CH. 4 CONSTITUTIONAL
LIMITATIONS
What are the constitutional
limits on state the
choice of law methods? Options
for analysis:
•
a traditional vested rights approach
increased scrutiny), vs. (2)
permissive approach.
Consider constitutional
provisions:
1) Due process & equal
protection clause
2) Full faith & credit
clause
3) Privileges and immunities
clause
4) Commerce clause
Constitutional Limits
p. 298
Home Insurance v. Dick, p. 298
Texas resident/plaintiff sues in
Texas (forum) on Mexican casualty insurance policy issued by Mex. Ins. Company,
asserting jurisdiction in rem against reinsurers in New York.
Def. not doing business in
Texas.
Suit commenced more than one
year after loss.
Mexican policy states must be commenced
within one year. Loss in Mexican waters. Cont.
Home Insurance v. Dick, cont.
Tex. Statute says contract can
not provide for less than a two year period to commence action.
Tex. trial court-judgment
against garnishees.
Affirmed on (two) appeals in
Texas.
Assertion in U.S. Sup. Ct. that
statute violated due process clause of 14th Amendment.
Held: (1) Federal jurisdiction
does exist;
(2) Statute deprives
garnishees of due process;
(3) Tx. public policy not
superseding here.
(4) Due process benefits
reinsurers & aliens.
Delta & Pine Land Co.,
p.303 U.S. Sup. Ct.
Tennessee as principal place of
business.
Insurance contract protecting
against employee embezzlement. Litigation (in Miss.) & then moved place of
business to Miss. Was Miss. S/L applicable to void contractual limitations?
Held: No right was vested
elsewhere and Miss. policy grounds did not permit abrogation of the contract
which had been based in Tennessee.
Noting these constitutional
limits
P.304 – does the state have
some minimal contacts to enable application of its own law under the U.S.
Constitution due process clause?
Do overwhelmingly stronger
contacts in another jurisdiction favor the law of another state - a full
faith & credit analysis is essential here.
Pacific Employers Insurance
Co. P.304
Mass. employee of Mass.
employer with injury in Cal. Does full faith & credit clause
preclude Cal. workmen’s comp. act from superseding Mass. workmen’s comp.
statute?
Employee filed Cal. workmen’s
comp. claim.
Cal. Commission ordered
compensation paid.
Does Mass. statute govern in
Cal. court (under full faith & credit clause)? A Mass. contract of
employment; but conflict with Cal. statute.
Conclusion: Cal. statute can be
applied.
Watson v. Employers
Liability p.308
La. insurance code allows
direct action against liability insurance company. Action in La. against Ins.
Co. for personal injury in La. For product manufactured in Illinois.
Insurance policy issued in
Mass. & Ill.
Policy includes a no direct
action clause until tort liability determined against manufacturer.
Insurer asserts due process
violation – state is seeking extraterritorial jurisdiction.
Held: La. has valid interest;
due process OK & no violation of full faith & credit. Cont.
Watson v. Employers
Liability continued
Analysis in opinion supporting
La. law as being applicable (i.e., local contacts).
- Likelihood that persons
injured in La. would be resident in Louisiana.
- Medical benefits to La.
residents best provided in Louisiana.
- La. Interested in providing
tort benefits for La. residents.
Clay v. Sun Insurance
Office p.310
Diversity case for damages
under ins. policy.
Policy purchased in Ill. but
insured moved to Fl.
Does (1) 12 month-suit clause
in the policy govern, or (2) the Fl. statute effectively nullifying this clause
when providing for a 5 yr S/L?
Holding: Adequate contacts
for the transaction and the parties in Fl. and, therefore, not
violating due process or full faith & credit.
Here comparing Dick case where
the (Texas) forum activities were deemed “too slight.”
Quill Corp. v. North
Dakota p.313
State has a due process right
to collect use taxes from mail order (& internet) merchandisers with no
physical presence in the state.
What is a “use” tax; cf.,
sales tax.
But, how obtain jurisdiction in
the state?
Proceed in the merchandiser’s
jurisdiction?
But tax liabilities not
enforced; cf. interstate compact for tax liability enforcement.
Allstate Ins. Co. v. Hague
p.313 No Majority Opinion
Due process clause or full
faith & credit clause barring Minn. court re choice of substantive Minn.
law re an insurance policy?
Stacking of 3 claims for
uninsured motorist?
Allstate arguing Wis. law:
place of accident, policy & residents (at time of accident). But, Minn.
forum interprets Minn. choice of law rules as requiring Minn. law to permit
stacking (& not Wis. law to disallow stacking of the claims).
Cont.
