Forum Shopping After Klaxon

Klaxon requires a federal court sitting in diversity to apply the conflicts law of the state where it sits, so that the federal court selects the same governing law a state court in that state would select.¹ The question of which law a federal court applies in a case not based on federal law goes to the heart of the relationship between the federal and state governments.² Klaxon answers it inside the Erie doctrine, which applies where no Federal Rule is on point and the underlying claim is state-created.³

The Court knew the rule had a price. Federal courts in different states would follow different conflicts rules, and the Court accepted that result in these words: "Whatever lack of uniformity this may produce between federal courts in different states is attributable to our federal system, which leaves to a state, within the limits permitted by the Constitution, the right to pursue local policies diverging from those of its neighbors."⁴

Two labels describe the trade. Vertical uniformity means that the federal and state courts of one state apply the same law to the same dispute. Horizontal uniformity means that federal courts in different states apply the same law to the same dispute. Klaxon delivers the first and gives up the second.

Vertical Uniformity

The policy underlying Erie, the Court held in Klaxon, mandates that a federal diversity court apply the forum state's choice of law rules as well as its substantive law.⁵ The mechanics are simple. A federal court sitting in New York asks what body of tort law a New York state court would apply if the plaintiff had sued there, and a federal court sitting in Pennsylvania asks the same question about the Pennsylvania courts.⁶ Because the federal judge chooses the same body of law the local state court would choose, the case is decided under the same law whether it is filed in the state court or the federal court.⁷

The combination of Klaxon and Erie therefore produces substantial vertical uniformity⁸, and that is the defense of the rule. It does not deter forum shopping from one state to another, but it takes the juice out of shopping between a federal and a state court within the same state.⁹

Erie's own facts show the effect when two states share a conflicts rule. Suppose New York and Pennsylvania both chose tort law by the place of injury. Tompkins, hurt on a Pennsylvania footpath, would then meet Pennsylvania's willful-or-wanton standard in the Pennsylvania state court, the Pennsylvania federal court, the New York state court, and the New York federal court alike, and no choice among the four would improve his position. The same would be true of every multistate case if all states used the same choice of law rules, because those rules would direct every court, wherever it sat, to the same law.¹⁰ The shopping that survives Klaxon therefore comes from differences among the states' conflicts rules, which the federal courts copy faithfully.

Vertical uniformity also depends on the federal judge applying the state's conflicts rule as the state's courts now apply it. Federal courts may not anticipate changes in state conflicts law. A party who would benefit from a standard, territorially oriented rule reflected in the state's latest high-court pronouncement "would do well to choose the federal district court as forum," while a party who wants that rule changed in line with current trends has a far better chance in the state supreme court.¹¹ One commentator warns that this effect may endanger intrastate harmony as well.¹²

Horizontal Disuniformity

Klaxon ends one kind of forum shopping and leaves another in place. The kind that remains appears as soon as two states use different conflicts rules.

Change one fact in Tompkins's case. Pennsylvania still chooses tort law by the place of injury, but New York has adopted an interest-balancing approach. Such an approach can lead a court to apply its own law even though the accident occurred elsewhere, because it weighs the residence of the parties, the interests that each state's tort principle promotes, the place of the negligence, and the place where the injury is felt.¹⁴ Assume the balance points to New York law, which requires only ordinary care, while Pennsylvania law requires willful or wanton conduct. The four courtrooms now divide along state lines:

Court	Conflicts rule	Law selected	Standard applied
Pennsylvania state court	Place of injury	Pennsylvania	Willful or wanton conduct
Pennsylvania federal court	Pennsylvania's rule, under Klaxon	Pennsylvania	Willful or wanton conduct
New York state court	Interest analysis	New York	Ordinary negligence
New York federal court	New York's rule, under Klaxon	New York	Ordinary negligence

Within each state the federal court and the state court agree, which is vertical uniformity. Across the two states the federal courts apply different standards of care to the same accident, so horizontal uniformity is lost.¹⁵ Tompkins benefits from ordinary care, so he files in New York, assuming the railroad can be sued there, and gets that standard in either of New York's court systems. A filing in either of Pennsylvania's courts leaves him with the heavier burden.

The disparity resembles the one Erie condemned, since Tompkins again chooses between two substantive rules, but its source is different. Under Swift the rules diverged between the federal and state courts of a single state. Now they diverge because Pennsylvania and New York have adopted different law and different conflicts rules, and Klaxon treats that divergence as a product of the federal system.¹⁶

The reason lies in the structure of the rule. A federal court that copies its state's conflicts rules inherits what the state has decided about when its own law applies. States decide that question differently, so the copies differ from one another even as each matches its original. Forum shopping for favorable law therefore survives in a new form, because a plaintiff often can choose among the state courts of different states and among the federal courts in each of those states.¹⁷ Suppose Pogo, now an Ohio citizen, sues Albert, a Wisconsin citizen, for injuries in a Wisconsin accident. If Albert can be sued in both states, Pogo has four courthouses to consider, and each applies the conflicts rule of the state where it sits.¹⁸

The opportunity is real but imperfect, because a plaintiff can shop only as well as the plaintiff can predict how a forum will behave. Modern choice of law "rules" involve an ambiguous balancing of policy considerations, which makes it harder to predict which state's law the forum court will choose. Plaintiffs can only try to forum shop, and they may end up mired in a different state's law because the court drew the balance differently.¹⁹

The Neutral-Arbiter Critique

The cost of horizontal disuniformity supplies the strongest argument against Klaxon. Choice of law involves the relations among the states, and the framers might well have considered that a federal diversity court should be available to litigants as a neutral decision-maker in choosing the proper body of state law.²¹ Klaxon instead sends the choice to the forum state's own rules, and because a plaintiff often can choose among several forums²², the plaintiff in effect helps choose which state's conflicts rule applies.

A second strand of the critique questions Klaxon's footing. Commentators note that the rule seems not to rest on the same constitutional prohibitions as Erie, despite the Court's statement to the contrary. They add that ordering the relations among the states is a uniquely federal function, and that authority for federal conflicts lawmaking need not rest on "federalism" alone but may also rest on the Full Faith and Credit Clause.²³ The Rules of Decision Act sets the terms of any such argument. It tells federal courts to regard "the laws of the several states" as rules of decision in cases where they apply, "except where the constitution, treaties or statutes of the United States shall otherwise require or provide."²⁴

Defenders answer that the rule never promised to end shopping among states. It targets the more immediate problem within a single state, and by that measure it works.²⁵ The Erie and Klaxon doctrine promotes intrastate harmony at the price of continued interstate divergence in choice of law.²⁶ Independent conflicts rules that bound only diversity courts would reopen the gap between the federal and state courthouses of one state. A federal conflicts law that also bound the state courts would not reopen it, but the Court has continued to adhere to Klaxon.²⁷

The Court heard both views and kept the rule. In Day & Zimmerman v. Challoner, 423 U.S. 3 (1975), military personnel suffered serious injuries in Cambodia during the Vietnam War and sued on strict liability claims. Texas's place-of-injury rule led to Cambodian law, which did not recognize strict liability, so choosing that law would end the plaintiff's case.²⁸ The federal court had found Cambodia a disinterested state, and the court of appeals thought Texas itself would not have applied the law of the place of the tort.²⁹ The Supreme Court nonetheless reaffirmed Klaxon unanimously in a brief per curiam opinion.³⁰

A harsh result in a particular case, then, does not move the rule. The Supreme Court continues to adhere to Klaxon, and a diversity court that acted on the critique would be departing from it.