Could a state court's selection of another state's substantive law exceed constitutional limitations on choice of law?

AuthorThatcher, Charles M.
  1. INTRODUCTION

    On those infrequent occasions when the Supreme Court of the United States has addressed limitations that the Constitution imposes on a court's power to choose the law governing resolution of issues arising in multistate litigation, the Court has never reversed a lower court's decision to apply the substantive law of another state. (1) Almost all of the Supreme Court cases treating constitutional limitations on choice of law have involved possible overreaching by courts that applied forum law rather than the conflicting law of another state or nation. (2) This article considers the rare case in which a litigant challenges a state court's decision to apply the substantive law of another state rather than the conflicting law of the forum, a situation that has been described as underreaching by the state court. (3) The conclusion that a court's choice of another state's substantive law might be unconstitutional when that law conflicts with the forum's own substantive law is, at the very least, counter-intuitive.

    Most of the Supreme Court Justices agreed in Allstate Insurance Co. v. Hague (4) that the two principal sources of constitutional limitations on choice of law are the Full Faith and Credit Clause (5) and the Due Process Clause. (6) A plurality of the Court in Hague announced a single standard which satisfies the restrictions that each clause imposes on choice of law: (7) "[F]or a State's substantive law to be selected in a constitutionally permissible manner, that State must have a significant contact or significant aggregation of contacts, creating state interests, such that choice of its law is neither arbitrary nor fundamentally unfair." (8) Yet, as concurring Justice Stevens opined in Hague, "the [Full Faith and Credit] Clause should not invalidate a state court's choice of forum law unless that choice threatens the federal interest in national unity by unjustifiably infringing upon the legitimate interests of another State." (9) Consistent with that opinion, a state court's application of the substantive law of another state could not possibly "infring[e] upon the legitimate interests of [that other] State." (10) Quite the contrary. (11) Moreover, if satisfaction of the Full Faith and Credit Clause necessarily insulates the forum court's decision to apply some other state's law from a due process challenge, then a state court's application of the substantive law of another state would seem to be constitutionally permissible.

    The standard which a majority of the Court's membership endorsed in Hague (12) and which continues to govern constitutional limitations on choice of Law (13) is permissive. The Hague test has been described as requiring only "minimal constitutional scrutiny" (14) under a "rational basis" standard of review; (15) it fosters an attitude of "judicial abstention" (16) under an '"anything goes' approach" (17) in reviewing lower court decisions on choice of law. The ease with which the proponent of a state court's choice of law can satisfy the Hague test (18) makes it unlikely that a state court's application of the substantive law of another state could ever be held to exceed the modest limitations the Constitution imposes on choice of law.

    When a state court chooses to apply another state's law, rather than the conflicting law of the forum, based on the court's straightforward application of a traditional choice of law rule, the prospect of mounting a successful constitutional challenge is even dimmer. (19) Consider a hypothetical breach of contract action in which a state court chooses the substantive law of another state by applying the forum's traditional choice of law rules, under which the contractual capacity of a party is determined in accordance with the local law of the state where the contract was made, (20) and a contract formed by the process of offer and acceptance is made in the state where an offeree accepts the offer. (21) Even if the choice of the other state's substantive law would appear to produce an unreasonable result from an intuitive perspective, "the Supreme Court has never clearly [rejected an] unreasonable [result] reached [by the application of a] traditional choice of law rule[,]" even though application of such an unreasonable law "is quite at odds with the Court's own pronouncements." (22)

    In its initial treatment of the subject, the Supreme Court appeared to take the position that application of the substantive law of the state where a contract was made (23) or modified (24) was a constitutional imperative under the Due Process Clause of the Fourteenth Amendment in order to protect freedom of contract. (25) Although the Court has long since repudiated that position, it has never overturned a state court's application of the substantive law of the place where an unmodified contract was made. (26)

