1 Agenda for 5th Class Choice of Law in Contracts (continued) –Unilateral v bilateral guarantee contracts –Restatement 2nd –Interest analysis (continued) Lilienthal –Comparative Impairment Farmers Choice of law clauses –Restatement 2 nd –The argument in favor Nedlloyd Lines (CB ) The Law Market (Handout pp ) –Cases involving Covenants not to Compete

2 Assignment for Next Class Marriage –Traditional approach (CB 66-78) –Miscegenation cases (Handout pp. 1-5) –California cases (Handout pp. 6-7) –Restatement 2 nd (Handout) You need not read every Comment carefully You can skip or skim the Reporter’s Notes Questions on next slides Optional –Hoffheimer, Chapter 9, except pp. 105 & Qs 8-9 –Spillenger, pp

Questions to Think About In re May’s Estate –Should it matter that the parties seem to have gone to Rhode Island solely to get married? –Should it matter that the decedent could have written a will directing his assets to be distributed in a way that would have matched the distribution under the assumption that he had been married? –How would this case have been resolved under the 1 st Restatement? –How would this case be resolved under the 2 nd Restatement? –How would this case be resolved, if the parties were domiciled in California and the case was brought in California? –How would this case have been resolved if New York applied interest analysis or comparative impairment? –Consider the statutory interpretation in Lanham v Lanham in the paragraph that spans pp If the interpretation there were applied to In re May’s Estate, what would the result have been? What is the best interpretation of a statute declaring a particular kind of marriage void? –Should there be a policy in favor of marriages? 3

Questions to Think About Lanham v Lanham –Should it matter that the parties seem to have gone to Michigan solely to get married? –Should it matter that the decedent could have written a will directing his assets to be distributed in a way that would have matched the distribution under the assumption that he had been married? –How would this case have been resolved the Wisconsin court applied New York choice of law and precedents circa 1953? –How would this case have been resolved under the 1 st Restatement? –How would this case be resolved under the 2 nd Restatement? –How would this case be resolved, if the parties were domiciled in California and the case was brought in California? –How would this case have been resolved if Wisconsin applied interest analysis or comparative impairment? 4

Questions to Think About State v Ross –Were you surprised by the outcome? –How would this case have been resolved under the First Restatement? Restatement 2 nd ? Interest Analysis? Comparative Impairment? –What is Judge Rodman’s attitude toward mixed race marriages? –How could Judge Rodman respond to Judge Reade’s arguments about polygamy and marriages between nine year olds? –Why does Judge Reade think that voiding the marriage would not disturb the legitimacy of children and property rights? State v Bell –Why does the court in this case reach a different result than in State v Ross? –Which opinion is more persuasive, State v Bell or State v Ross? What, if anything, do these cases suggest about recognition of same-sex marriages, when such marriages were contracted in states which allow such marriages, but where recognition is sought in states which do not? 5

Questions to Think About In re estate of Grant V. Levie –The court alludes to an argument based on Hurtado. What do you think that argument was? Is it persuasive? –Should it matter that the decedent could have written a will directing his assets to be distributed in a way that would have matched the distribution under the assumption that he had been married? 6

7 Restatement 2 nd on Contracts 188. Law Governing in the Parties in the Absence of Effective Choice by the Parties –(1) The rights and duties of the parties with respect to an issue in contract are determined by the local law of the state which, with respect to that issue, has the most significant relationship to the transaction and the parties under the principles stated in § 6. –(2) In the absence of an effective choice of law by the parties (see § 187), the contacts to be taken into account in applying the principles of § 6 to determine the law applicable to an issue include: (a) the place of contracting, (b) the place of negotiation of the contract, (c) the place of performance, (d) the location of the subject matter of the contract, and (e) the domicil, residence, nationality, place of incorporation and place of business of the parties. These contacts are to be evaluated according to their relative importance with respect to the particular issue. –(3) If the place of negotiating the contract and the place of performance are in the same state, the local law of this state will usually be applied, except as otherwise provided in §§ and 203. § 198. Capacity to Contract –(1) The capacity of the parties to contract is determined by the law selected by application of the rules of §§ –(2) The capacity of a party to contract will usually be upheld if he has such capacity under the local law of the state of his domicil.

8 Lilienthal & Farmers Lilienthal –What do you think the outcome of this case would have been under the traditional approach? –What do you think the outcome of this case would have been under comparative impairment? –What do you think the outcome of this case would have been under the Restatement 2 nd ? –Does your answer to these questions depend on whether suit was brought in California or Oregon? Farmers –Why do you think that Farmers filed for declaratory relief? –Why does California have “a strong interest in seeing that its anti- stacking law is enforced”? –Why does the court refer to “Governmental Interest Analysis” and section 193 of the Second Restatement of Conflict of Laws, when California has chosen Comparative Impairment as its approach to Conflict of Laws? –Is this a False Conflict or True Conflict case? –What do you think the outcome of this case would have been under the traditional approach? Interest Analysis? Restatement 2 nd ? –Do your answers to the previous question depend on whether suit was brought in California or Arizona?

Arguments for Choice of Law Clauses The Law Market –Are you persuaded by O’Hara and Ribstein’s reasons to generally respect choice-of-law clauses. Why or why not? –O’Hara and Ribstein suggest that choice-of-law clauses in consumer contracts should be enforced even in consumer contracts, unless such clauses are expressly forbidden by statute. Do you agree with that proposal? Why or why not? Nedlloyd Lines –Can you think of any reason not to enforce choice-of-law clauses agreed to by large, sophisticated businesses? –Do you agree with the majority that the choice-of-law clause governed the action for breach of fiduciary duty? –Suppose the court had found that the choice-of-law clause did not govern the action for breach of fiduciary duty. How do you think lawyers would have drafted choice of law clauses differently in subsequent contracts? 9

Restatement 2 nd & Lilienthal Hypotheticals § 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. Suppose the contract in Lilienthal v. Kaufman had included the following clause: “This contract shall be governed by California law.” If Oregon courts followed the Restatement 2 nd approach to choice of law clauses, would that have changed the outcome of the case? Suppose the contract in Lilenthal v. Kaufman had included the choice of law clause mentioned above and the following clause: “All disputes arising out of this contract shall be litigated in California state court.” Would that have changed the outcome of the case? 10

Covenants Not to Compete I Cook Sign –The Minnesota Court of Appeals applied the Better Law approach to choice of law. How is that approach different from the Restatement 2 nd approach to choice of law clauses? What do you think of this approach to choice of law? –Compare this case to Applications Group Which approach to the enforceability of choice of law clauses did you find more persuasive? Do you think the fact that one court enforced the choice of law clause while the other did not reflects the different choice of law approaches chosen by California and Minnesota? Or some other factor? 11

Covenants Not to Compete II Applications Group –According to the opinion, Hunter admitted that it used covenants not to compete to deter and prevent solicitation, recruitment and hiring of its employees and “to avoid a bidding war that would increase the salary of its consultants.” If you were representing Hunter, can you think of reasons to use covenants not to compete that might been more effective? –If California courts invalidate covenants not to compete between employers and employees in other states, who bears the cost of such invalidation? Who benefits? –After this case, if Hunter wants to avoid liability for unfair competition under California Unfair Practices Act §17200, what would it need to do (or not do)? 12