by the intoxicated person. Although we chose to impose liability on the Vesely defendant on the basis of his violating the applicable statute, the clear import of our decision was that there was no bar to civil liability under modern negligence law. Certainly, we said nothing in Vesely indicative of an intention to retain the former rule that an action at common law does not lie. The fact then, that in the case at bench, section 25602 of the Business and Professions Code is not applicable to this defendant in Nevada so as to warrant the imposition of civil liability on the basis of its violation, does not preclude recovery on the basis of negligence apart from the statute. Pertinent here is our observation in Rowland v. Christian. “It bears repetition that the basic policy of this state set forth by the Legislature in section 1714 of the Civil Code is that everyone is responsible for an injury caused to another by his want of ordinary care or skill in the management of his property.”
Questions and Comments
(1) Blamey v. Brown, 270 N.W.2d 844 (Minn. 1978), is a case similar, but not identical, to Bernhard. Blamey involved a one-car accident. The defendant, sole proprietor of a beer and liquor store, was in Wisconsin but within a few miles of the Minnesota border. Defendant’s store sold beer to the driver of the car in which plaintiff was injured in Minnesota. The Minnesota court specifically found that “[d]efendant neither advertised in Minnesota nor attempted to attract Minnesota residents or young people [plaintiff was 15] to his establishment.” The defendant did not have insurance to cover the kind of liability imposed by Minnesota since Wisconsin imposed no similar liability. The Minnesota court decided that the Minnesota statute imposing strict liability for sales of alcohol to minors was inapplicable by its own terms. But rather than apply the considerably milder Wisconsin statute (which would not have imposed liability), it applied Minnesota common-law negligence theory to hold the defendant liable while specifically holding that Wisconsin common law would not impose liability. The decision was based upon Minnesota interests and the “better law” approach, which is treated at page 227 infra.
(2) Is comparative impairment anything more than what Currie suggested (restraint in the interpretation of domestic policies when there is an apparent conflict) plus some of what he condemned (weighing of interests)? Professor Kanowitz thinks it sounds a lot like the latter, and adds:
Despite the elaborate stages of the comparative impairment method revealed in Bernhard … it is hard to avoid the impression that the technique is founded essentially on an interest-counting process. This process will, in the long run, prove no more satisfactory than the contact-counting prescribed by the Second Restatement of the Conflict of Laws.
Kanowitz, Comparative Impairment and Better Law: Grand Illusion in the Conflict of Laws, 30 Hastings L.J. 255, 277 (1978).
(3) Even if comparative impairment is a valid theory, Professor Reppy thinks that it was misapplied to the facts of Bernhard:
The court in Bernhard then misapplied comparative impairment to permit recovery. Nevada’s interest in protecting this class of defendants, tavern keepers, from what Nevada considered to be unfair liability for injuries caused by persons becoming drunk at the tavern would have been sacrificed one hundred percent by the application of California’s law imposing liability. But California’s interest in seeing a California tort victim receive compensation would not have been wholly sacrificed by the application of the Nevada law, since the victim already had a cause of action against the drunk tortfeasor or could recover against his own insurer if the drunk had no liability insurance. To have deprived the California victim of a second bite at the compensation apple would not have fully defeated California’s interest.
Reppy, Eclecticism in Choice of Law: Hybrid Method or Mishmash? 34 Mercer L. Rev. 645 (1983).
(4) If it is California’s regulatory interest that is at stake (and not a compensatory interest), does it make any difference that the plaintiff was a California resident? See Brilmayer, Interest Analysis and the Myth of Legislative Intent, 78 Mich. L. Rev. 392, 406 (1980).
