Choice-of-Law Statutes?

Image by David Mark from Pixabay

American choice of law relies primarily on common law methods that differ from state to state. Determining the relevant law when a dispute has a connection to more than one state can be difficult. When the dispute is transnational, the difficulties increase, particularly if the forum state’s choice-of-law rules incorporate a home-state bias. Oregon’s response to this common law “mess” was to codify a new approach in statutes that apply to all cases—domestic and transnational—in which choice of law is at issue. This post first surveys and evaluates Oregon’s experiment with codifying choice-of-law rules. It then argues that while the statutes have proven successful, some courts have interpreted them in ways that undermine their purpose. The post concludes with some reflections on the relative merits of common law and statutes as a source of law in this area.

The Oregon Experiment

In 2002 and 2009, Oregon enacted comprehensive choice of law statutes for contracts and for “torts and other non-contractual claims.” The statutes replaced Oregon’s common law choice of law rules, which tended to follow the Restatement (Second) of Conflict of Laws.

For many years, Oregon’s state and federal courts simply ignored the new statutes in reported decisions. When a choice-of-law issue arose, they continued to apply the Restatement (Second). I was struck by this disconnect between the actual law of Oregon and what the courts were doing on the ground. I started telling my Conflict of Laws students that they were members of an exclusive club, because they were some of the few who actually knew the real rules for choice-of-law in Oregon.

But were the statutes any better than the common law? Mulling over that question, I began working on the project that became Some Realism about Choice of Law Statutes and the Common Law: The Oregon Example.

The Statutes

The Oregon statutes create significant certainty about choice of law through a series of mandates and strong presumptions. But they also contain residual sections that attempt to guide courts through a more open-ended assessment of situations that are not covered by the more specific rules. These provisions ask courts to determine which state’s law is the “most appropriate” for deciding a specific issue. To reach this conclusion, the court must identify the states that have a relevant contact or connection with the issue, identify the policies reflected in the conflicting laws of these states (notably, policies, not “interests”), and “[e]valuat[e] the relative strength and pertinence of these policies” in light of a short set of considerations that include avoiding harm to the policies of other states.

This is where the trouble begins. These provisions are not as open-ended as the Second Restatement’s notorious § 6, but they still put a lot onto the shoulders of the judge, especially as compared to other parts of the statute.

The primary drafters of the statutes (Willamette Law School’s Jim Nafziger and Symeon Symeonides) wrote helpful notes—a kind of committee report—to accompany the proposed legislation. Symeonides also wrote two long law review articles that provide a detailed exegesis of each statute. Their strong position was that the statutes served to completely replace the old common law with an entirely new foundation and framework. Among other things, courts would start fresh when they applied the residual sections. In other words, courts would develop new common law rules to implement the open-ended parts of the statutes.

But that’s not what the courts did. After first ignoring the statutes, several opinions took the position that the policy analysis required by the “most appropriate” law test was essentially the same as the interest analysis contained in the Restatement (Second), which meant that courts could keep citing the same cases and doing the same analysis. Reaching that conclusion took quite a bit of creative misreading that became more and more difficult to justify as time went by.

In Schedler v. Fieldturf USA, for example, the district court confronted a choice-of-law issue in an employment case. The court quoted the “most appropriate law” standard alongside a pre-codification Oregon court of appeals opinion and stated it was evaluating the parties’ contacts to determine whether “the state has some interest in having its law apply to the dispute.” When the parties objected to this hybrid approach, the court responded:

Section 15.445(3) instructs courts to evaluate the relative strength of the policies of the relevant states. Although the term has changed[,] the underlying principle from the cited pre-codification cases is the same—courts must still weigh one state against the other.

The court held, in short, that the statute had done nothing more than reaffirm the preexisting common law rules. This is, unfortunately, not what the statute actually did.

Minding the Gaps

The most recent development in Oregon choice of law is the identification of “gaps”: situations that are not covered by the statutes (and particularly, situations that fall outside of the residual sections). If the statutes do not apply to a particular choice-of-law question, then some other source of law must provide the answer—and that source turns out to be the old common law rules. Choice-of-law devotees probably will not be surprised that this general claim essentially means applying the principles of two notable and much criticized Oregon cases: Erwin v. Thomas and Lilienthal v. Kaufman. In other words, where a gap exists in the statute, Oregon courts should revert to the old Oregon common law, and the most relevant common law rule is that, when things get tricky, a court should “do what comes naturally” and apply forum (Oregon) law.

