Conflict of Laws

Dean Perritt

Spring, 2001

Model Answer

Question I.

A.        Krebs has strong arguments to support personal jurisdiction in Pennsylvania state court

in an action for intentional interference with contractual relations against Trixie.  First, he must satisfy any requirements of Pennsylvania's Long Arm Statute.  We would need to do research on the content of that statute, but let's assume that the statute asserts jurisdiction to the limits permitted by the due process clause of the Fourteenth Amendment, under International Shoe

To satisfy those requirements, Krebs must show that Trixie purposefully availed himself of the benefits of Pennsylvania law.  He can do that in one of three ways.  His strongest argument is that Trixie reached out to Krebs and to Pennsylvania when Trixie looked at Krebs' Web site and then corresponded with Krebs by email.  This argument would be much stronger if there is anything on Krebs' Web site that showed that he was located in Pennsylvania.  If there is not, Trixie will argue that the Web site and the email mailbox actually were located in Virginia, and therefore if he had purposeful contact with anyplace, it was Virginia and not Pennsylvania. 

Krebs could overcome this argument only by showing that there was some information on his Web site or his email address that showed he was located in Pennsylvania or by arguing that the requirements of World Wide Volkswagen for purposefulness of the contact must be interpreted in the Internet context to impute knowledge of the actual location of a Web page or email correspondent, an argument that would require the court to make some new law.

Krebs also can argue that minimum contacts existed with Pennsylvania because Trixie knowingly "plugged into" an ISP with operations in all 50 states.  Therefore, he knew and intended that his conduct would have conduct with all 50 states, including Pennsylvania.  The weakness in this argument—and one that Trixie will surely take advantage of—is that this looks a lot like the stream of commerce argument that was rejected in Asahi.  By plugging into a 50-state ISP, Trixie no more intended contact with all 50 states than Asahi intended contact with all places in the world by putting its motorcycle tire valves into a commercial stream that was world wide.  This argument is plausible, but on the whole weak for Krebs.

A third argument is that Trixie purposefully had contact with Krebs in Pennsylvania by putting his IP address onto the blacklist.  The problem with that argument is that Trixie had no real way of knowing that that IP address was associated with Pennsylvania; indeed it was not.  It was the IP address of AOT, which is located in Virginia.

Absent establishing purposeful contact, Krebs still can argue that the fair play and substantial justice factors of Burger King and Asahi tilt in his favor, although he will have to persuade the court, based on slim support in Asahi, that jurisdiction can be established under the fair play and substantial justice factors even when minimum contacts are absent.  The Pennsylvania forum has an interest in hearing the case because it is concerned with protecting its citizens—Krebs—from intentional interference with their contracts.  Plaintiff Krebs has an interest in litigating in Pennsylvania, but he will not be deprived of a forum even if the Pennsylvania courts lack jurisdiction because he always can sue Trixie in California.  The burden factors weigh equally for and against litigating in Pennsylvania.  Trixie would be burdened, though not overwhelmingly so, by having to travel to Pennsylvania to litigate, but Krebs would be about equally burdened by having to litigate in California.  The interstate interest does not point either way, because the case could be litigated about as well in California as in Pennsylvania.  Certainly this analysis supports jurisdiction if minimum contacts exist. 

Overall, Krebs has strong, but not overwhelming arguments in favor of jurisdiction in Pennsylvania. 

Jordan has an uphill battle in establishing personal jurisdiction in Illinois.  Unlike his communication with Krebs in Pennsylvania, Trixie did nothing that specifically targeted Illinois or Jordan.  Indeed, there is no reason to infer that he knew that Jordan existed.  While he arguably entered into a contractual relation with Jordan's ISP, that ISP was located in Washington.  The fact that the ISP also had a contractual relationship with Jordan in Illinois cannot be attributed to Trixie, because it was a purposeful availment by a third party and not by the defendant. 

Jordan's only argument in favor of personal jurisdiction is that Trixie purposefully made contact with all 50 states by contracting with an ISP he knew to have operations in all 50 states, but this argument suffers from the same weaknesses of a stream of commerce argument as explained in connection with Krebs lawsuit.

B.        

