Opinion ID: 2259102
Heading Depth: 1
Heading Rank: 1

Heading: contractual choice of law provision

Text: [¶ 7] The trial court may enter a summary judgment if the pleadings, depositions, answers to interrogatories, and admissions on file, together with the affidavits, if any, referred to in the statements required by [M.R. Civ. P.] 7(d) show that there is no genuine issue as to any material fact set forth in those statements and that any party is entitled to a judgment as a matter of law. M.R. Civ. P. 56(c). On appeal from a grant of summary judgment, we view the evidence in the light most favorable to the nonprevailing party, and review the trial court decision for errors of law. Greenvall v. Maine Mutual Fire Ins. Co., 1998 ME 204, ¶ 5, 715 A.2d 949, 951. [¶ 8] In accordance with past decisions favoring the use of the Restatement to resolve choice of law disputes, we adopt the guidelines of the Restatement (Second) Conflicts of Laws section 187(2) to interpret this contractual choice of law provision. See, e.g., Harbor Funding Corp. v. Kavanagh, 666 A.2d 498, 500 (Me.1995) (applying Restatement section 229); Collins v. Trius, Inc., 663 A.2d 570, 572-73 (Me.1995) (applying Restatement sections 145 and 146); Baybutt Constr. Corp. v. Commercial Union Ins. Co., 455 A.2d 914, 918 (Me.1983) (applying Restatement section 188). Pursuant to section 187(2), we will enforce a contractual choice of law provision 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) the 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.... RESTATEMENT (SECOND) CONFLICTS OF LAWS § 187(2) (1971). Applying section 187(2), we conclude that the contractual choice of law provision in Schroeder's employment agreement requires that Delaware law govern this dispute. [¶ 9] A substantial relationship exists between Delaware and the employment agreement because Rynel is incorporated in Delaware. See RESTATEMENT (SECOND) CONFLICTS OF LAWS § 187(2)(a) (1971). Incorporation in a state constitutes a substantial relationship. See Valley Juice Ltd., Inc. v. Evian Waters of France, Inc., 87 F.3d 604, 608 (2d Cir.1996); RESTATEMENT (SECOND) CONFLICTS OF LAW § 187 cmt. f (1981). At the time Schroeder signed the Employment Agreement Rynel was engaged  with Schroeder's encouragement  in the process of incorporating in Delaware. Rynel incorporated in Delaware only six months after Schroeder signed the employment agreement. Consequently, Rynel has a substantial relationship to Delaware. See RESTATEMENT (SECOND) CONFLICTS OF LAW § 187 cmt. f (1981). [¶ 10] In addition, a reasonable basis existed for the parties choice of Delaware law. See RESTATEMENT (SECOND) CONFLICTS OF LAW § 187(2)(a) (1981). If parties choose a state's laws to govern because of that state's well-known and established body of law, then a court will enforce that choice of law provision. See Valley Juice Ltd., Inc., 87 F.3d at 608 (enforcing parties choice of New York law to govern general distribution agreement because of highly developed body of New York commercial law); RESTATEMENT (SECOND) CONFLICTS OF LAW § 187 cmt. f (1971) ([P]arties to a contract for the transportation of goods by sea between two countries with relatively undeveloped legal systems should be permitted to submit their contract to some well-known and highly elaborated commercial law.). At the time of the contract, investors urged Rynel to incorporate in Delaware to avail itself of an established body of corporate law, including law governing employment contracts. Therefore, a reasonable basis existed for selecting Delaware law to govern employment disputes arising from Schroeder's employment agreement. [¶ 11] Schroeder contends that pursuant to section 187(2)(b), we cannot enforce the contractual choice of law provision because 26 M.R.S.A. §§ 621 and 626 represent a fundamental policy of Maine that would be frustrated by the application of Delaware law to this dispute. We disagree. [¶ 12] We will not enforce a contractual choice of law provision if the 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 . . . . RESTATEMENT (SECOND) CONFLICTS OF LAWS § 187(2)(b) (1971). Assuming sections 621 and 626 set forth a fundamental policy of Maine, the application of Delaware law to Schroeder's claim only violates that policy if there are significant differences in the application of the law of the two states. Banek, Inc. v. Yogurt Ventures U.S.A., Inc., 6 F.3d 357, 362 (6th Cir. 1993) (quoting Tele-Save Merchandising Co. v. Consumers Distrib. Co., Ltd., 814 F.2d 1120, 1123 (6th Cir.1987)). We will not refuse to apply Delaware law merely because a different result would be reached pursuant to Maine law. See, e.g., RESTATEMENT (SECOND) CONFLICTS OF LAW § 187 cmt. g (1971); Tele-Save, 814 F.2d at 1123; Barnes Group, Inc. v. C & C Products, Inc., 716 F.2d 1023, 1031 (4th Cir.1983). After examining the relevant statutory provisions pursuant to Maine and Delaware law, we decline to hold unenforceable the choice of law provision on the ground that the application of Delaware law to Schroeder's claim violates a fundamental policy of Maine. Compare 26 M.R.S.A. § 626 (Supp.1998) with DEL.CODE ANN. tit. 19, §§ 1103, 1112, and 1113 (1995) (governing liquidated damages, attorney fees, and civil penalties for withholding employees' unpaid wages). [¶ 13] The trial court did not err when it upheld the choice of law provision providing that Delaware law applies to disputes arising from the employment agreement. Schroeder only pled violations of Maine law, and, as a result, the trial court did not err when it granted a summary judgment for Rynel.