Conflict of Laws: An Overview
Conflict of Laws is a course about the allocation of sovereign authority. In most substantive law courses, discussions assume that a legal rule promulgated by “the State” binds its subjects. This course lifts that assumption to consider governing laws in a world where multiple states make laws, where people, assets, and events are located in multiple jurisdictions, and where each of these three things are movable. When disputes arise as a result of interstate activities, it is possible that multiple states’ laws govern the dispute. It is also possible, at least in theory, that no law governs the dispute. Complicating the situation is the fact that often disputes can be resolved in multiple courts, allowing for strategic selection of the judicial forum. Moreover, if plaintiff is issued a favorable monetary judgment in State A, but all of defendant’s assets are located in States B and C, plaintiff might need the cooperation of these other states in order to have the judgment satisfied. Ideally, conflicts principles smoothly and sensibly define sovereign boundaries and aid selection of the appropriate law to be applied. In reality, conflicts principles often have failed to craft solutions that are either smooth or sensible. Those principles, including the conceptual similarities and differences found across states and nations, will be the subject of study in this course.
Which jurisdictions have authority to assert jurisdiction over the people involved in the dispute? Which jurisdiction’s law should govern the parties’ rights and responsibilities? And to what extent can issues and claims resolved in one jurisdiction be reopened for reconsideration by another jurisdiction? To what extent are these issues resolved according to state law? Federal law? International treaties? To what extent might the answers to questions of sovereign authority change when parties attempt to choose their own courts and law through contract or otherwise? Do the answers change when claims are aggregated into complex forms of litigation? These and other questions will be explored throughout the book.
The problem of the allocation of sovereign authority is both old and ubiquitous. See generally Scoles, Hay, Borchers & Symeonides, Conflict of Laws §§2.2-2.6 (3d ed. 2000). Moreover, conflict of laws problems arise in virtually every substantive field of law. Cases in the book explore the problem as it arises in contracts, torts, property, corporate law, securities law, antitrust law, trusts and estates law, family law, admiralty law, and others. Of course, the focus of attention in this course is not the substantive principles of law in those various fields; rather, the multiple fields of law illustrate both the ubiquity of conflicts problems and the difficulty of solving conflicts problems according to a single set of conflicts law. Finally, numerous conflicts approaches have been utilized over time to resolve these issues. The multiplicity of approaches continues today, even within the United States, where choices of state law are typically left to determination by the states themselves.
Conflict of laws issues play an increasingly large role in dispute resolution. With the fall of trade barriers, advances in communication technology, and cheaper and easier travel, people and businesses interact across borders on a daily basis. E-mail, telephone conversations, online shopping, vacations, commuting, and job and plant relocations are just a few of today’s common activities that cross state or national borders and open questions regarding governing laws and courts. Any well-trained lawyer engaged in twenty-first-century litigation or transactional work should know the basic principles used to allocate sovereign authority. This knowledge can enable a skilled attorney to provide her clients with the strategic advantage of having their conduct and rights evaluated in the courts and according to the laws most favorable to them.
The specifics of conflicts principles are explored in the remaining chapters of this book. This chapter presents three problems based on actual cases to illustrate the conceptual breadth of the subject matter of Conflict of Laws and to introduce students to some of the tensions underlying the legal doctrines. The questions following the problems are designed to both help signify the scope of the problem of conflict of laws and identify the types of questions that a conflicts analysis entails. Consider returning to these problems at the end of the course as a tool for reviewing the materials. At that point you will be equipped to provide more sophisticated and nuanced responses.
Problem 1: Male or Female?
Marshall Gardiner, a businessman in northeast Kansas, died intestate (without having written a will). Joe, Marshall’s estranged son, petitioned the Kansas probate court for letters of administration, claiming that he was the sole heir to his father’s estate. J’Noel Gardiner, a post-operative male-to-female transsexual and Marshall’s widow, filed an objection and petitioned the court for letters of administration to be issued to her. J’Noel asserted a right to administer the estate as Marshall’s legal wife. Specifically, J’Noel asserts that (1) Wisconsin had lawfully changed her birth certificate to indicate that J’Noel is a female; (2) Kansas must accord this act of Wisconsin full faith and credit under Art. IV, §1 of the U.S. Constitution; and (3) J’Noel had married Marshall in Kansas after her birth certificate was changed. Joe has challenged the validity of J’Noel’s marriage to Marshall by claiming that J’Noel is legally a man in Kansas and that his father was unable to enter into a valid marriage with another man, because Kansas prohibits same-sex marriages.