1.   Krebs has pretty good arguments to get Pennsylvania law to apply, and he surely

wants Pennsylvania law above all the other possibilities because his chances of recovery on the merits are greatest under Pennsylvania law.  The Pennsylvania court will apply its own choice of law rule, and Krebs will argue that the Pennsylvania choice of law rule is and should be lex loci delicti.  Under Alabama Great Southern v. Carroll, the place of the wrong is the place where injury occurred, and not where the conduct occurred.  This is good for Krebs, because he can argue that the place of injury in an intentional interference with contact relations is the place where the party seeking to make a contract was prevented from doing so.  He is in Pennsylvania, and therefore that's where the contract was interfered with and the injury felt.

Trixie will argue that, even under lex loci delicti, Maryland law should apply, which would not permit recovery.  He would argue that the contract Krebs sought was to be preformed in Maryland, where the boat is located, and this is where the injury occurred. 

Both parties also will argue more modern approaches to choice of law:  most significant contacts, and governmental interests.

In terms of contacts, Pennsylvania was the place where the injured party is found, (arguably) the place where the injury occurred, and (arguably) the place where the contract probably would have been consummated.  California is the place where the defendant is located and did business, and where his conduct occurred.  Maryland is where the subject matter of the intended contract was located.  Quantitatively, the most significant contacts analysis is pretty much a standoff.  It permits either Krebs or Trixie to argue that the center of gravity of the contacts was in their own state.  That invites governmental interests analysis to see which contacts are the most significant.

Pennsylvania has an interest in protecting its citizens from tortious injury, and also has an interest in furthering commerce by permitting contracts to be made without blacklist-based interference.  California has an interest in shielding its citizens from liability for seeking to regulate Internet business practices.  That interest is evident from the content of California intentional interference law.  Trixie may argue that California also has an interest in protecting consumers like Krebs, but that interest is not implicated in this case because Krebs is not in California.  The governmental interest analysis weighs slightly in favor of the application of Pennsylvania law as opposed to California law.  There are arguments that Maryland has an interest in permitting its boats to be sold easily, but that is unlikely to trump the interests of either Pennsylvania or California.

There surely are enough Pennsylvania interests to permit Pennsylvania courts, as a constitutional matter, to apply their own law.  Given the fact that courts are instruments of their own state policy, and the practical tendency of courts to apply their own substantive law when reasonably appropriate under their choice of law rules, Krebs has a pretty good chance of getting Pennsylvania law to be applied.

2.      Assuming that Jordan can establish jurisdiction in Illinois courts (which is unlikely, as discussed in part "A" of the answer to the question), he has a more sophisticated choice of law argument to make than Krebs.  He may need to get one source of law to apply to one part of his claim and another source to apply to another part.  In any event, he must get Pennsylvania law to be applied to the tort—intentional interference, and not Washington or California law.  Either Pennsylvania or California law would favor him on the agency question.  If California law applies to the agency question, he must establish the proposition that the source of law for the tort can be different from the source of law for the agency question.  That should not be too difficult because choice of law problems traditionally have been disaggregated, with different law applying to different parts of a single claim.

Lex loci delicti, most significant contacts, and governmental interest all point to Pennsylvania law for deciding the intentional interference to contractual relations tort question, as explained in subpart "1" to this part "B".  To piggyback on Krebs' arguments in favor of Pennsylvania law, Jordan must argue that the injury was suffered in Pennsylvania, and not in Illinois.  His best argument to support that proposition is to say that he would have made the contract in Pennsylvania by going to see Krebs, and therefore he suffered injury by not being able to do that in Pennsylvania.  This is a little counterintuitive.  Because Jordan lives in Illinois, it is more plausible to conclude that he suffered the economic injury in Illinois by making the contract to buy the more expensive and less satisfactory boat while he was there.  Nevertheless, he is not without argument in favor of Pennsylvania. 

That leaves the choice of law problem for the agency question  Intuitively, whether there was an agency between MHL and Trixie would seem to center in Washington or California where the two parties to the purported agency were.  Jordan's best argument is to say that the relationship between Trixie and MHL ran between California and Washington, and therefore California law should apply.  California surely has an interest in deciding whether its principals should be bound by the conduct of purported agents, and its law would hold MHL to be an agent.

He also might argue that the claim should not be disaggregated and that Pennsylvania law should be applied to agency because Pennsylvania law should be applied to the underlying tort.  That surely is a plausible argument.  He also would like to argue that because the agent acted in Maryland, Pennsylvania, or California, that’s the state whose law should be applied to the agency question.  He is going to have a hard time arguing that the agent acted in Pennsylvania.  It did not.  Its conduct occurred in Washington, and the contract through which the conduct was felt ran between Washington and Illinois.  On the other hand, the subject matter of the contract interfered with was in Maryland, and he might be able to argue that the agent implicitly acted in Maryland, but that seems to be a stretch.  Governmental interest analysis may help, because both Pennsylvania and Maryland have an interest in seeing that third parties who give effect to the actions of a purported principal (Trixie) do not escape liability because agency cannot be established and therefore have an interest in applying their own law to the agency question. 

