1 Agenda for 17th Class (FJ) Admin – Name plates – Handouts Mediation – Chart of teams and rooms – Guidelines for Students – Materials for Mediators and Students – Readings on Negotiation & Mediation Slides Choice of Law – Section F-J only M 10/27. Class rescheduled to 1:45-3:35 in Rm 7 – Mock mediation next Friday Go directly to room on chart (not to regular classroom) Review of Settlement Fees – Fee shifting problem Intro to Erie and Choice of Law

2 Next Class Settlement and Fees – A Civil Action, pp. 146 to end Especially pp. 146, , , , 280, , – Writing Assignment / Questions to think about 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? Given the settlement, how did they calculate how much Schlichtmann and the other lawyers received? Erie Docrine – 28 USC 1652, 2072 – Yeazell , – Writing Assignment / Questions to think about Questions on next slide – Optional. Glannon Chapters 10 and 11 Choice of Law – Choice of Law Handout – Writing Assignment / Questions to think about Choice of Law Questions on slides which follow (6 slides) – Optional. Glannon Ch. 12

3 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)

4 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.

5 Choice of Law Questions II 4) Driver and Passenger are both domiciled 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.

6 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.

7 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.

8 Choice of Law Questions V Plaintiff in Phillips brought the case in federal district court in Montana. Why is there a decision of the Supreme Court of Montana? In Phillips, the Montana Supreme Court observes that “applying the law of the place of manufacture would be unfair because it would tend to leave victims under compensated as states wishing to attract and hold manufacturing companies would raise the threshold of liability and reduce compensation…. [A state with a high concentration of manufacturing] could enjoy all the benefits associated with liability laws which favored manufacturers in order to attract and retain manufacturing firms and encourage business within its borders while placing the costs of its legislative decision, in the form of less tort compensation, on the shoulders of nonresidents injured by its manufacturers’ products.” (p. 249). – Suppose Montana has a relatively low concentration of manufacturing. Would its citizens benefit by laws which raised the threshold of liability and reduced compensation? Or would its citizens benefit by laws which lowered the threshold of liability and increased compensation? If it lowered the threshold of liability and increased compensation, who would bear the increase in costs? What does this suggest about the fairness of applying Montana law?

9 Choice of Law Questions VI In Phillips, the Montana Supreme Court asserted that “we do not believe that the purpose of any potentially applicable Michigan product liability law would be to regulate the design and manufacture of products within its borders. The purpose of product liability law is to regulate interstate sales or sales to residents and to set the level of compensation when residents are injured. ” (p. 249) – If the plaintiffs in Phillips had filed the case in Michigan state court, do you think Michigan state judges would have agreed that its laws are inapplicable? What purpose might a Michigan judge ascribe to product liability law to show that Michigan law should apply? If you were a judge on the Montana Supreme Court, would you have retained the traditional lex loci commissi rule, or would you have voted (like the actual Montana Supreme Court) to adopt the Restatement (Second) most significant relationship approach? Why?

10 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

11 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

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 12

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 20 th century – Traditional rules. Rigid, territorial – Modern rules. Evaluations of interests of relevant states Restatement 2nd 13

14 Introduction to Choice of Law II Old rules (1 st 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

15 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 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 If federal question, apply federal law