A.  Proof of Foreign Law

In Animal Science Products, Inc. v. Hebei Welcome Pharmaceutical Co. Ltd,¹⁴⁷ the Supreme Court addressed the question of what weight must a federal court accord to a foreign government’s representation about its own law. In a unanimous opinión written by Justice Ginsburg, the Court held that a federal court “should accord respectful consideration to a foreign government’s submission, but is not bound to accord conclusive effect to the foreign government’s statements.”¹³⁹ In so holding, the Court vacated a contrary decision of the Second Circuit, which was discussed in the 2016 Survey,140 and resolved a split among the circuits.¹⁴¹

Adeleye v. Driscal¹⁶⁰ was decided by a state court in Texas, a state that, like most other states, has adopted rules that are virtually identical to federal Rule 44.1. The trial court held that the parties were validly married in a proxy marriage in Nigeria. The husband appealed, arguing that the trial court erred in allowing the wife’s expert on Nigerian marriage law to testify despite the fact the wife did not timely identify him as an expert witness. The court of appeals rejected the argument, holding that the husband failed to preserve this issue for appellate review because he did not file “a timely . . . objection, or motion in the trial court.”¹⁶¹ The husband also argued that the trial court erred in applying Nigerian law because the wife failed to provide proper notice of her intention to offer evidence on Nigerian law and failed to provide sufficient evidence to establish that law. The appellate court acknowledged that the applicable Texas rule required “notice in the pleadings or other reasonable written notice,”¹⁶² but again held that the husband failed to preserve the issue and thus he “forfeited” the right to complain on appeal.¹⁶³ Finally, the husband argued that the wife’s evidence of Nigerian law was insufficient and thus, under an occasionally invoked fiction, the court “should have assumed the law of Nigeria is the same as the relevant law of Texas.”¹⁶⁴ The appellate court did not question the wisdom of the fiction or its applicability in this case. Instead, the court held that the husband failed to provide specific and sufficient evidence to demonstrate that the wife’s evidence was insufficient.

Estate of Obata¹⁶⁵ is one of the cases in which the court went the extra mile in delving into foreign law. The case involved a type of a Japanese extrajudicial adult adoption known as yōshi-engumi. In order to explain the effect of this type of adoption under Japanese law, the California court also explained the concept of a “house” as a social unit, and did so by not only analyzing extensive excerpts from the Japanese civil code and other Japanese statutes but also by resorting to, and quoting extensively from, books on history, politics, and social anthropology. It is unclear whether the parties supplied these materials or whether the court located them through its own research. Either way, this case stands out as a commendable, albeit infrequent, example of how one should strive to understand the social context of foreign institutions.

C.  Choice-of-Law Methodology

Table 2, below, depicts the judicial following of the various choice-of-law approaches in the fifty states, the District of Columbia, and the Commonwealth of Puerto Rico. Because there have been no changes from last year, this table is the same as the 2017 table and is reproduced here for the readers’ convenience. It should be read with all the caveats expressed in the previous surveys.

TABLE 2. ALPHABETICAL LIST OF STATES AND CHOICE-OF-LAW METHODOLOGIES FOLLOWED

C.   Contracts

1.  Contracts with Choice-of-Law Clauses

a.  Choice of Procedural and Conflicts Law

One well-established principle of conflicts law is that, ordinarily, a choice-oflaw clause includes only the chosen state’s substantive or internal law—not its conflicts law and not its procedural law.¹⁷⁶ However, the rationale for the two exclusions is different: the exclusion of conflicts law is a matter of contractual intent, whereas the exclusion of procedural law is arguably a matter of contractual power. Also different is the scope of these exclusions, depending on whether the choice-of-law clause chooses the law of the forum state (“inbound” clause) or the law of another state (“outbound” clause).

• Exclusion of Conflicts Law

First, although an inbound choice-of-law clause excludes the choice-of-law rules of the forum state, that exclusion covers only rules other than those whose application is necessary for determining the validity of the clause itself. For example, if the forum state follows § 187 of the Restatement (Second) for assessing the enforceability of choice-of-law clauses, an inbound choice-of-law clause cannot displace that section.

In fact, what distinguishes this case from the previous two cases is not the fact that the choice-of-law clause included New York’s procedural law. Rather it is the fact that— unlike the New York statutes involved in those cases which qualified as veritable choice-of- law rules—the borrowing statute involved in this case is an inseparable appendage of New York’s statutes of limitation, which New York characterizes as procedural. If one accepts the court’s conclusion that a borrowing statute is not a choiceof-law rule despite having a certain choice-of-law function, then its application is inevitable, regardless of whether the inbound choice-of-law clause does or does not include the forum’s procedural law. If, as in this case, the clause includes the forum’s procedural law, then the borrowing statute applies as part of that law. If, as in most cases, the choice-of-law clause chooses only the forum’s substantive law, then the statute applies as part of the forum’s procedural law, which remains applicable despite the choice-of-law clause.¹⁸⁹

The other three 2018 cases involving a similar scenario—Federated Capital Corporation v. Deutsch,190 Federated Capital Corp. v. Abraham,¹⁹¹ and Federated Capital Corp. v. Nazar192— were litigated in Utah, a state that also follows the procedural characterization of statutes of limitation. In these cases, the inbound choice-of-law clauses did not purport to include the forum’s procedural law, but the contracts also contained inbound forum selection

clauses, which could be interpreted as the parties’ consent, if one were needed, to the application of the forum’s procedural law. A Michigan credit card company sued three credit card holders domiciled in states other than Utah for defaulting on credit card debts that were payable in Pennsylvania. The actions were timely under Utah’s six-year statute of limitation but were barred by Pennsylvania’s four-year statute. The lower court held that the actions were barred because the Utah borrowing statute mandated the application of Pennsylvania’s shorter statute. The court of appeals affirmed and also awarded attorney fees to the credit card holders under Utah law.

2. Outbound Clauses

SunTrust Bank v. Ritter¹⁹³ involved an outbound choice-of-law clause and a statute-of- limitation conflict. A loan contract between a Georgia bank and a Tennessee borrower contained a Florida choice-of-law clause. When the borrower defaulted, the bank sued in Tennessee. The action was timely under Tennessee’s six-year statute of limitation but untimely under Florida’s five-year statute. Relying on the choice-oflaw clause, the trial court held the action barred under the Florida statute. The court of appeals reversed. The court noted that, “[a]lthough Tennessee will honor the parties’ choice of law for substantive matters, Tennessee law governs matters of procedure.”¹⁹⁴ After explaining why “statutes of limitation are considered procedural matters”¹⁹⁵ in Tennessee, the court held that the Tennessee statute applied, and the action was timely.¹⁹⁶

In Professional Collection Consultants v. Lujan,¹⁹⁷ another case involving an outbound choice-of-law clause and a statute of limitation conflict, the action was filed in California, a state that has abandoned the procedural characterization of statutes of limitation.¹⁹⁸ A credit card agreement between a Delaware bank and a California domiciliary contained a Delaware choice-of-law clause. The action against the defaulting credit card debtor was timely under California’s four-year statute of limitation but untimely under Delaware’s three-year statute. Relying on the choice-of-law clause, the court held that the action was untimely under the Delaware statute. Like most courts before it,¹⁹⁹ the California court rejected the bank’s argument that the court should also apply Delaware’s tolling statute, which suspended the running of time for as long as the debtor was outside Delaware and could not be served with process. The court reasoned as follows:

Because [the debtor] is not susceptible to suit in Delaware, applying the tolling provision would produce the absurd result of abolishing the statute of limitations defense entirely, which is surely inconsistent with a fundamental policy of California law. Because Delaware’s tolling provision is not inherent in, or inseparable from, its statute of limitations . . . our refusal to adopt Delaware’s non-resident tolling statute does not prevent us from enforcing Delaware’s statute of limitations.²⁰⁰

Finally, in Deloitte Tax LLP v. Amedisys, Inc.,²⁰¹ an accounting malpractice case that also involved an outbound choice-of-law clause, the action was timely under the peremptive period²⁰² of the forum state, Louisiana, but untimely under a shorter contractual period that was valid under the law of the chosen state, New York, but not Louisiana. The court refused to apply the contractual period, after finding that: (1) in the absence of the choice-of-law clause, Louisiana law would have been applicable because of Louisiana’s significant contacts and interests;²⁰³ and (2) the application of New York law would violate Louisiana’s strong public policies of regulating the provision of accounting services in Louisiana, protecting the public from accountant malpractice, and not allowing the contractual shortening of the statutory peremptive period.

The court did not discuss any countervailing Illinois policy, but apparently it shared the concerns regarding usury because, as the concurring judge pointed out, the loan was usurious under both Illinois and Minnesota law. It charged an interest rate of over 60%, when the permissible rate was 9% in Illinois and 8% in Minnesota. This factor, along with the contracting parties’ unequal position and the fact that AWH was not a party to this litigation, may explain why the court’s holding goes against existing authority, such as the Restatement (Second), which provides that when the chosen law invalidates the whole contract, the choice-of-law clause should be disregarded as the result of mutual error.²⁰⁹

In American Family Mutual Ins. Co. v. Cintas Corporation No. 2,²¹⁰ the issue was the enforceability of an indemnification provision in a Wisconsin building-management contract containing an Ohio choice-of-law clause. Under Wisconsin law, indemnification agreements that, like the one involved in this case, required the indemnitor to indemnify the indemnitee for the indemnitee’s negligence required a heightened level of clarity to be enforceable (“strict construction” rule). Ohio did not have such a requirement. The Wisconsin Supreme Court held, over a strong dissent, that this difference did not rise to a fundamental policy difference sufficient to defeat an otherwise valid choice-of-law clause.