J’Noel was born in Green Bay, Wisconsin as a male, and J’Noel’s Wisconsin birth certificate initially listed a male name. Ever since J’Noel was a child, however, he self-identified as female rather than male, a condition known as gender dysphoria. Although J’Noel was married to a woman at the time, J’Noel began in 1991 a series of treatments, procedures, and surgeries to transform his physical appearance to that of a woman. By 1995, J’Noel had completed a series of sex reassignment surgeries that replaced his male genitalia with female external sexual anatomy, which enabled vaginal sexual intercourse but not child bearing. By this time, J’Noel had divorced from her initial marriage and successfully petitioned a circuit court in Wisconsin to change her name and sex designation on her birth certificate. A new birth certificate was issued in September of 1994. J’Noel also had her driver’s license and her employment and school records changed to reflect her new name.
In 1998, J’Noel met Marshall while she was a faculty member at Park College, Kansas (Park University as of 2014) and they quickly fell in love. In the same year, the couple married in Kansas and lived together as husband and wife until Marshall’s death. J’Noel had informed Marshall of her sex change operation before the marriage.
Under Wisconsin law, same-sex marriage has not been legalized. Wisconsin will not issue a marriage license to same-sex couples, nor will the state recognize same-sex marriages performed elsewhere. However, Wisconsin will allow a person to change the sex designation on his or her birth certificate in cases where the person’s sex anatomy has been altered. Once sex reassignment surgery is completed, the individual is treated as belonging to the newly designated sex for all legal purposes, including marriage. Thus, under Wisconsin law, J’Noel and Marshall would be legally married.
Under Kansas law, same-sex marriage also has not been legalized, and, like Wisconsin, Kansas will not recognize same-sex marriages performed within or without the state. Kansas statutes limit marriage to two parties of the opposite sex and state that “[a]ll other marriages are declared to be contrary to the public policy of the state and are void.” Kan. Stat. Ann. §23-2501. Kansas does not permit the sex designation on birth certificates to be amended unless the sex designation was incorrect at the time of birth. Under Kansas law, J’Noel would remain a male and would not be permitted to validly marry Marshall.
States (and nations) are split on the question of whether sex reassignment surgery can serve as the basis for altering an individual’s sex for legal purposes, including that of entering into a valid marriage. The difference seems to turn on how each state defines sex. Some states, like Kansas, define sex narrowly as a matter of law and look only to chromosomal makeup and its biological consequences (i.e., whether the individual has a womb, cervix, or ovaries). Texas, Florida, Ohio, Tennessee, England, and others fit into this category. Other states define sex more broadly, to encompass a number of factors in addition to chromosomes and the presence of internal sexual features, including the presence of other primary and secondary sexual characteristics, hormonal makeup, assigned sex and gender of rearing, and sexual identity. Under this broader definition, sex is not immutably fixed, but an individual’s sex might well turn on the nuances of individual facts. Maryland, New Jersey, New York, Australia, and others fall into this category. A discussion of state laws on the question can be found in In re Estate of Gardiner, 42 P.3d 120 (Kan. 2002); In re Heilig, 816 A.2d 68, 83 (Md. 2003) (“It appears that 22 States and the District of Columbia have enacted statutes expressly enabling a person who has undergone a change in gender to have his or her birth certificate amended to reflect the change.”).
Questions and Comments
(1) Although this matter would be decided by a Kansas court, that court need not apply its own law if it deems it appropriate to apply another state’s law instead. Indeed, as will be examined in Chapter 4, under some circumstances, states are not constitutionally permitted to apply forum law but must instead apply the law of another sovereign to resolve the case. Whose law should apply to determine whether Marshall and J’Noel were validly married? Given Kansas and Wisconsin law, the validity of their marriage turns on whether J’Noel legally was a male or female at the point in time that she married Marshall. Whose law should apply to determine that question? When should a court defer to another state’s law? Does it matter here that, according to the Gardiner case cited above, Kansas has a strong public policy of maintaining a traditional definition of marriage (and perhaps sex)?
