Opinion ID: 763539
Heading Depth: 2
Heading Rank: 2

Heading: Oklahoma Choice of Law

Text: 7 Oklahoma choice-of-law principles require a court to apply Oklahoma rules to procedural matters even when those principles require the application of the substantive law of another jurisdiction. See Veiser v. Armstrong, 688 P.2d 796, 799 n. 6 (Okla.1984) (In a conflict-of-law analysis matters of procedure are governed by the law of the forum.) (citing Northern Pac. Ry. Co. v. Babcock, 154 U.S. 190, 194, 14 S.Ct. 978, 38 L.Ed. 958 (1894)); cf. Restatement (Second) of Conflict of Laws § 122 (1971) (A court usually applies its own local law rules prescribing how litigation shall be conducted even when it applies the local law rules of another state to resolve other issues in the case.). Unfortunately, Oklahoma law is silent 2 on the classification of attorney's fees as substantive or procedural for choice-of-law purposes. 3 Nonetheless, it is this court's responsibility to ascertain how the Oklahoma Supreme Court would decide the choice-of-law issue. 4 See Klaxon, 313 U.S. at 496-97; First Nat. Bank of Durant v. Trans Terra Corp. Int'l, 142 F.3d 802, 806 (5th Cir.1998). 8 Oklahoma courts have classified attorney's fees as procedural, but did so in the context of determining a statute's retroactive application. 5 See, e.g., McCormack v. Town of Granite, 913 P.2d 282, 285 (Okla.1996) ( [S]tatutes relating to the award of attorney fees to a prevailing party are procedural, and subject to retrospective operation.); Qualls v. Farmers Ins. Co., 629 P.2d 1258, 1259 (Okla.1981) ( 'Taxing of attorneys' fees as costs relates to a mode of procedure.'  (quoting Phoenix Fed. Sav. & Loan v. Great S.W. Fire Ins. Co., 603 P.2d 356, 358 (Okla.Ct.App.1979) (internal quotation omitted))); Cox v. American Fidelity Assur. Co., 581 P.2d 1325, 1327 (Okla.Ct.App.1977) (same);Jeffcoat v. Highway Contractors, Inc., 508 P.2d 1083, 1087 (Okla.Ct.App.1972) (holding that § 936 related only to the remedy or mode of procedure). KMGA argues that these cases resolve the issue here. 9 The characterization of an issue as procedural for retroactivity purposes cannot be so easily transplanted into a choice-of-law context. Recalling the admonition that the substantive/procedural dichotomy for Erie purposes is not the same for choice-of-law purposes, the Restatement (Second) of Conflict of Laws cautions generally that [substantive/procedural] characterizations, while harmless in themselves, have led some courts into unthinking adherence to precedents that have classified a given issue as 'procedural' or 'substantive,' regardless of what purposes were involved in the earlier classifications. § 122 cmt. b. The Restatement then provides the example of a decision classifying an issue as procedural for retroactivity purposes which might mistakenly be held controlling on the question whether [the issue] is 'procedural' for choice-of-law purposes. Id. The Supreme Court has iterated this principle: The line between 'substance' and 'procedure' shifts as the legal context changes. 'Each implies different variables depending upon the particular problem for which it is used.'  Hanna v. Plumer, 380 U.S. 460, 471, 85 S.Ct. 1136, 14 L.Ed.2d 8 (1965) (quoting Guaranty Trust Co. of N.Y. v. York, 326 U.S. 99, 108, 65 S.Ct. 1464, 89 L.Ed. 2079 (1945)). 10 The purposes underlying the substantive/procedural dichotomies employed in retroactivity and choice-of-law cases are completely different. In the choice-of-law context, most matters are treated as substantive. Only in particular instances should a court consider a matter to be procedural. If a case has foreign contacts and ... many issues in the case will be decided by reference to the local law of another state, a state should label an issue procedural and thus apply its own law only when to do so would serve the purpose of efficient judicial administration. Restatement § 122 cmt. a. The range of issues relating to efficient judicial administration is narrow and includes such items as the proper form of action, service of process, pleading, rules of discovery, mode of trial and execution and costs. Id; see generally id. ch. 6. These are matters in which it would be especially disruptive or difficult for the forum to apply the local rules of another state, and in which failure to employ another state's law will not undermine interstate comity. 6 See id. § 122 cmt. a. 11 The general presumption in retroactivity determinations is that a statute will not apply retroactively unless the legislature has clearly expressed its intent that it apply retroactively. See Landgraf v. USI Film Prods., 511 U.S. 244, 275, 114 S.Ct. 1483, 128 L.Ed.2d 229 (1994). If the legislature has made its intent clear, a court need not even consider whether the statute should be classified as substantive or procedural. See id. at 280, 114 S.Ct. 1483. Only if the legislature's intent is not clear should a court consider whether the statute is substantive or procedural. See id. at 275-80, 114 S.Ct. 1483. The question then becomes whether the retroactive operation of the statute would alter the parties' vested rights. If the parties' vested rights would be affected, then the statute is substantive and will not be applied retroactively. Otherwise, the statute is deemed to be procedural and may apply retroactively because parties generally have a diminished reliance interest in procedural matters. See id.; see also id. at 275 n. 29, 114 S.Ct. 1483 (noting some instances in which procedural rules will not be applied retroactively). 