Opinion ID: 2585839
Heading Depth: 3
Heading Rank: 2

Heading: Governmental interests and comparative impairment

Text: In Phillips Petroleum Co. v. Shutts (1985) 472 U.S. 797, 105 S.Ct. 2965, 86 L.Ed.2d 628, the United States Supreme Court held that a forum state may apply its own substantive law to the claims of a nationwide class without violating the federal due process clause or full faith and credit clause if the state has a `significant contact or significant aggregation of contacts' to the claims of each class member such that application of the forum law is not arbitrary or unfair. [7] (Id. at pp. 821-822, 105 S.Ct. 2965; Stonewall Surplus Lines Ins. Co. v. Johnson Controls, Inc. (1993) 14 Cal.App.4th 637, 649-650, 17 Cal.Rptr.2d 713.) But even where its own law may be constitutionally applied, California follows a three-step governmental interest analysis to address conflict of laws claims and ascertain the most appropriate law applicable to the issues where there is no effective choice-of-law agreement. ( Clothesrigger, supra, 191 Cal. App.3d at pp. 612-616, 619, 236 Cal.Rptr. 605; see generally Application. Group, Inc. v. Hunter Group, Inc. (1998) 61 Cal. App.4th 881, 896, 72 Cal.Rptr.2d 73 [cases involving choice-of-law clauses present an exception to application of governmental interest approach]; Stoneivall Surplus Lines Ins. Co. v. Johnson Controls, Inc., supra, 14 Cal.App.4th at pp. 645-646, 17 Cal.Rptr.2d 713.) `[G]enerally speaking the forum will apply its own rule of decision unless a party litigant timely invokes the law of a foreign state. In such event [that party] must demonstrate that the latter rule of decision will further the interest of the foreign state and therefore that it is an appropriate one for the forum to apply to the case before it.' ( Bernhard v. Harrah's Club (1976) 16 Cal.3d 313, 317-318, 128 Cal.Rptr. 215, 546 P.2d 719, quoting Hurtado v. Superior Court (1974) 11 Cal.3d 574, 581, 114 Cal.Rptr. 106, 522 P.2d 666 (Hurtado) ; cf. Offshore Rental Co. v. Continental Oil Co. (1978) 22 Cal.3d 157, 163, fn. 5, 148 Cal.Rptr. 867, 583 P.2d 721 [cautioning against an unduly literal reading of quoted statements and noting that courts may make their own determination of the policies and interests of the involved states].) Under the first step of the governmental interest approach, the foreign law proponent must identify the applicable rule of law in each potentially concerned state and must show it materially differs from the law of California. The fact that two or more states are involved does not in itself indicate there is a conflict of laws problem. ( Hurtado, supra, 11 Cal.3d at p. 580, 114 Cal.Rptr. 106, 522 P.2d 666.) Indeed, if the relevant laws of each state are identical, there is no problem and the trial court may find California law applicable to class claims. (Ibid.; see Bernhard v. Harrah's Club, supra, 16 Cal.3d at p. 317, 128 Cal.Rptr. 215, 546 P.2d 719.) If, however, the trial court finds the laws are materially different, it must proceed to the second step and determine what interest, if any, each state has in having its own law applied to the case. ( Hurtado, supra, 11 Cal.3d at p. 580, 114 Cal.Rptr. 106, 522 P.2d 666.) Despite materially different laws, there is still no problem in choosing the applicable rule of law where only one of the states has an interest in having its law applied. (Ibid.; see Bernhard v. Harrah's Club, supra, 16 Cal.3d at p. 317, 128 Cal.Rptr. 215, 546 P.2d 719.) This means the trial court may properly find California law applicable without proceeding to the third step in the analysis if the foreign law proponent fails to identify any actual conflict or to establish the other state's interest in having its own law applied. (See Bernhard v. Harrah's Club, supra, 16 Cal.3d at pp. 317 318, 128 Cal.Rptr. 215, 546 P.2d 719; In re Title U.S.A. Ins. Corp. (1995) 36 Cal. App.4th 363, 372, 42 Cal.Rptr.2d 498.) Only if the trial court determines that the laws are materially different and that each state has an interest in having its own law applied, thus reflecting an actual conflict, must the court take the final step and select the law of the state whose interests would be more impaired if its law were not applied. ( Bernhard, v. Harrah's Club, supra, 16 Cal.3d at p. 320, 128 Cal.Rptr. 215, 546 P.2d 719; see also Offshore Rental Co. v. Continental Oil Co., supra, 22 Cal.3d at pp. 164-165, 148 Cal. Rptr. 867, 583 P.2d 721.) In making this comparative impairment analysis, the trial court must determine the relative commitment of the respective states to the laws involved and consider the history and current status of the states' laws and the function and purpose of those laws. ( Offshore Rental Co. v. Continental Oil Co., supra, 22 Cal.3d at p. 166, 148 Cal. Rptr. 867, 583 P.2d 721.) These rules apply whether the dispute arises out of contract or tort ( Application Group, Inc. v. Hunter Group, Inc., supra, 61 Cal. App.4th at p. 896, 72 Cal.Rptr.2d 73; cf. Bernkrant v. Fowler (1961) 55 Cal.2d 588, 594, 12 Cal.Rptr. 266, 360 P.2d 906), and a separate conflict of laws inquiry must be made with respect to each issue in the case ( Application Group, Inc. v. Hunter Group, Inc., supra, 61 Cal.App.4th at p. 896, 72 Cal.Rptr.2d 73; Beech Aircraft Corp. v. Superior Court (1976) 61 Cal.App.3d 501, 518, 132 Cal.Rptr. 541). Amici curiae in support of ASB argue that the burdens contemplated in Hurtado, supra, 11 Cal.3d 574, 114 Cal.Rptr. 106, 522 P.2d 666, should not apply when a nationwide class action is at issue. In their view, the law of the other states in which class members reside should presumably govern their claims unless the proponent of class certification affirmatively demonstrates that California law is more properly applied. To support this position, amici curiae point out that nationwide class actions may be, and often are, used to resolve the claims of nonresidents who lack the minimum contacts in the forum state normally needed to support personal jurisdiction. (See Phillips Petroleum Co. v. Shutts, supra, 472 U.S. at pp. 806-814, 105 S.Ct. 2965.) In such cases, they argue, California may not constitutionally weigh the scales in favor of applying its own law. We disagree. As amici curiae acknowledge, and as already noted above, a forum state may constitutionally apply its own law to the claims of nonresident class members if the state has a `significant contact or significant aggregation of contacts' to the claims asserted by each member of the plaintiff class, contacts `creating state interests,' in order to ensure that the choice of [the forum's] law is not arbitrary or unfair. ( Phillips Petroleum Co. v. Shutts, supra, 472 U.S. at pp. 821-822, 105 S.Ct. 2965.) Accordingly, so long as the requisite significant contacts to California exist, a showing that is properly borne by the class action proponent, California may constitutionally require the other side to shoulder the burden of demonstrating that foreign law, rather than California law, should apply to class claims. [8] In sum, in the absence of an effective choice-of-law agreement to the contrary, California law may be used on a classwide basis so long as its application is not arbitrary or unfair with respect to nonresident class members ( Phillips Petroleum Co. v. Shutts, supra, 472 U.S. at pp. 821-822, 105 S.Ct. 2965), and so long as the interests of other states are not found to outweigh California's interest in having its law applied ( Bernhard v. Harrah's Club, supra, 16 Cal.3d at p. 320, 128 Cal. Rptr. 215, 546 P.2d 719; Clothesrigger, supra, 191 Cal.App.3d at p. 614, 236 Cal. Rptr. 605).