(5) Why did the court in Bernhard consider it appropriate to limit the scope of its holding to those Nevada tavern owners who “actively solicit extensive California patronage”? In product-liability cases, the usual rule has become application of the law of the place of injury, rather than of the place of manufacture. Does a tavern owner anywhere within driving distance of the California border do any less to put the drunken driver into the “stream of commerce” than the manufacturer of a defective product? Doesn’t the fact that the tavern owner’s act was already criminal in Nevada, quite apart from his or her advertising in California, establish that Nevada’s interest in protecting the tavern owner is a weak one?
(6) See Note, Comparative Impairment Reformed: Rethinking State Interests in the Conflict of Laws, 95 Harv. L. Rev. 1079, 1084-1085 (1982):
Interest analysis insists that this kind of policy [seeking accommodation of various states’ interests] can never be strong enough to override the forum state’s interest, however weak it may be, in applying its own law.… [But a] regime in which every choice-of-law decision were [sic] calculated to achieve maximum effectuation of the policies of all interested states would give each state the greatest opportunity to attain its own policy objectives. Thus, a state bent on effectuating its purely internal policy to the greatest extent possible can easily sacrifice its own weak interests in a spirit of interstate comity, knowing that in a future case its sister state will do the same.
But if the appeal is to be on the basis of self-interest, isn’t the forum better off by adhering to interest analysis while its neighbors adhere to comparative impairment?
(7) In 1978, the California legislature amended section 25602 of its Business and Professional Code, changing the former provision to subsection (a) and adding subsections (b) and (c). The entire statute now reads:
§25602. Sales to Drunkard or Intoxicated Person; Offense; Civil Liability
(a) Every person who sells, furnishes, gives, or causes to be sold, furnished, or given away, any alcoholic beverage to any habitual or common drunkard or to any obviously intoxicated person is guilty of a misdemeanor.
(b) No person who sells, furnishes, gives, or causes to be sold, furnished, or given away, any alcoholic beverage pursuant to subdivision (a) of this section shall be civilly liable to any injured person or the estate of such person for injuries inflicted on that person as a result of intoxication by the consumer of such alcoholic beverage.
(c) The Legislature hereby declares that this section shall be interpreted so that the holdings in cases such as Vesely v. Sager, Bernhard v. Harrah’s Club and Coulter v. Superior Court be abrogated in favor of prior judicial interpretation finding the consumption of alcoholic beverages rather than the serving of alcoholic beverages as the proximate cause of injuries inflicted upon another by an intoxicated person.
Kearney v. Salomon Smith Barney, Inc.
39 Cal. 4th 95, 137 P.2d 914, 45 Cal. Rptr. 3d 730 (2006)
[California residents, clients of Salomon Smith Barney (SSB), a financial institution, brought a putative class action against SSB, alleging that SSB recorded conversations between them and SSB’s brokers in its Atlanta, Georgia office, and that the recording occurred without the clients’ consent in violation of California statute. A 1967 statute enacted by the California legislature created civil and criminal causes of action against any person or entity that, inter alia, records a telephone conversation without the consent, knowledge or reasonable expectation of recording, of all parties to the conversation. Any person who suffers from an unauthorized recording can sue the violator and recover the greater of $5000 or three times the amount of actual damages sustained and can seek to enjoin and restrain any further violations of the statute. Cal Stats. 1967, ch. 1509, §1, pp. 3584-3588, enacting Cal. Pen. Code, §§630-637.2. The clients sought injunctive relief, damages, and restitution. The Georgia legislature also enacted a privacy statute addressing the recording of telephone conversations, but it permits the recording of a conversation so long as one party to the conversation consents to that recording. Ga. Code Ann. §16-11-66. A clear majority of U.S. states permit recording with the consent of one party to the conversations (like Georgia), and about 11 states (including California) require consent by all parties to the conversation. Bast, What’s Bugging You? Inconsistencies and Irrationalities of the Law of Eavesdropping, 47 DePaul L. Rev. 837, 870 (1998). The court concluded that both states have an interest in having their privacy statutes apply to the calls at issue, with California seeking to protect its residents from unauthorized recording and Georgia seeking to protect its residents and businesses from liability for actions taken in reasonable reliance on the protections of Georgia law.
