SSRN Id2789838
SSRN Id2789838
John F. Coyle*
Abstract: Over the past half-century, courts in the United States have developed canons
of construction that they use exclusively to construe choice-of-law clauses. These canons are
consistently applied by state and federal courts. They play an important role in determining
the meaning of choice-of-law clauses and, by extension, the law that will be applied to
resolve disputes that come before the courts. To date, however, these canons have attracted
relatively little attention in the academic literature.
This Article aspires to fill that gap. It develops the first taxonomy of these canons, which
fall into one of two families. The first consists of the lexical canons. These canons assign
meaning to words and phrases that commonly appear in choice-of-law clauses. The second
consists of the canons relating to scope. These canons determine whether the law selected by
the parties applies exclusively to contract claims or whether it also applies to related tort and
statutory claims. The Article then draws upon interviews and e-mail exchanges with
practicing attorneys in an attempt to determine empirically whether these canons generate
outcomes that are consistent with the preferences of most contracting parties. It shows that
some do and others do not. When a particular canon regularly produces outcomes that are
inconsistent with majoritarian preferences, the Article argues that the courts should cast it
aside. The Article concludes by addressing how to resolve conflicts among the canons when
they arise.
631
INTRODUCTION
* Associate Professor of Law, University of North Carolina at Chapel Hill. I would like to thank
Ronald Brand, Lissa Broome, Steve Burton, Kathie Coyle, Lauren Coyle, Bill Dodge, Christopher
Drahozal, Victor Flatt, Maggie Gardner, Michael Hoffheimer, Holning Lau, Jonas Monast, Richard
Myers, Stephen Sepinuck, Aaron Simowitz, Kathleen Thomas, Judith Wegner, Mark Weidemaier,
Mark Weisburd, Glenn West, Chris Whytock, the participants at the Colorado Junior Business Law
Conference in July 2016, the participants at the New Voices in Conflict of Laws session at the
AALS Annual Meeting in January 2017, and the faculty of Brooklyn Law School in February 2017
for their comments on an earlier draft of this Article. Thanks to Jack Middough for excellent
research assistance.
1. THERON METCALF, PRINCIPLES OF THE LAW OF CONTRACTS: AS APPLIED BY COURTS OF LAW
317 (1874).
2. See RESTATEMENT (SECOND) OF CONFLICT OF LAWS § 188 (AM. LAW INST. 1971).
3. See Dowis v. Mud Slingers, Inc., 621 S.E.2d 413, 417–19 (Ga. 2005); Shirley A. Wiegand,
Fifty Conflict of Laws “Restatements”: Merging Judicial Discretion and Legislative Endorsement,
65 LA. L. REV. 1, 4 (2004).
4. See, e.g., Janet V. Hallahan, The Case of the Missing Decision: When Will Pennsylvania Solve
the Mystery of its “Flexible” Choice-of-Law Analysis?, 69 TEMP. L. REV. 655, 694 (1996)
(“Pennsylvania choice-of-law desperately needs some uniformity because, since it is so chaotic and
ad hoc, it costs too much, wastes too much time, and is simply unfair.”); David Hrick, Infinite
Combinations: Whether the Duty of Competency Requires Lawyers to Include Choice of Law
Clauses in Contracts They Draft for Their Clients, 12 WILLAMETTE J. INT’L L. & DISP. RESOL. 241,
250 (2004) (“[L]itigation costs are a significant cost in the absence of a choice of law provision.”).
5. See Mastrobuono v. Shearson Lehman Hutton, Inc., 514 U.S. 52, 59 (1995) (observing that a
“choice of law provision, when viewed in isolation, may reasonably be read as merely a substitute
for the conflicts-of-laws analysis that otherwise would determine what law to apply to disputes
arising out of the contractual relationship”).
6. The widespread use of choice-of-law clauses serves to reduce legal uncertainty in commercial
transactions. See John F. Coyle, Rethinking the Commercial Law Treaty, 45 GA. L. REV. 343, 345–
47 (2011) (discussing problem of legal uncertainty); John Prebble, Choice of Law to Determine the
Validity and Effect of Contracts: A Comparison of English and American Approaches to the
Conflict of Laws, 58 CORNELL L. REV. 433, 495 (1973) (observing that the use of choice-of-law
clauses simplifies the judicial task while contributing to certainty in commercial transactions).
7. See LEA BRILMAYER ET AL., CONFLICT OF LAWS: CASES AND MATERIALS 698 (7th ed. 2015)
(“[S]urprisingly often, the parties do not even bother to research the chosen law before they include
a clause selecting it.”). One in-house attorney explained his thinking in the following way:
[I]n the ordinary course of commerce, where there are lots of contracts flying around all the
time, and time/cost are always issues, it is not uncommon to agree to a choice of law without
doing a detailed analysis of how that jurisdiction’s laws work for you or against you. Unless
you have a crystal ball, you don’t know what your issues are going to be, so you don’t always
know what to worry about.
E-mail from In-House Counsel at U.S. Energy Company to author (Mar. 3, 2016) (on file with
author).
8. See, e.g., Mail Boxes Etc. USA, Inc. v. Considine, No. C98-1472L, 1999 U.S. Dist. LEXIS
23380 (W.D. Wash. Aug. 13, 1999); RESTATEMENT (SECOND) OF CONFLICT OF LAWS § 187
Reporter’s Note (AM. LAW INST. 1971) (collecting cases).
9. Michael Gruson, Governing Law Clauses in Commercial Agreements—New York’s Approach,
18 COLUM. J. TRANSNAT’L L. 323, 325 (1980).
characterization will not, of course, hold true in every case. Where one
contracting party is quite sophisticated (an insurance company) or where
the contract itself is a high-value contract (a merger agreement), the law
of the chosen jurisdiction is more likely to be researched carefully.10
When it comes to ordinary, run-of-the-mill commercial agreements,
however, each party will tend to gravitate to the law of its home
jurisdiction without giving the matter much additional thought.11
When neither party is willing to accept the law of the other’s home
jurisdiction, the parties will sometimes compromise by choosing the law
of a “neutral” jurisdiction with no connection to either party. In the
United States, the most frequently selected neutral jurisdictions are
Delaware and New York.12 In international contracts, the most
commonly selected neutral jurisdictions are England, Singapore, and
Switzerland.13 Choice of law is also closely linked to the choice of
forum. The parties will typically want the chosen forum to be the same
as the chosen law.14 Indeed, in many cases they may care more about the
choice of forum than the choice of law.15 To the extent that one party
10. See INS. SERVS. OFFICE, INC., ISO: ENHANCING COMPETITION IN THE WORLD’S INSURANCE
MARKETS (1999), reprinted in KENNETH S. ABRAHAM, INSURANCE LAW AND REGULATION 33 (3d
ed. 2000) (stating that the Insurance Services Office “monitors changes in the insurance industry
and in the law,” and then “drafts language necessary to address new laws, court interpretations of
coverage forms, or changed market conditions”); Juliet P. Kostritsky, Context Matters—What
Lawyers Say About Choice of Law Decisions in Merger Agreements, 13 DEPAUL BUS. & COMM.