Allstate Ins. Co. v. Hague
continued
Did the Minn. Sup. Ct.’s choice
of its own substantive law in this situation violate the full faith &
credit clause of the U.S. Constitution?
P. 316: For state’s
substantive law to be constitutionally acceptable the state must have
significant contact(s) creating the state’s interest; the choice of law can
not be fundamentally unfair.
Holding: Minn. has three
contacts with parties and occurrence and this is sufficient. Cont.
Allstate Ins. Co. v. Hague
continued
Plurality opinion & three
factors:
•
Decedent employed in Minnesota – p.316.
•
Insurer doing business in Minn – p. 318.
•
Plaintiff (estate representative) became
bona fide resident in Minn. before
initiating this litigation – p. 318; i.e., not moving to Minn. for forum
shopping purposes.
Minn. had a “sufficient
aggregation of contacts” (p. 318).
Allstate Ins. Co. v. Hague
continued
Stevens concurrence with
judgment – p.319.
Issues: 1) Does full faith
& credit clause require Minn. court to use Wisconsin law? Not here – no
threat to Wis. sovereignty, even though under normal conflict law Wis. law
applicable.
•
Does due process clause prevent Minnesota
from applying Minnesota law?
This choice of law decision is not fundamentally unfair. Policy coverage here
is applicable throughout the U.S.
See p. 323 re limited
jurisdiction in this case.
Allstate Ins. Co. v. Hague
cont. – Dissent Opinion
Powell dissenting opinion –
p.323
Agreement that choice of law
should be invalidated when state picks its own law and no significant contacts
in that situation.
But, here, only trivial
contacts between the forum state (Minn.) and the litigation. P. 325
And, forum state must have a
legitimate interest in the outcome of the litigation. P.324.
Phillips Petroleum Co.
p.327
Class action in Kansas state
court to recover interest for royalty owners on delayed royalty payments made
by Philips.
U.S. Sup. Ct. sustains Philips
claim re choice of law. ¼ of 1% of leases at issue were in Kansas.
Only 1,000 of 28,000 class
members in Kansas.
Kansas court had awarded
interest on suspended royalties (at a specified rate).
Philips claimed court should
have looked to the laws of each relevant state. Cont.
Phillips Petroleum Co.
p.327 Continued
Kansas Sup. St. said every
cause of action for the class action members could be decided under Kansas
law.
But, 99% of leases had no
contact with Kansas.
Held: Application of Kansas
substantive law violated due process & full faith & credit
rules.
Plaintiffs desire for Kansas
law not relevant.
Held: expectation of the
parties not for Ks. law.
Ks. not having a significant
contact with most claims. But, US Sup. Ct. not declaring rules.
Text, p. 333
After Philips Petroleum case:
“We still seem to know very
little about what contacts would constitutionally justify application of forum
law under the modern learning.”
Sun Oil v. Wortman
P.334
Property owners in Tx., Ok,
& La. sued Sun Oil in Kansas to recover interest on royalties.
Action barred by S\L in Tx, Ok.
& La.
Kansas Ct. used Ks. S\L (5
years); rejecting full faith credit violation argument by Sun.
Prior US Sup. Ct. holdings that
forum S/L ok.
May S/L be considered a procedural
matter for full faith & credit purposes?
Held: Ks. may apply its
own S/L. Cont.
Sun Oil v. Wortman
P.334 continued
Conflicts rules that become
minority positions do not thereby become unconstitutional. P.337.
Ks. not violating Full Faith
& Credit clause when applying its own S/L.
Due process claim on Ks. Ct.
use of its S/L (p.337) – but rejected.
Any misconstruction of other
state law not a violation of the full faith & credit clause.
Sun Oil v. Wortman
P.334 continued
Brennan
concurrence in part – p. 338.
No rules for determining
unconstitutionality.
S/L are not purely procedural.
O’Connor
concurrence/dissent – p.341
-acceptable that not
unconstitutional for Kansas to choose its S/l.
However, not constitutional to
avoid the interest rates in each state, as set by FERC.
Accuracy of State court
Interpretation p.343, Q4
What is the obligation under
U.S. constitution of the federal court to assure that the state court has
accurately interpreted foreign law (from the state’s perspective)? E.g., see
Justice O’Connor’s observation in Sun Oil re applicable interest rates.
Obligation and Right to Provide
a Forum p.343
1) Can local court (first
state) close its door to a claim based on events arising outside its jurisdiction
(i.e., in second state)?
2) Can the first state reject
a second state’s position that a claim arising in the second state can only be
litigated in the second state?
See Hughes case (next slide):
What constitutional obligation of state to provide a forum for foreign (other
state) cause of action?
