Opinion ID: 3039127
Heading Depth: 3
Heading Rank: 3

Heading: Whether the Swiss-law claims arise under New

Text: Jersey law because of the application of New Jersey choice-of-law rules The Banks’ third argument—that New Jersey’s choice-oflaw rules are “state laws” that trigger application of Swiss law to the present dispute, thus forming the Swiss laws’ basis—is creative but unpersuasive.24 The Banks point out that the District Court’s subject matter jurisdiction is based on diversity of citizenship, which, under Erie R. Co. v. Tompkins, 304 U.S. 64, 78 (1938) and Klaxon Co. v. Stentor Elec. Mfg. Co., 313 U.S. 487, 496 (1941), requires that the forum state’s (here, New Jersey’s) choice-of-law rules govern the dispute. It is these choice-of-law rules that, the Trust contends, direct application of Swiss law. Id. The Banks, invoking Klaxon, argue that, if the Trust’s characterization of New Jersey’s choice-of-law rules is correct, those New Jersey choice-of-law rules form the basis of the Trust’s Swiss-law claims. The Banks read more into Klaxon than is there. In Klaxon, a diversity action brought by a New York corporation against a Delaware corporation in the District Court for the District of Delaware, plaintiff, having secured a jury verdict in the amount of $100,000, then moved for an award of prejudgment interest covering the years in which the suit was pending. The District Court granted the motion. This court affirmed: without addressing Delaware law with respect to contract damages, this court ruled, in reliance on two provisions 23 Of course, should further examination of the Swiss-law claims on remand reveal that the Trust’s characterization of Swiss law is in error, the District Court may reconsider this issue at that time. 24 This argument emerges from the Banks’ attempt to characterize the Swiss-law claims as “based upon the statutory or common law of any State,” see 15 U.S.C. § 78bb(f)(1), here, New Jersey. 26 of the Restatement of Conflicts, that “[t]he measure of damages for breach of contract is determined by the law of the place of performance,” and that interest was an element of damages. Stentor Elec. Mfg. Co. v. Klaxon Co.,115 F.2d 268, 275 (3d Cir. 1940). The Supreme Court reversed: The conflict of laws rules to be applied by the federal court in Delaware must conform to those prevailing in Delaware’s state courts. Otherwise the accident of diversity of citizenship would constantly disturb equal administration of justice in coordinate state and federal courts sitting side by side. Any other ruling would do violence to the principle of uniformity within a state upon which the Tompkins decision is based. Whatever lack of uniformity this may produce between federal courts in different states is attributable to our federal system, which leaves to a state, within the limits permitted by the Constitution, the right to pursue local policies diverging from those of its neighbors. It is not for the federal courts to thwart such local policies by enforcing an independent ‘general law’ of conflict of laws. Subject only to review by this Court on any federal question that may arise, Delaware is free to determine whether a given matter is to be governed by the law of the forum or some other law. 313 U.S. at 496–97. In the case at bar, the Trust contends that New Jersey’s choice-of-law rules require that, in a dispute in a New Jersey court in which Swiss banks are charged with failing to comport with proper standards of oversight of entities utilizing the services of Swiss banks, Swiss law, not New Jersey law, should govern. If the Trust’s formulation of New Jersey’s choice-oflaw rules, as embodied in counts III and IV of it complaint, is accurate, this would reflect the unsurprising conclusion by New Jersey’s lawgivers, whether judicial or legislative, that, whatever New Jersey’s law with respect to bank misconduct may be, when the allegedly miscreant bank is a Swiss enterprise executing Swiss banking transactions, Swiss banking law, not New Jersey banking law, should control. To conclude that, within the intendment of SLUSA, those claims are “based upon the . . . law 27 of” New Jersey would require attributing to Congress a subtlety of such exquisite reach as to have no place in the legislative process.