L.J. 211, 217 (2015) (arguing that lawyers drafting merger agreements “put a moderate level of
thought into choice of law provisions” (emphasis omitted)).
11. See supra note 7.
12. Theodore Eisenberg & Geoffrey Miller, Ex Ante Choices of Law and Forum: An Empirical
Analysis of Corporate Merger Agreements, 59 VAND. L. REV. 1975, 1979–83 (2006).
13. Gilles Cuniberti, The Laws of Asian International Business Transactions, 25 PAC. RIM L. &
POL’Y J. 35 (2016); Gilles Cuniberti, The International Market for Contracts: The Most Attractive
Contract Laws, 34 NW. J. INT’L L. & BUS. 455 (2014).
14. See Theodore Eisenberg & Geoffrey P. Miller, The Flight to New York: An Empirical Study of
Choice of Law and Choice of Forum Clauses in Publicly-Held Companies’ Contracts, 30 CARDOZO
L. REV. 1475, 1505 (2009) (observing that “contracts overwhelmingly specify the place of choice of
law as the choice of forum”); Eisenberg & Miller, supra note 12, at 1981 (“If a particular state’s law
is chosen, that state’s forum is also very likely to be selected.”) Symeon C. Symeonides, Choice of
Law in the American Courts in 2015: Twenty-Ninth Annual Survey, 64 AM. J. COMP. L. 221, 239
(2016) (observing that choice-of-law clauses and forum selection clauses “almost always” select the
same jurisdiction).
15. See George A. Zaphiriou, Choice of Forum and Choice of Law Clauses in International
Commercial Agreements, 3 INT’L TRADE L.J. 311, 311 (1978) (“The initial concern when drafting a
transnational agreement is to determine first, the forum for resolving disputes related to the
agreement, and secondly, the law governing its validity, interpretation and performance.”); E-mail
from In-House Counsel at U.S. Energy Company to author, supra note 7 (“In truth, I usually worry
more about the venue than the choice of law.”).
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16. See SYMEON SYMEONIDES, CHOICE OF LAW 388–406 n.52 (2016) (observing that it is
exceedingly rare to find a contract in which the chosen forum is different from the chosen law);
supra note 14.
17. See John C. Coates IV, Managing Disputes Through Contract: Evidence from M&A, 2 HARV.
BUS. L. REV. 295, 322–23 (2012); Eisenberg & Miller, supra note 14, at 1480–87; Eisenberg &
Miller, supra note 12, at 1979–83; Jody S. Kraus & Robert E. Scott, Contract Design and the
Structure of Contractual Intent, 84 N.Y.U. L. REV. 1023, 1101–03 (2009); Sarath Sanga, Choice of
Law: An Empirical Analysis, 11 J. EMPIRICAL LEGAL STUD. 894, 90203 (2014). But see Kyle Chen
et al., Empirical Study Redux on Choice of Law and Forum in M&A: The Data and Its Limits, 16 J.
BUS. & SEC. L. 1 (2015) (challenging earlier studies that found that Delaware companies “flee” to
New York law).
18. See Juliet P. Kostritsky, Context Matters—What Lawyers Say About Choice of Law Decisions
in Merger Agreements, 13 DEPAUL BUS. & COMM. L.J. 211, 213–17 (2015).
19. See generally Adam B. Badawi, Interpretive Preferences and the Limits of the New
Formalism, 6 BERKELEY BUS. L.J. 1 (2009) (arguing that cotton and diamond merchants have a
preference for formal interpretation of their contracts but that these preferences are not necessarily
shared by parties entering into construction or tailored software contracts).
20. See PETER HAY ET AL., CONFLICT OF LAWS 1145 (5th ed. 2010).
21. See Glenn West, The Law You Choose to Govern Your Contract May Not Be the Law That
Governs, WEIL’S GLOB. PRIVATE EQUITY WATCH (Jan. 12, 2016), http://goo.gl/RlJTDv
[https://perma.cc/3TR9-MLHV] (stating that “most deal professionals actually do focus on the law
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chosen to govern an agreement” but that “there is often less focus on the actual wording of the
clause that effectuates that choice”); Interview with In-House Counsel at U.S. Pharmaceutical
Company (Feb. 24, 2017) (“When it comes to boilerplate, I see people negotiate indemnification,
termination, insurance, survivability, and assignability all the time. I never seen anyone negotiate
the choice-of-law clause except for the governing jurisdiction.”).
22. HAY ET AL., supra note 20, at 1145.
23. See Volt Info. Scis., Inc. v. Bd. of Trs., 489 U.S. 468, 488 (1989) (Brennan, J., dissenting)
(“Construction of a contractual provision is, of course, a matter of discerning the parties’ intent. We
must therefore rely on the contract itself. But the provision of the contract at issue here was not one
that these parties drafted themselves. Rather, they incorporated portions of a standard form contract
commonly used in the construction industry. That makes it most unlikely that their intent was in any
way at variance with the purposes for which choice-of-law clauses are commonly written and the
manner in which they are generally interpreted.”).
24. The analysis in this Article generally assumes that the contract in which a choice-of-law
clause appears is between two sophisticated firms with roughly equal bargaining power. Cf. Alan
Schwartz & Robert E. Scott, Contract Theory and the Limits of Contract Law, 113 YALE L.J. 541,
544 (2003) (developing a theory of contracts that applies exclusively where one firm sells to another
firm). When a choice-of-law clause is set forth in a consumer contract, or where there is a
significant disparity in terms of party bargaining power, a different analytical approach may be
warranted. See Ronald J. Gilson, Charles F. Sabel & Robert E. Scott, Text and Context: Contract
Interpretation as Contract Design, 100 CORNELL L. REV. 23, 75–95 (2014) (proposing an
interpretive regime tailored specifically to contracts of adhesion).
25. Some scholars distinguish between the act of contract “interpretation” and the act of contract
“construction.” See, e.g., RESTATEMENT (SECOND) OF CONTRACTS § 200 Reporter’s Note (AM.
LAW INST. 1981) (observing that “‘interpretation’ relates to meaning,” whereas “construction”
relates to “the ascertainment of legal operation or effect”). While this distinction is conceptually
useful, the “overwhelmingly common practice” of courts today is to use the two terms
interchangeably. 5 MARGARET N. KNIFFIN, CORBIN ON CONTRACTS § 24.7, at 30 (Joseph M. Perillo
ed., 1998); see also E. ALLEN FARNSWORTH, CONTRACTS § 7.7 (4th ed. 2005); Michael H.