12 Thus, the considerations entertained by a court in classifying a particular matter as procedural or substantive are quite different depending upon whether the context is choice of law or retroactive application of a statute. Choice of law analysis concerns judicial efficiency, while retroactivity analysis primarily concerns legislative intent and only secondarily considers fairness with regard to party expectations. 13 While the divergent purposes of retroactivity and choice-of-law analyses render the Oklahoma retroactivity precedents inapposite in this case, this court acknowledges that both inquiries share a concern about disrupting the parties' expectations. 7 Nonetheless, the roles of party expectations in each inquiry are meaningfully different. 14 Because conflicts of law are inevitable in a federal system, parties to a contract are empowered to and frequently do choose a particular state's law to apply to the execution and interpretation of the contract. Absent special circumstances, courts usually honor the parties' choice of law because two prime objectives of contract law are to protect the justified expectations of the parties and to make it possible for them to foretell with accuracy what will be their rights and liabilities under the contract. Restatement § 187 cmt. e; 8 see also Williams v. Shearson Lehman Bros., 917 P.2d 998, 1002 (Okla.Ct.App.1995) (concluding that parties' contractual choice of law should be given effect because it does not violate Oklahoma's constitution or public policy); Barnes Group, Inc. v. C & C Prods., Inc., 716 F.2d 1023, 1029 n. 10 (4th Cir.1983) ([P]arties enjoy full autonomy to choose controlling law with regard to matters within their contractual capacity.). 15 Consistent with the primacy of party expectations in determining contractual obligations, party choice of law is a significant consideration in determining whether an attorney's fees statute is substantive or procedural for state choice-of-law purposes. See, e.g., El Paso Natural Gas Co. v. Amoco Prod. Co., Civ. A. No. 12083, 1994 WL 728816, at  4- 5 (Del.Ch. Dec.16, 1994) (holding that attorney's fees are procedural for choice-of-law purposes, that issue of applicability of Texas attorney's fee statute was substantive because contract contained a Texas choice-of-law provision);Atchison Casting Corp. v. Dofasco, Inc., No. 93-2447-jwl, 1995 WL 655183, at  8-9 (D.Kan.1995) (concluding that issue of entitlement to attorney's fees was substantive for choice-of-law purposes in part because parties' choice-of-law provision indicated that they relied upon law of another jurisdiction). 16 In contrast, the parties' expectations are not given the same elevated status in retroactivity cases. Only if legislative intent is unclear are the parties' expectations considered by the court. Because parties' expectations are not critical in retroactivity cases, they were not even considered in the Oklahoma cases holding that Oklahoma's attorney's fees statute may be applied retroactively. In contrast, when determining choice-of-law issues, Oklahoma courts prioritize party expectations. See, e.g., Shearson Lehman, 917 P.2d at 1002; cf. Bakhsh v. JACRRC Enters., 895 P.2d 746, 747 (Okla.Ct.App.1995) (holding, in choice-of-forum case, that [p]arties to a contract may choose the jurisdiction in which all actions arising from their transaction shall be heard). 17 Finally, this court is not convinced that what counts as procedural for choice-of-law purposes is the same as what counts as procedural for retroactivity purposes. For support we look to the Restatement, to which Oklahoma courts routinely refer on issues relating to choice of law. See, e.g., Beard v. Viene, 826 P.2d 990, 994-98 (Okla.1992); Bohannan v. Allstate Ins. Co., 820 P.2d 787, 795-96 (Okla.1991); Shearson Lehman, 917 P.2d at 1002. Chapter six of the Restatement is dedicated to the general rule that a forum should apply its own local rules prescribing how litigation shall be conducted even when it applies the local law rules of another state to resolve other issues in the case. § 122. Oklahoma follows this general rule. See Veiser, 688 P.2d at 799 n. 6. Though not purporting to be exhaustive, chapter six of the Restatement surveys the matters normally considered procedural for choice-of-law purposes. 