(2) Of what significance is the fact that J’Noel’s birth certificate was amended in Wisconsin? Does it matter that a Wisconsin court ordered the amendment? As discussed in Chapter 7, the full faith and credit clause of the U.S. Constitution, Art. IV, §1, requires each U.S. state to give respect to the acts, records, and judicial proceedings of the other states. Much more respect is owed to the judgments of other states than to its acts and records, but even in the context of judgments, states’ obligations are limited. Some courts have determined that because vital records, including birth certificates, provide only prima facie evidence of the facts designated therein, then other states can also question the factual designations (here sex) in the records. See In re Estate of Gardiner, 22 P.3d 1086 (Kan. Ct. App. 2001); In re Nash, 2003 WL 23097095 (Ohio Ct. App. 2003) (unpublished opinion) (also involving changed sex designation after sex reassignment surgery). If a court determines that, factually, sex reassignment surgery was completed and that J’Noel presents herself to the world as a female, should it then be constrained to uphold the validity of this marriage?
(3) Problem 1 is a summary of an actual case, in which the Kansas Supreme Court concluded that the couple was not validly married. In re Estate of Gardiner, 42 P.3d 120 (Kan. 2002). Would a Wisconsin court have reached the same result in this case? If not, is there something profoundly problematic about the fact that questions as fundamental as the validity of a marriage and an individual’s sex designation can turn on the court in which the question is litigated? If the couple had moved back and forth between Kansas and Wisconsin during their relationship, does it make any sense at all for J’Noel’s sex and her marital status to change as she and Marshall traveled back and forth between Wisconsin and Kansas? Can choice of law or the law of judgment recognition help stabilize the legal treatment of such issues? Could a federal law solve the problem? If so, what form should that law take?
Problem 2: The Long Arm of the Law
The opinion reproduced below was rendered by a French court. Plaintiffs from that litigation have asked a court in Sunnyvale, California, the location of defendant Yahoo! Inc.’s corporate headquarters, to order Yahoo! Inc. to comply with the judgment. They also seek the recovery of fines described in the French court’s order.
Licra and UEJF v. Yahoo! Inc.
Tribunal de Grande Instance de Paris (May 22, 2000)
(available at www.lapres.net/yahen.html (Daniel Lapres, trans.))
GOMEZ, First Deputy Chief Justice.
[Yahoo! Inc. (“Yahoo!”), a U.S. corporation and one of the world’s leading web portals, has an Internet auction site that offered for sale Nazi memorabilia such as flags, stamps, and military souvenirs. Persons at computers in France could access this site through links on the French-language portal of Yahoo!’s French subsidiary, Yahoo! France, or by accessing Yahoo!’s portal directly from France by typing www.yahoo.com into a computer browser. The International League Against Racism and Anti-Semitism (LICRA) and the Union of French Jewish Students (UEJF) sued Yahoo! and Yahoo! France, alleging violations of Article R. 645-2 of the French penal code, a World War II-era law criminalizing the exhibition or sale of racist materials. The plaintiffs asked the Court to force Yahoo! to block French users’ access to Nazi objects for sale on Yahoo!’s U.S. auction site.]
Yahoo! Inc. has argued that our court is not territorially competent over the matter, because the alleged fault is committed on the territory of the United States. [It further argues for rejection of plaintiffs’ claims on the ground that] the duties of vigilance and prior censure which the petitioners would seek to impose upon it are impossible obligations, first in terms of the law and the American constitution, in particular the First Amendment of the Constitution which institutes the liberty of expression and then in view of the technical impossibility of identifying surfers who visit the auction service, while recalling that in its charter it warns all surfers against using the service for purposes worthy of reprobation for whatsoever motive (incitement to hatred, racial or ethnic discrimination …).