Hughes v. Fetter
p.344 Re: Court Access
Wis. estate rep. brings
proceeding in Wis. re Ill. auto death and Ill. wrongful death statute.
Wis. court rejected the suit,
summary judgment dismissing complaint “on merits,” asserting jurisdiction
(under Wis. statute) only for wrongful death suits for Wis. deaths (& not
Ill. deaths). Violating full faith & credit? Yes.
Held: Wis. must proceed with
suit.
Here parties were resident in
Wis. (including estate administrator and insurance co.?) cont.
Hughes v. Fetter
p.344 continued
Dissent (p.345): Cf.,
recognizing (1) judgments from another state, vs. (2) right of action
created in another state.
Full Faith & Credit clause
should not be extended to negate effect of Tenth Amendment to
enable state rights recognition.
Note: Ill. law would have
similarly provided no jurisdiction to pursue in Ill. a Wis. based wrongful
death claim.
Cf., deference (forum nc) vs.
discrimination.
Wells v. Simonds Abrasive
Co. P.347
Industrial accident in Alabama.
Fed. Dist. Ct. diversity case
in Pa.
Ala. had two year S/L (in
the wrongful death statute); 1 year Pa. S/L under Pa. conflicts rule.
Held: Full faith & credit clause
not mandating using the Ala. two year S/L.
Forum state (Pa.) permitted to
apply own S/L.
Dissent: Law where cause of
action arose should follow cause of action to wherever presented.
Nevada v. Hall
Sovereign Immunity p.351
May a state claim immunity
(under FFC) from tort suit in the courts of another state?
Facts: Nev. state employee negligently kills Cal. residents on
Cal. highway. Statutory limit of $25,000 in suit against State of Nevada
(waiving sovereign immunity only to that extent).
Cal. jury awards $1 million
plus damages.
1) Art. III and 11th
Amend. do not limit one state’s courts in exercise of jurisdiction over another
state. Cont.
Nevada v. Hall
p.351 continued
•
Cal. has fully waived its sovereign
immunity. Cal. public policy
will not dictate Cal. to respect Nev. limit on sovereign immunity. No
FFC violation.
•
Comity suggests Cal. entitled to use its policy
of compensation in its courts.
Dissent
(p.355): Nev. sovereignty should not end at Nev.-Cal. border. Implicit
constitutional right of sovereign immunity exists.
Dissent
(p.356): consider state parity.
Collection of Judgment
Issues p.356
Can one state enforce a
judgment against another state – against assets of 2nd state held in
1st state’s jurisdiction?
Should state assets be
segregated into many separate legal entities to frustrate collectability of
judgment against debtor state?
What if in the Hall situation
Cal. had retained sovereign immunity doctrine for itself? Different result?
Franchise Tax Board v.
Hyatt p.358
Hyatt claims for Cal. tax
purposes he had moved to Nev. & filed part-year Cal. return.
Later, Hyatt files in Nev.
alleging intentional tort by Cal. & Cal. claims sovereign immunity.
Nev. Ct. asserts protecting its
citizens is more important than Cal. sovereign immunity.
US Sup. Ct. determines FFC
clause does not require Nev. courts to respect Cal. sovereign immunity. No Nev.
policy of hostility to Cal. acts.
Constitutional Limits on
Interstate Discrimination
P. 360 These limits are:
•
Equal protection clause,
(2) Privileges and immunities
clause
Both impose constitutional
limits on interstate discrimination.
In addition:
(3) Due process clause, and
(4) Full faith & credit
clause.
Austin v. New Hampshire
p.362 State Taxation
Residents of Maine; employed
in N.H.; subject to N.H. Commuters Income Tax.
Petition that this tax violates
(1) privileges and immunities clause and (2) equal protection clause of U.S.
Constitution.
N.H. Sup. Ct. upheld this tax.
Reversed - privileges and
immunities clause.
This tax only applies to N.H.
non-residents; not to N.H. residents on income from any source.
Cont.
Austin v. New Hampshire
p.362 cont.
Privileges and Immunities
clause makes noncitizenship & nonresidency an improper basis for
classification.
Consider the structural
balance for federalism.
P.365: Rule of substantial
equality for taxing state (1) citizens and (2) nonresidents.
Here tax imposed exclusively on
non-residents (and no other counterbalancing offsets).
& no benefit from
discrimination on other side.
Dissent: p.366 –no substantial
federal issue.
Austin case Implications
p.368
Is “interest analysis”
constitutionally invalid?
Should the interest of the
foreign parties mean their foreign jurisdiction laws should be applied (rather
than local law)?