9 The section Rules for Management of Litigation appears to be where a loser-pays attorney's fees provision would be listed, if at all. See id. §§ 123-36. The procedural issues listed, however, clearly relate to vehicles by which litigation proceeds, such as service of process and notice, pleading and conduct of proceedings, burden of proof, pleading requirements for set-off or counterclaim, and enforcement of judgment, to name a few. See id. §§ 126, 127, 128, 131, 133. Although Oklahoma has not comprehensively addressed which matters it considers procedural for choice-of-law purposes, a few Oklahoma courts have concluded that certain issues, similar to those listed by the Restatement, are procedural for choice-of-law purposes. See, e.g., Flanders v. Crane Co., 693 P.2d 602, 605 (Okla.1984) (summary judgment standards); Veiser, 688 P.2d at 799 & n. 6 (procedure to collaterally attack judgment); Stephens v. Household Fin. Corp., 566 P.2d 1163, 1165 (Okla.1977) (set off, counterclaim, and recoupment). 18 This court is unable to discern any relationship between a loser-pays attorney's fees provision and the Restatement 's classification of procedural issues for choice-of-law purposes. 10 Moreover, KMGA fails to explain why Oklahoma's retroactivity cases compel this court to conclude that attorney's fees are also procedural in a choice-of-law context. Consequently, the retroactivity cases are not controlling in the determination of the status of attorney's fees for choice-of-law purposes. See also Dofasco, 1995 WL 655183, at  7 (noting Restatement 's caution and rejecting contention that cases holding attorney's fees procedural in retroactivity context control in choice-of-law context (citing Restatement (Second) of Conflict of Laws § 122 cmt. b)). 19 Taking a different approach, KMGA cites to two cases to support its argument that under Oklahoma law, the law of the forum governs the mode of procedure and remedy in breach of contract cases, regardless of the law applicable to the substantive contract issues. In Clark v. First National Bank of Marseilles, Illinois, the Oklahoma Supreme Court stated: 20 The law of the state where the contract is entered into determines matters bearing upon its execution, interpretation, and validity, but the law of the state where the contract is sought to be enforced determines the remedy and mode of procedure in enforcing the same. 21 157 P. 96, 96 para. 3 (Okla.1916) (syllabus by the court); see also Aetna Cas. & Sur. Co. of Hartford, Conn. v. Gentry, 132 P.2d 326, 326 para. 2 (Okla.1942) (similar). 22 Clark and Aetna, however, do not address the issue here. In Clark, the issue before the Oklahoma Supreme Court was whether a lender who had seized the debtor's chattel in Kansas had been entitled to avail itself of Kansas-law procedures for seizing and selling mortgaged chattels. See id. at 97-98. After the seizure and sale in Kansas, the lender had sued the debtor on the promissory note in Oklahoma court. See id. at 97. That court had refused the debtor's request to assess against the lender a penalty prescribed by Illinois law for a mortgagee who fails to strictly follow the Illinois statute's procedural requirements for chattel-mortgage foreclosures. See id. Rejecting the debtor's argument that Illinois law, not Kansas law, governed the remedy available to a lender because the mortgage had been created and largely performed in Illinois, the court on appeal stated that: 23 [T]he laws of Illinois ... could have no applicability in the state of Kansas where [lender] sought to enforce his chattel mortgage, and that the [lender] having followed the remedy prescribed by the laws of Kansas ... the [debtor] cannot be heard to complain. 24 157 P. at 99 (emphasis added). Clark did not purport to apply Oklahoma choice-of-law rules and the language quoted by KMGA provides no insight as to how the Oklahoma Supreme Court would decide the issue here. 25 Although Aetna did involve a choice of law issue, it is of no assistance to KMGA's position. The issue in Aetna was whether Kansas or Oklahoma law applied, the former creating a direct cause of action by victims against a tortfeasor's insurer and the latter rejecting direct insurer liability. 191 Okla. 659, 132 P.2d 326, 330-31 (Okla.1942). The contract at issue was made in Kansas, pursuant to Kansas law. See id. at 331. Despite the defendant's argument that the cause of action brought in Oklahoma constitute[d] merely a procedural or remedial right under the law of [Kansas], and as such is not recognizable or enforceable under the law of Oklahoma, ... where such a right does not exist, the court concluded that [t]he nature of the liability on the contract ... is governed by the law of the state where it was made. Id. Plainly the court concluded that the issue was substantive and thus is consistent with Oklahoma choice of law principles providing that the law of the state with the most significant relationship to the transaction and the parties governs the contract. See, e.g., Shearson Lehman, 917 P.2d at 1002 (citing to Restatement § 188, law governing in absence of effective choice by parties). Moreover, KMGA does not argue and we cannot find anything in Aetna to suggest that attorney's fees would also be considered procedural by the Oklahoma Supreme Court. 26 Despite the parties' arguments to the contrary, Oklahoma law provides no guidance for the classification of attorney's fees for choice-of-law purposes.