    Application of the Hague test (27) to the facts of the following hypothetical case supports the proposition that a state court's decision to apply another state's substantive law when that law conflicts with forum law could be unconstitutional under the due process clause. That conclusion is warranted even though choice of the other state's law does not violate the Full Faith and Credit clause and even though the court makes that choice by applying the traditional rule that questions of capacity to contract are resolved under the local law of the state where the contract was made. If that proposition is sound, it supports the proposition that the Due Process Clause is the exclusive source of constitutional limitations on choice of law in such a case. (28)

  2. THE HYPOTHETICAL CASE OF PI V. DELTA

    Gerry Pi brought suit against Dawn Delta in a State F[orum] court seeking specific performance of a contract for the sale of land. Pi and Delta are both lifelong domiciliaries and citizens of State F, where they have always resided in the city of Feffington. When the contract was made, Pi was a fifty-year- old real estate tycoon, and Delta was a twenty-year-old college student majoring in veterinary science at Faber University in Feffington. Delta had been employed for the preceding two years under annual contracts as an assistant at a local veterinary clinic. Delta is an only child. Her mother died when Delta was fifteen, and her father died shortly after Delta's twentieth birthday. Delta's father had been a wealthy industrialist, and Delta inherited most of the assets in her father's estate, including the family mansion in Feffington. One month after Delta's father died, Pi contacted Delta and asked whether she would be willing to sell the mansion to Pi. Delta responded that such a sale was possible. Lawyers for the parties conducted extensive negotiations in Feffington for Pi's purchase of the property from Delta. At the conclusion of the negotiations on March 1, Delta's lawyer delivered to Pi an elaborate writing that Delta's lawyer had drafted and Delta had signed. The writing communicated Delta's formal offer to sell the property to Pi for a price of one million dollars and invited Pi to accept by signing and dating his copy of the written offer and mailing it to Delta at the mansion within thirty days. If Pi accepted Delta's offer, the parties understood that the closing was to take place at the mansion. Six days later, Pi decided to accept Delta's offer. While Pi was at his office in Feffington on the morning of March 7, Pi signed and dated Delta's signed written offer in the blanks marked "Acceptance" and "Date." Pi enclosed this written acceptance in a stamped envelope and addressed it to Delta at her mansion. Pi put the envelope in his brief case, intending to mail it in Feffington later that day. Pi forgot to do so, however, before he drove two hundred miles west across State F early that afternoon to attend a wedding in Fexarkana, a city bisected by the State F-State X border. Pi realized during the course of his journey that he had not yet mailed his signed written acceptance of the offer to Delta. When he arrived in Fexarkana, Pi removed the envelope containing the written agreement from his brief case and deposited it in a mailbox. Unbeknownst to Pi, the mailbox happened to be located on the State X side of the F-X border. Delta received Pi's written acceptance in Feffington two days later. When Pi returned to Feffington after the wedding, he telephoned Delta to schedule the closing. During the course of that conversation, Delta informed Pi that she had changed her mind and was unwilling to sell the family mansion after all. Delta's lawyer had examined the envelope containing Pi's written acceptance and noticed that the envelope bore a State X postmark. Although the age of majority in State F is nineteen, the age of majority in State X is twenty-one. Delta's lawyer advised her that because Pi had dispatched his written acceptance of Delta's offer in State X, the contract had been made in State X, and therefore Delta could disaffirm it on grounds that she was a minor under the substantive law of State X. Delta accordingly refused to perform the contract, and Pi promptly filed suit against her in a State F court seeking specific performance for breach of the land sale contract.

    At a preliminary hearing before the State F trial court, Delta's lawyer made a motion for summary judgment, arguing that the contract was voidable by Delta on grounds of minority. The parties stipulated that Pi had deposited his written acceptance of Delta's signed offer in a mailbox that was located in State X. Under the common law rule of both States, State X was the place where the contract had been made, because it was the place where the last, or the "principal," (29) event necessary to conclude the offered bargain had occurred. (30) Under the traditional choice of law rule still prevailing in State F, the local substantive law of the place where a contract is made determines each party's capacity to enter into a contract. (31) Delta was twenty...

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