After finding a true conflict between California and Georgia law, the Court, George, C.J., continued with a comparative impairment analysis:]
A.
In considering the degree of impairment of California’s interest that would result if Georgia law rather than California law were applied, we note initially that the objective of protecting individuals in California from the secret recording of confidential communications by or at the behest of another party to the communication was one of the principal purposes underlying the 1967 invasion-of-privacy enactment.… Assembly Speaker Unruh, the principal author of the legislation, prepared a statement that he delivered before the Senate Committee on the Judiciary in conjunction with its consideration of the bill, in which he explained the impetus for the legislation … : “In the first place, whereas such invasions of privacy are presently legal if one party consents to the listening in, Assembly Bill 860 would require that all parties must consent. This is a most reasonable requirement. Presently it is entirely legal for one who receives a call to be totally unaware that it is being listened to by another party. Likewise, a party may converse in person with another party who is secretly recording the conversation—he may be seriously injured by that conversation, either personally or in his business affairs—and he has no recourse at law. Assembly Bill 860 would correct this defect. It is a defect that was less meaningful before the recent development and widespread availability of eavesdropping devices, but as the advertising material which I have passed out to you indicates, it is a legal defect which is most apparent today.”
In addition, it is clear that this is most certainly not an instance like [Offshore Rental Co. v. Continental Oil Co., 22 Cal. 3d 157, 148 Cal. Rptr. 867, 583 P.2d 721 1978),] in which the court found that the California statute in question was “ancient” and rarely, if ever, utilized or relied upon and concluded that the state had little current interest in the application of its own law. On the contrary, California decisions repeatedly have invoked and vigorously enforced the provisions of section 632. [citations omitted]
Furthermore, in recent years the California Legislature has continued to add provisions to and make modifications of the invasion-of-privacy statute here at issue (see, for example, Pen. Code §§632.5-627.7 [cordless or cellular phones], 633.6 [permitting recording by victims of domestic violence upon court order]) and in addition repeatedly has enacted new legislation in related areas in an effort to increase the protection of California consumers’ privacy in the face of a perceived escalation in the impingement on privacy interests caused by various business practices. (See e.g., Civ. Code §§1798.80-1798.84 [disclosure of consumer records], 1798.85-1798.86 [Social Security numbers], 1798.90.1 [driver’s license information], 1798.91 [medical information], 1799-1799.2 [business records], 1799.3 [disclosure of personal information by providers of video cassette sales or rental services]). In addition, California’s explicit constitutional privacy provision (Cal. Const., art. I, §1) was enacted in part specifically to protect Californians from overly intrusive business practices that were seen to pose a significant and increasing threat to personal privacy. [citations omitted]; cf. Rattray v. City of National City (9th Cir. 1994) 51 F.3d 793, 797 [“Having one’s personal conversations secretly recorded may well infringe upon the right to privacy guaranteed by the California Constitution”].
Thus, we believe that California must be viewed as having a strong and continuing interest in the full and vigorous application of the provisions of section 632 prohibiting the recording of telephone conversations without the knowledge and consent of all parties to the conversation.
We also believe that the failure to apply section 632 in the present context would substantially undermine the protection afforded by the statute. Many companies who do business in California are national or international firms that have headquarters, administrative offices, or—in view of the recent trend toward outsourcing—at least telephone operations located outside of California. If businesses could maintain a regular practice of secretly recording all telephone conversations with their California clients or customers in which the business employee is located outside of California, that practice would represent a significant inroad into the privacy interest that the statute was intended to protect … an out of state company that does business in another state is required, at least as a general matter, to comply with the laws of a state and locality in which it has chosen to do business. As this court determined in Bernhard, … with regard to the need to apply California law relating to the liability of tavern owners to the out-of-state tavern owner at issue in this case, the failure to apply California law in the present context seriously would undermine the objective and purpose of the statute.