3.      Krebs has better choice of law arguments than Jordan, because he is suing in Pennsylvania court, which has an inclination to apply its own law when its choice of law rules permit.  His best argument is that the agency questions should not be disaggregated from the underlying intentional interference tort question and that all of the interests that Pennsylvania has in resolving the intentional interference problem also attach to the agency question.  His problem is that any contact that MHL had with Pennsylvania was indirect rather than direct.  Krebs had no contract with MHL, and MHL had no way to know that the IP address that the blacklist was causing its routers to block was associated with Pennsylvania. 

4.      The arguments would change very little if either Jordan or Krebs filed suit in federal court, because under Erie and Klaxon, a federal court is required to apply the choice of law rules of the state in which it sits.  Therefore, all of the choice of law arguments available to the parties if they were in state court are applicable if they are in federal court.

Conflict of Laws

Model Answer

Question II

Memorandum for Ms. Mildred Wagner

Subject:            Enforcement of Danish Judgment

You have asked me to explain the risks you face in having a default judgment from a Danish court enforced against you.  The judgment resulted from a claim for defamation arising from a book review of a Danish author’s new book posted on your Web site.

I assume that you have assets in the United States, specifically in Illinois, as well as your interest in the condominium in Ireland.

Because you have no plans to travel to Denmark and no assets in Denmark, there is no likelihood of the judgment being enforced directly by a Danish court.  There is, however, a possibility that the judgment might be enforced against your assets in Illinois or against your assets in Ireland.  This memorandum considers each possibility separately.

Enforcement against US assets

The possibility exists that the Danish plaintiff would bring his Danish judgment to a state or federal court in Illinois and seek to have it enforced here.  He would do that either under the common law doctrine of comity or under the Illinois version of the Uniform Foreign Money-Judgments Recognition Act in conjunction with the Illinois version of the Uniform Enforcement of Foreign Judgments Act.

Under the comity doctrine, the Danish author would file a new action for debt and seek recognition of the Danish judgment as prima facie evidence of the debt.  Comity allows—but does not require—a state court, or a federal court sitting in diversity jurisdiction, to recognize foreign-country judgments subject to certain exceptions.  The exceptions essentially are the same as those codified in the Money Judgments Recognition Act.  They are discussed in the following section of this memorandum pertaining to that Act.

Uniform Acts

The Uniform Enforcement of Foreign Judgments Act and the Uniform Foreign Money-Judgments Recognition Act work together.  The Recognition Act provides the basis for recognizing a foreign country judgment, and the Enforcement Act provides the mechanism for proceeding directly to enforce a foreign judgment rather than having to file a new lawsuit for debt.  The recognition act covers the Danish judgment because it qualifies as a “foreign judgment” under §1, and therefore is enforceable just like the judgment of a sister state under Full Faith and Credit, under §3.

The only bases for refusing to recognize the Danish judgment are the absence of personal jurisdiction or failure to receive notice of the proceedings.  Failure to provide impartial tribunals or due process as an independent ground for refusal of recognition is inapplicable in this case because the Danish courts almost certainly provide impartial tribunals and due process in there internal procedures.  The public policy basis is weak except for the First Amendment argument developed below.

You are entitled to litigate personal jurisdiction and notice in the recognition/enforcement proceeding because you did not appear in the Danish proceeding and therefore there has been no actual litigation of personal jurisdiction by the Danish Court.  Your strongest argument for the absence of personal jurisdiction is that the mere visibility of your Web site in Denmark is not sufficient purposeful targeting of Denmark to satisfy the minimum contacts and far play in substantial justice test of American Constitutional Law under International Shoe and Asahi.  American Constitutional Law applies here because the Danish plaintiff is seeking to enlist the coercive power Illinois against you and that power can be used only consistent with the United States Constitution.  You would have a very strong personal jurisdiction argument except that the content that gave rise to the lawsuit concerned a Danish plaintiff.  It is likely that the Danish plaintiff would argue successfully that your criticism of a Danish citizen sufficiently targeted Denmark to satisfy the purposeful availment requirement of World Wide Volkswagen.