Hoffheimer, Conflicting Rules of Interpretation in Multi-Jurisdictional Disputes, 63 RUTGERS L.
REV. 599, 639–40 (2011) (“Courts applying the Second Restatement to private choice of law
agreements fail to differentiate between interpretation and construction.”).
26. See Larry Kramer, Rethinking Choice of Law, 90 COLUM. L. REV. 277, 320 (1990)
(describing a canon as “a background presumption about the legal system that is used to resolve
uncertainty in interpretation” and observing that “any interpretive norm that courts rely on to
resolve ambiguity is a ‘canon’”). In his Article, Kramer proposes several canons of construction that
judges should use to ascertain the intent of the legislature in resolving true conflicts. Id. at 319–38.
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In this Article, I identity several canons of construction that judges do use to ascertain the intent of
the parties when construing choice-of-law clauses.
27. For a sampling of the recent literature discussing canons of various stripes, see James J.
Brudney & Cory Ditslear, Canons of Construction and the Elusive Quest for Neutral Reasoning, 58
VAND. L. REV. 1, 9 (2005); Abbe R. Gluck, The Federal Common Law of Statutory Interpretation:
Erie for the Age of Statutes, 54 WM. & MARY L. REV. 753, 793–94 (2013); Daniel B. Kostrub &
Roger S. Christenson II, Canons of Construction for the Interpretation of Mineral Conveyances,
Severances, Exceptions, and Reservations in Producing States, 88 N.D. L. REV. 649, 651 (2012);
Jonathan R. Macey & Geoffrey P. Miller, The Canons of Construction and Judicial Preferences, 45
VAND. L. REV. 647, 658–68 (1992); Keith A. Rowley, Contract Construction and Interpretation:
From the “Four Corners” to Parol Evidence (and Everything in Between), 69 MISS. L.J. 73, 82
(1999).
28. Both the lexical canons and the canons relating to scope are species of interpretive default
rules that “assign legal content to particular phrases.” See William Baude & Stephen E. Sachs, The
Law of Interpretation, 130 HARV. L. REV. 1079, 1107 (2017). The lexical canons ascribe meaning to
individual words in choice-of-law clauses. The canons relating to scope ascribe meaning to the
clause as a whole.
29. See infra section II.A.
30. See infra section II.B.
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The lexical canons and the canons relating to scope play an important
role in determining the meaning of choice-of-law clauses and, by
extension, the law that will be applied to resolve disputes that come
before the courts. To date, however, they have attracted relatively little
attention in the academic literature.35 The Article’s first contribution to
the literature, therefore, is to identify these canons, to assign them labels,
31.
See infra section II.C.
32.
See infra section II.D.
33.
See infra section III.A.
34.
See infra section III.B.
35.
For recent and noteworthy exceptions, see HAY ET AL., supra note 20, at 1136–46; SYMEON
SYMEONIDES, CHOICE OF LAW 388–406 (2016).
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41. Boilerplate, BLACK’S LAW DICTIONARY 167 (7th ed. 1999) (defining “boilerplate” as
“[r]eady-made or all-purpose language that will fit in a variety of documents”).
42. Henry E. Smith, Modularity in Contracts: Boilerplate and Information Flow, 104 MICH. L.
REV. 1175, 1191 (2006).
43. Hartford Casualty Ins. Co. v. Swift Distribution, Inc., 326 P.3d 253, 288 (Cal. 2014);
Greenfield v. Philles Records, Inc., 780 N.E.2d 166, 170 (N.Y. 2002).
44. Hartford, 326 P.3d at 288; Greenfield, 780 N.E.2d at 170.
45. See Stephen J. Choi, Mitu Gulati & Robert E. Scott, Variation in Boilerplate: Rational
Design or Random Mutation?, 3 (NYU Law & Econ. Research Paper No. 16-30, 2017)
https://papers.ssrn.com/sol3/papers.cfm?abstract_id=2827189 [https://perma.cc/MD58-CUF2]
(suggesting that “there are contract provisions . . . in some boilerplate contracts that neither party
understands nor intends to convey current meaning”).
46. HAY ET AL., supra note 20, at 1145 (“[T]oo many choice-of-law clauses are poorly or
haphazardly drafted (and often wholesale copied from other contracts or cases). As such, these
clauses provide a very weak basis from which to safely infer that the parties did or did not
contemplate non-contractual issues.”).
47. See Broad v. Rockwell Int’l Corp., 642 F.2d 929, 947 (5th Cir. 1981) (en banc).
48. See Kolbe v. BAC Home Loans Servicing, LP, 738 F.3d 432, 440 (1st Cir. 2013) (“When a
contract uses uniform language that is contained in a large number of contracts, as is the case here,
it is a well-established common law principle of contract interpretation that such contracts are
‘interpreted wherever reasonable as treating alike all those similarly situated, without regard to their
knowledge or understanding of the standard terms of the writing.’”) (citing RESTATEMENT
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(SECOND) OF CONTRACTS § 211(2) (AM. LAW INST. 1981)); Bank of N.Y. Mellon Trust Co. v.
Liberty Media Corp., 29 A.3d 225, 241 (Del. 2011) (“[I]n interpreting boilerplate indenture
provisions, courts will not look to the intent of the parties, but rather the accepted common purpose
of such provisions.” (internal quotation marks and citations omitted)).
49. Sharon Steel Corp. v. Chase Manhattan Bank, N.A., 691 F.2d 1039, 1048 (2d Cir. 1982)
(“There are no adjudicative facts relating to the parties to the litigation for a jury to find and the
meaning of boilerplate provision is, therefore, a matter of law rather than fact.”); see also Chase
Manhattan Bank v. Traffic Stream (BVI) Infrastructure Ltd., 52 F. App’x 528, 530 (2d Cir. 2002);
Leverso v. SouthTrust Bank of Ala., Nat. Assoc., 18 F.3d 1527, 1534 (11th Cir. 1994); Bank of
N.Y. v. Tyco Int’l Grp., S.A., 545 F. Supp. 2d 312, 319 (S.D.N.Y. 2008); Drage v. Santa Fe Pac.
Corp., No. 67966, 1995 WL 396370, at *5 (Ohio Ct. App. July 3, 1995).
50. See Morgan Stanley & Co. v. Archer Daniels Midland Co, 570 F. Supp. 1529, 1541–42
(S.D.N.Y. 1983); Diane Lourdes Dick, Confronting the Certainty Imperative in Corporate Finance
Jurisprudence, 2011 UTAH L. REV. 1461, 1475–77 (collecting cases).
51. Cf. Royce de R. Barondes, Vestigial Literalism in the Interpretation of Corporate Financing
Instruments, 15 TRANSACTIONS TENN. J. BUS. L. 239 (2014) (describing various judicial approaches
to interpreting boilerplate provisions in corporate financing instruments).