27 Rosene cites to two Tenth Circuit cases to support its assertion that attorney's fees are substantive. In Hess Oil Virgin Islands Corp. v. UOP, Inc., this court stated: 28 We are convinced that the district court correctly looked to the Oklahoma conflict of laws rule to determine whether Oklahoma would apply its own statute on attorney's fees or that of the Virgin Islands where the substantive claim arose.... We also agree with the trial court's view that Oklahoma would apply the law of the Virgin Islands since the right of recovery of the attorney's fee is intertwined with that of the substantive right. 29 861 F.2d 1197, 1210 (10th Cir.1988) (citations omitted). Although a federal court and not an Oklahoma state court applied Oklahoma choice-of-law principles, Hess is the only case that discusses the issue here. As precedent, however, Hess is so problematic it does not aid this court's decision. First, Hess was decided before Salve Regina College v. Russell, in which the Supreme Court rejected the prevailing clear-error standard of review of district courts' determinations of state law and required instead that courts of appeals review such determinations de novo. 499 U.S. 225, 231, 111 S.Ct. 1217, 113 L.Ed.2d 190 (1991). More significantly, however, it is doubtful that Hess remains viable after Rosene II. See Rosene II, 123 F.3d at 1353. 30 Other Tenth Circuit cases also hold that attorney's fees are substantive, but they do not purport to engage in a choice-of-law analysis for Oklahoma. In Prudential Insurance Co. of America v. Carlson, this court stated that [s]tatutes providing for attorneys' fees impose a liability which one may enforce as a matter of right. Such fees are put in controversy in the suit and are a part of the substantive right. 126 F.2d 607, 611 (10th Cir.1942). Prudential, however, employed the reasoning rejected by Rosene II: Since the substantive rights of the parties are governed by the lex loci, it follows that the law of [the state where the contract was made] ... governs the right to recover attorneys' fees. Id.; see also R.L. Clark Drilling Contractors v. Schramm, Inc., 835 F.2d 1306, 1309 (10th Cir.1987) (citing Prudential ). 31 KMGA points to A.T. Clayton & Co. v. Missouri-Kansas-Texas Railroad Co. to support its claim that the Tenth Circuit has effectively recognized the procedural nature of Oklahoma's attorney fee statutes. 901 F.2d 833 (10th Cir.1990). In Clayton the issue was whether an Oklahoma attorney's fee statute was preempted by a federal statute, the Carmack Amendment, previously determined to preempt state common law remedies. See id. at 834-35. The Clayton court relied upon a Supreme Court decision concluding that a Texas attorney's fee statute was not preempted by the Carmack Amendment because the Texas statute did not contradict or burden the Carmack Amendment. See id. (quoting Missouri, Kansas & Texas Ry. Co. v. Harris, 234 U.S. 412, 419-21, 34 S.Ct. 790, 58 L.Ed. 1377 (1914)). The Clayton court concluded that, similar to the Texas statute, the Oklahoma statute simply provides an incidental compensatory allowance for the expense of employing an attorney and does not substantively enlarge the responsibility of the carrier. See id. at 835 (construing Okla. Stat. tit. 12, § 940 A (1981)). KMGA argues that the Clayton court's willingness to apply the Oklahoma attorney's fee statute even when the case was substantively governed by the law of another jurisdiction indicated the court's view that the statute was procedural. 32 Clayton, however, is completely devoid of state choice-of-law analysis, and the court's conclusion that an Oklahoma attorney fee statute had a de minimis effect on a defendant's liability under the Carmack Amendment contributes nothing to the discussion here. Unlike choice-of-law principles which are a zero-sum game (either state A or state B's law will be applied), preemption law permits the concurrent application of state and federal law if the state law is not inconsistent with the federal law. See Gade v. National Solid Wastes Management Ass'n., 505 U.S. 88, 98-99, 112 S.Ct. 2374, 120 L.Ed.2d 73 (1992) (discussing conflict preemption). Moreover, because federal procedural law is applicable in federal courts, the procedural or substantive nature of Oklahoma's attorney's fee statute was irrelevant. See Hanna v. Plumer, 380 U.S. 460, 465, 85 S.Ct. 1136, 14 L.Ed.2d 8 (1965).
