Agenda for 19th Class
• Admin
– Name plates
– Handouts
• Slides
• Choice of Law
– Mock mediation this Wednesday
• Go directly to room on chart (not to regular classroom)
• Review of Settlement
• Fees
– Fee shifting problem
• Settlement and fees in A Civil Action
• Intro to Erie and Choice of Law
1
Next Classes
• Wednesday
– Mock mediation
• Monday
– Email me settlement or last offers in Mock Mediation (one email per group of
6-8 students)
– Erie Doctrine
• 28 USC 1652, 2072
• Yeazell 241-50, 258-66
• Writing Assignment for Group 7 / Questions to think about
– Questions on next slide
• Optional. Glannon Chapters 10 and 11
– Choice of Law
• Choice of Law Handout
• Writing Assignment for Group 1 / Questions to think about
– Choice of Law Questions on slides which follow (4 slides)
• Optional. Glannon Ch. 12
2
Erie Questions
• Suppose West Dakota has a summary judgment practice different from the that
which has governed in the federal courts since Celotex. In West Dakota, a
defendant may not prevail by pointing out that plaintiff lacks evidence on an issue,
but rather the defendant can only prevail on summary judgment by presenting
undisputed evidence on every issue. If a diversity case is filed in federal district
court in West Dakota, what standard should apply if the defendant files a motion
for summary judgment?
• Federal courts have a policy of encouraging mediation. One aspect of that policy is
that neither the parties nor the mediator can be compelled to reveal what was said
in mediation. In addition, a mediator’s proposal is immune from disclosure. That is,
if, at the end of the mediation, the mediator suggests what she thinks is a fair
settlement, those settlement terms are confidential and cannot be revealed to a
judge or jury. The federal policy is not embodied in the Federal Rules of Civil
Procedure or Federal Rules of Evidence, but is part of case law at the appellate
level in most circuits, including the Fourteenth Circuit, which includes East Dakota.
East Dakota state courts have no such policy. Judges are free to ask questions of
lawyers about mediation. Some find it useful to ask, “what was the mediator’s
proposal?” Judges use that information in a variety of ways. Some use it as the
starting point for their own settlement conferences; they encourage the parties to
agree to the mediator’s proposal or something similar. Some take a more
aggressive approach and implicitly threaten lawyers, “if you don’t accept the
mediator’s proposal, I’ll make sure evidentiary and other rulings go against you.”
Judge Fred, a federal district court judge in East Dakota, thinks that the East Dakota
state court’s approach is the correct one, because mediation is so useful that no
one in her right mind would refuse mediation because she feared disclosure of the
mediator’s proposal. Patty sued David for breach of contract in federal court in East
Dakota. The parties went through an unsuccessful mediation. May Judge Fred
compel Patty and David to reveal the mediator’s proposal? (from 2011 exam)
3
Choice of Law Questions I
• 1) Suppose Wes, a resident of West Dakota, gets into an
accident with East, a resident of East Dakota, on a highway in
West Dakota. Wes sues East in West Dakota state court alleging
per se negligence because East was driving 79 miles per hour.
No speed limit was posted. West Dakota law states that, unless
otherwise posted, the speed limit on a highway is 70 miles per
hour. East Dakota law, however, states that, unless otherwise
posted, the speed limit on a highway is 80 miles per hour.
Which state’s law applies to this dispute? Is your answer
different under the traditional lex loci commissi rule than under
the Restatement Second? If your answer is different, which rule
makes more sense?
• 2) Same as (1) except Wes sues in West Dakota federal district
court.
• 3) Same as (1) except Wes sues in East Dakota state court. 4
Choice of Law Questions II
• 4) Driver and Passenger both reside in West Dakota. Driver drives
passenger to East Dakota. While in East Dakota, Driver talks on his
cell phone and causes an accident in which Passenger is injured.
Passenger sues Driver in West Dakota state court for negligence.
According to East Dakota law, passengers have no right to sue drivers
for injuries caused by negligence. According to West Dakota law,
passengers can sue drivers for negligence. Which state’s law applies
to this dispute? Is your answer different under the traditional lex loci
commissi rule than under the Restatement Second? If your answer is
different, which rule makes more sense?
• 5) Same as (4), except Passenger sues in West Dakota federal court.
• 6) Same as (4) except Passenger sues in East Dakota state court.
5
Choice of Law Questions III
• 7) Spend, a Nevada domiciliary, is completely irresponsible with money.
Fortunately, he recognizes this fact and has set up a spendthrift trust. Under the
terms of the trust, Spend cannot borrow money without the consent of Trustee, a
friend he trusts. Spend goes to California and borrows money there from Sharkey
to be repaid in one year at Sharkey’s place of business in California. When Spend
doesn’t repay the loan, Sharkey sues Spend in Nevada. Under Nevada law, loans to
someone who has set up a spendthrift trust are void. California law does not allow
people to set up spendthrift trusts, so under California law, such loans are
enforceable. The traditional rule for contracts was the law of the place the
contract was formed governs disputes about contract validity. Under the
traditional rule, what state’s law would apply? Under the Restatement Second,
which state’s law should apply to the dispute? If the traditional rule and
Restatement Second suggest different answers, which makes more sense?
• 8) Same as (7), except Sharkey sues in California state court.
• 9) Same as (8), except Sharkey traveled to Nevada, loaned Spend the money there,
with repayment to be made to Sharkey when he returns to Nevada a year later.