Whereas it is not challenged that surfers who call up Yahoo.com from French territory may, directly or via the link offered by Yahoo.fr, see on their screens the pages, services and sites to which Yahoo.com gives access, in particular the auction service (Auctions) lodged by Geocities.com, the lodging service of Yahoo! Inc., in particular in its declension relating to Nazi objects;
Whereas the exposition for the purpose of sale of Nazi objects constitutes a violation of French law (article R.645-2 of the Criminal Code) as well as an offence against the collective memory of a country profoundly wounded by the atrocities committed by and in the name of the Nazi criminal enterprise against its citizens and most importantly against its citizens of the Jewish religion;
Whereas while permitting the visualization in France of these objects and eventual participation of a surfer established in France in such an exposition/sale, Yahoo! Inc. thus has committed a wrong on the territory of France, a wrong, the unintentional nature of which is apparent, but which is the cause of harm to the LICRA as well as the UEJF which both have the mission of pursuing in France any and all forms of banalization of Nazism, regardless of the fact that the litigious activity is marginal in relation with the entire business of the auction sales service offered on its … Yahoo.com site;
Whereas Yahoo! Inc. claims that it is technically impossible to control access to its auction service or any other service, and that therefore it cannot prohibit any surfer from France from visualizing same on his screen;
Whereas it wishes nevertheless to emphasize that it warns all visitors against any uses of its services for purposes that are “worthy of reprobation for whatsoever reason,” such as for purposes of racial or ethnic discrimination (cf. its user’s charter);
But whereas Yahoo! Inc. is in a position to identify the geographical origin of the site which is visited, based on the IP address of the caller, which should therefore enable it to prohibit surfers from France, by whatever means are appropriate, from accessing the services and sites the visualization of which on a screen set up in France, and in some cases teledischarging and reproduction of the contents, or of any other initiative justified by the nature of the site consulted, would be likely to be qualified in France as a crime and/or constitute a manifestly illegal nuisance within the meaning of articles 808 and 809 of New Code of Civil Procedure, which is manifestly the case of the exhibition of uniforms, insignia, emblems reminiscent of those worn or exhibited by the Nazis;
Whereas as regards surfers who navigate through sites which guarantee them anonymity, Yahoo! Inc. has fewer means of control except for example through refusing systematically access to such sites to all visitors who do not disclose their geographical origin;
Whereas the real difficulties encountered by Yahoo do not constitute insurmountable obstacles;
That [Yahoo!] will therefore be ordered to take any and all measures of such kind as to dissuade and make impossible any consultations by surfers calling from France to its sites and services in dispute the title and/or contents of which infringe upon the internal public order of France, especially the site selling Nazi objects;
That Yahoo will be given two months to enable it to formulate proposals of technical measures likely to lead to a settlement of this dispute;
Whereas, as regards Yahoo France, it bears mentioning that its site Yahoo.fr does not itself offer surfers calling from France access to the sites or series the title and/or the contents of which constitute infractions of French law; that therefore, it does not provide access to the site or services for auction sales of Nazi objects;
Or whereas, knowing what are the contents of the services offered by Yahoo.com, and in this case the service of auction sales including in one of its declensions the sale of Nazi objects, it behooves it to warn surfers, by a banner, prior to the surfer’s entry into the Yahoo.com site, that should the result of his search on Yahoo.com … point toward sites, pages or forums the title and or contents of which constitute a violation of French law, such as is the case of sites which, whether directly or indirectly, intentionally or unintentionally, make the apology of Nazism, it must interrupt the consultation of the site in question lest it incur the sanctions stipulated by French law or answer to legal actions which might be initiated against it;
At a public audience and rendering its judgment in first instance, after having heard all the parties, the Court: …
Orders Yahoo! Inc. to take such measures as will dissuade and render impossible any and all consultation on Yahoo.com of the auction service for Nazi objects as well as any other site or service which makes apologies of Nazism or questions of the existence of Nazi crimes;
Orders [a subsequent hearing] during which Yahoo! Inc. shall submit the measures which it intends to implement to end the harm and the nuisance suffered by the plaintiffs and to prevent any new incidents of nuisance;
Finds Yahoo! Inc. liable to pay to the LICRA an amount of 10,000 Francs [approximately $133 when the case was decided] on the basis of article 700 of the New Code of Civil Procedure;
[Following this ruling, the Paris court convened a panel of Internet experts who prepared a report about the feasibility of Yahoo! blocking access in France to its U.S. auction site. The report concluded that Yahoo! could block French users from accessing its U.S. auction site with a 90% success rate through a combined process of (a) tracing the computer user’s Internet Protocol address to its geographical source, and (b) conditioning access to the auction site on a declaration of nationality. The court embraced this conclusion, and also noted that Yahoo! had already been identifying French users to some degree because French users visiting the Yahoo! auction site were greeted with French-language advertisements. On the basis of these findings, the Court affirmed its previous ruling, gave Yahoo! three months to comply, and ordered a fine of 100,000 francs (about $13,300) per day for noncompliance after that time. See Licra et UEJF v. Yahoo! Inc., Tribunal de Grande Instance de Paris, (November 20, 2000) available at www.lapres.net/yahen11.html (translation by Daniel Lapres). Shortly after concluding the case in the French court, Yahoo! Inc. banned all Nazi paraphernalia from its U.S. auction sites but claimed that the move was not in response to the French decision. See Guernsey, Yahoo to Try Harder to Rid Postings of Hateful Material, N.Y. Times, Jan. 3, 2001, sec. 5, p. 2.]