33 KMGA cites the Wyoming Supreme Court decision Smithco Engineering, Inc. v. International Fabricators, Inc. for the proposition that § 936, the Oklahoma attorney's fee statute at issue here, is procedural. 775 P.2d 1011, 1017-1019 (Wyo.1989). The issue in Smithco was whether, by virtue of contract situs, the party who sued in Wyoming could nonetheless [utilize] the Oklahoma attorneys' fees ... statute in Wyoming. Id. at 1017. The Wyoming Supreme Court reiterated the proposition that matters of procedure are governed by the law of the forum, even if the applicable substantive law is from another jurisdiction. See id. at 1018; see also 16 Am.Jur.2d Conflict of Laws § 151 nn.35 & 37 (1998) (citing Smithco, among other cases, for this proposition); accord Veiser, 688 P.2d at 800 n. 6 (In a conflict-of-law analysis matters of procedure are governed by the law of the forum.). The court proceeded to hold that attorney's fees are procedural in Wyoming. See id. at 1018. KMGA relies upon dicta in which the court stated that [w]e are buttressed in our view [that attorney's fees are procedural] by the fact that Oklahoma recognizes that the assessment of attorney's fees as costs under ... § 936 ... is procedural. Id. 34 Smithco is not helpful because the Wyoming Supreme Court expressly engaged in an analysis of Wyoming, not Oklahoma, choice of law. See id. at 1017-18. Additionally, although a state is free to consult the choice-of-law determinations of another state in deciding whether its own statute is substantive or procedural, state courts are not compelled to do so. Cf. Nesladek v. Ford Motor Co., 46 F.3d 734, 737 (8th Cir.1995). Rather, the forum's law controls the substantive/procedural determination, and KMGA provides no support for the proposition that Oklahoma has found Wyoming choice-of-law analysis compelling enough to adopt it. See Klaxon, (requiring federal court sitting in diversity to apply conflict-of-law rules of state in which court sits). For these reasons, Smithco is no more compelling than Dofasco, which held that under Kansas choice-of-law principles, attorney's fees are substantive. See Dofasco, 1995 WL 655183, at  9. Moreover, the Oklahoma cases upon which Smithco relies are the retroactivity cases already discussed and rejected as insufficiently analogous for choice-of-law purposes. See discussion supra, at 1118. 35 Finally, KMGA cites City of Carter Lake v. Aetna Casualty & Surety Co. 604 F.2d 1052 (8th Cir.1979). In Carter, the court considered whether the attorney's fee statute in the forum state, Nebraska, was substantive or procedural. See id. at 1062. The Eighth Circuit had only to look to the Nebraska Supreme Court, which had addressed the issue and held that the attorney's fee statute in question was procedural. See id. (citing Hawkeye Cas. Co. v. Stoker, 154 Neb. 466, 48 N.W.2d 623, 634 (1951)). Had Oklahoma decided the issue before us, this decision would be as easy as that in Carter. Carter is also unpersuasive because, like Smithco, it does not purport to apply Oklahoma choice-of-law principles. Moreover, to the extent that KMGA cites to Carter for the appearance of uniformity among courts who have considered the issue here, this court notes that other courts have decided that their attorney's fee statutes are substantive, not procedural, indicating that this is by no means an obvious or settled issue. For example, an Oregon state court held that because attorney's fees must be pleaded and proved, awarding them is a matter of substantive, rather than procedural, right. Seattle First Nat'l Bank v. Schriber, 51 Or.App. 441, 625 P.2d 1370, 1373 (Or.Ct.App.1981); see also Aries v. Palmer Johnson, Inc., 153 Ariz. 250, 735 P.2d 1373, 1380 & n. 3 (Ariz.Ct.App.1987) (holding that Arizona law providing for award of attorney's fees was substantive, and citing cases from several other states); Corrosion Rectifying Co. v. Freeport Sulphur Co., 197 F.Supp. 291, 292 (S.D.Tex.1961) (Texas authorities and other cases clearly hold the issue of attorneys' fees to be one of substantive rights....).