6
Choice of Law Questions IV
• 10) Same as (7), except the loan contract includes the following clause: “This
contract shall be governed by California law.” The traditional rule was not to
enforce choice of law clauses. See also Restatement (Second) below
• § 187. Law Of The State Chosen By The Parties
• (1) The law of the state chosen by the parties to govern their contractual rights and
duties will be applied if the particular issue is one which the parties could have
resolved by an explicit provision in their agreement directed to that issue.
• (2) The law of the state chosen by the parties to govern their contractual rights and
duties will be applied, even if the particular issue is one which the parties could not
have resolved by an explicit provision in their agreement directed to that issue,
unless either
– (a) the chosen state has no substantial relationship to the parties or the
transaction and there is no other reasonable basis for the parties' choice, or
– (b) application of the law of the chosen state would be contrary to a
fundamental policy of a state which has a materially greater interest than the
chosen state in the determination of the particular issue and which, under the
rule of § 188, would be the state of the applicable law in the absence of an
effective choice of law by the parties.
7
Review of Settlement
• Economic model simplifies, but also illuminates
• Factors that impede settlement
– Mutual optimism
– Hard bargaining
• Factors that encourage settlement
– Litigation costs
– Risk aversion
– Mutual pessimism
• Settlement in a Civil Action
• In what ways does A Civil Action confirm the validity of
Polinsky’s economic model of settlement?
• In what ways does A Civil Action contradict Polinsky’s economic
model of settlement or suggest that the real world is more
complex than that model?
8
Costs & Fees
• Costs
– Usually pretty minor– filing fees, court reporter, non-expert witness fees
– According to 28 USC 1920 always paid by losing party
• Fees
– Lawyers fees
– Usually large
– American rule: each party pays own attorneys’ fees
– British rule. Loser pays
• If plaintiff wins, then defendant pays plaintiff’s lawyer’s fees
• If defendant wins, then plaintiff pays defendant’s lawyers fees
• Fee shifting always subject to judicial inquiry into reasonableness
• Fee shifting problems
9
Fees & Costs II
• 3 ways lawyers are paid
– Hourly fee. (most common for defense)
– Contingent fee (most common for plaintiffs
• Lawyer gets nothing if loses; gets percentage (now usually 40%) of any
amount the plaintiff wins
– Salary. (most common for government or public interest lawyers)
– When party who hired lawyer on contingent fee or salary is entitled to lawyer’s
fees, then courts estimate hourly rate (lodestar method)
– Fees and costs are usually folded into settlement amount
– But, if not mentioned specifically in settlement agreement, then prevailing
party can still claim costs
• Fees in a Civil Action
– Given the settlement, how did they calculate how much Schlichtmann and the
other lawyers received?
10
Introduction to Erie
• In diversity cases, federal court applies state substantive law
– State statutes
– State court interpretations of common law
– BUT federal court applies FRCP and other aspects of federal procedure
• Note that situation was completely different before 1930s
– Federal courts applied state procedure
• FRCP did not exist
– Federal courts applied their own interpretations of the common law
• “general common law” (Swift v Tyson)
• Only applied state substantive law if embodied in statute
11
Introduction to Choice of Law I
• Courts do not always apply their own law
– Federal courts apply state law in diversity cases
– State courts apply federal law when required by the Supremacy Clause
– Sometimes one state court applies the law of another state
• If MA citizen gets into accident in CA and is sued in MA, MA court is likely to
apply CA traffic law
• If NY citizen and UK citizen get married in UK and then move to NY, UK law
may govern validity of marriage
• Choice of law (a.k.a. conflict of law) answers the question “whose law applies?”
– MA or CA law
– US or UK law
– Choice between federal or state law is not usually considered choice of law
question
• Rather Erie, Supremacy Clause, or preemption question
• Major change in 20th century
– Traditional rules. Rigid, territorial
– Modern rules. Evaluations of interests of relevant states
12
• Restatement 2nd
Introduction to Choice of Law II
• Old rules (1st Restatement)
• Different rules for different areas of law
• Torts: lex loci commissi / Lex loci delictus (law of place of accident)
– If car accident in CA, then CA law applies
– Some ambiguity about situations where defendant’s negligence took place
in different state than harm to plaintiff
» E.g. If D negligently manufactured car in MI which caused accident in
CA, would CA or MI law apply?
» In general, courts held that place of harm rather than place of
negligence was key
• Contracts
– Place of formation, if issue was whether contract properly entered into
– Place of performance, if issue was whether contract breached
• Choice of law clauses not generally enforced
13
Introduction to Choice of Law III
– Modern rules
• Many different versions
• Restatement Second, “most significant relationship”
– What relationships count in tort?
» Place of injury, Place where conduct causing injury occurred
» Domicile, residence, nationality, place of incorporation, place of
business of plaintiff and defendant
• Not clear which factor dominates in any case
• May consider “interests” of various states in applying their law
– Plaintiff’s state has interest in applying own law, if favors plaintiff
» But not if favors defendant
– Defendant’s state has interest in applying own law, if favors defendant
» But not if favors plaintiff
• Similar factors for contract and other areas of law
• Choice of law clauses generally enforced
– But complicated rules governing enforceability
• Federal court in State X applies X’s choice of law rules. (Klaxon)
• Only relevant in diversity cases
14
• If federal question, apply federal law