Moreover, if section 632, and, by analogy, other similar consumer-oriented privacy statutes that have been enacted in California—could not be applied effectively to out-of-state companies but only to California companies, the unequal application of the law very well might place local companies at a competitive disadvantage with their out-of-state counterparts. To the extent out-of-state companies may utilize such undisclosed recordings to further their economic interests—perhaps in selectively disclosing recordings when disclosure serves the company’s interest, but not volunteering the recordings’ existence (or quickly destroying them) when they would be detrimental to the company—California companies that are required to comply with California law would be disadvantaged. By contrast, application of section 632 to all companies in their dealings with California residents would treat each company equally with regard to California’s concern for the privacy of the state’s consumers.
In sum, we conclude that the failure to apply California law in the present context would result in a significant impairment of California’s interests.
B.
By contrast, we believe that for a number of reasons, the application of California law rather than Georgia law in the context presented by the facts of this case would have a relatively less severe effect on Georgia’s interests.
First, because California law, with regard to the particular matter here at issue, is more protective of privacy interests than the comparable Georgia privacy statute, the application of California law would not violate any privacy interest protected by Georgia law. In addition, there is, of course, nothing in Georgia law that requires any person or business to record a telephone call without providing notice to the other parties to the call, and thus persons could comply with California law without violating any provisions of the Georgia law.
Second, with respect to businesses within Georgia that record telephone calls, California law would apply only to those telephone calls that are made to or received from California, not to all telephone calls to and from such Georgia businesses. In considering the practicability of singling out California calls for distinct treatment, there would appear to be little question that it would be feasible for a business to identify those calls that its own employees are making to current or potential California clients. Similarly, with regard to calls that received by a business in Georgia, it appears likely that technical tools, such as “caller ID”—are available that readily would make it possible to identify which calls received by the Georgia office are coming from California, and, even in the absence of such technological devices, there would appear to be no reason why an SSB employee, when answering a call, could not simply inquire where the client is coming from. Thus, application of California law would appear to affect only those telephone calls to or from California.
Furthermore, applying California law to a Georgia business’s recordings of telephone calls between its employees and California customers will not severely impair Georgia’s interests.… California law does not totally prohibit a party to a telephone call from recording the call, but rather prohibits only the secret or undisclosed recording of telephone conversations, that is, the recording of such calls without the knowledge of all parties to the call. Thus, if a Georgia business discloses at the outset of a call made to or received from a California customer that the call is being recorded, the parties to the call will not have a reasonable expectation that the call is not being recorded and the recording would not violate section 632. Accordingly, to the extent Georgia law is intended to protect the right of a business to record conversations when it has a legitimate business justification for doing so, the application of California law to telephone calls between a Georgia business and its California clients or customers would not defeat that interest.…
C.
Accordingly, because we have found that the interests of California would be severely impaired if its laws were not applied in this context, whereas Georgia’s interests would not be significantly impaired if California law rather than Georgia law were applied, we conclude that … California law should apply in determining whether the alleged secret recording of telephone conversations at issue in this case constitutes an unlawful invasion of privacy.…
Questions and Comments
(1) Are you convinced that California’s policies are really more impaired than are Georgia’s? Why is it relevant that Georgia does not require secret taping? Is comparative impairment systematically biased against state laws that are permissive?
(2) Note one possible consequence of Kearney: The policy decisions of the nearly 40 states that have chosen to enable the taping of a conversation with the consent of one party effectively will be thwarted. Companies very often adopt uniform policies and business practices in order to train employees more efficiently and effectively. Interstate businesses create uniform policies by adhering to the regulations of the most restrictive state in which the company does business. Thus, states that chose not to hinder businesses with the need to seek recording permission may nevertheless find that their businesses are forced to comply with the regulatory policy enacted in just a few states. Does it help in this context that businesses can comply with California law simply by stating at the beginning of the call that it is being recorded?