Questions and Comments
(1) What should the California court do in response to plaintiffs’ requests? Nothing requires a U.S. court to recognize and enforce judgments from other nations. What factors should a court take into account when determining the appropriate treatment? Should a court consider whether it agrees with the policy rationale underlying the foreign judgment?
(2) The French court relied on an expert feasibility report’s assessment that Yahoo could identify the geographic locations of its users with a 90 percent probability, and ruled that any obstacles that might exist are not “insurmountable.” However, compliance could be “not insurmountable” and yet be excessively costly—what would be a sufficiently intelligible principle to determine the point at which Yahoo could defend non-compliance because the cost of compliance becomes prohibitive?
(3) This ruling, which states that Internet users can be feasibly and reliably traced back to their geographical location, was issued in 2000. Although the ruling may have been correct at the time, it is highly disputable as of 2014 because tools that make it significantly harder to trace a user’s Internet Protocol (IP) address to its geographical location have proliferated and become much easier to use. Trimble, The Future of Cybertravel: Legal Implications of the Evasion of Geolocation, 22 Fordham Intell. Prop. Media & Ent. L.J. 567, 568 (2012). One example of such a tool is the proxy IP address: by connecting to the Internet through a proxy server physically placed in France, a Connecticut user would display to the rest of the Internet a French IP address. See id. at 602. How should a court take into account the availability of these technologies when deciding which jurisdiction’s law should apply, or when requiring companies like Yahoo to identify the geographical locations of their users?
(4) How far should the governmental authority of a nation extend on the Internet? Following the Yahoo decision, companies like Yahoo and Google—based in the United States but also doing business in foreign countries—have become increasingly compliant with local censorship laws for fear of becoming unable to do business there. Stevenson, Breaching the Great Firewall: China’s Internet Censorship and the Quest for Freedom of Expression in A Connected World, 30 B.C. Int’l & Comp. L. Rev. 531, 537-539 (2007). This means that, when a Chinese court issues an injunction to censor something on a Web site run by Google that can be accessed both from the U.S. and China, it need not look to U.S. courts to enforce that injunction. Id. at 545, 547. From the perspective of the United States, one could claim that these companies’ First Amendment rights are being violated. In the Yahoo case, a French court attempted to reach a U.S. company through its long-arm statute—could a U.S. court protect its companies from censorship in countries such as China by enforcing First Amendment rights by using the long-arm?
(5) The problem of allocating governmental authority over actions on the Internet has arisen in a number of contexts. Although legitimate governmental authority typically is thought to operate territorially, the Internet does not operate according to geographic boundaries. For a debate over whether Internet disputes can be adequately treated via traditional, territorial-based approaches to choice of law, see Johnson & Post, Law and Borders—The Rise of Law in Cyberspace, 48 Stan. L. Rev. 1367 (1996) (arguing that they cannot); Goldsmith, Against Cyberanarchy, 65 U. Chi. L. Rev. 1199 (1998) (arguing that new technologies make geographic designations increasingly feasible).
(6) Consider also People v. World Interactive Gaming Corp., 714 N.Y.S.2d 844 (N.Y. Sup. Ct. 1999), a case in which the Attorney General of the State of New York brought criminal proceedings against the defendant company in an effort to obtain a court injunction against the company providing Internet gambling services to New York residents. World Interactive was a Delaware corporation with corporate offices in New York. Internet gambling operations were not conducted by World Interactive, but one of its wholly owned subsidiaries operated an Internet gambling operation from its location in Antigua, where gambling is legal. Customers were required to open accounts prior to gambling, and they were required to provide a permanent address as part of the account application. Any person who entered a New York State permanent address was denied access to the gambling services, but customers who provided fake addresses were permitted to gamble. The New York court found it appropriate for New York’s gambling prohibition to extend to the subsidiary’s activity, and it found it appropriate to hold the parent company responsible for the actions of the subsidiary. This assertion of governmental authority was deemed necessary in order to effectuate the State’s “deep-rooted policy” against unauthorized gambling. The court issued the State’s requested injunction and approved awards for restitution, penalties, and costs.
Is New York’s assertion of governmental authority appropriate? Is this case conceptually distinguishable from Yahoo?