52. Roadway Package Sys., Inc. v. Kayser, 257 F.3d 287, 288–89 (3d Cir. 2001) (observing that
“a generic choice-of-law clause tells us little (if anything) about” the intentions of the contracting
parties).
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53. This is generally known as the problem of renvoi. See Renvoi, BLACK’S LAW DICTIONARY
1300 (7th ed. 1999) (“The doctrine under which a court in resorting to foreign law adopts as well
the foreign law’s conflict-of-laws principles, which may in turn refer the court back to the law of the
forum.”).
54. See RESTATEMENT (SECOND) OF CONFLICT OF LAWS § 187(3) cmt. h (AM. LAW INST. 1971).
(“When they choose the state which is to furnish the law governing the validity of their contract, the
parties almost certainly have the ‘local law,’ rather than the ‘law,’ of that state in mind. To apply the
‘law’ of the chosen state would introduce the uncertainties of choice of law into the proceedings and
would serve to defeat the basic objectives, namely those of certainty and predictability, which the
choice-of-law provision was designed to achieve.”).
55. 221 F.2d 189 (2d Cir. 1955).
56. Id. at 193.
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brought a claim against the cruise operator in federal district court.57 The
suit was, however, brought more than one year after the injury had
occurred.58 The trial court concluded that the choice-of-law clause
selecting English law was enforceable and that the contract provision
limiting the time in which suit could be brought was valid under English
law.59 The plaintiff appealed this decision to the Second Circuit.
On appeal, the Second Circuit weighed the question of how best to
interpret the clause.60 After determining that the issue was to be decided
under federal conflict-of-laws rules, the court observed that the “the
provision that English law should govern must be taken to represent the
intention of both parties.”61 One of the key interpretive issues was
whether the word “Law” referred to the whole law of England—
including its conflict-of-laws rules—or to the internal law of England.62
The court concluded that the word “Law” referred exclusively to the
internal law of England:
We think the provision must be read as referring to the [internal]
law alone, for surely the major purpose of including the
provision in the ticket was to assure Cunard of a uniform result
in any litigation no matter where the ticket was issued or where
the litigation arose, and this result might not obtain if the
“whole” law of England were referred to.63
The court thus concluded—perhaps inaccurately, given that it was
dealing with a boilerplate provision in a contract of adhesion—that both
parties intended that English law would govern the contract. The court
then cited the need to ensure a uniform choice of law, irrespective of
forum, as a rationale for why the parties must have wanted to choose the
internal law of England rather than its whole law.
In 2003, a federal court in the Southern District of New York invoked
a similar rationale in support of applying this canon. In Weiss v. La
Suisse, Société d’Assurances sur la Vie,64 the court was called upon to
interpret an insurance contract that contained a choice-of-law clause
stating that the agreement was to be governed by “Swiss law.”65 The
57. Id.
58. Id.
59. Id.
60. Id.
61. Id.
62. Id.
63. Id. at 194.
64. 293 F. Supp. 2d 397 (S.D.N.Y. 2003).
65. Id. at 402.
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66. Id.
67. Id.
68. Id.; see also Reger v. Nat’l Assoc. of Bedding Mfrs. Grp. Ins. Tr. Fund, 372 N.Y.S.2d 97, 118
(N.Y. Sup. Ct. 1975) (“In the court’s opinion the parties to the group policy obviously intended only
Illinois internal law to apply. To look to the whole law of Illinois would serve to introduce
uncertainty . . . .”).
69. See generally Ministers & Missionaries Benefit Bd. v. Snow, 45 N.E.3d 917, 923 (N.Y. 2015)
(“New York courts should not engage in any conflicts analysis where the parties include a choice-
of-law provision in their contract . . . . To do otherwise—by applying New York’s statutory
conflict-of-laws principles, even if doing so results in the application of the substantive law of
another state—would contravene the primary purpose of including a choice-of-law provision in a
contract—namely, to avoid a conflict-of-laws analysis and its associated time and expense. Such an
interpretation would also interfere with, and ignore, the parties’ intent, contrary to the basic tenets of
contract interpretation.”); IRB-Brasil Resseguros, S.A. v. Inepar Invs., S.A., 982 N.E.2d 609, 612
(N.Y. 2012) (“It strains credulity that the parties would have chosen to leave the question of the
applicable substantive law unanswered and would have desired a court to engage in a complicated
conflict-of-laws analysis, delaying resolution of any dispute and increasing litigation expenses.”). In
other cases, the courts have applied the presumption in favor of internal law without articulating its
underlying rationale. See, e.g., Chan v. Soc’y Expeditions, Inc., 123 F.3d 1287 (9th Cir. 1997);
Amoco Rocmount Co. v. Anschutz Corp., 7 F.3d 909, 920 (10th Cir. 1993); Economu v. Borg-
Warner Corp., 652 F. Supp. 1242, 1246 (D. Conn. 1987).
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70. Very occasionally, one will come across a choice-of-law clause that expressly chooses the
conflict-of-laws rules of the chosen jurisdiction. See, e.g., Watson Pharmaceuticals Inc., U.S.
Supply and Distribution Agreement (Form 10-Q) (Jan. 18, 2006) (“This Agreement is governed by
the laws of the State of Illinois, including its choice of law principles.”). It is difficult to understand
why anybody would ever knowingly do this.
71. See Carlos v. Philips Bus. Sys., Inc., 556 F. Supp. 769, 774 n.4 (E.D.N.Y. 1983) (“While it is
true that the parties designated New York law as controlling it is also true that the reference to New
York law . . . was in no way limited or circumscribed to include only [internal] law. Specifically, it
is the finding of the court that the whole law of New York, including its conflicts of law principles,
must be referenced on this issue.”). There are a number of cases in which the courts have interpreted
the word “law” in a particular statute to refer to the whole law of a particular state. See, e.g., Burgio
v. McDonnell Douglas, Inc., 747 F. Supp. 865, 869–70 (E.D.N.Y. 1990) (applying whole law of
Louisiana, including its choice of law rules, to issue of damages under the Federal Reservation Act);
Simon v. United States, 805 N.E.2d 798, 801 (Ind. 2004) (“Under the [Federal Tort Claims Act], a
court should apply the whole law, including choice-of-law rules, of the place where the acts of
negligence occurred.”) (citing Richards v. United States, 369 U.S. 1 (1962)). There are, however,
vanishingly few cases in which a court has interpreted the word “law” in a particular contract in this
same manner.
72. Watson Pharmaceuticals, Inc., U.S. Supply and Distribution Agreement (Form 10-Q) § 13.1
(May 5, 2012) (emphasis added).
73. Power Integrations Inc., Wafer Supply Agreement (Form 10-Q) § 18.4 (Aug. 8, 2011)
(emphasis added).