In Berry and Berry Acquisitions, LLC v. BFN Properties LLC,²¹¹ the Oklahoma Supreme Court held enforceable a Texas choice-of-law clause in a contract between a Texas buyer and an Oklahoma seller of a nationwide nursery business. The seller had violated the contract’s non-compete covenant by operating a competing business in Oklahoma. The court held for the buyer after finding that, despite some differences, the covenant was valid under the laws of both Texas and Oklahoma.

In Fin Associates LP v. Hudson Specialty Insurance Company,²¹² the court upheld a New York choice-of-law clause and an arbitration clause in an insurance policy insuring 19 buildings located in New Jersey and one in Pennsylvania. The court did not discuss the content, much less the policies, of the involved states’ laws or any of the other factors for determining the enforceability of choice-of-law clauses under New Jersey conflicts law. What was determinative in the court’s view was the fact that the insureds were sophisticated enough and had employed a commercial insurance broker to negotiate the policy on their behalf.

In Moore v. Fischer,²¹³ a loan contract between a Delaware lender and a New Jersey borrower contained a Delaware choice-of-law clause and a clause charging an atrocious interest rate of 180%. That rate was permissible under Delaware law, but not under New Jersey law. The New Jersey trial court recognized that the application of Delaware law would violate New Jersey’s fundamental policy in protecting its consumers from usury. Nevertheless, the court upheld the contract, after finding that the borrower had visited the lender’s Delaware establishment and negotiated and signed the contract there, thus making Delaware law applicable anyway. The appellate court reversed and remanded, after finding that the trial court did not give enough weight to the borrower’s allegations that she had applied for the loan from her New Jersey home and received the approval there, and that her visit to Delaware was for the sole purpose of signing the contract and picking up the money.

2. Inbound Clauses

Change Capital Partners Fund I, LLC v. Volt Elec. Sys., LLC, ²¹⁴ also involved a loan contract containing a Delaware choice-of-law clause and charging an exorbitant interest rate of 102%. The lender was incorporated in Delaware and headquartered in New York, the borrowers were based in Texas, and the contract was negotiated in New York and signed by the borrowers in Texas. When the borrowers defaulted, the lender’s assignee sued the borrowers in Delaware, which somehow had jurisdiction.²¹⁵ The defendants argued that the Delaware choice-of-law clause was unenforceable because the application of Delaware law, which allowed such a high interest rate, would violate the fundamental public policy embodied in the anti-usury laws of both Texas and New York. The Delaware court acknowledged this conflict in fundamental policy but nevertheless held the clause enforceable because—despite Delaware’s lack of significant contacts—the defendants did not affirmatively demonstrate that the laws of either Texas or New York would be applicable in the absence of the choice-of-law clause.

In North American Tubular Services, LLC v. BOPCO, L.P.,²¹⁶ the issue was the enforceability of a Texas choice-of-law clause and an indemnity clause in a contract between Texas parties for oilfield services in New Mexico. The indemnitor argued that the court should hold the indemnity clause unenforceable under New Mexico law. The Texas court rejected the argument after finding that, because of Texas’s numerous contacts, Texas law would have been applicable even in the absence of the Texas choice of law clause, and that the indemnity clause was valid under Texas law.

In Oxford Global Resources, LLC v. Hernandez,²¹⁷ the issue was the enforceability of a Massachusetts choice-of-law clause and a non-solicitation covenant in an employment contract between a Massachusetts employer and a California domiciliary hired for work in California. The covenant was arguably enforceable under Massachusetts law, but was expressly prohibited by a California statute. When the employee quit his employment and allegedly breached the non-solicitation covenant while working for a competing California employer, the Massachusetts employer sued its former employee in Massachusetts under the contract’s forum selection clause. The Massachusetts Supreme Court held that the Massachusetts choice-of-law clause was unenforceable because: (1) in the absence of a choice-of-law clause, California law would govern the employment contract; (2) California had a materially greater interest in applying its law than Massachusetts; and (3) the application of Massachusetts law would violate a fundamental public policy of California in promoting open competition and protecting employee mobility. Finally, the court affirmed the lower court’s dismissal of the action on forum non conveniens grounds, after finding that the forum selection clause did not prevent such dismissal and that the employee had carried the burden of satisfying the forum non conveniens factors.

In all other 2018 cases involving this pattern, the courts implicitly or explicitly applied the substantive law of the forum without explaining their choice.²²⁴ The same Among the latter cases, Liberty Woods International, Inc. v. M/V Ocean Quartz,²²⁷ presented several similarities with the Supreme Court’s decision in Vimar Seguros y Reaseguros, S.A. v. M/V Sky Reefer.²²⁸ A bill of lading covering goods transported to New Jersey contained a mandatory forum selection requiring litigation in South Korea. When the goods arrived in damaged condition, the shipper filed an in rem action against the vessel in New Jersey federal court. The plaintiff argued that, because South Korea did not allow in rem actions against ships, the forum selection clause violated section 3(8) of the Carriage of Goods by Sea Act (COGSA), which voids “[a]ny clause . . . relieving the carrier or the ship from liability for loss or damage to . . . the goods, arising from negligence, fault, or failure in the duties and obligations provided in this section, or lessening such liability otherwise than as provided in this Act.”²²⁹ Relying on Sky Reefer, the court rejected the argument. The court pointed out that Sky Reefer interpreted COGSA as prohibiting the lessening of substantive liability but not the procedural means and costs of enforcing that liability:

COGSA protects ship liability, not any particular vehicle for imposing it. The text does not mention in rem suits, nor require any specific remedy for enforcing ship liability. Indeed, such an interpretation would run counter to Sky Reefer’ s holding that COGSA does not protect procedural means for enforcing liability.²³⁰

The Court of Appeals affirmed. First, the court found that the Japanese defendant’s forum non conveniens arguments were “without merit, because [the defendant] agreed to (and most likely proposed) California as a forum.”²³⁶ Second, the court found that the defendant failed to carry its burden of showing the mandatory forum selection clause was “unreasonable” and thus unenforceable. Nevertheless, the court concluded, the fact that California has jurisdiction under such a clause does not mean that a court is compelled to exercise it. In cases such as this one, which lack any connections with California and there is a suitable alternative forum elsewhere, a court has discretion not to exercise its jurisdiction:

California has no public interest in providing a forum for resolution of a dispute between two Asian companies, involving a contract formed and executed in Asian countries, where there are suitable alternatives. The determination not to burden our courts with this purely foreign litigation was well within the [trial] court’s considerable discretion.²³⁷

Finally, the court concluded that the aforementioned § 4010.40 did not prevent the dismissal of the action. The court noted that § 410.40 “recognizes the existence of jurisdiction in California for an aggrieved party to file a lawsuit against a foreign corporation for wrongs that have occurred abroad.”²³⁸ However, said the court, “[t]his is not to say that the aggrieved party is entitled to have its lawsuit heard in [California].”²³⁹ A California court may still dismiss the case for “legitimate and substantial interests,” such as the absence of California interests and the presence of foreign interests in providing in a forum.²⁴⁰

e.  Choice-of-Law and Arbitration Clauses

DeGraff v. Perkins Coie California P.C.,²⁴¹ was one of several cases in which the contract contained choice-of-law and arbitration clauses.²⁴² A partnership agreement between a Seattle law firm and a California partner contained a Washington choiceof-law clause and a clause mandating arbitration in Washington. The California court, applying Washington law, held that some of the provisions of the arbitration agreement were substantively unconscionable but were severable from the rest of the agreement.²⁴³

Mandviwala v. Five Star Quality Care, Inc.²⁵⁰ involved a dispute arising from a California employment contract that contained a Maryland choice-of-law clause and a mandatory arbitration clause. The California employee brought a putative class action in California against her employer alleging violations of California labor laws regarding unpaid wages and seeking representative civil penalties under California’s Private Attorney General Act (PAGA). The Ninth Circuit held that PAGA represented a fundamental California policy and because application of Maryland law would result in a waiver of the plaintiff’s representative PAGA claims, the Maryland choice-of-law clause was unenforceable. The court then distinguished between the plaintiff’s claims for unpaid wages, which are private claims that are collected in an individual capacity, and her claims for penalties under PAGA, which are sought in a representative capacity and are paid mostly into the state treasury rather than to the aggrieved employee. The court held that the arbitration clause was enforceable with regard to the wages claims but not with regard to the PAGA claims. The court also concluded that its ruling regarding the non-arbitrability of PAGA claims was not preempted by the FAA and the Supreme Court’s decision in DirecTV, Inc. v. Imburgia.²⁵¹ The Supreme Court denied certiorari.²⁵²

2.  Contracts without Choice-of-Law Clauses

In Portfolio Recovery Associates, LLC v. Sanders,²⁵³ the initial contract between a Virginia credit card company and a Utah credit-card holder, who later defaulted, contained a Virginia choice-of-law clause. However, the clause was inapplicable to the dispute between the credit card holder and a collection agency, to whom the credit card company assigned its claim. The court found that, when the company sent a final demand letter to the credit card holder (who at that time was domiciled in Washington) and he did not object, a new “contract for an account stated” came into existence and that contract did not contain a choice-of-law clause. The collection agency’s action would have been untimely under Virginia’s three-year statute of limitation (if applicable) but was timely under the six-year statute of the forum state, Oregon, where the credit card holder had moved his domicile in the meantime. Oregon is one of the states that have adopted the Uniform Act on statutes of limitations, which, subject to some exceptions, requires the applications of the statute of limitations of the state whose law governs the merits of the claim. Thus, the court had to determine the law applicable to the merits, without the aid of a choice-of-law clause.