(3) Isn’t there also a serious potential problem with notice to individuals and entities outside of California? Even if it were the case that caller ID can help to filter out California residents (though imperfectly so), might individuals and small businesses and other entities find themselves unknowingly ensnared in a California statutory regime that provides for criminal prosecution and punitive damages? The California Supreme Court attempted to avoid the harshness that might result from a lack of notice in three ways. First, the court limited its holding to the civil claim portion of the California statute, acknowledging that extraterritorial application of the criminal prosecution provisions might be problematic. Second, the court phrased its holding as one applying to the context of the case, which appears to be one where a sophisticated interstate company affirmatively chooses to do business in California, and it specifically stated that its holding does not address liability in the case of recording by nonbusiness entities. Third, in the final portion of the Kearney opinion, the Court approved the issuance of an injunction against SSB but disallowed imposing monetary penalties against SSB for its past conduct on grounds that until this opinion was rendered, businesses were not on sufficient notice that California law might apply extraterritorially. This limitation was also justified on comparative impairment grounds because the compromise enables California to protect its residents while at the same time accommodating “Georgia’s interest in protecting persons who acted in Georgia in reasonable reliance on Georgia law from being subject to liability on the basis of such action.” Kearney, 39 Cal. 4th at 128. The court cautioned that future reliance by out-of-state businesses would not be reasonable, however. Id. at 130-131. Are these measures sufficient to protect those outside of California from unfair surprise?
(4) A federal district court followed Kearney’s guidance in Butler v. AdoptionMedia, LLC, 486 F. Supp. 2d 1022 (N.D. Cal. 2007). Plaintiffs, same-sex domestic partners residing in California and certified and approved to adopt in California, sought to list their profile during 2002-2003 on an adoption-related Web site operated by defendants, in Arizona. One of defendants’ Web sites, ParentProfiles.com, offered a service that allowed prospective adoptive parents, for a fee, to post “profiles” containing information about themselves for review by women considering placing their babies for adoption. Defendants rejected the plaintiffs’ application on grounds that the business had adopted a policy allowing only individuals in an opposite-sex marriage to post profiles. Plaintiffs sued, alleging, inter alia, violations of California civil rights laws, and seeking damages and injunctive relief. California law prohibits marital status discrimination against registered domestic partners in California, and, although California law was not clear on that matter until January 2005, California did prohibit both sexual orientation and marital status discrimination prior to that point. In contrast, although Arizona civil rights law prohibits discrimination against certain specified categories of individuals, Arizona law does not specifically address discrimination on the basis of sexual orientation or marital status. Although Arizona law and policy on the matter seemed less clear, the district court assumed that the case presented a true conflict for choice-of-law purposes. Relying heavily on the reasoning in Kearney, the court concluded that the California civil rights law should apply.
Regarding California’s interests, the court stated:
If businesses with headquarters in other states could maintain a regular practice of discrimination against California residents, that practice would substantially impair the protection afforded by the statute.
The court is not persuaded by defendants’ argument that Arizona’s interests would be seriously impaired by applying California law. In Kearney, the court found that because California law was more protective of privacy interests than the comparable Georgia statute, “the application of California law would not violate any interest protected by Georgia law.” Moreover, the court noted, because there was “nothing in Georgia law that requires any person or business to record a telephone call without providing notice to the other parties to the call, … persons could comply with California law without violating any provision of Georgia law.” [citations omitted]
Similarly, in the present case, [California law] is more protective of consumers than the comparable Arizona law. Application of California law would not violate any right protected by Arizona law, and [California law] merely provides protections in addition to those specified enumerated protections in Arizona. Arizona law does not require, or even permit, discrimination by businesses against same-sex couples.