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When two parties agree that a contract will be governed by the “laws”
of a particular state, it is not altogether clear whether they are choosing
to be governed by (1) the substantive law of the state, (2) the procedural
law of the state, or (3) both. Substantive law is that body of law that
“creates, defines, and regulates the rights, duties, and powers of
parties.”77 Procedural law is comprised of rules that “prescribe the steps
for having a right or duty judicially enforced.”78 In construing the word
74. Salix Pharmaceuticals, Supply Agreement (Form 10-K) § 9.3 (Feb. 28, 2012) (emphasis
added).
75. As a general matter, the third formulation—the one that instructs courts not to apply any
conflicts rule that would result in the application of the law of another jurisdiction—is to be
preferred. A number of states have enacted statutes that direct courts to apply the law chosen by the
parties even in situations where neither the parties nor the contract have a substantial connection to
the state. See, e.g., CAL. CIV. CODE § 1646.5 (West 2014); DEL. CODE ANN. tit. 27, § 2708 (2015);
FLA. STAT. § 685.101 (2016); 735 ILL. COMP. STAT. 105/5-5 (2015); N.Y. GEN. OBLIG. LAW § 5-
1401 (McKinney 2012); OHIO REV. CODE ANN. § 2307.39 (West 2015). Each of these statutes
constitutes a conflict-of-laws rule. If a choice-of-law clause provides that the contract shall be
governed by the law of a state “without regard to conflict of laws principles,” then a court could in
theory read this phrase as evidencing the parties’ intent that these statutes not apply. See Michael
Gruson, Governing Law Clauses Excluding Principles of Conflict of Laws, 37 INT’L L. 1023, 1025
(2003). It is highly unlikely that this is what the parties intended. The third formulation discussed
avoids this problem by limiting the exclusion to only those conflicts rules that would result in the
application of the law of another jurisdiction.
76. See, e.g., IRB-Brasil Resseguros, S.A. v. Inepar Invs., S.A., 982 N.E.2d 609, 612 (N.Y. 2012)
(stating that the omission of the words “without regard to conflict of laws principles” from a choice-
of-law clause was “inconsequential as a matter of law”); GARY B. BORN, INTERNATIONAL
ARBITRATION 257 (2012) (observing that “authorities in most jurisdictions interpret choice-of-law
clauses as specifying the applicable substantive (and not conflict of laws) rules, even if an anti-
renvoi provision is not included in the text of the clause”).
77. Substantive Law, BLACK’S LAW DICTIONARY (7th ed. 1999).
78. Procedural Law, BLACK’S LAW DICTIONARY (7th ed. 1999).
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79. Stone & Webster, Inc. v. Baker Process, Inc., 210 F. Supp. 2d 1177, 1186 (S.D. Cal. 2002)
(“[T]he general rule is that a general choice-of-law clause only incorporates state substantive laws,
but NOT state procedural laws. State procedural laws must be expressly incorporated into the
contract.”).
80. RESTATEMENT (SECOND) OF CONFLICT OF LAWS § 122 cmt. a (AM. LAW INST. 1971).
81. Id.; see also PNC Bank v. Sterba, 852 F.3d 1175, 1175–76 (9th Cir. 2017).
82. Cole v. Mileti, 133 F.3d 433, 437 (6th Cir. 1998) (observing that “contractual choice-of-law
clauses incorporate only substantive law, not procedural provisions”); Woodling v. Garrett Corp.,
813 F.2d 543, 551 (2d Cir. 1987) (“The contractual choice of law provision is deemed to import
only substantive law, however, not procedural law.”).
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83. RESTATEMENT (SECOND) OF CONFLICT OF LAWS § 126 (AM. LAW INST. 1971); see also
George Bundy Smith & Thomas J. Hall, The Enforceability of Choice of Law Provisions, N.Y. L.J.
(Apr. 19, 2013) (“New York courts find that, despite a contrary choice of law provision, the law of
New York as the forum state governs procedural issues, including . . . personal jurisdiction and
motions for default judgment.” (internal citations omitted)).
84. RESTATEMENT (SECOND) OF CONFLICT OF LAWS § 145 (AM. LAW INST. 1971).
85. See HAY ET AL., supra note 20, at 1137–41; H.L. McClintock, Distinguishing Substance and
Procedure in the Conflict of Laws, 78 U. PA. L. REV. 933, 942 (1930). A complicating factor in this
analysis is the line of cases decided pursuant to the Erie doctrine that classifies legal issues as
“substantive” or “procedural” for purposes of determining whether they should be governed by
federal or state law. While it may be tempting to look to the Erie cases for guidance, an inquiry into
whether an issue is substantive or procedural for purposes of resolving conflicts between the laws of
two co-equal states presents issues that are distinct and different from the task of resolving conflicts
between the laws of a state and the federal government. See Gluck v. Unisys Corp., 960 F.2d 1168,
1180 n.9 (3d Cir. 1992). Accordingly, the drafters of the Restatement urge courts to avoid
“unthinking adherence to precedents that have classified a given issue as ‘procedural’ or
‘substantive.’” RESTATEMENT (SECOND) OF CONFLICT OF LAWS § 188 cmt. b (AM. LAW INST.
1971); Gilmore v. Gilmore, 1997-NMCA-103, ¶ 11, 124 N.M. 119, 946 P.2d 430 (“The problems
arise when a perfectly sound decision in one area of the law classifies a matter as ‘substantive’ or
‘procedural’ and then a court considering another area of the law blindly applies the precedent
despite the different considerations that should come into play.”).
86. See BRILMAYER ET AL., CONFLICT OF LAWS 135 (7th ed. 2015).
87. Heavner v. Uniroyal, Inc., 305 A.2d 412, 415 (N.J. 1973).
88. See Laura Cooper, Statutes of Limitations in Minnesota Choice of Law: The Problematic
Return of the Substance-Procedure Distinction, 71 MINN. L. REV. 363, 378–79 (1986) (surveying
literature).
89. See RESTATEMENT (SECOND) OF CONFLICT OF LAWS § 142 (AM. LAW INST. 1988) (“Whether
a claim will be maintained against the defense of the statute of limitations is determined under
[general choice-of-law principles].”); R. LEFLAR, AMERICAN CONFLICTS OF LAW § 128 (3d ed.
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1977) (“There is no inherent reason why the choice between statutes of limitations should be
handled any differently than other choice-of-law problems.”).
90. Western Video Collectors, L.P. v. Mercantile Bank, 935 P.2d 237, 239 (Kan. Ct. App. 1997).
91. Portfolio Recovery Assocs., LLC v. King, 927 N.E.2d 1059, 1061 (N.Y. 2010) (internal
citations omitted). Cf. Am. S.S. Owners Mut. Prot. & Indem. Ass’n, Inc. v. Dann Ocean Towing,
Inc., 756 F.3d 314, 319 (4th Cir. 2014) (concluding that a choice-of-law clause selecting New York
law encompassed New York statutes of limitations).