Applying the Oregon codification for contract conflicts, the court noted that:

1. the relevant contacts were dispersed among several states (Utah, Washington, Virginia, and Oregon); (2) “as between Virginia and Oregon, the relevance of the connections does not resolve the conflict-of-law issue, as none of those connections is of the type that evidences a state interest in having its law applied;”²⁵⁴ (3) “the parties have not identified, and we do not readily perceive, any state policies underlying the length of time provided in the respective statutes of limitation of Virginia or Oregon that is relevant to the matters that the statute directs us to consider;”²⁶⁷ and (4) “Virginia would have no substantial interest in having its statute prevent [plaintiff’s] action because defendant was not a resident of ”²⁵⁵ Then, following the path of least resistance, the court concluded: “Where neither state has a connection to the transaction such that it has an interest in having its law applied, we will apply the law of Oregon as the forum state.”²⁵⁶ The court based this conclusion on Erwin v. Thomas,²⁵⁷ a 1973 tort  case.  Apparently, the parties and the court  were  unaware that the Oregon codifications for contract and tort conflicts have both repudiated Erwin’s methodology and the tort codification overruled its result.

In Larsen v. Giannakoulias,²⁵⁸ the contract, a prenuptial agreement which the parties downloaded from an Internet site, did not contain a choice-of-law clause. The parties were domiciled in New Mexico when they signed the agreement but moved to Tennessee long before their divorce trial. The agreement, which waived alimony, was enforceable under the law of Tennessee but not of New Mexico. Tennessee is still a lex loci contractus state, despite having abandoned the lex loci delicti rule in 1992. However, its lex loci contractus rule is subject to an exception upon a showing that the parties in good faith intended for another law to apply. Relying on this exception, and because the parties frequently moved their domicile from one state to another, the trial court came up with a creative solution—that the parties intended their contract to be “ambulatory in nature,” and was to be governed by “the law of the state where they’re living at the time they need it.”²⁵⁹ That time, the trial court reasoned, would be the end of the marriage, not the beginning. The Tennessee Court of Appeals rejected the argument, noting that a prenuptial agreement goes into effect at the time the parties enter into the marriage and not later. Consequently, under the lex locus contractus rule, New Mexico law governed the agreement.

C.  Torts

1.  Common Domicile Cases

Two Illinois cases involved the common-domicile pattern in which parties domiciled in one state, in this case Illinois, are involved as tortfeasor and victim in a tort that occurs entirely in another state. Both cases fit the Babcock pattern in which the law of the common domicile provided recovery, but the state of the tort did not. In the first case, Hand v. Hand,²⁶⁰ the court applied the law of the common domicile, Illinois. In the second case, Perkinson v. Courson,²⁶¹ the court applied the law of the state of the tort. The difference in result can be explained by the fact that Hand involved a loss-distribution conflict, whereas Perkinson involved a conduct-regulation conflict. However, as is often the case, neither court used these exact terms.

Hand was a typical interspousal immunity conflict. The parties, husband and wife domiciled in Illinois, were involved in a single-car accident in Indiana when the husband lost control of the car. Indiana’s guest statute provided that, in the absence of wanton or willful misconduct, the driver was not liable for injuries to a passenger spouse.²⁶² Illinois did not provide such immunity. Applying the Restatement (Second), the Illinois court held that Illinois law governed. The court noted that, in typical personal injury cases, the court begins with the presumptive rule § 146, which provides for the application of the law of the state of injury. “However,” said the court, “the question of interspousal immunity is not a question of a tort itself. Rather, it is a question of a particular issue in tort”;²⁶³ and for that issue the applicable Restatement section is § 149, which provides that the applicable law is “usually” the law of the common domicile, unless another state has a more significant relationship under §§ 145 and 6. After examining the contacts of § 145 and the principles of § 6, the court had no difficulty concluding that the law of the common domicile should govern. The court reasoned that, “because the only question before us pertains to interspousal immunity and not whether a tort was committed, the contacts of paramount importance are the parties’ domicile and where their relationship was centered.”²⁶⁴ The court concluded:

[T]he parties’ domicile is the most important contact such that the interspousal immunity question must be answered in favor of Illinois law . . . [because] Illinois’s interest in regulating the ability of its married domiciliaries to bring tort actions against each other outweighs any interests Indiana has in preventing those actions by guests who are merely passing through the state on their way back home to Illinois.²⁶⁵

The Perkinson case arose out of an equestrian accident and involved a conductregulation conflict, although the court did not use this term. The defendant’s horse, named “Little Bit,” kicked the plaintiff more than a little while the two equestrians, domiciled in Missouri, were riding their horses side-by-side in a Missouri recreational facility. An Illinois statute imposed strict liability on the owners of dogs and “other animals,”²⁶⁶ whereas a Missouri statute imposed such liability only on dog owners.²⁶⁷ Moreover, another Missouri statute, the Equine Liability Act, which codified the common law principle of assumption of risk, released the horse owners from liability for injuries occurring during recreational equine activity.²⁶⁸ Additionally, the plaintiff signed a release containing an assumption of risk statement and releasing from liability the Missouri organizer of the Missouri horseback rides as well as “participants” in the rides, such as plaintiff.²⁶⁹ Under these circumstances, the conflict was as easy as they come. The court could have held that the Missouri assumption of the risk statute was conduct regulating and as such applied to all recreational equine activity within Missouri regardless of the parties’ domicile. Conversely, the Illinois statute was also conduct regulating and as such it only applied within Illinois territory and did not follow Illinois equestrians in Missouri.

However, the Illinois court had to follow the Restatement (Second) which, unlike the forthcoming Third Restatement,²⁷⁰ does not conspicuously spell out the conduct-regulation vs. loss-distribution distinction and does not provide clear cut rules. In the end, the court reached the result suggested here, albeit in a roundabout way. The court began with the presumption of § 146, which provides for the application of the law of the state of injury, in this case Missouri, and then examined whether the presumption was rebutted under the contacts of § 145 and the principles of § 6. The court noted that the occurrence of the injury in Missouri was not fortuitous because the Missouri recreational facility was the planned destination of both parties. The court found that most of the relevant conduct also occurred in Missouri, dismissing the plaintiff’s argument that it also occurred in Illinois where the defendant failed to properly train her horse. After noting that the parties’ domiciles and the place of their relationship (or rather acquaintance) were in Illinois and thus the § 145 contacts were evenly split between Illinois and Missouri, the court turned to the policies of § After extensive discussion of those principles, the court concluded that they did not rebut the § 145 presumption in favor of the law of the state of injury.

Smith v. Church Mutual Insurance Company²⁷¹ arose out of a two-car traffic accident in Mississippi involving Tennessee parties traveling independently. A van owned by a Tennessee church and carrying twelve children collided with a car driven by a Tennessee driver, just south of the Tennessee-Mississippi border. The children and the van driver, who was pregnant and had a miscarriage as a result of the accident, sued in Mississippi. The Mississippi trial court held that “any issues involving Mississippi’s Rules of the Road would be controlled by Mississippi law”²⁷² and that Tennessee law would govern all other issues.

The Mississippi Supreme Court affirmed the holding with regard to the rules of the road but held that on two other issues the application of Tennessee law would be “repugnant to the laws of [Mississippi].”²⁷³ The first issue was whether the van driver was entitled to a wrongful death action for the loss of her unborn child or fetus. The answer was uncertain under Tennessee law because it would depend on whether the fetus was “viable” at the time of the accident. By contrast, Mississippi law provided an action for the wrongful death an “unborn quick child,” which it defined as “a child that has developed so that it moves within the mother’s womb.”²⁷⁴ The court described at length and with passion the importance of this rule to Mississippi and explained why, in its view, it should be applied even to non- Mississippians. The court said that “Mississippi ha[d] declared a governmental interest in the dignity and intrinsic worth of the unborn and ha[d] bestowed the status of a person when the unborn shows some evidence of life within the womb.”²⁷⁵ The court continued:

When a person steps foot in this State, he not only is bound to abide by, but is also burdened with Mississippi law, which the trial court recognized in applying Mississippi’s Rules of the Road. Likewise, persons are entitled to the benefits that come with those burdens[.] . . . Wrongfuldeath beneficiaries of an unborn, quick child are afforded a right to a remedy for their injury. Such a deprivation of that right [under Tennessee law] is wholly repugnant to the laws of this State.²⁷⁶

The second issue for which the Mississippi court felt very strongly was the issue of comparative negligence. As the court explained, Mississippi was the first state to introduce comparative negligence in 1910.²⁷⁷ Mississippi followed the pure version of comparative negligence, which allowed the plaintiff to recover damages, reduced by the percentage of her fault, without regard to whether that percentage was lower or higher than the defendant’s fault. By contrast, said the court, “Tennessee law on this subject is a century behind Mississippi.”²⁷⁸ Tennessee followed the forty-ninepercent rule, which allows recovery only if the plaintiff’s negligence is less than that of the defendant. The court noted that, although in this phase of the litigation the percentage of each party’s fault was unknown, in some cases the application of the Tennessee rule “could result in no recovery to a severely injured person”²⁷⁹ and could even deny recovery to both of them if they were equally at fault.²⁸⁰

In a thoughtful dissent joined by two members of this nine-member court, Justice Ishee pointed out that the majority misapplied the public policy (ordre public) exception. He quoted from an earlier Mississippi case a statement that a conflict between the law of Mississippi and another state “does not itself mean that the foreign law is so offensive that it must be set aside.”²⁸¹ Noting that “repugnance requires more than mere inconsistencies,”²⁸² the dissent quoted Judge Cardozo’s classic statement that the public policy exception is properly applied only when the foreign law violates “‘some fundamental principle of justice, some prevalent conception of morals, some deep-seated tradition of the common weal.’”²⁸³

2.  Cross-Border Unfair Trade Practices

In Danganan v. Guardian Protection Services,²⁸⁴ the Pennsylvania Supreme Court held that Pennsylvania’s Unfair Trade Practices and Consumer Protection Law (UTPCPL) applied against a Pennsylvania headquartered company in a case arising from a transaction that occurred in another state and involved a party domiciled in the latter state. The company provided home security services to a District of Columbia resident and then continued to charge him for those services after he informed the company that he had sold that house and moved to California. The plaintiff filed a putative class action in Pennsylvania federal court under the UTPCPL on behalf of himself and more than 17,000 similarly situated consumers from several states.