Sufficiency of notice also is judged under American Constitutional Law.  Denmark affirmatively authorized notice by email, and you received actual notice.  So the only argument is that this form of notice violates the American Constitutional requirement that you receive notice of a lawsuit in a form reasonably calculated to give actual notice.  The fact that you had actual notice hurts your argument, but is not conclusive.  You can argue that email notice is constitutionally insufficient because there is no case law recognizing such means of giving notice as constitutionally adequate and enumerating all the reason why an email notice is insufficiently formal and insufficiently reliable to be calculated to give actual notice in the usual range of circumstances.  For example, most email users receive lots of SPAM, which they ignore, and many email users abandon email mailboxes and never look at their contents at all. 

All things considered, you face a high risk that an Illinois court would enforce the Danish judgment under the uniform acts and/or Comity.

You do have a public policy argument, however, based on the First Amendment to the United States Constitution.  You could claim that imposing liability on you for defamation is impermissible in this case because Danish defamation law does not meet the requirements of New York Times v. Sullivan.  Substantive analysis of defamation under that case is beyond the scope of this memorandum, but we can develop it further if you wish.

Enforcement in Ireland

It is almost certain that Ireland is a signatory to the EEC Convention on Jurisdiction and the Enforcement of Judgments in Civil and Commercial Matters (“the Brussels Convention”), but we should confirm this.  That convention obligates Irish courts to recognize and enforce Danish judgments within its scope.  Article 26 of the Convention requires the Irish courts to recognize the Danish judgment “without in any special procedure being required.” 

But Article 27 prohibits recognition if it is contrary to Irish public policy, or if it is a default judgment and you were not “duly served.”

Because the Brussels Convention is a dual convention, you also may be able to resist enforcement in Ireland if you can show that the Danish court lacks jurisdiction under the Brussels Convention.  Defamation is a tort, so the relevant jurisdictional provision is Article 5(3) that approves jurisdiction over tort claims in the courts for the place “where the harmful event occurred.”  You have an argument, however, that this is inapplicable because the chapeau of Article 5 limits its scope to persons domiciled in a contracting state, and you presumably are domiciled in Illinois, so you can argue that the Brussels Convention does not approve jurisdiction over you as a foreign national.  But the Brussels Convention is not the only source of jurisdiction in signatory courts.  It does not exclude the possibility that the Danish Court may have had valid personal jurisdiction under local Danish law.  You will have to convince the Irish Court that it should not look to Danish law to determine personal jurisdiction, but should look to its own law or consider that the Brussels Convention sets forth the exclusive basis of jurisdiction. 

We would have to do more research on that choice of law issue, but you should understand that it is unlikely we could sustain the position that no court in Europe has personal jurisdiction over defendants from outside Europe. This apparently would be the implication of understanding the Brussels Convention is the exclusive source of personal jurisdiction. 

As to the notice argument, you have to sustain the proposition that you were not “duly served with the document which instituted the proceedings.”  This argument raises another choice of law question.  Is the “duly served” requirement to be judged according to Danish law? If it is, you lose, because you were served pursuant to Danish law by email.  Is it to be judged pursuant to Irish law?  If it is, you can argue that Ireland should apply standards for notice  similar to those used under the United States Constitution, and that email notice is not reasonably calculated to give actual notice and therefore is insufficient.  Or, is notice to be judged according to an independent body of law developed directly under the Brussels Convention, in which case you could make the same arguments under a third source of law? 

That leaves the public policy argument under Article 27(1).  Unambiguously, Irish law is applicable to this question because that’s what Article 27(1) says:  “contrary to public policy in the state in which recognition is sought.”  You would want to make the same freedom of expression argument that you would make under U.S. law—that exposing you to liability for defamation under the facts of this case impermissibly conflicts with the public policy of freedom of expression under Irish law.  We would have to do more research to support the proposition that Irish law is similar to U.S. Constitutional Law in this regard and, as noted earlier, to support our argument that the facts of this case do not qualify under New York Times v. Sullivan.

As a final matter, I should note that the constitutional and treaty-based limitations on in rem jurisdiction in Schaffer v. Heitner and under Article 3 of the Brussels Convention are irrelevant.  As noted in Schaffer v Heiitner, original jurisdiction based on the presence of property in the form statues is distinct from enforcing a valid judgment against property located in the enforcing state.  There is no requirement for a relationship between the property executed against and the claim.  In this case the Danish judgment was supported by personal jurisdiction based on minimum contacts, if it was supported by jurisdiction at all.