Choice of Law
Many people assume that New York courts always apply New York law and that California courts always apply California law. But courts frequently apply the law of other jurisdictions, trying to decide cases as if they were a court somewhere else. This allows parties to litigate claims in conveniently located courts or in courts in which there is personal jurisdiction over the parties, without necessarily changing what law governs the claims. It also leads to some complex analysis, which takes time and costs money.
Why should you read this post about choice of law issues?
You really want Delaware law to apply to your case, but you don’t want to actually go to Delaware.
You want to know how an American court would apply Chinese law.
You are from the future and you want to know what blog posts looked like in the 2020s.
Image credit: https://en.wikipedia.org/wiki/Law#/media/File:Joao_sem_terra_assina_carta_Magna.jpg
How Courts Determine What Law Applies
Different courts have their own rules to determine what law to apply to a case. And, often, courts apply their own rules to make that determination. This provides an exception to the general concept that the same law may apply to a case, regardless of which court hears the lawsuit: different courts may apply different rules to determine which law applies.
Many courts first look to see if the parties agreed which law should apply to the case in a contract. Many contracts have a “choice of law” provision that tells the court which law the parties want to use. If the parties to an agreement agree to apply Delaware law to a case, a New York court may apply Delaware law as it did, for example, in this case. Although a court may disregard a choice of law provision if a dispute has no connection to the jurisdiction of the chosen law or if there is a public policy reason to disregard the choice, New York has a statute that expressly authorizes the use of New York law for certain disputes over more than $250,000.
In the absence of a contract, Illinois and the courts in some other states apply the “most significant relationship” test, which considers multiple factors to determine which jurisdiction has the closest connection to the dispute. These factors include
the place of the injury;
the place of misconduct;
the domicile, residence, nationality, place of incorporation and place of business of the parties; and
the place where the relationship between the parties is centered.
But other states, like Virginia and Maryland, apply the lex loci delicti test, which applies the law of the state where the wrongful act occurred.
Courts often apply these tests when one of the parties asks the court to dismiss the case or to grant judgment in its favor. As part of its application, the party may have to argue which law applies and then explain why it prevails under that law. That gives the opposing side an opportunity to claim another law applies and for the court to decide which party is correct.
How Courts Apply Another Jurisdiction’s Law
Once a court decides to apply another jurisdiction’s law, it then proceeds as if it were a court in that jurisdiction. That generally means citing the applicable law from the other jurisdiction instead of the local law.
So, for example, when a New York court considers a breach of contract claim, it may cite New York statutes and legal precedents to explain what the necessary elements of the claim are. But if it considers the claim under Delaware law, it will cite Delaware statutes and precedents instead and apply those rules to the case. Similarly, if a Florida court considers a Massachusetts Labor Law claim, it will cite the Massachusetts statute and apply its rules.
Sometimes, however, there are no statutes or precedents from another jurisdiction that directly answer the question that a court needs to consider. In those situations, courts often will apply the law in the way they believe the other state would have applied the law. And, in some situations, courts in one jurisdiction can “certify a question” to the highest court of another state for it to answer so that the local court can apply the law correctly.
Sometimes U.S. Courts Apply Foreign Law
Applying different laws within the United States is somewhat straightforward. In practice, there is not a great difference between citing New York law in a court case versus citing Nevada law. It really just means clicking a different box in Lexis or Westlaw when performing a search for law and then citing the cases that come up there:
A screenshot from Lexis.com
And although laws differ across states, general principles are consistent and they are articulated in court decisions using language that judges throughout the country understand.
But sometimes, parties to a contract agree to apply the law of another country. Or the choice of law analysis leads to the conclusion that a foreign country’s law should apply, often because the underlying conduct took place abroad. In those situations, the foreign law may be written in another language, or involve concepts with which judges in the United States may not be readily familiar.
In those situations, lawyers often hire lawyers from the foreign country to submit a report to the judge to explain what the foreign law is and how it applies to the case. Of course, different parties to a case may have different foreign law experts who have competing views on how the foreign law applies. Ultimately, the local judge then decides which foreign law expert seems to be correct and then applies the law as she understand it to be.