The UTPCPL provided an action to “any person” against any other “person” for “unfair or deceptive acts . . . in the conduct of any trade or commerce”²⁸⁵ and did not contain any geographic limitation of these terms. The defendant argued that, in cases in which the plaintiff is not a Pennsylvania domiciliary, the UTPCPL applies only if “there exists a sufficient nexus between the transaction or injury and [Pennsylvania], such that the improper conduct primarily and substantially occurred in Pennsylvania.”²⁸⁶ Otherwise, the defendant argued, “anyone from anywhere in the world could assert a claim under the UTPCPL.”²⁸⁷

The Third Circuit certified to the Pennsylvania Supreme Court the question of “[w]hether a non-Pennsylvania resident may bring suit under the [UTPCPL], against a business headquartered in and operating from Pennsylvania, based on transactions which occurred outside of Pennsylvania?”²⁸⁸ The Pennsylvania court answered the question in the affirmative. The court based its conclusion primarily on a textual interpretation of the UTPCL, but also offered some policy reasons. The court reasoned that interpreting the statute as “protective of non-residents in the absence of contrary statutory language” was consistent with the statute’s “remedial” character and its purposes of “equalizing the bargaining power of the seller and consumer, ensuring the fairness of market transactions, and preventing deception and exploitation.”²⁸⁹ The court also noted that the nexus requirement, at least as the defendant described it by requiring that the injury or transaction must occur within Pennsylvania, was tantamount to “restat[ing] the now-rejected lex loci delecti [sic] rule.”²⁹⁰

Kubbernus & Balaton Group, Inc. v. ECAL Partners, Ltd.²⁹¹ was a similar case involving the application of the Texas Securities Act (TSA) to securities sales emanating from Texas. The defendants argued that, because the purchasers (the plaintiffs) were domiciled in other states and foreign countries and had sustained their losses there, they could not assert claims under the TSA “because such . . . claim[s] would involve an improper extraterritorial application of Texas law.”²⁹² To be sure, as the Surveys of previous years have underscored, there is nothing “extraterritorial” in the application of a state’s law to conduct that occurs in that state, but the injuries occur elsewhere. The Texas Court of Appeals properly rejected the defendants’ argument. The court relied on Citizens Insurance Co. of America v. Daccach,²⁹³ in which the Texas Supreme Court held that the application of the TSA to non-Texas purchasers and purchases was necessary for achieving the TSA’s purposes. ²⁹⁴ The Court of Appeals concluded that “the Texas legislature intended the TSA to apply to transactions emanating from Texas, even when they involve non-Texas residents.”³⁰⁸

Thornell v. Seattle Service Bureau, Inc.³⁰⁹ involved the interpretation and applicability of the Washington Consumer Protection Act (WCPA) to out-of-state consumers who suffered their injuries in their home states. In a decision discussed in the 2015 Survey, the Washington Supreme Court answered a question certified by the Ninth Circuit by holding that the WCPA did not exclude from its scope actions filed by out-of-state plaintiffs against a Washington defendant for sending allegedly deceptive debt collection letters from Washington in violation of WCPA.³¹⁰

When the case returned to the federal courts, the district court held that the Washington court’s holding that the WCPA was applicable to out-of-state plaintiffs did not mean that it should be applied in this case. Instead, the court held that this case was governed by the law of the plaintiff’s home state of Texas, which did not provide an action for actions such as the plaintiff who did not qualify as a consumer. The Ninth Circuit affirmed. The court based its decision on § 148 of the Restatement (Second), which applies to misrepresentation. The court concluded that that Texas’s contacts were the “most significant” because the plaintiff “reside[d] there, received the letters there, and suffered any damages there,” and that a policy analysis did “not overcome the clear preponderance” of Texas’s contacts.³¹¹ The court noted that Washington had an interest in applying its law “to deter deceptive conduct by an instate defendant,” but thought that that Texas, “where the plaintiff live[d] and all alleged damages occurred, also ha[d] an interest in having its law applied to its resident claimants.”³¹² The court deemed immaterial the fact that Texas law did not protect the Texas plaintiff.³¹³

In a strong dissent, Judge Marsha Berzon noted, inter alia, that Texas’s prodefendant law was intended to protect Texas defendants and, “[w]ithout any Texas defendants to protect,” applying Texas law “serve[d] no purpose other than uniquely to disfavor Texas plaintiffs who are otherwise entitled to sue in Washington.”³¹⁴ On the other hand, since the defendant was based in Washington and acted there, Washington had an interest in applying its law to protect the Washington public and promote honest competition there.²⁹⁵

In Premium Freight Management, LLC v. PM Engineered Solutions, Inc.,²⁹⁶ the conflict was between the Connecticut Unfair Trade Practices Act (CUTPA), which protected the Connecticut plaintiff (the seller) who suffered losses in Connecticut, and Michigan’s corresponding Act, which protected the Michigan defendant (the buyer) who acted in Michigan. The case was decided in a neutral forum, Ohio. The court held that Connecticut law should govern, basing its decision on both contacts and state interests. Regarding contacts, the court reasoned that, although the rest of the contacts were divided between the two states, what tipped the scales was that the parties’ relationship was based in Connecticut and the goods, which were manufactured in Connecticut, were delivered in that state. Regarding interests, the court acknowledged that Michigan “unquestionably ha[d] an interest in protecting its businesses from excessive liability for unfair trade practices,” but concluded that “the state with the ‘strongest interest’ in regulating unfair trade practices, whether liability is imposed or foreclosed, is the state where the harm occurred.”²⁹⁷ In this case, therefore, “[b]ecause the harm occurred in Connecticut, it is Connecticut that has the strongest interest.”²⁹⁸

3.  Other Torts

In Jahnke v. Deere & Company,²⁹⁹ the Iowa Supreme Court held that the Iowa Civil Rights Act (ICRA) did not apply to an alleged discriminatory demotion and repatriation of an Iowa domiciliary for misconduct committed during his employment for the defendant in China. The court found that the text of ICRA did not contain any expression indicating an intent to be applied extraterritorially and that in this case all the disciplinary decisions regarding the employee were made in China and approved at the employer’s headquarters in Illinois. Under these circumstances, the fact that the employee lived and worked for the employer in Iowa before and after the demotion or that one of the Illinois managers who approved the demotion was also domiciled in Iowa, were not sufficient contacts to justify the application of ICRA.

Viener v. Casano³⁰⁰ involved an action for alienation of affections, which was filed in Mississippi, one of a handful of states that recognize this action. A Louisiana husband sued a Mississippi defendant, alleging that the defendant caused the breakdown of the plaintiff’s marriage. The defendant had met the plaintiff’s wife during a trip to Florida and developed a relationship with her that included encounters in several states including Louisiana, but only one in Mississippi. Louisiana, unlike Mississippi, does not allow an action for

alienation of affections. Applying Mississippi’s center of gravity approach along with the Restatement (Second), the Fifth Circuit held that, as the state of the matrimonial domicile and the place of injury, Louisiana presumptively had the most significant relationship and that the policy considerations of § 6 of the Restatement (Second) did not rebut that presumption. In the court’s words, “Mississippi case law indicates only that Mississippi has a strong public policy in favor of protecting the marriages of its own citizens” but “it is essentially silent as to whether Mississippi has a strong public policy interest in protecting the marriages of citizens from other states.”³⁰¹ The court held that Louisiana law governed, barring the action.

Coulter v. ADT Security Services³⁰² was a dispute between a company that provided residential alarm monitoring services and a Pennsylvania homeowner, the plaintiff. The company installed an alarm system in the plaintiff’s Pennsylvania house in 2007 and represented to her that the company will monitor the alarm on a daily basis. In 2013, the plaintiff moved to New Jersey but kept her Pennsylvania house and alarm system. Later that year, the plaintiff discovered that the company had been monitoring the alarm only once a month. Thereafter, the plaintiff discovered that the alarm stopped functioning, but the company never notified her. The plaintiff sued the company in Florida on both contract and tort counts. The Eleventh Circuit held that Pennsylvania law governed her claims under the 2007 contract, but a time limitation contained in the contract, which was enforceable under Pennsylvania law, barred those claims. The court also held that Pennsylvania law governed the plaintiff’s tort claims arising from the 2007 misrepresentation, and that Pennsylvania’s statute of limitation barred those claims as well. Finally, the court held that New Jersey law governed the plaintiff’s tort claims arising from the 2013 events, but that law did not allow recovery for pure economic loss.