Butler, 486 F. Supp. 2d at 1052-1053. Regarding defendants’ argument that application of California law would place undue burden on those conducting affairs outside of California, the court stated:
Defendants have provided no evidence that the application of California law would pose an undue and excessive burden on interstate commerce by making it impossible or infeasible for defendants to comply with the requirements of [California law] without altering their conduct with regard to ParentProfiles.com’s non-California clients.
In Kearney, the application of California law to the out-of-state defendant was “limited to the defendant’s surreptitious or undisclosed recording of words spoken over the telephone by California residents while they are in California.” [citation omitted] As plaintiffs point out, the same geographic limitations apply in the present case, as they are seeking to prevent defendants from discriminating against California residents while they are in California. The evidence shows that defendants already require all persons who wish to use the ParentProfiles service to identify their state of residence and where they are certified to adopt. Thus, defendants can easily distinguish California residents from others, and the application of California law will not require defendants to alter their policy or practice with regard to residents of other states.
Butler, 486 F. Supp. 2d at 1053-1054. As in Kearney, this court split the issue of remedies and disallowed the plaintiffs from recovering monetary damages against defendants, thereby limiting plaintiffs’ remedy to injunctive relief. The rationale the court used to limit the remedy differed from that relied upon in Kearney, however:
Defendants maintain that their consistent practice of requiring all customers to agree to Arizona law and venue limits the foreseeability of being subject to liability under California law for actions that are lawful under Arizona law. They claim that Arizona’s interest in protecting Arizona companies from liability for reasonable reliance on Arizona law could certainly be impaired if California law were applied in this case.
The question, as the court sees it, however, is not whether defendants in this case should have reasonably relied on Arizona law. Unlike the dispute in Kearney regarding the application of the California statute, this case presents no conflicting decisions on point from other jurisdictions. As plaintiff points out, the relevant facts in this case are more like the facts in Bernhard. Defendants in this case have actively sought business connections with Californian consumers, and as of October 2002, their Internet business was more closely tied to California than to any other state (based on the profiles posted by residents of various states). California has a strong interest in regulating defendants’ activities because of defendants’ penetration into the California economy, and the likelihood of exposure for violating California law was a foreseeable and reasonable business expense.
… the question of whether [California law] prohibited marital status discrimination was not completely resolved in 2002.… The court finds, given the status of California law in 2002, that defendants should not be subjected to damages for marital status discrimination in connection with their rejection of plaintiffs’ application. However, the claim for injunctive relief can go forward.
Butler, 486 F. Supp. 2d 1055-1056. Are you convinced regarding the claimed similarities and differences between Kearney and Butler? Between Butler and Bernhard?
(5) Another recent comparative impairment case is McCann v. Foster Wheeler LLC, 225 P.3d 516 (Cal. 2010) (applying Oklahoma statute of repose to bar California plaintiff’s suit based on asbestos exposure decades earlier while plaintiff was a resident of Oklahoma). Courts sometimes discuss comparative impairments in the analysis of true conflicts; in such cases, it’s not always easy to determine which theory the judge is applying. See, e.g., Gutride Safier LLP v. Reese, 2013 WL 4104462 (N.D. Cal. 2013).
D. The “Better Rule”
Leflar, Conflicts Law: More on Choice-Influencing Considerations
54 Cal. L. Rev. 1584, 1586-1588 (1966)
Major Choice-Influencing Considerations
A short restatement of the five summarized considerations is given here.
A. PREDICTABILITY OF RESULTS
Uniformity of results, regardless of forum, has always been a major goal in choice-of-law theory. Achievement of this goal would enable parties entering into a consensual transaction to plan it with reference to a body of law that would give them the results they desired. As a result, their transactions would normally be validated and their justified expectations thus protected. This would further the broad social policies of most forum states by sustaining legal arrangements in which parties have in good faith engaged themselves. At the same time it would discourage “forum shopping.”