92. See RMS Tech., Inc. v. TDY Indus., Inc. 64 F. App’x 853, 857 (4th Cir. 2003) (Virginia);
Conway v. Portfolio Recovery Assocs., LLC, 13 F. Supp. 3d 711, 715 (E.D. Ky. 2014); Retail
Pharm. Mgmt. Servs., Inc. v. Amerisourcebergen Drug Corp., No. 12-CV-308-JHP, 2013 U.S. Dist.
LEXIS 15377 (E.D. Okla. Feb. 5, 2013); Eagle Nation, Inc. v. Mkt. Force, Inc., 180 F. Supp. 2d
752, 756 (E.D.N.C. 2001); Alaska Airlines, Inc. v. Lockheed Aircraft Corp., 430 F. Supp. 134, 139
(D. Alaska 1977); Etheredge v. Genie Indus., Inc., 632 So. 2d 1324, 1326 (Ala. 1994); Middleton v.
Lockhart, 139 S.W.3d 500, 502–03 (Ark. 2003); Midland Funding, LLC v. Wieczorkowski, No.
CV-136014740, 2015 Conn. Super. LEXIS 1091 (Conn. Super. Ct. May 13, 2015); Pivotal
Payments Direct Corp. v. Planet Payment, No. N-15C-02-059 EMD CCLD, 2015 Del. Super.
LEXIS 1058 (Del. Super. Ct. Dec. 29, 2015); Griffin v. Hunt Ref. Co., 664 S.E.2d 823, 825–26 (Ga.
Ct. App. 2008); Belleville Toyota, Inc. v. Toyota Motor Sales, U.S.A., 770 N.E.2d 177, 194 (Ill.
2002); Smither v. Asset Acceptance, LLC, 919 N.E.2d 1153, 1158 (Ind. Ct. App. 2010); Harris v.
Clinton Corn Processing Co., 360 N.W.2d 812, 814 (Iowa 1985); Tornesello v. Tisdale, 2008 ME
84, P14 (Me. 2008); Lewis v. Waletzky, 31 A.3d 123, 133 (Md. 2011); Brazos Higher Educ. Serv.
Corp. v. Stinnett, No. 329780, 2017 Mich. App. LEXIS 485, at *8 (Ct. App. Mar. 23, 2017);
Zurich Am. Ins. Co. v. Goodwin, 920 So. 2d 427, 433 (Miss. 2006); Hemar Ins. Corp. of Am. v.
Ryerson, 108 S.W.3d 90, 95 (Mo. Ct. App. 2003); Nez v. Forney, 1989-NMSC-074, (¶ 4), 109
N.M. 161, 162, 783 P.2d 471, 472; Martin Marietta Materials, Inc. v. Bondhu, LLC, 772 S.E.2d
143, 146 (N.C. Ct. App. 2015); Taylor v. First Resolution Inv. Corp., 2016-Ohio-3444, ¶36 (Ohio
June 16, 2016); Wilson v. Transp. Ins. Co., 889 A.2d 563, 571 (Pa. Super. Ct. 2005); Ill. Tool
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Works, Inc. v. Harris, 194 S.W.3d 529, 532 (Tex. App. 2006); Federated Capital Corp. v. Libby,
2016 UT 41, ¶13, 384 P.3d 221 (Utah 2016); cf. Bartlett v. Commerce Ins. Co., 114 A.3d 724, 729
(N.H. 2015) (“[W]e treat statutes of limitations as procedural in any case in which either party is a
New Hampshire resident or the cause of action arose. In a case in which no party is a New
Hampshire resident and the cause of action did not arise in this state, we treat statutes of limitations
as substantive.” (internal quotation marks and citations omitted)).
93. Adm’r v. Sullivan, 753 So. 2d 549, 553 (Fla. 1999); Merkle v. Robinson, 737 So. 2d 540 (Fla.
1999).
94. Gaisser v. Portfolio Recovery Assocs., LLC, 571 F. Supp. 2d 1273, 1276 (S.D. Fla. 2008).
95. See Jackson v. Chandler, 61 P.3d 17, 19 (Ariz. 2003); Dillon v. Dillon, 886 P.2d 777, 778
(Idaho 1994); McCarrell v. Hoffmann-La Roche, Inc., 153 A.3d 207, 221 (N.J. 2017); Nierman v.
Hyatt Corp., 808 N.E.2d 290, 292 (Mass. 2004); Harodite Indus. v. Warren Elec. Co., 24 A.3d 514,
535 (R.I. 2011); Wenke v. Gehl Co., 2004 WI 103, ¶58, 274 Wis.2d 220, 682 N.W.2d 405.
96. UNIF. CONFLICT OF LAW-LIMITATIONS ACT § 2 cmt., 12 U.L.A. 63 (SUPP. 1994); see COLO.
REV. STAT. 13-82-104 (2016); MINN. STAT. § 541.31 (2016); MONT. CODE ANN. § 27-2-503 (2016);
NEB. REV. STAT. § 25-3203 (2016); N.D. CENT. CODE § 28-01.2-02 (2015); OR. REV. STAT.
§ 12.430 (2016); WASH. REV. CODE § 4.18.020–904 (2016).
97. 46 Cal. Rptr. 2d 33 (Cal. Ct. App. 1995).
98. Id. at 36.
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99. Id.
100. Id.
101. Id. at 38 (internal quotation marks and citations omitted).
102. Id. at 38.
103. Id. at 39. This analysis is not entirely persuasive. The reference to “local law” is more fairly
read to distinguish between a jurisdiction’s internal law and its whole law. It does not address the
distinction between a jurisdiction’s procedural law and its substantive law. See infra note 291.
104. Id.
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110. The ability of the parties to shorten the statute of limitations by selecting the law of another
jurisdiction with a shorter limitations period may in some instances be limited by state law.
Compare Order of United Commercial Travelers v. Wolfe, 331 U.S. 586, 608 (1947) (“[I]n the
absence of a controlling statute to the contrary, a provision in a contract may validly limit, between
the parties, the time for bringing an action on such contract to a period less than that prescribed in
the general statute of limitations, provided that the shorter period itself shall be a reasonable
period.”), with ALA. CODE § 6-2-15 (2016) (“Except as may be otherwise provided by the Uniform
Commercial Code, any agreement or stipulation, verbal or written, whereby the time for the
commencement of any action is limited to a time less than that prescribed by law for the
commencement of such action is void.”). Courts and legislatures in Florida, Idaho, Maryland,
Mississippi, Missouri, Montana, Nebraska, Oklahoma, South Carolina, South Dakota, Texas, and
Vermont have also imposed limits on the parties’ ability to shorten otherwise applicable statutes of
limitation by contract. See FLA. STAT. ANN. § 95.03 (2016); IDAHO CODE ANN. § 29-110 (2016);
MD. INS. CODE ANN. § 12-104 (2016); MISS. CODE ANN. § 15-1-5 (2016); MO. REV. STAT.
