Conflict of laws in the United States

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The choice of law rules in the Conflict of Laws in the United States have diverged from the traditional rules applied internationally. Choice of law is a procedural stage in the litigation of a case when it is necessary to reconcile the differences between the laws of different states, and in the U.S. between individual federated states. The outcome of this process potentially requires the courts of one jurisdiction to apply the law of a different jurisdiction in lawsuits arising from, say, family law, tort or contract.

New approaches in the United States
There were many criticisms of the traditional approach from members of the U.S. legal community who saw it as too rigid, sometimes forcing application of the laws of a state that had no connection to either party, except that a tort or contract claim arose between the parties in that state.


Renvoi
Courts may look for a provision in the law of the choice of law state that permits the court to use the lex fori, i.e. law of the forum state. For example, suppose State X has a rule that says that if property located in State X is conveyed by a contract entered into in any another state, then the law of that other state will govern the validity of the contract. Suppose also that State Y has a rule that says that if a contract entered into in State Y, conveys property located in any other state, then the law of that other state will govern the validity of the contract. Now suppose that party A conveys land located in State X to party B through a contract entered into in State Y. If a lawsuit arising from that transaction is brought in State X, the law of State X requires the courts of that state to apply the law of the state where the contract was made, which is state Y. However, the courts of State X might note that a court in State Y would apply the law of State X, because that is where the land is located, and the law of State Y follows the land.

Most U.S. states frown upon renvoi in a choice of law situation. In this example, they would insist that the only law the courts of State X should look at is the law of contracts of State Y, not the "whole law" of State Y, which includes that state's law governing choice of law. The basic criticism of renvoi is that it can lead to an endless circle. In the above example, it could be argued that if the law of State Y points back to State X, then the law of State X would only once again require application of the law of State Y, and so forth and so on without end.


Significant contacts test
The significant contacts test evaluates the contacts between the states and each party to the case, and determines which state has the most significant contacts with the litigation as a whole. This test has been criticized for failing to respect the sovereignty of the state in which the cause of action arose, and because courts can tip the balance in one way or another in deciding which contacts are significant.


Seat of the relationship test
The seat of the relationship test specifically examines the relationship between the parties to the lawsuit, and uses the law of the state in which the relationship between the parties was most significant. For example, if two people who live in State X meet and develop a relationship in State Y, and a cause of action arises between them while they are traveling through State Z, a court of any state applying this test would probably apply the law of State Y, because that state is the seat of the relationship between these two parties.


Balance of interests test
The balance of interests test examines the interests of the states themselves, and the reasons for which the laws in question were passed. It is the brainchild of University of Chicago law professor Brainerd Currie, who outlined the doctrine in a series of articles from the 1950s and 60s. Under this form of analysis, the court must determine whether any conflict between the laws of the states is a true conflict, a false conflict, or an unprovided-for case.

A true conflict occurs when one state offers a protection to a particular party that another state does not, and the court of the state that offers no such protection is asked to apply the law of the state offering the protection. For example, suppose A, lives in State X, which has no cap on tort damages for injuries received in an auto accident. B lives in State Y, which caps tort damages for injuries received in an auto accident at $100,000. While traveling through State X, B causes an auto accident in which A is seriously injured. A sues B in B's home State of Y, but asks the court there to apply the law of State X. In this situation, it can be argued that State X has chosen to place no limit on recovery in order to protect its citizens and keep its roads safer; while State Y has chosen to place a limit on tort damages to prevent tort abuse and keep insurance costs down. Therefore, State X's law protects its plaintiffs, and State Y's law protects its defendants - the laws serve opposite purposes, but each state has an interest in its own law being applied, to advance its own purposes.
In such a case, if the interests are balanced, the law of the forum will prevail.
A false or apparent conflict occurs when the state offering the protection has no actual interest in the endorsement of that protection against the particular parties to the case. For example, some states prohibit spouses from suing one another for negligent torts, in order to prevent them from colluding in order to collect from insurance companies. Other states permit such suits, on the theory that people should be able to recover for their injuries, and possible collusion can be presented as a factor for the jury to deal with. Suppose that a couple, A and B, live in state X, which prohibits these suits, and they travel to state Y, which permits these suits. While in state Y, A negligently injures B, and upon their return to state X, B sues A in the court of state X, asserting that the law of state Y should govern. In this case, since neither party is from state Y, state Y has no interest in the application of the law to these persons.
An unprovided-for case is one in which each party is seeking to apply the law of the other state. For example, suppose State X has a law that limits recovery in a tort suit, and state Y has no such limit. A plaintiff from State X suing a defendant from State Y will want the rule of State Y to apply rather than the limit imposed by state X; the defendant will want the State X's limit to apply.
In such a case, the law of the forum will prevail.
Some courts have sought to distinguish different types of law, giving more weight to laws of foreign states that are intended to regulate conduct (e.g. prohibitions on disfavored activities), and less weight to laws of foreign states that are intended to allocate losses (e.g. tort immunity for charitable organizations; joint and several liability).


