The Conduct-regulating Exception in Modern United States Choice-of-law

• Publication year: 2022

36 Creighton L. Rev. 425. THE CONDUCT-REGULATING EXCEPTION IN MODERN UNITED STATES CHOICE-OF-LAW

Creighton Law Review

Vol. 36

JOHN T. CROSS(fn*)

INTRODUCTION

As courts and scholars regularly remind us, choice-of-law doctrine in the United States underwent a sea of change during the latter half of the last century. The modern methods of selecting law represent a fundamentally different way of thinking about the choice-of-law problem. The new thinking most clearly manifests itself in the field of torts. Whereas the classical method focused almost exclusively on where the tort occurred, the modern methods focus more on who was involved in the alleged tort. Thus, courts applying the modern choice-of-law methods are much more likely to select the law of the jurisdiction where the parties reside than the law of the place of the tort.(fn1)

Of course, to every rule there is an exception. Even under the modern methods there are certain issues for which courts continue to apply the law of the place where the tort occurred. The most notable of these issues are those concerning a party's conduct. If the state of conduct has a law regulating how the tortfeasor or victim is supposed to act in the particular situation, courts will apply that standard rather than the law of the parties' residence.(fn2) In fact, this preference for the conduct-regulating law of the conduct state is virtually absolute, winning out even over the law of other interested states. Courts as a practical matter recognize a "conduct-regulating exception" to the normal interest-based choice-of-law methods.

This article has two main goals. First, it will demonstrate that a conduct-regulating exception indeed does exist. Although most of the commentary focuses exclusively on the numerous New York cases dealing with the issue,(fn3) a review of cases across the nation reveals that courts across the land treat conduct-regulating rules differently than loss-allocating rules in the choice-of-law process. Second, the article will attempt to justify the existing exception based on choice-of-law policy.

Part I provides a background, discussing the per se conduct-regulating exception that existed under the classical approach to choice of law. Part II shows how courts have carried over a similar exception into the modern interest-based approaches. Even though there is very little discussion of conduct-regulating rules in case law or literature, courts continue to turn to the law of the conduct state to gauge whether a party's conduct was proper, usually without even considering the interests of the other connected states. For all intents and purposes, then, the modern interest-based choice-of-law methods preserve the exception for conduct-regulating rules that was explicitly set out in the classical approach.

Part III explores whether the conduct-regulating exception that exists in case law can be justified. Although a general exception for all conduct-regulating rules is not defensible, sound policy considerations do support an absolute preference for the conduct-regulating law of the conduct state in certain particular circumstances. After defining the logical parameters of the exception, Part III.B defines what it means for a rule to be conduct-regulating for purposes of the exception.

At the outset, it might prove helpful to settle on a few conventions to simplify the discussion. This article will use the term "state" to refer to all political subdivisions that have their own substantive law. Except where the context makes it clear that the discussion applies only to the states of the United States, such as in the discussion of the due process and full faith and credit limitations on choice of law,(fn4) a "state" can also be a foreign nation, Canadian province or Australian state, or the national government in a federal system.(fn5) Second, the article will employ the abbreviation "CS" to refer to the state where the conduct giving rise to the tort claim occurred. Finally, the article will use the abbreviation "OS" to refer to the other state whose law is being considered in the choice-of-law decision. Of course, depending on the circumstances, there might be more than one other state whose law is under consideration. In these situations, OS will refer to all candidate states other than CS unless otherwise specified. Although these conventions may take a while to get used to, they help to reduce the verbiage of the discussion.

I. THE CONDUCT-REGULATING EXCEPTION UNDER THE CLASSICAL APPROACH

From the late nineteenth century through the middle of the twentieth, choice-of-law in the United States was extremely uniform. Courts used a highly territorial methodology that evolved from the writings of legal scholars such as Ulric Huber, Frederich von Savigny, Joseph Story, and Joseph Beale.(fn6) The classical choice-of-law-method focused its efforts on determining where the claim or defense in question "vested." A central axiom of the approach was that the state in which the right vested had exclusive authority to define the scope, and even the existence, of that right.(fn7) In most cases, a right vested in the state where certain key events giving rise to the right occurred.

This strictly territorial approach is reflected in the highly influential first RESTATEMENT OF CONFLICT OF LAWS.(fn8) The first Restatement dominated United States choice of law for the first half of the twentieth century. Although most states have abandoned its approach in tort cases, something resembling the first Restatement still remains in force in ten states in tort.(fn9)

The first Restatement's general choice-of-law rules for tort cases are set out in sections 377 to 390. For most issues, these sections call for use of the law of the place of the "wrong." As a practical matter, this standard usually results in use of the law of the state where the defendant acted and the plaintiff suffered an injury. However, it is quite common for a defendant's acts in one state to result in injury in a different state. Products liability cases are perhaps the most common example, where a product that is designed and manufactured in one state causes injury elsewhere. Other sorts of cases likewise involve acts and injuries in separate states, such as defamation cases involving the mass media and plane or train wrecks. In cases where the accident and injury are in separate states, section 377 of the first Restatement defines the place of the wrong not as the place where the wrongful act occurred, but instead as the place where the last event necessary to make defendant liable took place.(fn10) The last event is almost always the victim's injury. The rule of section 377 flows naturally from the vested rights axiom of the first Restatement, under which the tort does not exist until all events necessary to make the defendant liable have taken place.(fn11)

On the other hand, the first Restatement contains several exceptions to this general principle. The most important for present purposes is section 380(2), which provides:

Where by the law of the place of wrong, the liability-creating character of the actor's conduct depends upon the application of a standard of care, and such standard has been defined in particular situations by statute or judicial decision of the law of the place of the actor's conduct, such application of the standard will be made by the forum.

This section establishes a broad exception for certain conduct-regulating rules. A state statute or common law rule that specifies how a person is supposed to act in a given situation will be applied to all tort claims arising from that conduct, regardless of where the resulting injury occurs. Section 380(2) typically applies in a case where plaintiff argues that the defendant's conduct is negligent per se because it violates a standard set by positive law.(fn12)

Application of the rule of section 380(2) results in an interesting and curious hybrid of laws. The law of the state of injury continues to govern most issues in the case, including the basic elements of the particular tort claim. The law of CS becomes a factor only if the injury state establishes a negligence standard.(fn13) In that case, the court must refer to the law of CS, but only on the narrow issue of whether defendant's acts are per se unreasonable because they violated the standard set by CS.

Section 382 is the converse of this principle. Under section 382(1), if the law of the state where the defendant acts requires the defendant to act in a certain way, the defendant cannot be held liable for acting that way even if the injury occurred in a state with a different rule. Similarly, section 382(2) provides that conduct privileged in the state of conduct may never give rise to liability. Like section 380(2), then, these rules give CS primary control over a party's acts within that state whenever CS has explicitly regulated the activity in question.

In addition to these specific provisions of the first Restatement, many courts applying the classical approach recognized still another exception to the general state of injury rule in intentional tort cases. In an excellent exposition of this intentional torts exception, Professor Ehrenzweig noted that courts tended to gauge whether a particular act constituted an intentional tort by reference to the law of CS rather than the injury state, at least where...