Courts Flailing in the Waters of the Louisiana Conflicts Code: Not Waving but Drowning

• Author: Russell J. Weintraub
• Position: Professor of Law and holder of Powell Chair, University of Texas School of Law
• Pages: 1365-1377

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Professor of Law and holder of Powell Chair, University of Texas School of Law. The title is from Stevie Smith, Not Waving But Drowning, in Selected Poems 18 (1964):

I was much too far out all my life. And not waving but drowning.

I Introduction: Cases Studied

I analyzed the decisions of Louisiana state courts and of federal courts that, as of December 1, 1999, have applied Articles 3537 and 3540 of the Louisiana Civil Code, which govern choice of law for "conventional obligations."¹ Of the thirty- two cases in this group,² fifteen misapply the articles in the most fundamental Page 1366 manner. The courts in these cases never identify a difference between Louisiana law and the law of another state before making a choice-of-law analysis.³ In three more cases, the courts apply the Code provisions even though the differences between Louisiana law and the law of the other state would not produce a difference in result.⁴ Other cases make some other fundamental mistake in the mechanical process of applying the Code provisions.⁵ Only five,⁶ or perhaps six cases⁷ apply the Code as the drafters intended. It is for these few cases that criticism reaches the level of evaluating the courts' sagacity in applying the Code to the circumstances.

I wish to make it clear at the outset that I am not disparaging the wisdom or competence of any judge. Judges are not stupid, just busy. They meet choice-oflaw issues rarely. Of the twenty-nine judges on the Louisiana courts of appeal who participated in these decisions, only four had more than one choice-of-law case, and each of those had only two cases.⁸ Of the twenty-one federal Fifth Circuit and district court judges who participated in these decisions, six had more than one case, and only one of these had more than two cases.⁹ Perhaps in no other area of Page 1367 the law are judges as dependent on the parties' lawyers to provide guidance. The only time that it is fair to blame a judge for a botched choice-of-law decision is when counsel has held up the light and the judge persists in not seeing. Without studying the briefs and transcripts of arguments in all of these cases, I cannot know whether this has occurred, but it is counter-intuitive to think that such obduracy in error occurs frequently, if at all.

Part II of this article analyzes the cases. Part III draws some conclusions and suggests actions that might result in better choice-of-law decisions.

II Analysis Of The Cases

A Cases That Do Not Indicate Any Differences Between The Laws

As stated in Part I, fifteen of the cases make the basic mistake of purporting to apply the Code without adverting to any differences between Louisiana law and the law of another state.¹⁰ The reason that this is a basic mistake is that the Code selects law separately for each issue in the case and requires a court to apply "the law of the state whose policies would be most seriously impaired if its law were not applied to that issue."¹¹ In order to determine which state's policy "would be most seriously impaired," a court must first identify the substantive rule applicable to the issue in Louisiana and in the other state or states that have contacts with the parties and the transaction. If, and only if, there are different applicable rules, should the court proceed to identify the policies underlying the conflicting rules and then Page 1368 determine which policy would be most seriously impaired if not given effect. Moreover, two years after the Code took effect, Professor Symeonides, who was the Reporter for the Conflicts Codification, wrote an article explaining the new law.¹²In this article, he commented on two of the cases discussed here¹³ and criticized them for not determining whether there was any difference between the laws of Louisiana and the other states involved. He remarked, "[w]ithout [reference to the relevant policies of the two states] the choice-of-law decision is bound to degenerate into a quantitative counting of contacts."¹⁴

It may well be that in one or more of these fifteen cases the author of the opinion was aware of a difference in law that he or she did not mention. For example, one of the cases in the sample, Davis Oil Co. v. TS, Inc.,¹⁵ emerged again in the Fifth Circuit in an opinion that indicates why a choice between Ontario and Louisiana law might be necessary.¹⁶ Moreover, the Fifth Circuit opinion twice correctly stated that if there is no difference in law, the Code requires the court to apply the law of the Louisiana forum.¹⁷ The Fifth Circuit opinion decided that a clause choosing Ontario law did not cover the issue before the court and that therefore Article 3540 did not require application of that law.¹⁸ The opinion should have gone on to explain why, in the absence of an effective choice of law, Article 3537 required the court to apply Louisiana law. The opinion, however, simply assumes that if Ontario law does not apply under the choice-of-law clause, the court can eliminate Ontario law from its analysis.¹⁹

