Article by Patrick Woolley
Because the Class Action Fairness Act of 2005 (CAFA) simply expands the jurisdiction of the federal courts, the common wisdom is that CAFA should have no effect on the choice-of-law rules applied in federal court. But the common wisdom is already under attack, in part because CAFA's legislative history is replete with evidence of concern over aggressive state choice-of-law practices that can result in the application of a single state's law in a multistate or nationwide class suit. In this Article, I explore and ultimately endorse the common wisdom that federal courts remain rigidly bound by state choice-of-law rules in diversity class actions.
My argument is in two parts. Part II examines why Congress believed that merely expanding the subject matter jurisdiction of the federal courts would address perceived state court abuses with respect to choice of law. Congress relied in part on the fact that lower federal courts—in the guise of applying Rule 23 of the Federal Rules of Civil Procedure—increasingly have ignored one important state choice-of-law rule which may lead to application of the law of a single state—the presumption in favor of forum law. But the claim that Rule 23 permits federal courts to ignore state law presumptions in favor of forum law is paper-thin and may not survive review by the United States Supreme Court.
In any event, state courts have applied the law of a single state to claims in a multistate or nationwide class suit without relying on the presumption in favor of forum law. And Rule 23 has not been thought to relieve federal courts of the obligation to follow state choice-of-law rules that would lead to a similar result in federal court. Congress blithely assumed that any state court which applies the law of a single state in a multistate or nationwide class suit is in clear violation of the Constitution. But while federal courts arguably are more attentive to federal rights than state courts, there is little support in the Supreme Court's choice-of-law jurisprudence for the proposition that application of a single state's law in a multistate or nationwide class suit is inherently improper.
For all of these reasons, Congress likely was mistaken to think that expanding federal jurisdiction would resolve the choice-of-law problems it perceived. Part III accordingly considers whether federal courts may fill the gap and assist Congress in achieving its choice-of-law objective through the use of federal common law. CAFA found that state courts have used abusive choice-of-law techniques. So I examine whether federal courts may rely on this finding to create modest exceptions to the longstanding rule that federal courts must apply the choice-of-law rules of the state in which they sit.
I conclude that a legislative finding is a legitimate basis for reexamining the choice-of-law rules by which federal courts effectuate their obligation to apply the “laws of the several states” under the Rules of Decision Act (RDA). Federal courts nonetheless lack authority to effectuate the RDA's mandate independently of state choice-of-law rules. I recognize that a substantial body of scholarly opinion supports the view that Article III of the Constitution—in conjunction with the Necessary and Proper Clause—grants the United States authority to develop choice-of-law rules independently from state law for use in federal courts. But although the Full Faith and Credit Clause clearly grants Congress plenary power to develop or authorize the development of independent choice-of-law rules binding in both state and federal courts, federal power under Article III is far more limited. Because choice-of-law rules define substantive rights, Article III cannot properly be read to authorize the use of independent choice-of-law rules, but instead requires application of the whole law of a state—that is, the choice-of-law rules and internal law of a state—selected without regard to its content. Thus, if Congress wishes to displace state choice-of-law rules in diversity cases, it must enact—or authorize federal courts to develop—choice-of-law rules under the Full Faith and Credit Clause.
About the Author
Patrick Woolley. Beck, Redden & Secrest Professor in Law, The University of Texas School of Law.
Citation
80 Tul. L. Rev. 1723 (2006)