Murray v. Janssen Pharmaceuticals, Inc.³¹⁵ involved the same defendants and the same drug as Stange, but the plaintiff was a Maryland domiciliary. The Pennsylvania court disposed of the punitive damages issue in the same way as in Stange by remanding the case with instructions to resolve the true conflict between New Jersey law and the law of the state of injury, Maryland. However, Murray presented an additional conflict. Maryland law capped noneconomic damages to $500,000, whereas Pennsylvania law did not. As the court put it, “Maryland’s law favors protecting defendants in the interest of limiting their liability and making insurance more available and affordable in the state,” while “Pennsylvania’s law appears more plaintifffriendly, as it sets no cap on noneconomic damages and aims to fairly and adequately compensate plaintiffs, as determined by juries and trial courts.”³¹⁶ The court concluded that, because the defendant was “not incorporated nor d[id] it have a principal place of business in Maryland, which has a defendant-protecting rule,” and the plaintiff did “not reside in Pennsylvania, which has a plaintiff-friendly rule,” this was an “unprovided-for” case.³¹⁷ The court resolved the conflict under the Restatement (Second), concluding that the plaintiff did not rebut the presumption of § 146 in favor of the law of the state of injury, which was also the place where the plaintiff used the drug and suffered the injury.

G.   Statutes of Limitation³²²

MTK Food Services, Inc. v. Sirius America Ins. Co.³²³ was decided in New Jersey, one of the 24 states that have abandoned the procedural characterization of statutes of limitation, and one of the eight states that have adopted § 142 of the Restatement (Second) as revised in 1988.³²⁴ A Pennsylvania restaurant owner sued an attorney who practiced law in both Pennsylvania and New Jersey for legal malpractice in not acting timely to prevent the expiration of the Pennsylvania statute of limitation in the plaintiff’s claim against the restaurant’s insurer. However, the plaintiff’s own malpractice action against the attorney was untimely under Pennsylvania’s two-year statute of limitation, although it was timely under New Jersey’s six-year statute. Applying § 142, the trial court held the action timely under New Jersey law. Section 142 provides that, in cases of this pattern, the forum’s longer statute presumptively applies unless “maintenance of the claim would serve no substantial interest of the forum.”³²⁵ In this case, the trial court reasoned that New Jersey had a substantial interest in regulating attorneys who are licensed to practice law in New Jersey.

Brandon v. Ivie³³⁴ was decided in Texas, one of the 28 states that continue to follow the procedural characterization of statutes of limitation.³³⁵ This was a personal injury action arising out of a traffic accident in Louisiana and involving two Texas drivers. The action was timely under Texas’s statute of limitation but untimely under Louisiana’s shorter statute. The defendant urged the court to “abandon the mechanical rules of the traditional theory in favor of more flexible choice-of-law methodologies” because “[t]he automatic application of the procedural law of the forum . . . does not allow a consideration of the particular facts and circumstances of each case, and often undermines the interests and policies of the interested states.”³³⁶ The court declined the invitation, noting that the defendant did “not explain how, in this case, the application of the law of the forum undermines the interests and policies of the interested states,” nor did he identify “an interest or policy undermined by the application by a Texas court of the Texas statute of limitations in a lawsuit between two Texas residents involving a Louisiana collision” or one that “would support the substitution of the procedural law of the forum by the more flexible choice-of-law approach he advocates.”³³⁷ In any event, said the court, “[a]s an intermediate appellate court,” it was “compelled to apply the established Texas law as declared by [the] supreme court,” which “considers statutes of limitations procedural” and to apply the Texas statute, barring the action.³⁵⁸

The district court dismissed the conversion action on statute of limitation grounds. However, the court based its decision not on the Italian judgment but rather on the Italian ten-year statute of limitation, which was applicable through California’s borrowing statute. In applying the borrowing statute, the court held that California law, rather than Italian law, determined when the plaintiff’s claim “accrued,” i.e., it came into existence, and that occurred in the year 2000. The plaintiff appealed the district court’s decision on this ground (and several others). In a decision discussed earlier,³⁴⁹ the Ninth Circuit affirmed. The court noted that the California Supreme Court has not ruled on whether California or foreign law governs the question of when a foreign cause of action accrues for purposes of the borrowing statute. Nevertheless, the Ninth Circuit held that: (1) the district court correctly decided that question under California law; (2) the court was “permitted” but not required to decide it under Italian law; and (3) in any event, in this case, the result would be the same under either law.³⁵⁰

In Travelers Indemnity Company v. CNH Industrial America, LLC, ³⁵⁹ the underlying dispute also involved a manufacturer’s liability for asbestos-containing products, but the precise issue was the validity of anti-assignment clauses contained in the insurance policies. Tenneco, a Texas based company, purchased insurance policies from Travelers naming as insureds all of Tenneco’s wholly owned subsidiaries, including J.J. Case, a Wisconsin-based manufacturer. Later, J.J. Case assigned the policies to CNH, who then sued Travelers in Delaware seeking coverage. Invoking the antiassignment clauses in the policies, Travelers refused to provide coverage. The clauses were enforceable under Texas law, but not under Wisconsin law. The lower court treated J.J. Case as the insured and applied Wisconsin law.

Among the hundreds of cases involving automobile insurance conflicts, State Auto Property & Cas. Ins. Co. v. Moser,³⁶⁶ a case involving the question of insurability of punitive damages, may be the only one worth discussing. The case arose out of a Pennsylvania accident that caused the death of a Pennsylvania domiciliary. However, the main dispute was between the owners of the Maryland car that caused the accident and their own insurer. The insurer intervened in the Pennsylvania litigation between the victim’s estate and the car owners, seeking a declaration that the insurer was not obligated to provide coverage for punitive damages that might be assessed against the owners. The car was registered in Maryland and insured through a policy issued to the owners and delivered to them in Maryland. However, at the time of the accident, the car was driven by a Pennsylvania resident who worked as an independent contractor of the owners, and, with their permission, kept the car at his Pennsylvania residence. Maryland law allowed insurance coverage for punitive damages. However, Pennsylvania law allowed such coverage only for claims arising from vicarious liability and prohibited coverage for claims arising from direct liability. Because the victim’s estate asserted punitive damage claims against the owners on the basis of both direct and vicarious liability, a conflict existed between the laws of the two states.

The Pennsylvania court acknowledged that this was a contractual conflict because “[t]he central question . . . revolve[d] around the scope of the insurer’s coverage obligation towards its insureds.”³⁶⁷ Nevertheless, the court concluded that, in Pennsylvania, the choice- of-law analysis is “essentially the same for contract and tort actions and focuses on the significance of the state contacts and the respective interests of the competing states.”³⁶⁸ Employing this analysis, the court concluded that Maryland law should govern “[b]ecause Maryland [was] the state of issuance for the applicable insurance policies.”³⁶⁹ The court also concluded that Maryland’s allowance of insurance coverage for punitive damages arising from direct liability did not offend Pennsylvania’s public policy.

In holding that Maryland law should govern, the court expressed some hesitation because the car was stationed in Pennsylvania, more or less permanently and with the owners’ permission. The court noted that, “[u]nder these circumstances, . . . [one] may infer the inevitability of frequent Pennsylvania travel and the related possibility of a motor vehicle accident within Pennsylvania.”³⁷⁰ In turn, this would suggest that “Maryland would seem to have a diminished interest” in applying its law and that “[the owners’] reliance on Maryland insurance law would be subject to question.”³⁷¹ Nevertheless, the court felt constrained by a previous Pennsylvania case that had applied the law of the state of the insurance contract under similar circumstances.³⁷² Indeed, as in previous years, the vast majority of cases involving this scenario, namely a car insured in one state and involved in an accident in another state, tend to apply the law of the state of the insurance contract, rather than the law of the state of the accident. This year was no exception.³⁷³

In Von Saher v. Norton Simon Museum of Art at Pasadena,³⁸² the plaintiffs did not fare as well as the Philip plaintiffs in their lawsuit against a California museum. Von Saher involved two Renaissance masterworks—“Adam” and “Eve”—painted by Lucas Cranach the Elder, and owned by Dutch Jews. Initially, the paintings had the same fate as the Philp collection, i.e., a forced sale to Hermann Göring during World War II. The difference was that, for a long period after the war, the owners’ heirs consciously and strategically decided not to avail themselves of several formal administrative and judicial processes and opportunities provided by the Dutch government to claim the paintings from its possession. In 1966, the Dutch government sold the paintings to Stroganoff, who claimed to be their previous owner before they were sold by the Soviet Union at a 1931 auction in Berlin. Stroganoff then sold the paintings to the California museum, the defendant in this case. In the 1990s, the heirs filed restitution proceedings in the Netherlands, but the Dutch court ruled against them. Later on, the government voluntarily returned some other paintings to the heirs, stating that the claim regarding Adam and Eve had been “settled” by the Dutch court’s decision. In 2007, the heirs sued the California museum in California.