(7) Unlike Problem 1, the Yahoo case involves a conflict between the laws of two nations rather than a conflict between the laws of two U.S. states. Should the international character of a dispute change a court’s analysis, or are sovereign conflicts the same regardless of the sovereigns involved? If the international character of the dispute might be relevant to the conflict’s analysis, how does/should it differ from conflicts confined to U.S. sovereigns? This topic is considered more fully in Chapter 8 and will be raised at numerous points in the course materials.
(8) Judgment enforcement difficulties can provide natural constraints on the extraterritorial application of a nation’s laws:
The real problem is turning a judgment supported by jurisdiction into meaningful economic relief.… If an old lady in Richmond, Virginia is the victim of fraud perpetuated through the Internet by someone located in Belgium, she has a reasonable chance of convincing a Virginia circuit court that it has jurisdiction over the Belgian actor. Unless the fraud is enormous, the Belgian actor is unlikely to appear and she is likely to get a default judgment. But what can she do with her default judgment? Even if the Belgian legal system, through its equivalent of the comity doctrine, will enforce the judgment, it is improbable that she will spend the money to get a Belgian lawyer to enforce the judgment in Belgium. The transaction costs dwarf the value of the claim.
Perritt, Will the Judgment-Proof Own Cyberspace? 32 Intl. Lawyer 1121, 1123 (1998). New York can enforce the judgment against World Interactive because the company is located in the United States and partially located in New York. What if the Antiguan company were not a subsidiary of a U.S. corporation? Would New York be able to enforce a judgment against it? Note that Congress passed the Unlawful Internet Gambling Enforcement Act of 2006, 31 U.S.C.A. §5361 et seq., which authorized federal regulations requiring financial institutions and other intermediaries to identify and block the processing of charges related to online gambling. That is one way around the problem of regulating outsiders in order to protect the welfare of residents. Are there problems with taking this route?
Peter Plaintiff, resident of New Orleans, Louisiana, filed a declaratory judgment action in a Louisiana federal district court against Durel Defendant, a resident of the Czech Republic, seeking to quiet title to “Man in a Bottle,” a painting created by Franz Artiste, which is currently in Peter’s possession in New Orleans. Durel had previously sent a demand letter to Peter, claiming that the painting rightfully belonged to him as the sole heir to Aaron Birnbaum, a wealthy Austrian merchant of the Jewish faith. Birnbaum owned and possessed the painting until 1941, when he was imprisoned by the Nazis and tortured until he signed a document relinquishing all of his artwork, including “Man in a Bottle,” to a Nazi art dealer who operated a gallery and auction house in Switzerland. Birnbaum died in prison shortly thereafter. In 1956, the painting was sold in Switzerland to a New York gallery. In 1963, Peter purchased the painting. Since then, the painting has been on display in his home and occasionally loaned out for exhibits around the country. Peter argues that even though the painting was effectively stolen by the Nazis who tortured Birnbaum, he was a purchaser in good faith (without knowledge of the painting’s tainted ownership), and therefore he holds good title to it. Durel argues that because the painting was effectively stolen from Birnbaum, no subsequent possessor can obtain good title. Research on laws potentially relevant to resolving this dispute has uncovered the following:
Under Article 934 of the Swiss Civil Code, a buyer acting in good faith will acquire valid title to stolen property after a period of five years. After the five-year period, a previous owner of a stolen object is no longer entitled to request its return from a good-faith purchaser. One is considered a good-faith purchaser if she paid reasonable consideration for the property without knowledge or reason to believe that the property was stolen. Swiss law also presumes that a purchaser acts in good faith, and a plaintiff seeking to reclaim stolen property has the burden of establishing that a purchaser did not act in good faith. That presumption has been applied to art works with a potential relationship to Germany during World War II (i.e., emanating from a German collection or created by artists deemed “degenerate” by the Nazis). In the 1950s, some other European nations rejected this presumption and determined that a dealer accepting such art works would automatically be subject to a heightened standard of diligence in order to obtain good title. In 1987, the Swiss Federal Supreme Court removed the good faith presumption and imposed a due diligence standard on sales transactions involving second-hand luxury automobiles. Shortly thereafter it also removed the presumption as applied to the antiquities business because “in these businesses stolen property is known to be frequent; therefore a heightened alertness may be expected from buyers in these sectors.” Although some Swiss legal commentators are of the opinion that the art market should also fall into this category of known frequent confiscation and theft, the Swiss Federal Supreme Court has not extended the due diligence standards to transactions with works of art.