B. MAINTENANCE OF INTERSTATE AND INTERNATIONAL ORDER
Both nations and states within a nation are interested in facilitating the orderly legal control of transactions that in any fashion cross their boundary lines. Smooth conduct of affairs between the peoples of different nations is essential to modern civilization; the easy movement of persons and things—free social and economic commerce—between states in a federal nation is essential to the very existence of the federation. There must be a minimum of mutual interference with claims or aspirations to sovereignty. No forum whose concern with a set of facts is negligible should claim priority for its law over the law of a state which has a clearly superior concern with the facts; nor should any state’s choice-of-law system be based upon deliberate across-the-board “forum preference.” Encouragement of that measure of interstate and international intercourse which is in keeping with the interests of the forum state and its people has always been a prime function of conflicts law.
C. SIMPLIFICATION OF THE JUDICIAL TASK
Courts do not like to do things the hard way if an easier way serves the ends of justice substantially as well. It would be utterly impractical for a court hearing a case brought on extrastate facts to apply the whole body of procedural law of the place where the facts occurred, and not much would be gained by doing so. Courts therefore use their own procedural rules. There are, however, some outcome-determinative rules, at times classified as procedural, which are so simple that one state’s rule can be used as easily as another’s, so that the substance-procedure dichotomy is not sensibly applicable to them. Purely mechanical rules for choice of substantive law are also easy for courts to apply, but other considerations may outweigh simplification of the judicial task where such rules are involved. Ease in judicial performance is ordinarily not of first importance among the choice-influencing considerations, but it is important in some choices.
D. ADVANCEMENT OF THE FORUM’S GOVERNMENTAL INTERESTS
If a forum state has a genuine concern with the facts in a given case, a concern discoverable from its strongly felt social or legal policy, it is reasonable to expect the state’s courts to act in accordance with that concern. This refers to legitimate concerns, not just to the local occurrence of some facts, or to the local existence of some rule of law that could constitutionally be applied to the facts. A state’s governmental interests in the choice-of-law sense need not coincide with its rules of local law, especially if the local rules, whether statutory or judgemade, are old or out of tune with the times. A state’s total governmental interest in a case is to be discovered from all the considerations that properly motivate the state in its law-making and law-administering tasks, viewed as of the time when the question is presented. So viewed, the circumstances may show that the forum is truly interested in applying its own law to a set of facts. If they do show this, that conclusion becomes a major choice-influencing consideration.
E. APPLICATION OF THE BETTER RULE OF LAW
The better rule of law is the most controversial of the considerations, yet a potent one. If choice of law were purely a jurisdiction-selecting process, with courts first deciding which state’s law should govern and checking afterward to see what that state’s law was, this consideration would not be present. Everyone knows that this is not what courts do, nor what they should do. Judges know from the beginning between which rules of law, and not just which states, they are choosing. A state’s “governmental interest” in a set of facts can be analyzed only by reference to the content of the competing rules of law. Choice of law is not wholly a choice between laws as distinguished from a choice between jurisdictions, but partly it is.
A judge’s natural feeling that his own state’s law is better than that of other states to some extent explains forum preference. Of course the local law is sometimes not better, and most judges are perfectly capable of realizing this. 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. The law’s legitimate concerns with “justice in the individual case,” sometimes spoken of as a choice-of-law objective, and with that “protection of justified expectations of the parties,” which often corresponds with Ehrenzweig’s “basic rules of validation,” are furthered by deliberate preference for the better rule of law. The preference is objective, not subjective. It has to do with preferred law, not preferred parties. It is “result selective” only in the same sense that in any non-conflicts case a determination of what the law is (presumably the “better law,” if there was argument about the law) controls the results of litigation. In conflict cases, just as in other cases, courts have always taken the content of competing rules into account, but they have too often used characterization, renvoi, multiple-choice rules or the like as manipulative devices to cover up what they were really doing, when there was no need at all for any cover-up.
Milkovich v. Saari
295 Minn. 155, 203 N.W.2d 408 (1973)
TODD, J.
