Nebraska Choice of Law: an Updated Synthesis

• Publication year: 2022

53 Creighton L. Rev. 339. NEBRASKA CHOICE OF LAW: AN UPDATED SYNTHESIS

NEBRASKA CHOICE OF LAW: AN UPDATED SYNTHESIS

PATRICK J. BORCHERS ^[D1]

I. INTRODUCTION

In 2005, I wrote an article in this Review ^[1] endeavoring to con-dense Nebraska choice-of-law principles into black-letter, Restatement-like rules. My purpose in doing so was to help busy judges and lawyers who generally lack the luxury of time necessary to navigate the shifting landscape of post-Conflicts-Revolution doctrine. The article had some success. It got cited a bit, ^[2] and some lawyers and judges have told me that it was helpful to them.

More than a decade later, it is time to update it. Some of the rules are still accurate and some need revision. A few new rules are added for completeness. Nebraska follows the Second Conflicts Restatement, which was promulgated in 1971. ^[3] With work underway on a Third Restatement, ^[4] it seems likely that at some point the Third Restatement will influence Nebraska courts, so I will note the Third Restatement drafts where they are germane.

I will not repeat all the analysis that went into the rules I drafted in 2005. Instead, I will repeat the original black-letter rules and assess them in light of developments since then. If the rule needs revision, I will offer a revised rule. In some cases, I draft new rules either for the sake of completeness or to update the analysis. Revised and new rules are so labeled. In conclusion, I condense the current rules into black letter form.

II. GENERAL RULES

(New) General Rule #1: Unless there is a compelling reason to depart from them, Nebraska courts follow the presumptive rules of the Restatement (Second) of the Conflict of Laws.

This rule is new. Although Nebraska courts have long purported to follow the Second Restatement, ^[5] like many other courts this primarily meant citation to the most open-ended provisions in the Second Restatement, notably sections 6 (the general "most significant relationship" test), ^[6] 145 (the general torts rule), ^[7] and 188 (the general contracts rule). ^[8] Since 2005, however, some prominent state courts have begun to cite the more specific provisions, such as Section 146 which creates a presumption that in personal injury cases the law of the state of the injury governs. ^[9]

Happily, Nebraska courts have picked up on this trend. Among the most prominent are Section 146 which points to the law of the injury state in tort cases, ^[10] Section 193 which points to the law of the location of insured risk in insurance contracts, ^[11] and Section 187 on the validity of choice-of-law clauses. ^[12] I view this as a positive development, because it gives courts a concrete starting place, as opposed to trying to balance up to eleven different abstract factors. ^[13] Moreover, the presumptive rules are just that - presumptive. If strong considerations point to a different state's law applying, Nebraska courts have applied it. For example, in Heinze v. Heinze, ^[14] a case involving Nebraska's now-repealed guest statute, ^[15] the Nebraska Supreme Court applied Nebraska law rather than that of the injury state because both parties were domiciled in Nebraska. ^[16]

Two other general rules are obvious, but worth stating. One concerns the approach taken by courts in diversity cases. The law, since the famous United States Supreme Court case in Klaxon v. Stentor Electric Manufacturing Co., ^[17] is that federal courts sitting in diversity apply their home state's choice-of-law approach. Thus, unsurprisingly, Nebraska federal courts sitting in diversity apply Nebraska choice-of-law principles. ^[18] The other is that Nebraska courts follow the majority approach ^[19] that if neither party raises the possibility of another state's or nation's law applying, Nebraska law applies. ^[20]

This then yields two other general rules:

(New) General Rule #2: Nebraska federal courts sitting in diversity apply Nebraska's choice-of-law principles.

(New) General Rule #3: If no party timely raises the possible applicability of another State's ^[21] law applying, Nebraska law applies.

III. TORTS

The tort rule and exceptions as set forth in 2005 read as follows:

Tort Rule: In tort cases in which the parties or events are connected with more than one State, the law of the State in which the plaintiff is injured governs.