§ 431.030 (2016); MONT. CODE ANN. § 28-2-708 (2016); 15 OKL. ST. § 216 (2016); S.C. CODE ANN.
§ 15-3-140 (2016); S.D. CODIFIED LAWS § 53-9-6 (2016); TEX. CIV. PRAC. & REM. CODE ANN.
§ 16.070(a) (2016); VT. STAT. ANN. § 12-465 (2016); Intervision Sys. Techs. v. Intercall, Inc., 872
N.W.2d 794, 798–99 (Neb. Ct. App. 2015). However, the extent to which these rules limit the
ability of the parties to select a shorter statute of limitations via a choice-of-law clause is unclear.
The Florida Supreme Court, for example, has held that the parties may shorten the applicable statute
of limitations indirectly by selecting the law of a jurisdiction with a shorter limitations period even
though Florida has a statute that expressly prohibits parties from shortening statutes of limitation
directly via contract. See Burroughs Corp. v. Suntogs of Miami, Inc., 472 So. 2d 1166, 1169 (Fla.
1985).
111. Nu Skin Enters. Inc., Settlement and Release Agreement (Form 8-K) § 12 (Oct. 16, 2015)
(emphasis added).
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When this language is present, the intent of the parties to select the
procedural law of the chosen jurisdiction is clear.114 In the absence of
such language, however, most U.S. jurisdictions have concluded that
while generic choice-of-law clauses select the substantive law of the
chosen jurisdiction, they do not select the procedural law of that
jurisdiction. This is the canon in favor of substantive law. 115
112. Basic Energy Servs., Inc., Temp. Limited Waiver (Form 8-K) § 8 (Sept. 15, 2016) (emphasis
added).
113. 2138747 Ontario, Inc. v. Samsung C&T Corp., 39 N.Y.S.3d 10, 12–13 (N.Y. App. Div.
2016). When a choice-of-law clause stipulates that a contract is to be “enforced” under the law of a
particular jurisdiction, a number of courts have construed that word to signal the parties’ intent to
select the procedural law of the chosen jurisdiction. See id. at 136; Czewski v. KVH Indus., 607 F.
App’x 478, 481 (6th Cir. 2015); Mills v. Smith, No. 3:05CV534-S, 2006 U.S. Dist. LEXIS 63564,
at *6–7 (W.D. Ky. Aug. 30, 2006); Diamond Waterproofing Sys. v. 55 Liberty Owners Corp., 793
N.Y.S.2d 831, 835 (N.Y. 2005); Yuen v. Superior Court, 18 Cal. Rptr. 3d 127, 135 (2004). But see
Lloyd v. Prudential Sec., 438 S.E.2d 703, 704–05 (1993) (declining to construe clause using the
word “enforced” to select the statute of limitations of the chosen jurisdiction).
114. There are, of course, practical limits on the ability of the parties to choose the entire
procedural law of a different state. See S.I. Strong, Limits of Procedural Choice of Law, 39 BROOK.
J. INT’L L. 1027, 1034 (2014) (“[S]ome boundaries to procedural autonomy must necessarily exist,
either as a matter of prudence, policy, or practice.”).
115. In some cases, the chosen jurisdiction will have enacted a borrowing statute that directs the
courts to apply the statute of limitations of the state where the cause of action arose or accrued. See,
e.g., N.Y. CPLR § 202 (McKinney 2016). If a court concludes that the law of the state selected in
the clause includes its borrowing statute, then the court could conceivably apply the statute of
limitations of a different jurisdiction even if that court views statutes of limitations as procedural. In
one recent case, the New York Appellate Division held that a choice-of-law clause stating that a
contract was to be “enforced” in accordance with the law of the State of New York evidenced the
parties’ intent to select that state’s procedural law. See 2138747 Ontario, Inc., 39 N.Y.S.3d at 14.
The court reasoned that the procedural law of New York included the New York borrowing statute
and that it should therefore apply the statute of limitations of the place where the action had
accrued—Ontario, Canada—to determine if the claim was timely. Needless to say, it is unlikely that
this is the outcome the parties intended. See William J. Hine & Sevan Ogulluk, Standard New York
Choice of Law Provisions May Apply Foreign Laws to Bar Claims, 20 N.Y. BUS. L.J. 25, 27 (2016).
One possible means of contracting around this rule would be to include language in a choice-of-law
clause directing the court to apply the statute of limitations of the chosen state “without giving
effect to any choice-of-law or other rule that would result in the application of the laws of a
different jurisdiction.” Such a clause would direct the courts to apply the statute of limitations of the
chosen jurisdiction without giving effect to any “other” rule, i.e., a borrowing statute, that would
ordinarily require the court to apply the statute of limitations of another state.
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116. A few courts have distinguished between the act of contract “interpretation” and the act of
contract “construction.” See, e.g., Fashion Fabrics of Iowa, Inc. v. Retail Investors Corp., 266
N.W.2d 22, 25 (Iowa 1978) (“Interpretation involves ascertaining the meaning of contractual words;
construction refers to deciding their legal effect.”); RESTATEMENT (SECOND) OF CONTRACTS § 200
cmt. c (AM. LAW INST. 1981) (“Interpretation is not a determination of the legal effect of words or
other conduct. Properly interpreted, an agreement may not be enforceable as a contract, or a term
such as a promise to pay a penalty may be denied legal effect, or it may have a legal effect different
from that agreed upon, as in a case of employment at less than a statutory minimum wage.”). So far
as I have been able to determine, no U.S. court has ever invoked the distinction in the context of
interpreting a choice-of-law clause. In any event, most U.S. courts now view the terms “interpret”
and “construe” as interchangeable. See supra note 25 (surveying literature).
117. Several courts have construed the word “enforced” to evidence the parties’ intent to select
the procedural law of the chosen jurisdiction. See supra note 113. Accordingly, the word “enforced”
is not the linguistic equivalent of “governed” or “interpreted” or “construed” and does not fall
within the scope of the canon.
118. 364 So. 2d 15 (Fla. Dist. Ct. App. 1978).
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Because it was highly unlikely that the parties would go to the trouble
of including a choice-of-law clause solely to provide guidance to the
courts on how best to interpret ambiguous language within the contract,
the Fifth Circuit reasoned, the clause should be read to apply to matters
other than those relating to interpretation.
