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Choice-of-Law as Non-Constitutional Federal Law

By Mark D. Rosen. Full text here.

Domestic choice-of-law is widely bemoaned for being a chaotic mess, with states using a half dozen different approaches.  But if we praise ‘our federalism’ for allowing states to adopt divergent laws that best reflect their citizens’ distinctive values, why are different tort and family laws across states normatively acceptable but not choice-of-law?  In fact, the Supreme Court treats all three bodies of law the same, having ruled in the 1941 Klaxon decision that choice-of-law is state law that appropriately varies from state to state.

This Article argues that today’s disorder in choice-of-law is traceable to a largely overlooked conceptual mistake in Klaxon—the assumption that choice-of-law is state law—and that Klaxon must be overruled. Choice-of-law was not viewed as state law for most of our country’s history, but long was conceptualized as a subset of the “general commercial law” of private international law, which was neither state nor federal. Cross-state uniformity was one of the general law’s signal characteristics, and expectations of uniformity extended to choice-of-law. After Erie declared “[t]here is no federal general common law,” what had been understood to be general law had to be parceled out into one of the categories of law Erie recognized as legitimate. There were two main options—state and federal—and Klaxon put choice-of-law into the box of state law.

The Article provides four arguments as to why choice-of-law is best understood to be federal law, not state law. The first argument is an amalgam of history and functional analysis: in a post-Erie world in which all law must be attributed to a sovereign, choice-of-law must be federal because only federal law can satisfy what I call choice-of-law’s  “Single System Requirement.” To explain, while choice-of-law presupposes variations across states in the substantive law to which it applies, choice-of-law cannot effectively serve its managerial function of predictably determining which state’s law applies if choice-of-law itself varies across states. This gives rise to the Single System Requirement: all polities whose differences in substantive law give rise to the need for choice-of-law must use the same choice-of-law rules. While general law satisfied the Single System Requirement before Erie, only federal law can fulfill the Single System Requirement after Erie.

The Article also advances three conceptual arguments for its claim that choice-of-law is inherently federal.  First, at its core, choice-of-law sorts out conflicts between states’ overlapping regulatory powers, a federal role by its very nature.  Second, choice-of-law plays a substantial role in determining the character of our federal union; choice-of-law plays a crucial role in determining to what extent states can, as a practical matter, have divergent substantive laws in fields that federal constitutional and statutory law does not demand national uniformity.  Third, choice-of-law plays a crucial role in maintaining the health of our interstate system.  State law is unsuited to discharging these three tasks, whereas federal law is the most functionally appropriate and democratically legitimate resource for accomplishing them.

The Article also makes the positive doctrinal case for its claim that choice-of-law is federal law. The Full Faith and Credit Clause’s “effects clause” grants Congress the power to enact choice-of-law rules for state courts, and the Diversity Clause authorizes Congress to create choice-of-law rules for federal courts.

Because choice-of-law must be federal law, Klaxon’s dramatic break with the past—its holding that choice-of-law is state law that can vary across states—must be overruled.  To be more precise, the Article argues that a post-Klaxon amendment to the Full Faith and Credit Act is best understood as having partially overturned Klaxon, and as currently providing a statutory basis for the development by state courts (and possibly federal courts too) of a single body of federal choice-of-law that is applicable in all courts. But Klaxon unquestionably impairs the effectiveness of a second federal statute, the Rules of Decision Act, which provides clearer authorization than the Full Faith and Credit Act for federal courts to create a body of choice-of-law—yet another reason Klaxon should be overruled.

The Article argues that the Full Faith and Credit Act and the Rules of Decision Act are best understood as imposing obligations consistent with the Single System Requirement: the two statutes require that the same federal choice-of-law rules be operative in state and federal courts. The statutes do not detail what those choice-of-law rules would be, but—like the antitrust laws—delegate courts the authority to flesh out choice-of-law rules on a case-by-case basis.  The understanding that choice-of-law is federal provides considerable guidance in formulating choice-of-law rules.  And because Congress has ultimate authority over choice-of-law, it always can legislatively revise judicially created choice-of-law doctrines–even those of the Supreme Court.