Tort Exception # 1: If the laws of the connected States conflict as to an issue of loss distribution and each party contesting that issue is domiciled (or, in the case of a business entity, has its principal place of business) in the same State and that State is not the injury State, the law of the State of the contesting parties' common domicile (or principal place of business) governs as to the contested issue. For purposes of Exception # 1, "the same State" includes States that are distinct but have identical laws on the issue being contested.

Tort Exception # 2: If the injury and the conduct causing the injury occur in different States, and the laws of those States differ as to an issue of conduct regulation, the law of the State in which the conduct occurred applies. ^[22]

The tort rule and the first exception continue to nicely explain Nebraska law. In split domicile cases, Nebraska courts ^[23] and federal courts following Nebraska conflicts law ^[24] have applied the law of the injury state. In common domicile cases - as well as cases in which the only connection with a state is that injury occurred there - cases continue to apply the domiciliary law. ^[25]

The line between conduct regulation and loss allocation in tort law is only implicit in Nebraska law, and not expressly adopted by the Second Restatement. However, the draft Third Restatement adopts it, ^[26] and important state courts - such as the New York Court of Appeals-employ it. ^[27] The second exception has held up reasonably well. In cases in which the rule is clearly conduct regulating, and the conduct and the injury take place in different states, cases have generally applied the conduct state's law. ^[28]

Punitive damage choice-of-law issues have arisen frequently since 2005. The Nebraska Constitution forbids the award of punitive damages. ^[29] Most states, however, allow for punitive damages, at least in some circumstances. ^[30] Cases in which the liability-creating conduct takes place in a state that allows for punitive damages, but the injury takes place in Nebraska, have proved troublesome. In my 2005 article, ^[31] I relied heavily on the federal court decision in Fanselow v. Rice ^[32] in which the court allowed Minnesota's punitive damage law to apply to an accident in Nebraska, because the allegedly reckless actions leading to the Nebraska truck-automobile accident had been made in Minnesota. ^[33] In my view, this was and is the correct approach, because punitive damages seek to regulate and deter bad conduct, so the state in which the conduct took place is most rationally applied. ^[34] Some courts since have followed Faneslow and allowed a claim for punitive damages to stand under the conduct-state's law. ^[35]

However, a substantial number of cases have not allowed punitive damage claims to stand on facts like this. In cases in which the liability-creating conduct took place outside of Nebraska, but the injury occurred in Nebraska, several decisions have applied Nebraska law to deny punitive damages. ^[36] In many of these cases, however, there was little other than the conduct to connect the dispute to the conduct state, and connections to Nebraska other than the location of the injury. ^[37]

A complete reconciliation of these cases is not possible. Nonetheless, punitive damages need a separate tort exception. The following tort exception does a reasonably good job of reconciling the conflicting authorities:

(New) Tort Exception #3: In cases in which the plaintiff claims punitive damages under the law of another state, and the injury occurs in Nebraska, a claim for punitive damages will not be allowed unless the law of the State in which the conduct occurs allows for punitive damages and the conduct State has an interest in deterring the conduct that outweighs Nebraska's interest in applying its constitutional prohibition on punitive damages.

IV. CONTRACTS

The contracts rules in 2005 read as follows:

Contract Rule # 1: A choice-of-law clause not subject to an accepted contract defense (such as fraud or duress) is enforcea-ble if it chooses Nebraska law. A choice-of-law clause not subject to an accepted contract defense is enforceable if it chooses another State's law unless either there is no reasonable basis for the choice or the choice violates a fundamental public policy of Nebraska.

Contract Rule # 2: Subject to the sub-rules below, the law applicable to a contract without an enforceable choice-of-law clause is that of the State in which the parties contemplated the principal performance of the contract would occur, unless each party contesting that issue is domiciled (or, in the case of a business entity, has its principal place of business) in the same State and that State is not the performance State, in which case the law of the State of the contesting parties' common domicile (or principal place of business) governs as to the contested issue. For purposes of Contract Rule # 2, "the same State" includes States that are distinct but have identical laws on the issue being contested. ^[38]

As to the first contract rule, this is still accurate as Nebraska courts continue to rely heavily on...