Concept
Why State Conflicts Rules Control
Which state's law applies
Why State Conflicts Rules Control
Klaxon carried the prohibition that Erie placed on independent federal determinations into the field of conflict of laws1, and four reasons support the move. Federal and state courts in one state must select the same law. A state decides for itself how far its law reaches. A federal judge finds state law and leaves its improvement to the state. And a conflicts rule often decides who wins. A fifth question, what authority the rule rests on, has a less tidy answer, and it explains why courts treat Klaxon as settled although Congress could change it.
Uniformity Within a State
The first reason concerns two courthouses in one state. Had federal judges applied their own conflicts rules, Klaxon reasoned, the accident of diversity would constantly disturb the equal administration of justice in state and federal courts sitting side by side, and any other ruling would do violence to the principle of uniformity within a state on which Erie rests.2 Judge Magruder had made the point a year earlier, warning that if diversity courts followed their own choice-of-law rules, “the ghost of Swift v. Tyson ... still walks abroad, somewhat shrunken in size, but capable of much mischief.” Klaxon puts the ghost to rest, since the federal court must again do whatever the state court would.3
Because the federal court applies the conflicts law that the courts of its own state would apply, Klaxon and Erie together produce substantial “vertical uniformity”.4 That uniformity runs within each state, not across the country. Federal judges in Missouri and Illinois, each following local conflicts rules, may select different laws for the same kind of collision, as the two states' own courts would, and the Court attributed that disuniformity to the federal system itself.5 A later section returns to the forum shopping that survives between states.
State Policy Autonomy
The second reason concerns who owns the question of how far a state's law reaches. Whatever lack of uniformity the rule produces among federal courts in different states, the Court said, is attributable to a federal system that “leaves to a state, within the limits permitted by the Constitution, the right to pursue local policies diverging from those of its neighbors.” Federal courts may not thwart those policies by enforcing an independent “general law” of conflict of laws, and Delaware, subject only to review on federal questions, is free to decide whether forum law or some other law governs a given matter.6
A conflicts rule is a state's statement about the reach of its own law. One commentator illustrates with a state that follows a territorial approach: it has pronounced that its law attaches no legal consequences to events outside its borders, just as if each statute were limited to “events in this state.” A federal court that applied that state's law to an out-of-state event under its own selection method would not, on this view, be applying that state's law at all.7 Following the forum's conflicts rule is part of what it means to apply the forum's law.
Day & Zimmermann, Inc. v. Challoner shows how far the Court carries that deference. It required a federal court in Texas to apply the Texas place-of-tort rule, which referred to Cambodian law, although the federal court had found Cambodia a disinterested state and the appellate court believed that Texas itself would not have applied the law of the place of the tort.8 The Court acted unanimously in a brief per curiam opinion.9 The deference runs in both directions. A state that applies its own law to every case in its courts makes a policy choice just as one that sends cases outward does, and the federal court sitting there follows whichever choice the state has made.10
Finding, Not Improving
The third reason describes the federal judge's job. The proper function of the federal court in diversity is “to ascertain what the state law is, not what it ought to be”.11 That sentence changes the question the judge asks, from “what is the best conflicts rule?” to “what have this state's courts decided?”
Klaxon itself shows the difference. The court of appeals had concluded that New York's right to interest before verdict applied, reasoning that “it is clear by what we think is undoubtedly the better view of the law” that damages rules are matters of substance to be settled by the law of the appropriate state. The Supreme Court answered that its own views are not the decisive factor in determining the applicable conflicts rule, so a lower federal court's idea of the better rule cannot be decisive either.12 The new question matters because a judge's idea of the best rule is an opinion about doctrine, while the forum state's rule can be found in what its courts have done. Only the second predicts what a state court would do with the same case, and a judge who follows the first reaches results that no court in the state would reach, to the advantage of whoever can get into federal court.
Outcome-Determinative Rules
The fourth reason explains why a conflicts rule falls on the Erie side of the line at all. In Guaranty Trust Co. v. York, the Court put aside “abstractions regarding ‘substance’ and ‘procedure’” and listed matters on which diversity courts must follow state law: burden of proof, conflict of laws, and contributory negligence. The nub of Erie, it explained, is that for the same transaction “the accident of a suit by a non‑resident litigant in a federal court instead of in a State court a block away, should not lead to a substantially different result.”13
The test is functional. It asks whether disregarding the state rule in federal court would significantly affect the result of the litigation, compared with an action on the same claim by the same parties in state court.14 A conflicts rule meets that test because it selects the law that governs the claim. Klaxon shows how: whether the plaintiff could recover interest before verdict under the New York statute depended on whether New York law governed the contract, so the conflicts question helped set the size of the judgment.15 A rule whose application either way leaves the winner and the amount unchanged raises no comparable concern. A later section on limitations periods and labels returns to the trap that a rule may count as substantive for Erie purposes and procedural for others.
The Footing of Klaxon
The four reasons are arguments of policy, and the rule's legal footing is weaker than Erie's. Stated simply, a federal court in diversity applies the substantive law of the state in which it sits, including that state's conflict of laws rules, rather than any general federal common law.16 Erie forbids federal courts to create that general law for state-law claims, but extending the ban to conflicts rules does not follow from Erie by necessity. Commentators observe that Klaxon seems neither constitutionally required nor an inevitable result of Erie's policy, because uniformity of decision between state and federal courts in the same state was only one aspect of Erie.17
One line of reasoning rests the rule on statute instead. Congress has provided no law or clear policy on which choice-of-law rules govern federal courts sitting in diversity, and in the absence of one the Rules of Decision Act determines that state law should apply.18 Congress certainly has constitutional authority to prescribe choice-of-law rules for diversity courts, but it has not done so, and the federal courts should not act in advance of a congressional directive.19 The rule is therefore policy and statute, not constitutional command, and that is why Congress could displace it.
A narrower constitutional claim does exist. One scholar argues that federal courts cannot contradict states about the scope of their own law without congressional authorization, which does not now exist, and doubts that Congress could authorize it. In that limited sense, he concludes, Klaxon is constitutionally grounded.20
The Supreme Court continues to adhere to Klaxon.21 Choice-of-law rules for diversity proceedings alone may carry the same spurious quality that led the Court away from Swift, and federal rules that would bind state and federal courts alike have yet to emerge from Congress or from the Court.22 A later section takes up the argument that diversity courts should act as neutral arbiters among state laws. Until Congress supplies a federal choice-of-law rule, an answer that lets a diversity court apply its own conflicts rule is wrong.