That is what the District Court ultimately did in the Schedler case once it concluded its hybrid analysis. And the Oregon Supreme Court ratified this approach in its 2020 Portfolio decision.

Part of my article explains why I think these “gaps” do not exist, and that in fact the statutes provide a way for courts to address these areas. (Symeon Symeonides has done the same.) But the more I thought about this issue, the more I began to sympathize with the state and federal judges tasked with implementing the statutes. It we take the statutes as they were intended to be, then all of the old common law is gone, and the statutes instruct courts to make new common law based on the general principles contained in the statutes themselves. Some judges might enjoy this opportunity to be creative, but other judges would prefer not to make new rules in this area. Like ’em or not, the old common law rules at least were known, and even their uncertainties were familiar. Judges could feel like they were making policy interstitially, within a tradition. A “new” common law, by contrast, is uncharted territory, with the result that every decision breaks new ground.

One conclusion to this set of observations is specific to Oregon. The Oregon Law Commission and the state legislature ought to have provided more guidance in the residual sections, and courts should make good-faith efforts to implement the statutes. But these easy conclusions quickly dissolve into a set of larger questions: do choice-of-law statutes make sense in general? Do choice-of-law statutes make sense now that the choice-of-law provisions of the new Restatement (Third) of Conflict of Laws are coming into greater and greater focus? Should we abandon state-specific solutions and instead seek salvation in a federal approach? (This last question is a topic for a different post.)

The Logic of Codification

Forty-five years ago, Robert Leflar argued that choice-of-law statutes might make sense for specific topics, although he expressed skepticism about broader codification efforts. And of course, highly specific choice-of-law statutes have existed for quite a while, such as UCC 1-301. Initially, therefore, part of the answer to the general question has to be, yes, choice of law statutes make sense at least in specific circumstances.

The same answer holds for most of the terrain covered by the Oregon statutes. The mandates and strong presumptions address such things as consumer contracts and products liability with clear guidance and reasonable policy decisions. That is to say, at least some broader efforts to codify choice of law make sense, too.

The problem becomes more acute at the most general level, with the issues that arise when the mandates and presumptions do not apply. In light of the way courts are interpreting the residual statutes, it’s not clear what the legislature accomplished by including those provisions. What if it had just provided that situations not specifically addressed by the statutes would continue to be governed by the common law? Time will tell, but I’m confident that the old common law rules will continue to be incorporated one way or another into the statutory analysis, regardless of the legislature’s intentions.

The Restatement (Third) of Conflict of Laws

A state that is considering choice-of-law statutes should address these issues forthrightly, either with concrete guidance or clear instructions to do what comes naturally. But such a state should also take a look at the drafts of the Restatement (Third) of Conflict of Laws. The third time might really be the charm for the American Law Institute and choice of law. Instead of rigid territory-based rules, or a freewheeling anything goes approach, we are getting a framework that manages the different forces at play in choice-of-law in a significantly more determinate fashion than the Second, but with more flexibility that the First. That is to say, there was a moment when general choice-of-law statutes made sense as an option for reform. But that moment may have passed, and the common law may once again provide the best option.

Maybe. States that forego statutes in favor of sticking with the Restatement (Second) are consigning themselves to more of the same old mess. Contemporary statutes—especially on specific issues or topics—can reflect contemporary values, perspectives, and policy choices that weren’t on the minds of the drafters of the Restatement (Second). As between the two, therefore, a well-drafted set of statutory rules is likely superior to a Restatement that is 50+ years old.

By contrast, in states whose courts adopt the Restatement (Third), the legislature can likely forgo the effort of drafting new statutes—especially general or residual statutes. With the Restatement (Third), their courts have a framework that incorporates contemporary knowledge, perspectives, and values and that is also more flexible and adaptable than statutes. Plus, courts will almost certainly be able to switch Restatements more easily than a state legislature can draft a good set of choice-of-law rules.

Again, maybe. The Restatement (Third) is still years away from completion. Once in final form, it will add yet another method to the crowded choice-of-law toolbox of American courts. State supreme courts will decide whether or not to adopt it. Perhaps courts will adopt it and bring some order to their choice-of-law methodologies. Or, perhaps courts will adopt only parts of it, with uncertain consequences. Or perhaps courts will say they are adopting the new method but will keep on reaching whatever results they desire, regardless of method. Well-crafted statutes should therefore remain a serious option, especially on specific issues or topics.

The future, as always with choice-of-law, is uncertain.