Comparative impairment test
The comparative impairment test asks which state's policies would suffer more if their law was not applied. This is similar to interest analysis, in that the interests of the state are taken into account - however, this test does not look to see which state benefits more from the application of its laws, but rather for situations in which the other state's interests will actually be harmed by the application of the laws of the forum state.


The "better rule" test
Use of the "better rule" test, like renvoi, is frowned upon because it appears to be little more than a gimmick to allow a court to apply the law of its own state. The test itself presupposes that, between the laws presented by the two or more states in which the action arose, there is one set of laws which is empirically better. Because courts will almost always presume that their own state has better laws, this is effectively a device to avoid applying choice of law principles altogether.


United States Constitutional limitations
The United States Supreme Court has held that there are certain limitations imposed by the U.S. Constitution on the ability of states to apply their own law to events occurring in other states.

In one of the earliest cases in this area, Home Insurance Co. v. Dick, 281 U.S. 397 (1930), the Court held that the state of Texas could not constitutionally apply its own rule invalidating contract clauses that required any statute of limitations under two years to a contract that had no relation to Texas beyond the fact that the plaintiff was a Texas resident. The plaintiff had sued a New York reinsurer of a Mexican corporation that was primarily insured in Mexico, which is where the "injury" had occurred when a tugboat owned by the company was lost in a fire. The plaintiff was living in Mexico at the time (although not a resident), but returned to Texas to file suit. These contacts were insufficient to satisfy the Due Process Clause of the Fourteenth Amendment.

The doctrine steadily developed in a series of cases over the following decades. In Pacific Employers Insurance Co. v. Industrial Accident Commission, 306 U.S. 493 (1939), the court held that there was no violation of the Full Faith and Credit Clause where the state of California applied its own law to a case in which a Massachusetts employee of a Massachusetts corporation sued his employer for an injury received in California, seeking relief that would be unavailable under the law of Massachusetts.

This was reaffirmed in Watson v. Employers Liability Assurance Corp., 348 U.S. 66 (1954) held that neither the Full Faith and Credit Clause nor the Fourteenth Amendment was implicated when a couple who had bought an insurance policy in Illinois and then moved to Louisiana sued the issuer of the policy under a provision in the Louisiana law that permitted such suits. A decade later, in Clay v. Sun Insurance Office, Ltd., 377 U.S. 179 (1964), the court explicitly stated that insurance travels with the insured, and that policy holders who move from one state to another can expect to have the laws of their new domicile apply to the interpretation of the insurer's liabilities on the policy.

Allstate Insurance Co. v. Hague, 449 U.S. 302 (1981) determined that the same analysis applies to both the Full Faith and Credit Clause and the Fourteenth Amendment; and that both are satisfied so long as there are sufficient aggregate contacts between the forum and the event giving rise to the cause of action. In the case itself, a Wisconsin resident who was employed over the state line in Minnesota was killed in a motorcycle accident in Wisconsin. The decedent's wife then moved to Minnesota, where she was appointed administratrix of her husband's estate. She sued the insurance company to recover a higher amount permitted under Minnesota law, and the courts agreed that this was permissible, because of the combination decedent's employment contacts with the state, and the insurance company's commercial contacts with the state.

In Phillips Petroleum Co. v. Shutts, 472 U.S. 797 (1985), plaintiffs residing in all fifty states brought a class-action suit in the state courts of Kansas against an oil company that had failed to pay interest on certain leases. The Kansas court hearing the case simply assumed that the law of Kansas was adequate for all the claims. The Supreme Court disagreed, holding that the Kansas court was required to determine the law of each state on the substantive questions of law, and apply the laws of each state to the claims brought by plaintiffs from that state. In the related case of Sun Oil Co. v. Wortman, 486 U.S. 717 (1988), the Court refused to apply this rule when Kansas had chosen to apply its own statute of limitations to causes raised by a diverse population of class-action plaintiffs. There the Court held that they had long been viewed as procedural matters. The states could choose to use their own with no concern for violating the Constitution