[Plaintiff, defendant Saari, and defendant Rudd took a trip from their Ontario, Canada, homes to Duluth, Minnesota, in Ms. Saari’s automobile. Plaintiff was severely injured about 40 miles south of the border when the car crashed into rock formations adjacent to the road while Ms. Rudd was driving. Plaintiff was hospitalized at Duluth for approximately 1½ months. She then returned home to Ontario. Ms. Saari’s automobile was garaged, registered, and insured in Ontario.
Ontario has a guest statute, which would require plaintiff to establish gross negligence in order to recover against defendants. Minnesota does not have a guest statute. Defendants filed a motion to dismiss, arguing that Ontario’s guest statute applies in this case and prevents plaintiff from establishing her cause of action for negligence. The trial court denied the motion and defendants appealed.]
The field of “conflict of laws” in tort matters has undergone dramatic change in the last decade. Prior to that time, most courts were willing to accept the doctrine of “lex loci,” which proved to be easy to administer since the happening of an accident in any particular forum established that the law of the place of the accident would apply. Criticism of this entrenched doctrine mounted from all sides. The issue was met head on in Babcock v. Jackson.
While New York was experiencing its difficulties in the changing field of conflict of laws, a fact situation arose in a case appealed to the Supreme Court of New Hampshire, which allowed its learned Mr. Chief Justice Kenison to enunciate a doctrine which has been followed by many courts throughout the country, including our own Minnesota court. In Clark v. Clark, … a husband and wife had left their home in New Hampshire to proceed to another part of New Hampshire for a visit and were to return that evening. Part of their trip took them through Vermont, where the accident occurred. The plaintiff’s wife brought action in New Hampshire against her husband and sought an order of the court that the substantive law of New Hampshire governed the rights of the parties. New Hampshire had no guest statute and Vermont did. In a carefully reasoned opinion, Mr. Chief Justice Kenison traced the history and difficulty of the lex loci rule. He then proceeded to adopt five basic “choice-influencing considerations” to be applied in these cases. The basic premises for the considerations adopted by the court were first proposed by Professor Robert Leflar in his article, “Choice-Influencing Considerations in Conflicts Law,” 41 N.Y.U. L. Rev. 267, 279, and briefly stated, the tests selected by the New Hampshire court are: (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. Predictability of results can be overlooked since basically this test relates to consensual transactions where people should know in advance what law will govern their act. Obviously, no one plans to have an accident, and, except for the remote possibility of forum shopping, this test is of little import in an automobile accident case. As to the second consideration, the court found little trouble since under this heading no more is called for than the court apply the law of no state which does not have substantial connection with the total facts and the particular issue being litigated. The third point, simplification of the judicial task, poses no problem since the courts are fully capable of administering the law of another forum if called upon to do so.
The court observed that in selecting the law of a particular case the last two considerations carry most weight. In the case before it, the court found adequate governmental interest in applying its state’s law and concluded that the New Hampshire law was unquestionably the better law and should be applied.…
The facts of this case now complete the cycle. The choice-influencing considerations proposed by Professor Leflar and set forth by Mr. Chief Justice Kenison in Clark v. Clark were adopted by our court in Schneider v. Nichols indicating our preference for the better-law approach and our rejection of the guest statute concept of various jurisdictions. We have come to the conclusion in this case that plaintiff should be allowed to proceed with her action under our common law rules of negligence and should not be bound by the guest statute requirements of the Province of Ontario.…
On the consideration of governmental interest [in discussing Kell v. Henderson], Professor Leflar found adequate support for the decision rendered by the New York court. In so doing, he rejected the concept of the practical interest of the state in the supervision and safety of its state highways since the rule in question, unlike rules of the road and definitions of negligence, does not bear upon vehicle operation as such. Instead, he pointed out that the factor to be considered is the relevant effect the New York rule has on the duty of host to guest and the danger of