Under New York law, a thief cannot pass good title. “[A]bsent other considerations an artwork stolen during World War II still belongs to the original owner, even if there have been several subsequent buyers and even if each of those buyers was completely unaware that she was buying stolen goods.” Turner, The Innocent Buyer of Art Looted During World War II, 32 Vand. J. Transnatl. L. 1511, 1534 (1999) (citing Menzel v. List, 49 Misc. 2d 300, 305 (1966), modified as to damages, 28 A.D.2d 516 (1st Dept. 1967), rev’d as to modification, 24 N.Y.2d 91 (1969)). As a result, the burden of proving that the painting was not stolen properly rests with the possessor. The manner in which the New York rule is applied reflects an overarching concern that New York not become a marketplace for stolen goods and, in particular, for stolen artwork.
In addition, a cause of action for replevin against the good-faith purchaser of stolen property accrues when the true owner makes demand for return of the chattel and the person in possession of the chattel refuses to return it. Until demand is made and refused, possession of the stolen property by the good-faith purchaser for value is not considered wrongful, and the statute of limitations does not begin to run. New York has not adopted an alternative discovery rule under which the Statute of Limitations runs from the time that the owner discovered or reasonably should have discovered the whereabouts of the work of art that had been stolen. Specifically, a bill proposing that a museum would be immune from future claims once it “gave required public notice of acquisition and a three-year statute of limitations period had passed” was vetoed by then Governor Mario Cuomo, who stated that he had been advised by the State Department that the bill, if law, would have caused New York to become “a haven for cultural property stolen abroad since such objects would be immune from recovery under the limited time periods established by the bill.”
In general, Louisiana law provides strong protections for property owners. Under Louisiana Civil Code, ownership can never be lost by the failure to exercise it—only by the acquisition of ownership by another through possession sufficient to acquire it through “acquisitive prescription.” However, pursuant to article 3491 of the Louisiana Civil Code, “one who has possessed movable property as owner for ten years acquires ownership by prescription. Neither title nor good faith is required for this prescription.” The burden of proof of establishing the facts of acquisitive prescription rests on the party who makes the plea. However, the possessor is aided in this burden by a presumption that she/he possessed as owner. Louisiana Civil Code article 3488 provides: “[A]s to the fact itself of possession, a person is presumed to have possessed as master and owner, unless it appears that the possession began in the name of and for another.” Possession is defined under Louisiana law as the open and continuous detention or enjoyment of a corporeal thing, movable or immovable, that one holds or exercises by himself or by another who keeps or exercises it in his name. No exceptions to these rules apply in the case of stolen artwork.
The Holocaust Victims Redress Act provides in pertinent part:
It is the sense of Congress that … all governments should undertake good faith efforts to facilitate the return of the private and public property, such as works of art, to the rightful owners in cases where assets were confiscated from the claimant during the period of Nazi rule and there is reasonable proof that the claimant is the rightful owner.
Act §202, 112 Stat. at 17-18. According to the Ninth Circuit Federal Court of Appeals, the Holocaust Victims Redress Act was not intended to give individuals a private cause of action. Orkin v. Taylor, 487 F.3d 734, 739 (9th Cir. 2007). No other court has considered the question.
International Law Principle: The Terezin Declaration
The Terezin Declaration is a “legally non-binding” document promulgated on June 30, 2009, at the Prague Holocaust Era Assets Conference organized by the Czech Republic and is intended to impose “moral responsibilities” on its signatories. Forty-six states, including the United States, Switzerland, and Austria, approved of the document. The Terezin Declaration addresses a number of continuing problems related to the treatment of Holocaust victims and their families during and after World War II. It provides, in relevant part:
Nazi-Confiscated and Looted Art
Recognizing that art and cultural property of victims of the Holocaust (Shoah) and other victims of Nazi persecution was confiscated, sequestered and spoliated, by the Nazis, the Fascists and their collaborators through various means including theft, coercion and confiscation, and on grounds of relinquishment as well as forced sales and sales under duress, during the Holocaust era between 1933 and 1945 and as an immediate consequence.…
2. In particular, recognizing that restitution cannot be accomplished without knowledge of potentially looted art and cultural property, we stress the importance for all stakeholders to continue and support intensified systematic provenance research, with due regard to legislation, in both public and private archives, and where relevant to make the results of this research, including ongoing updates, available via the internet, with due regard to privacy rules and regulations. Where it has not already been done, we also recommend the establishment of mechanisms to assist claimants and others in their efforts.