Further Discrimination against
Nonresidents
Baldwin, p. 369: Not a
violation of privileges and immunities clause where a higher cost for hunting
and fishing licenses. This issue not bearing “on the vitality of the nation.”
Hicklin v. Orbeck, p.369:
Violation of privileges and immunities clause where Alaska discrimination for
residents when for jobs and pipeline permits on state properties.
Further Discrimination vs.
Nonresidents, P.369,¶6
- Texas statutes re (1) S/L
borrowing statute requiring non-resident plaintiff in Tx. Courts and to
satisfy Tx and other state S/L; and (2) permitting dismissal of
out-of-state asbestos exposure claims unless brought by a Tx. legal resident.
- W.Va. Forum - Va. Resident
sues in W.Va. against W.Va. Corp. for forklift product liability. W.Va. Code
disallows precludes W.Va. forum unless claim occurred in W.Va.
State Bar Admission Residency
Requirements
P.370- U.S. Sup. Ct.
invalidates (on privileges and immunities grounds) state rules requiring
in-state residency to enable admission to the bar.
Additional Invalid Residency
Requirements
P.370 – One year residency to
enable welfare benefit eligibility (based on “right to travel”).
- One year’s residency
requirement for voter
registration.
- Student (in Conn.) can not
become resident for in-state tuition purposes.
- Cal. welfare benefits
limited during the first year of state residence.
- Ia. one year residency
requirement to obtain divorce from state courts. Sosna case,p.370
Same-sex Marriage
Statutes p.371 (9)
Mass. statutory provision
permitting same-sex marriage but denying non-resident same-sex couples the
ability to enter same-sex marriage where they intend to live in a jurisdiction
prohibiting same-sex marriages.
Subject to U.S. constitutional
limitation?
G.D. Searle v. Cohn
p.371
N.J. statute tolls S/L in
action against foreign corporation where process can not be served.
No violation of (1) equal
protection clause and (2) due process clause. Remanded for consideration of
commerce clause challenge.
Eleven year lapse before suing
in N.J. drug company for stroke effect from drug.
Removal to Fed. Ct. & Def.
asserting 2 yr. S/L.
Response with tolling
provision. Cont.
G.D. Searle v. Cohn
p.371 cont.
N.J. court had
determined that tolling was in force despite enactment of a “long-arm statute.”
Holding: that
the tolling provision does not deprive the “unrepresented”
foreign corporation of the equal protection of the laws. Suit can
proceed (subject to remand). Def. protected by “laches,” if necessary.
Stevens dissent: no
legitimate purpose for the special burden imposed on the unregistered foreign
corporation.
“Extraterritorial” &
“Inconsistent” Regs. P376
Dormant commerce clause effect
– burden on interstate commerce?
U.S. Congress has authority to
regulate commerce among the states. Art. 1(8)(3).
State legislation can not
discriminate against out-of-staters.
State law can not significantly
burden interstate commerce.
State law can not operate
extraterritorially.
Brown-Forman Distillers
p.377
N.Y. state top limit on
wholesale liquor prices from producer – to the lowest price elsewhere.
A forbidden regulation of
interstate commerce?
Court indicates prospective
statute regulates out-of-state transactions in violation of the commerce clause
of U.S. Constitution.
Requiring in-NY state approval
before a transaction in another state violates U.S. Const.
N.Y. may not “project” its
legislation elsewhere.
Quill Corp. v. North D.
p.381
Issue re state’s commerce
clause power to tax activities outside the particular state.
Prior re no due process clause
violation. P.313.
Here: Tax invalidated under
commerce clause analysis. Must be substantial nexus with the state, fairly
apportioned and not discriminate against interstate commerce.
CTS Corp. v Dynamics
Corp. P.381
Indiana Business Corporation
statute re takeover limitations, i.e., acquisition of control subject to
approval of majority of pre-existing shareholders. If no approval to restore
voting rights of acquirer then corporation “may” redeem the control shares.
Does limitation violate the
Commerce Clause?
Objective of the Commerce
Clause? To limit state action concerning interstate commerce.
Cont.
CTS Corp. v Dynamics Corp.,
continued
Majority holding:
no commerce clause limitation: (1) State authority to regulate its domestic
corporations, including voting rights of shareholders; (2) State regulations
of corporate governance & tender offers for its domestic corporations is
permissible.
This act applies only to
in-state corporations.
Dissent:
Indiana act will substantially burden interstate market in corporate
ownership. This act directly inhibits interstate commerce.
State regulation of the
Internet p.392
See various cases at p. 392 re
commerce clause applicability to restrict state regulations of the Internet
particularly regulations concerning “spam” and indecent material.
Numerous decisions (but not
unanimous) concerning these limitations violating the commerce clause.