The Ninth Circuit held that, under these circumstances, the act of state doctrine barred adjudication of the plaintiffs’ claims. This doctrine is a “rule of decision” requiring that “the acts of foreign sovereigns taken within their own jurisdictions shall be deemed valid.”³⁸³ It is motivated by concerns that the judiciary, “by questioning the validity of sovereign acts taken by foreign states, may interfere with the executive branch’s conduct of foreign policy.”³⁸⁴ In this case, said the court, adjudication of the heirs’ claims “would necessitate declaring invalid at least three official acts of the Dutch government performed within its own territory.”³⁸⁵ The court took note of the U.S. State Department’s position that upholding the Dutch government’s actions was “important for U.S. foreign policy” and that the United States had “a substantial interest in respecting the outcome of the [Dutch] proceedings.”³⁸⁶ The court concluded that “[r]eaching into the Dutch government’s post-war restitution system,” would “embroil[] [American] courts in re-litigating long-resolved matters entangled with foreign affairs,” and would “require making sensitive political judgments that would undermine international comity.”³⁸⁷

In Adeleye v. Driscal,³⁹¹ which was discussed earlier,³⁹² the Texas court found that the parties had entered into a valid marriage by proxy in Nigeria, “even though neither party to the marriage was present at the ceremony.”³⁹³ According to the wife’s testimony, which the court accepted, “the custom in Nigeria is for the man to tell his family who he wants to marry, then his family writes to the woman’s family to ask for her hand in marriage, and dates are arranged for a ceremony.”³⁹⁴ In this case, the wife “introduced into evidence a letter from [husband’s] brother to her father, in which the brother stated that [husband] wished to marry [wife] and requested the father’s approval of their marriage.”³⁹⁵ The wedding took place two years later, and the parties lived together thereafter, albeit not always happily, until their divorce trial in Texas.

2.  Marital Property

In Gal v. Gal,⁴⁰³ the parties married in Israel and signed a premarital agreement stating that Israel’s Spouses Property Relations Law would govern their future marital property regime. Four years later, the husband filed a petition for dissolution in Florida and the wife filed a motion to declare the premarital agreement invalid on ground of unconscionability. In granting the wife’s motion, the trial court applied Florida law because “[n]either party has sought to challenge the Agreement in Israel” and “all pleadings have been filed in Florida.”⁴⁰⁴ The Court of Appeals reversed, reasoning that the trial court should have honored the Israeli choice-of-law clause unless the application of Israeli law would contravene “a strong Florida public policy.”⁴⁰⁵ Instead of undertaking such an analysis, the trial court, “relying . . . on convenience,” applied Florida law “merely because both parties filed their pleadings in Florida.”⁴⁰⁶ The Court of Appeals remanded the case for further proceedings “consistent with the premarital agreement.”⁴⁰⁷

In Hutchins v. Hutchins,⁴⁰⁸ the parties executed a premarital agreement in Nevada while they were domiciled there. The agreement contained a Nevada choice-oflaw clause. Fifteen years later, the spouses moved to Montana, where, eight years later, the wife filed for divorce and challenged the enforceability of the premarital agreement. The Montana court, applying Montana law, held the agreement enforceable. The Montana Supreme Court affirmed the holding but pointed out the trial court’s error in not honoring the Nevada choice-of-law clause. The Supreme Court noted that the clause was enforceable because none of the invalidating grounds provided in § 187 of the Restatement (Second) were present. Applying Nevada law, the court held the premarital agreement enforceable and then affirmed the trial court’s valuation and apportionment of the marital property under Montana law.

3.  Adoption and Succession

Estate of Obata⁴¹³ is a very interesting case involving the effects of a type of a Japanese extrajudicial adult adoption known as yōshi-engumi. The central person in the story was Tomejiro, who was born into the Nakano family in 1886. In 1911, at the age of 25, Tomejiro was “adopted” by his biological sister and her husband (the Obatas), apparently in order to eventually become the head of the Obata extended family or “house.” Tomejiro’s yōshi- engumi was recorded in the family registry of the Obata house, but his name was not removed from his biological father’s house (the Nakanos). Later, Tomejiro immigrated to California and eventually died intestate while domiciled there. This case concerned the inheritance rights to the estates of his two daughters, who also died intestate while domiciled in California. Because the daughters never married and had no descendants, their estates would be inherited by Tomejiro’s heirs. The dispute was between Tomejiro’s biological relatives (the Nakanos) and his adopted relatives (the Obatas).

The Nakanos argued that, under Japanese law, a yōshi-engumi, which is effected without judicial participation or approval: (1) does not produce a permanent relationship with the adopter; and (2) does not terminate the adoptee’s relationship with his or her biological family. The court thought that both of these arguments were “immaterial.”⁴¹⁴

4.  Child Custody and the Hague Convention

Guimaraes v. Brann⁴²² was one of several 2018 cases involving the 1980 Hague Convention on the Civil Aspects of International Child Abduction.⁴²³ The story is as sad as these stories usually are, but the outcome turned out to more expensive than usual for the abducting parent. The parents were domiciled in Texas, where their only child was born. When the child was three-years old, the mother sued the father for divorce. During the pendency of the proceeding, the court issued an order granting temporary joint custody of the child to the parents and prohibiting the child’s removal from the particular Texas county. A few months later, the mother persuaded the father to allow her to take the child to Brazil for a few days and then return it to Texas. Instead of returning to Texas, the mother kept the child in Brazil and initiated custody proceedings there. The father appeared in the Brazilian proceedings and requested the child’s return under the Hague Convention. The Brazilian court refused to order the return of the child, invoking two exceptions from the obligation of signatory countries to order the return of a wrongfully removed child to its home state. The first was the “well-settled” exception of Article 12 of the Convention, under which the court may, under certain conditions, allow the child to remain in the new country if the child has become settled in its new environment. The second exception is the “grave risk” exception of Article 13, under which the court may allow the child to remain if “there is a grave risk that his or her return would expose the child to physical or psychological harm or otherwise place the child in an intolerable situation.”⁴²⁴

In the meantime, the Texas case proceeded to trial, in which the mother appeared through counsel.⁴²⁵ The trial court: (1) granted divorce and divided the marital property; (2) awarded joint custody to both parents but gave to the father the exclusive right to designate the  child’s  residence;  and  (3)  awarded  to  the  father  $425,767  in  costs,  expenses  and attorneys’ fees, and $ 2 million in compensatory (plus $250,000 in exemplary) damages for mental anguish and suffering. The wife appealed, but the appellate court affirmed all parts of the trial court decision.

Regarding the child custody part of the case, the Texas court held that international comity did not require deference to the Brazilian judgment. The court noted that, under a test established by American federal cases, “a court may decline to extend comity if the foreign court clearly misinterprets the Hague Convention, contravenes the Convention’s fundamental premises or objectives, or fails to meet a minimum standard of reasonableness.”⁴²⁶ The court found that the Brazilian judgment failed this test. First, regarding the “well-settled” exception, the Brazilian court misapplied Article 12 of the Convention, which allows this exception only if the request for the return of the child is filed more than one year after its wrongful removal.⁴²⁷ In this case, the father filed his request within three months from the removal. Regarding the “grave risk” exception, the court found that the Brazilian court misinterpreted Article 13 of the Convention by adopting an “over- expansive” reading of the exception rather than requiring clear and convincing evidence of severe potential harm. This exception, the Texas court reasoned, “is not license for a court in the country in which the children are being held to speculate about where the children would be happiest.”⁴²⁸ In this case, said the court, the Brazilian court “improperly based its assessment of ‘grave harm’ on what it perceived to be the best interest of the child, i.e., living with his mother, instead of being cared for by a babysitter while his father worked. This is exactly the sort of best-interest review the Hague Convention is designed to prohibit.”⁴²⁹

The “well-settled” exception was the main issue in two other cases, although in both of them the child’s wrongful removal (by the mother) was from a foreign country to the United States. In both cases, the father’s petition requesting the child’s return was filed after one year from the child’s wrongful removal. In the first case, Fernandez v. Bailey,⁴³⁰ the father filed the petition two-and-half years after the removal from Panama. Nevertheless, the court ordered the return of the children to Panama. In the second case, Monzon v. De La Roca,⁴³¹ the father filed the petition sixteen months after the removal from Guatemala. Nevertheless, the court denied the petition to return the child to Guatemala. The two cases illustrate the degree of discretion a court has in ordering the return of the child and the extent to which the circumstances of the individual case can affect the exercise of that discretion.

In Fernandez, the mother was a repeat offender, and the court’s decision against her can be explained by what in other areas of the law is known as the “unclean hands” doctrine, although the court did not use this term. The mother first abducted her twin boys from Panama when they were nine months old and took them to Missouri, where a court eventually ordered their return to Panama under the Hague Convention. Then, when the boys were five, the mother abducted them again and took them to Florida, while a custody proceeding was pending before a Panamanian court, which had issued an order prohibiting their removal from Panama.⁴³² It took the father two-and-a-half years to discover their whereabouts and to petition a Florida court to order their return.

