Conflict of Laws in The United States - United States Constitutional Limitations

United States Constitutional Limitations

The United States Supreme Court has held that there are certain limitations imposed by the U.S. Constitution on the ability of states to apply their own law to events occurring in other states.

In one of the earliest cases in this area, Home Insurance Co. v. Dick, 281 U.S. 397 (1930), the Court held that the state of Texas could not constitutionally apply its own rule invalidating contract clauses that required any statute of limitations under two years to a contract that had no relation to Texas beyond the fact that the plaintiff was a Texas resident. The plaintiff had sued a New York reinsurer of a Mexican corporation that was primarily insured in Mexico, which is where the "injury" had occurred when a tugboat owned by the company was lost in a fire. The plaintiff was living in Mexico at the time (although not a resident), but returned to Texas to file suit. These contacts were insufficient to satisfy the Due Process Clause of the Fourteenth Amendment.

The doctrine steadily developed in a series of cases over the following decades. In Pacific Employers Insurance Co. v. Industrial Accident Commission, 306 U.S. 493 (1939), the court held that there was no violation of the Full Faith and Credit Clause where the state of California applied its own law to a case in which a Massachusetts employee of a Massachusetts corporation sued his employer for an injury received in California, seeking relief that would be unavailable under the law of Massachusetts.

This was reaffirmed in Watson v. Employers Liability Assurance Corp., 348 U.S. 66 (1954) held that neither the Full Faith and Credit Clause nor the Fourteenth Amendment was implicated when a couple who had bought an insurance policy in Illinois and then moved to Louisiana sued the issuer of the policy under a provision in the Louisiana law that permitted such suits. A decade later, in Clay v. Sun Insurance Office, Ltd., 377 U.S. 179 (1964), the court explicitly stated that insurance travels with the insured, and that policy holders who move from one state to another can expect to have the laws of their new domicile apply to the interpretation of the insurer's liabilities on the policy.

Allstate Insurance Co. v. Hague, 449 U.S. 302 (1981) determined that the same analysis applies to both the Full Faith and Credit Clause and the Fourteenth Amendment; and that both are satisfied so long as there are sufficient aggregate contacts between the forum and the event giving rise to the cause of action. In the case itself, a Wisconsin resident who was employed over the state line in Minnesota was killed in a motorcycle accident in Wisconsin. The decedent's wife then moved to Minnesota, where she was appointed administratrix of her husband's estate. She sued the insurance company to recover a higher amount permitted under Minnesota law, and the courts agreed that this was permissible, because of the combination decedent's employment contacts with the state, and the insurance company's commercial contacts with the state.

In Phillips Petroleum Co. v. Shutts, 472 U.S. 797 (1985), plaintiffs residing in all fifty states brought a class-action suit in the state courts of Kansas against an oil company that had failed to pay interest on certain leases. The Kansas court hearing the case simply assumed that the law of Kansas was adequate for all the claims. The Supreme Court disagreed, holding that the Kansas court was required to determine the law of each state on the substantive questions of law, and apply the laws of each state to the claims brought by plaintiffs from that state. In the related case of Sun Oil Co. v. Wortman, 486 U.S. 717 (1988), the Court refused to apply this rule when Kansas had chosen to apply its own statute of limitations to causes raised by a diverse population of class-action plaintiffs. There the Court held that they had long been viewed as procedural matters. The states could choose to use their own with no concern for violating the Constitution.