3.… [W]e urge all stakeholders to ensure that their legal systems or alternative processes, while taking into account the different legal traditions, facilitate just and fair solutions with regard to Nazi-confiscated and looted art, and to make certain that claims to recover such art are resolved expeditiously and based on the facts and merits of the claims and all the relevant documents submitted by all parties. Governments should consider all relevant issues when applying various legal provisions that may impede the restitution of art and cultural property, in order to achieve just and fair solutions, as well as alternative dispute resolution, where appropriate under law.
Questions and Comments
(1) Consider this case from Durel’s perspective. What arguments might Durel wish to make to avoid a potentially adverse determination by the district court? First, presumably Peter filed this declaratory judgment action in his home state in order to avoid having to litigate elsewhere, but Durel might object to having to litigate in Louisiana. Could Durel argue that the court lacks jurisdiction to resolve the matter? Would it serve his interests if he succeeded? Is he likely to succeed? This last question might be easier to answer after reading Chapter 5 on the Jurisdiction of Courts over Persons and Property. For now, note that because Conflict of Laws is essentially a course on advanced procedure, some of the topics explored in your Civil Procedure course will be relevant to the study of this course.
(2) Peter filed this action in a Louisiana federal court, but the choice of forum does not necessarily dictate the law to be applied. If at root this is a property law claim, property law is controlled by state law in the United States, so the federal court would be exercising its diversity jurisdiction over the claim. When it sits in diversity, the federal court must apply state substantive law rather than federal substantive law. Erie Railroad Co. v. Tompkins, 304 U.S. 64 (1938). Even if this is a state law claim, the court could decide that Swiss (or Austrian) law rather than the law of any U.S. state should be applied to resolve the claim. Each U.S. state has developed a set of principles that are applied in its courts to determine which law applies to resolve a claim that involves people, property, and/or activities located elsewhere. When a federal court sits in diversity, the court must apply the choice-of-law principles of the state in which the court is located. Klaxon Co. v. Stentor Electric Manufacturing Co., 313 U.S. 487 (1941). If this were a property claim, then the federal court in Louisiana would apply Louisiana choice-of-law principles to determine whether the property law of New York, Louisiana, Switzerland, or elsewhere should apply.
(3) Assuming that the court asserts jurisdiction over the case, should the merits of the case be determined according to state, federal, or international legal principles? Given that the Terezin Declaration is legally nonbinding, what relevance might it have to the resolution of the dispute? Is it significant that all three of the countries where the painting has “resided” since Nazi rule approved the Declaration? What about the federal statute? Should the Louisiana court decide that the Holocaust Victims Redress Act creates a federal private right of action? Note that if it does, the district court would be exercising federal question jurisdiction over the case. With federal question (as opposed to diversity) jurisdiction, the district court need not apply the choice-of-law principles of Louisiana. If the federal statute does not create a right of action, is it at all significant to the resolution of the dispute?
(4) Should a court consider the merits of a case when choosing law? What if it believes that Peter paid a lot of money for the painting and should be entitled to keep it? What if it believes that Durel’s family was subject to so much horror that by rights it should at least get its painting returned? Are these considerations relevant? If so, why?
(5) Should a court consider the merits of competing laws when choosing law? What if the court believes that the “open and continuous” rule of Louisiana law is archaic in that it reflects a time where everyone lived in the same village so that the victim had notice of adverse possession when another displayed his property openly? See Symeonides, A Choice-of-Law Rule for Conflicts Involving Stolen Cultural Property, 38 Vand. J. Transnatl. L. 1177 (2005).
(6) Several cases involving artwork formerly possessed by Holocaust victims have been litigated in U.S. courts with mixed results, both as to the applicable law and as to the outcome of the case. Problem 3 was based on a factual mixture of two cases. Three court opinions came to three different conclusions regarding the law that should apply to resolve the claims. See Dunbar v. Seger-Thomschitz, 615 F.3d 574 (5th Cir. 2010) (applying Louisiana law because the artwork was most recently possessed openly and continuously in that state); Bakalar v. Vavra, 2008 WL 4067335 (document signed by original owner simply gave right of sale, not title, to dealer; because first sale occurred in Switzerland, validity of transfer of title should be located according to the law of that place); Bakalar v. Vavra, 619 F.3d 136 (2d Cir. 2010) (law of state with the greatest interest in this case should apply; New York and Austria have greatest interests; Austrian interests furthered by application of New York law).