In reversing the trial court decision denying the petition, the Eleventh Circuit provided a thorough exposition of the meaning of the “well-settled” exception under the Convention and the implementing statute, ICARA.⁴³³ The court pointed to Article 18 of the Convention, which provides that “[t]he provisions of this Chapter [Chapter 3, which includes Article 12] do not limit the power of a judicial or administrative authority to order the return of a child at any time.”⁴³⁴ The court concluded, as have most other circuit courts,⁴³⁵ that Article 18, when read in conjunction with Article 12, grants courts discretion to order the return of a wrongfully removed child even if it is well-settled in the new environment. The court reasoned that this reading was consistent with one of the Convention’s primary objectives, which was “to prevent an abducting parent from wrongfully removing a child to a friendlier forum for the adjudication of a custody dispute.”⁴³⁶

 The court then described the “unique”⁴³⁷ circumstances of this case, which included the mother’s “audacity”⁴³⁸ exhibited by “a second wrongful removal within five years in violation of a court-ordered exit restriction,” the “ongoing involvement of Panamanian courts” in this case, and the father’s inability, because of his immigration status, to come to the United States to see his boys or to litigate custody issues in person.⁴³⁹ The court concluded that, under these circumstances, the district court’s refusal to order the return of the boys was “contrary to the aims and objectives of the Convention and constituted an abuse of discretion.”⁴⁴⁰

Compared to Fernandez, the blame and the equities in Monzon were not as one-sided. After the parents’ divorce and while the father was under a temporary restraining order for domestic violence, the wife moved from Guatemala to New Jersey and took the child with her against the father’s refusal to consent. Within weeks, the father filed a request for the return of the child with the Guatemalan authorities, which transmitted it to the U.S. authorities. However, because he did not know where the wife was, he did not sue her in New Jersey until 16 months later, i.e., after the expiration of the one-year, which is so critical under the Convention. The father argued that his request to the Guatemalan authorities should be treated as the initiation of proceedings under Article 12 of the Convention, or that the one- year period should be tolled for equitable reasons. The court rejected the argument, first because Section 9003(b) of ICARA requires the filing of “a civil action . . . in any court which has jurisdiction of such action and which is authorized to exercise its jurisdiction in the place where the child is located,”⁴⁴¹ and second because, under established precedent, the one- year period is not subject to tolling.⁴⁴²

The mother invoked the same exceptions to the obligation to return the child as in Guimaraes, namely the “well-settled” exception of Article 12 and the “grave risk” exception of Article 13 of the Convention. A proper reading of the Convention leaves no doubt that if either one of these exceptions is satisfied, the court has the discretion not to order the return of the child. However, in implementing the Convention, ICARA joined these two exceptions with the conjunctive “and” rather than the disjunctive “or.” Section 9003(e)(2) of ICARA provides as follows:

1. In . . . an action for the return of a child, a respondent who opposes the return of the child has the burden of establishing–by clear and convincing evidence that one of the exceptions set forth in article 13b or 20 of the Convention applies; and
2. by a preponderance of the evidence that any other exception set forth in article 12 or 13 of the Convention ⁴⁴³

Article 13b of the Convention contains the “grave risk” exception, whereas Article 12 contains the “well-settled” exception. Because subparagraphs (A) and (B) are joined by the conjunctive “and,” the father argued that the mother had to satisfy both subparagraphs. After extensive discussion, the court properly rejected the argument, reasoning, inter alia, that, in enacting ICARA, Congress did not intend to alter the remedies provided by the Convention. Finally, after examining the trial court’s record and analysis, the appellate court concluded that the trial court did not commit error in finding that the child was well settled in the new environment and denying the father’s request to return the child to Guatemala.⁴⁴⁴

A.  Foreign-Country Judgments

AlbaniaBEG Ambient Sh.p.k. v. Enel S.p.A.⁴⁶⁶ is probably the most important decision of the year on recognition and enforcement of foreign-country judgments. In this case, New York’s intermediate court, the Appellate Division, retreated from the position taken in its 2014 decision in Abu Dhabi Commercial Bank PJSC v. Saad Trading, Contr. & Fin. Servs. Co.,⁴⁶⁷ which was discussed in that year’s Survey. In Abu Dhabi, the court held that a New York court may recognize an otherwise eligible foreign judgment even if the court does not have jurisdiction over the defendant or the defendant’s assets. In AlbaniaBEG, the court held that the Abu Dhabi holding should be restricted to “the circumstances that were presented by that case,”⁴⁶⁸ in which the judgment debtor did not raise any grounds for non-recognition of the foreign judgment. By contrast, in this case the judgment debtor raised five different and non- frivolous grounds for non-recognition. The court held that, under these circumstances, the judgment creditor must establish that the New York court has jurisdiction over the defendant or its assets. A well-reasoned article authored by Professors Silberman and Simowitz, from which the court quoted repeatedly and extensively, deserves credit for the court’s retreat.⁴⁶⁹

Upon further reflection, which was prompted by the Silberman & Simowitz article, the court decided that “Abu Dhabi should not be read so broadly.”⁴⁵⁰ In fact, Abu Dhabi should not have spoken so broadly. AlbaniaBEG is more of a retreat from, rather than a clarification of Abu Dhabi. For example, the AlbaniaBEG court walked back much of the above-quoted statement from Abu Dhabi, when it stated that

Because we believe that the Constitution requires, as a matter of due process, a jurisdictional nexus with New York as a prerequisite to maintenance in this state of . . . proceeding to recognize and enforce a foreign country judgment of contested validity, it is of no moment that [New York’s Uniform Act] does not expressly provide that lack of such a jurisdictional nexus constitutes a defense in such a proceeding.⁴⁷⁷

In any event, the court distinguished Abu Dhabi on the ground that the judgment debtor in that case “did not raise any . . . grounds for nonrecognition of a foreign country judgment.”₄₅₁ Under those circumstances, the court reasoned, the New York enforcement proceeding “imposed no hardship” on the debtor because “there [was] nothing to defend” and the court’s role was confined to the “ministerial function” of “according recognition to a foreign judgment of unquestioned finality, conclusiveness and validity.”⁴⁵² By contrast, the court continued, in AlbaniaBEG in which the debtor had raised five non-frivolous grounds for non-recognition “there is something to defend, and the court’s function ceases to be merely ministerial.⁴⁵³ Consequently, “[t]]o require a defendant to litigate such substantive issues in a forum where it maintains no property, and where it has no contacts that would otherwise subject it to personal jurisdiction, would ‘offend [the] traditional notions of fair play and substantial justice’ at the heart of the Due Process Clause.”⁴⁵⁴

In conclusion, the court moved in the right direction by excising some overbroad statements in the Abu Dhabi decision and closing part of the door that decision had opened. However, because AlbaniaBEG is only a correction rather than a repudiation of Abu Dhabi, the two decisions will have to coexist, at least until the New York Court of Appeals takes up this issue. In the meantime, the combined effect of the two decisions will be as follows:

1. If, as in Abu Dhabi, the judgment debtor does not raise any grounds for nonrecognition under New York’s Uniform Act, a New York court will entertain an action to enforce the judgment, even if the court has no jurisdiction over the defendant or its
2. If, as in AlbaniaBEG, the judgment debtor raises non-frivolous grounds for non- recognition under New York’s Uniform Act, a New York court will not entertain an action to recognize the judgment unless the court has jurisdiction over the defendant or its assets.

The court based its decision on the fact that the plaintiff requested recognition of the 2003 judgment (whose life had been extended by the 2013 renewal), rather than of the 2013 judgment that renewed it. The court reasoned that, although the Canadian renewal extended the life of the judgment in Canada, “California law does not provide that the renewal of a foreign judgment extends the limitations period for a recognition action in California beyond the 10–year period.”⁴⁶⁸ The court noted that: (1) Canadian law determined whether the renewal was a new judgment rather than an extension of the old one; and (2) if, under Canadian law, the renewal qualified as a new judgment then the California statute of limitation would not bar its recognition. In response to the court’s question the plaintiff stated that the renewal was not a new judgment. Based on that admission, the court concluded:

[B]ecause the Attorney General filed the complaint to domesticate the 2003 judgment more than 10 years after it became effective and has not shown that the renewal order is a new judgment under Canadian law, she fails to overcome the statute of limitations defense and is not entitled to summary judgment.⁴⁶⁹

The opinion is unduly technical and conclusory. Fortunately, the court designated it as “non-publishable.”

Among other cases involving foreign judgments, one case denied recognition of a Belarussian judgment because the defendant did not receive notice of the foreign proceeding,⁴⁷⁰ two cases granted recognition of a Russian⁴⁷¹ and a Mexican judgment, respectively, after finding that, despite claims to the contrary, the defendant did receive adequate notice,⁴⁷² and one case granted recognition of a Costa Rican judgment after finding that the defendant did not provide sufficient evidence to substantiate his claim that the judgment was tainted by fraud.⁴⁷³

B.  Sister-State Judgments

Schmierer v. The Tribal Trust⁴⁷⁴ involved the same pattern as Attorney General of Canada v. Malone, which is described in the preceding section, but the New Mexico court was more hospitable to the California judgment than the California court was to the Canadian judgment—and the Full Faith and Credit clause made the difference. The creditor of a 1989 California judgment, which was renewed in 1999, sought its enforcement in New Mexico in 2004. Under California law, the renewal did not create a new judgment but extended the enforceability of the old judgment, in this case until 2009. New Mexico had a 14-year statute of limitations “from the date of the judgment.”⁴⁷⁵ Because the California renewal was not a new judgment, the 14-year period expired in 2003, thus barring the 2004 enforcement action. That would be so, said the New Mexico court, “unless full faith and credit mandates a different result.”⁴⁷⁶ The court discussed in detail the three Supreme Court decisions on statutes of limitation and judgments—McElmoyle ex rel. Bailey v. Cohen,⁴⁷⁷ Union National Bank v. Lamb,⁴⁷⁸ and Watkins v. Conway.⁴⁷⁹ In the end, the court adopted what it considered the better view in interpreting these decisions, concluding as follows:

[While forum states may apply their own statutes of limitations for the enforcement of judgments, they must treat foreign judgments that are revived in the rendering state in the same manner as the rendering state would treat the revived judgment        Thus, if the rendering state will enforce a judgment that has been revived under that state’s laws, then the forum state must do the same.⁴⁸⁰

In this case, the California judgment “remained subject to enforcement in the courts of California” until 2009, and “[t]herefore, under the Full Faith and Credit Clause [the] judgment was entitled to enforcement in New Mexico as well.”⁴⁸¹

In Taracorp, Ltd. v. Dailey,⁴⁸² the Oklahoma Supreme Court held that the holder of a 2007 Colorado judgment could enforce it in Oklahoma in 2016, although Oklahoma had a five-year statute of limitation for judgments.⁴⁸³ Colorado had a 20-year statute. The court based its decision on the spirit of Watkins v. Conway,⁴⁸⁴ although it reached the opposite result from Watkins. In Watkins, the holder of a Florida judgment, which was subject to a 20- year statute of limitation, sought its enforcement in Georgia one day after the expiration of Georgia’s 5-year statute. The Supreme Court held that Georgia did not violate the Full Faith and Credit Clause when it denied enforcement because all the judgment creditor had to do was return to Florida, revive his judgment, and come back to Georgia and file suit within five years. Apparently in order to spare the creditor from a return trip to Colorado, the Oklahoma Supreme Court held that the Colorado judgment was enforceable in Oklahoma, “because it [was] still valid and enforceable in the issuing state.”⁴⁸⁵

The hospitable attitude exhibited by the Schmierer and Taracorp cases is by no means universal. For example, in North Dallas Bank & Trust Co. v. Mabry,⁴⁸⁶ a Mississippi court summarily dismissed an action to enforce a Texas judgment because the action was filed after the expiration of Mississippi’s seven-year statute of limitation. The court reasoned that “efforts to enroll or enforce a foreign judgment outside the limitations periods set by [the Mississippi statute] are void—indeed . . . void ab initio.”⁴⁸⁷ The court did not even mention the Texas statute of limitation.

In EBF Partners, LLC v. Novabella, Inc.,⁴⁸⁸ the holder of a New York judgment sought its enforcement in Indiana. The judgment was entered pursuant to a confession of judgment contained in a cognovit note.⁴⁸⁹ Indiana had a strong public policy against enforcing cognovit notes. In fact, an Indiana statute made it a misdemeanor to “procure another” to execute a cognovit note or “to attempt to enforce within Indiana a foreign judgment based upon a cognovit note.”⁴⁹⁰ Nevertheless, the Indiana court held that, “in spite of Indiana’s aversion to cognovit provisions, a valid foreign judgment based on a cognovit note will be given full faith and credit in Indiana.”⁴⁹¹ The court noted that several Supreme Court decisions dictated this result, including Baker v. General Motors Corp.,⁴⁹² which stated that there is “no roving ‘public policy exception’ to the full faith and credit due judgments” of sister states.⁴⁹³

The Indiana court noted that the cognovit note provided that a confession of judgment could be entered only if permitted under the laws of the state in which the debtor resided and that in this case the debtor resided in Indiana. Under this provision, the New York court should not have entered the confessed judgment, but, as the Indiana court noted, the debtor’s only remedy was to challenge the judgment in New York, not in Indiana.⁴⁹⁴

In Toni 1 Trust, by Tangwall v. Wacker,⁴⁹⁵ the question was whether a state’s claim of exclusive jurisdiction over certain causes of action its law creates is binding on the courts of other states or on federal courts. The Alaska Supreme Court answered this question in the negative for such a claim established by an Alaska statute. The case involved a “self-settled spendthrift trust” established under an Alaska statute, which vested Alaska courts with exclusive jurisdiction over actions “against property of [the trust] or to avoid a transfer of property to [the trust].”⁴⁹⁶ A Montana state court and an Alaska federal bankruptcy court rendered judgments holding that certain transfers to the trust were fraudulent and the judgment creditors sought to enforce the judgments against the trust in Alaska. The trust argued that the judgments were unenforceable because the above-quoted statute deprive the Montana court and the federal court from jurisdiction to render the judgments. The Alaska Supreme Court rejected the argument.

With regard to the Montana judgment, the court relied on Tennessee Coal, Iron & R. Co.

1. George,⁴⁹⁷which is familiar to conflicts teachers. In that case, the U.S. Supreme Court held that the Full Faith and Credit Clause did not require Georgia to abide by an Alabama statute that claimed exclusive jurisdiction over certain causes of action the statute had created. As the Court noted, “jurisdiction is to be determined by the law of the court’s creation, and cannot be defeated by the extraterritorial operation of a statute of another state, even though it created the right of action.”⁴⁹⁸Toni 1 was an even stronger case because the creditor’s actions was created by Montana law rather than Alaska law.⁴⁹⁹

With regard to the federal court judgment, the Alaska Supreme Court relied on Marshall v. Marshall,⁵²⁷ in which the U.S. Supreme Court held that Texas could not curtail the jurisdiction of federal courts by claiming exclusive jurisdiction over a cause of action created by Texas law. Again, Toni 1 was a stronger because the cause of action asserted by the federal judgment creditor was based on federal law, i.e., the federal bankruptcy code, rather than state law.

C. Foreign Arbitral Awards

In Daesang Corporation v. NutraSweet Company,⁵⁰⁰ New York’s intermediate court reversed a lower court decision that had vacated an international arbitral award for “manifest disregard of the law,” a ground which courts have inferred from the Federal Arbitration Act (FAA).⁵⁰¹ The appellate court found that the lower court’s decision had violated the “emphatic federal policy in favor of arbitral dispute resolution” embodied in the FAA, “a policy that ‘applies with special force in the field of international commerce’”⁵⁰² The court recited applicable precedent stating that this ground for vacating an award is a “severely limited” doctrine of “last resort,” which may be used only in cases of “apparent egregious impropriety on the part of the arbitrators,” rather than in cases of “a simple error in law or a failure by the arbitrators to understand or apply it.”⁵⁰³ Specifically, the court said, an award may not be modified or vacated on this ground unless the court finds “both that (1) the arbitrators knew of a governing legal principle yet refused to apply it or ignored it altogether, and (2) the law ignored by the arbitrators was well defined, explicit, and clearly applicable to the case.”⁵⁰⁴

In this case, the lower court violated both prongs of this test because: First, contrary to the lower court’s findings, the arbitrators “made a good-faith effort to apply [the law] to the facts of this case.”⁵⁰⁵ “At most” they “misapplie[d] it,” said the court, but this “constitutes nothing more than a mere error of law for which [an] award will not be set aside”;⁵⁰⁶ and, Second, the disputed legal issue was not sufficiently well defined and “any error by the arbitrators in deciding this issue . . . was far from obvious and capable of being readily and instantly perceived by the average person qualified to serve as an arbitrator, . . . which is the standard for a showing of manifest disregard of the law.”⁵⁰⁷

In Republic of Argentina v. AWG Group LTD,⁵⁰⁸ the court confirmed an arbitral award against Argentina, after rejecting its challenge to the appointment of an arbitrator for “evident partiality.” The arbitrator was a member of the board of directors of an international financial-services company (UBS), which held “a sliver” of shares in two companies that were members of the AWG Group, along with five other companies. The Group argued, and the court agreed, that the arbitrator’s interest in the two companies was “remote—so remote, in fact, that she hadn’t even known about [it].”⁵⁰⁹ The court concluded that, because UBS’s interests in the two companies were “trivial,” the arbitrator’s interests in them were “insignificant” and thus “they could not have created evident partiality.⁵¹⁰

Argentina also argued that the arbitrators exceeded their authority because they rejected its necessity defense without providing an explanation. The court dismissed the challenge because Argentina did not point to anything (other than the arbitrators’ failure to supply reasons) that suggested that the arbitrators exceeded their authority. The court noted that, under applicable precedent, an arbitral panel’s decision “may be upheld even if it offered no explanation at all because the alternative, requiring a particular level of detail for every response to each party’s theories, would unjustifiably undermine the speed and thrift sought from arbitration proceedings.”⁵¹¹

In Leidos, Inc. v. Hellenic Republic,⁵¹² the district court confirmed a Greek arbitral award in favor of Leidos and against the Greek government for 39 million euros. The confirmation judgment stated the amount in euros. Thereafter, Leidos filed a motion under Federal Rule of Civil Procedure 59(e) to amend the judgment by converting the amount into

U.S. dollars. The court granted the motion and converted the amount into dollars. However, because the value of the euro had declined significantly since the time of the arbitral award, the conversion increased the amount by approximately $12 million. Following Greece’s appeal, the Court of Appeals reversed the conversion.

The court held that the district court committed two errors. The first was its assumption that Rule 59(e) did not apply to Leidos because it was not the “losing party.” That assumption was based on a misunderstanding of applicable precedent interpreting Rule 59(e). The Rule applied to both the losing and the prevailing party and prevented them from reopening matters that should have been raised prior to the entry of the judgment. The second error was the trial court’s conclusion that it was “manifestly unjust” to award Leidos a judgment in euros, even though Leidos had expressly sought relief in euros at least three times and had not asked for dollars until its post-judgment motion. The appellate court concluded by stating that, under Rule 59(e), a district court “may not convert a judgment to dollars if the movant contracted in euros, received its arbitral award in euros, requested euros in its complaint and filed three proposed orders seeking euros, before reversing course post-judgment.”⁵¹³

Completed Dec. 31, 2018

Salem, OR. S.C.S.