Could the drafters, by more clearly stating the central importance of determining whether it makes any difference which law applies, have prevented these fifteen courts from misapplying the Code? Products in everyday use have conspicuous warnings to guard against misuse. I have a four-legged aluminum ladder that has three such warnings. The ladder has a thin plastic shelf near the top for holding tools, pails, and such. Bold letters on this shelf read "NOT A STEP." Three steps from the top of this twelve-foot ladder there is a sign reading "DO NOT CLIMB ABOVE THIS STEP." Elsewhere there is a sign stating: "WARNING. MISUSE OF THIS LADDER CAN RESULT IN INJURY OR DEATH." Perhaps the drafters should have done the same for Article 3537. "WARNING. MISUSE OF THIS SECTION WILL PRODUCE NONSENSE. UNTIL YOU KNOW THAT THE LAW OF SOME OTHER STATE DIFFERS FROM LOUISIANA LAW IN A WAY THAT WILL AFFECT THE RESULT, USE LOUISIANA LAW."

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Does not comment (d) to Article 3537 clearly convey this message?

[T]he first step of the process is to identify "the relevant policies of the involved states." . . . The "relevant policies" of that state are identified through the resources of the interpretative process by focusing on the specific rules of substantive contract law whose applicability is being urged in the particular case.²⁰

Not clear enough apparently. One of the fifteen cases, CXY Chemicals U.S.A. v. Gerling Global General Insurance Co.²¹ quotes comment (d),²² but never indicates whether Alberta and Louisiana laws differ with regard to construing the insurance policy in issue. Instead, the court discusses the abstract policies that might cause a state to construe an insurance policy as covering or not covering a loss.²³

I have not included Cherokee Pump & Equipment Inc. v. Aurora Pump²⁴ in the fifteen cases, although it selects Illinois law without first determining whether that law is different from Louisiana law. In Cherokee Pump, a Louisiana distributor sued an Illinois manufacturer for wrongful termination of the distribution contract. The contract chose Illinois law, under which the termination was proper.²⁵ The reason that this case is not included as improperly choosing law when a choice is not necessary, is that by choosing Illinois law, the court avoided the difficult issue of whether the termination was improper under a recently enacted Louisiana statute and, if so, whether the court could constitutionally apply the statute retroactively.²⁶It is legitimate adjudicative strategy to decide a case on an easy issue in order to avoid a difficult issue, especially one of constitutional dimensions.

The problem with this strategy in Cherokee Pump is that the choice-of-law issue was far more difficult than the court seemed to think. The opinion dismissed the dealer's contention that Illinois law "contravenes the public policy"²⁷ of Louisiana by abrogating the termination requirements of the Louisiana's Repurchase Statute:

We conclude that [the distributor] has not met that burden. It has adduced no authority to establish that the amendment to the Repurchase Statute expresses a public policy of Louisiana that would displace the choice-oflaw determination made by the parties.²⁸

Perhaps this dismissal of the public policy argument is justified in view of the Louisiana distributor's burden of persuasion. Nevertheless, a choice-of-law clause imposed by a franchiser or manufacturer should not deprive a state's franchisees Page 1370 and distributors of protection under statutes specifically designed to ameliorate contracts of adhesion. In some states, the franchise statute specifically invalidates choice-of-law clauses which deprive local franchisees of the statute's protection.²⁹Even without an express provision invalidating choice-of-law clauses, courts have refused to apply such clauses if they choose law that gives less protection than the franchisee's home-state statute.³⁰

Cherokee Pump suggests another question. Does what I have said above, that a court should determine whether the law of another state is different from Louisiana law, apply to Article 3540, which gives the parties power to choose law? Suppose, for example, the contract chooses Missouri law and neither party demonstrates that Missouri law "contravenes the public policy of the state whose law would otherwise be applicable under Article 3537."³¹ Should the court, with the assistance of the parties, simply determine Missouri law and apply it? Perhaps so if the court can easily determine and apply Missouri law. On the other hand, it might be more efficient to assume that Missouri law would produce the...