The interpretive rule adopted by the Fifth and Sixth Circuits—the
canon of linguistic equivalence—is now followed by the majority of
U.S. courts.128 The reasoning of the Florida Court of Appeals has
attracted few adherents. A clause stating that a contract shall be
“interpreted” or “construed” in accordance with the law of a state is
viewed as the functional equivalent of a clause stating that the contract
shall be “governed” by the law of that same state. An appeals court in
Wisconsin applied this canon, and offered several additional rationales
in support of it, in the context of interpreting a clause stating that a
contract was to be “construed” according to Missouri law:
Common sense tells us that the process of construing an
agreement includes, in addition to the definition of possible
ambiguous terms, the application of the terms to the case in
question. This application may require resort to extrinsic sources
such as the substantive law. Thus, by indicating the law to be
used in construing a contract, the parties effectively involve the
substantive law of that state . . . . We . . . can conceive of few
instances where it would be reasonable to look to the law of a
specific state to define contractual terms but to the law of a
second jurisdiction to ascertain the legal effect of the agreement.
Such a maneuver would be unreasonable because the meaning
associated with a term by one jurisdiction might not mesh with
the statutory and common-law scheme of another. The meaning
given a word or phrase by the lawmakers of a particular
jurisdiction is necessarily bound to the statutory and common
law of that state.129
128. See Kipin Indus. v. Van Deilen Int’l, Inc., 182 F.3d 490, 493–94 (6th Cir. 1999); SPX Corp.
v. Shop Equip. Specialists, Inc., No. 4:00cv 49, 2001 U.S. Dist. LEXIS 4602 (W.D. Mich. Mar. 28,
2001); Eckert Int’l, Inc. v. Gov’t of Sovereign Democratic Republic of Fiji, 834 F. Supp. 167, 170
(E.D. Va. 1993); Enter. Bank & Tr. v. Barney Ashner Homes, Inc., 300 P.3d 115 (Kan. Ct. App.
2013); AAA Delivery, Inc. v. Airborne Freight Corp., 646 So. 2d 1113, 1116 (La. App. 1994). One
can find courts applying this canon as early as 1891. See Dugan v. Lewis, 14 S.W. 1024, 1026 (Tex.
1891).
129. Hammel v. Ziegler Financing Corp., 334 N.W.2d 913, 916 (Wis. Ct. App. 1983) (emphasis
in original); see also New England Mortg. Sec. Co. v. McLaughlin, 13 S.E. 81, 83 (Ga. 1891); cf.
Siegelman v. Cunard White Star, 221 F.2d 189, 194–95 (2d Cir. 1955) (“The language of the clause,
covering ‘all questions,’ indicates that validity as well as interpretation is embraced.”).
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130. See, e.g., Fastpath, Inc. v. Arbela Techs. Corp., 760 F.3d 816, 819 (8th Cir. 2014); Digital
Ally, Inc. v. Z3 Tech., LLC, 754 F.3d 802, 807 (10th Cir. 2014); Konica Minolta Bus. Solutions v.
Lowery Corp., No. 15-11254, 2016 U.S. Dist. LEXIS 160383 (E.D. Mich. Nov. 18, 2016); M.C. v.
Jiminy Peak Mt. Resort, LLC, No. 13-30119-MGM, No. 13-30108-MGM, 2016 U.S. Dist. LEXIS
116504 (D. Mass. Aug. 30, 2016); Fin. Cas. & Sur., Inc. v. Parker, No. H-14-0360 2015 U.S. Dist.
LEXIS 148360 (S.D. Tex. Nov. 2, 2015); Folkening v. Petten, 22 N.E.3d 818, 820 (Ind. Ct. App.
2014).
131. See Heating & Air Specialists, Inc. v. Jones, 180 F.3d 923, 930 (8th Cir. 1999); America’s
Favorite Chicken Co. v. Cajun Enters., 130 F.3d 180, 182 (5th Cir. 1997); Procter v. Mavis, 125
P.3d 801, 803 (Or. Ct. App. 2005); GMC v. Northrop Corp., 685 N.E.2d 127, 135 (Ind. Ct. App.
1997).
132. Macquarie Bank, Ltd. v. Knickel, 723 F. Supp. 2d 1161, 1179 n.6 (D.N.D. 2010) (emphasis
added).
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Each of these provisions uses all of the relevant words to eliminate all
doubt as to the parties’ intent. In so doing, each provision makes it
unnecessary for the court to apply the canon of linguistic equivalence.
However, the widespread use of the canon means that courts will
generally read all of these words into a contract even when they are
absent.
133. Oncocyte Corp., License Agreement (Form 10-K/A) § 10.9.2 (May 24, 2016) (emphasis
added).
134. See Hayes v. Delbert Servs. Corp., 811 F.3d 666, 675 (4th Cir. 2016) (“[A] party may not
underhandedly convert a choice of law clause into a choice of no law clause—it may not flatly and
categorically renounce the authority of the federal statutes to which it is and must remain subject.”).
135. On occasion, the parties will expressly incorporate federal law into their choice-of-law
clause. See, e.g., CNA Ins. Co. v. Hyundai Merch. Marine Co., 747 F.3d 339, 343 (6th Cir. 2014)
(“This Agreement shall be, insofar as relevant, governed by the terms of the Shipping Act of 1984,
and otherwise by the laws of the State of New York and of the United States of America.”).
136. Hauenstein v. Lynham, 100 U.S. 483, 490 (1879) (observing that federal law is “as much a
part of the law of every State as its own local laws and Constitution”); see also Travelers Prop. Cas.
Co. of Am. v. St.-Gobain Tech. Fabrics Can., Ltd., 474 F. Supp. 2d 1075, 1081–82 (D. Minn. 2007).
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143. Roadway Package Sys., Inc. v. Kayser, 257 F.3d 287, 288–89 (3d Cir. 2001), overruled on
other grounds by Hall St. Assocs., 552 U.S. 576 (2008).
144. See Pedcor Mgmt. Co. Welfare Benefit Plan v. Nations Pers. of Tex., Inc., 343 F.3d 355,
361–62 (5th Cir. 2003); Porter Hayden Co. v. Century Indem. Co., 136 F.3d 380, 383–84 (4th Cir.
1998); Ferro Corp. v. Garrison Indus., 142 F.3d 926, 938 (6th Cir. 1998); UHC Mgmt. Co. v.
Comput. Scis. Corp., 148 F.3d 992, 996–97 (8th Cir. 1998); Wolsey, Ltd. v. Foodmaker, Inc., 144
F.3d 1205, 1213 (9th Cir. 1998); Painewebber Inc. v. Elahi, 87 F.3d 589, 594 (1st Cir. 1996); Nat’l
Union Fire Ins. Co. v. Belco Petroleum Corp., 88 F.3d 129, 135 (2d Cir. 1996); Davis v. Prudential
Sec., Inc., 59 F.3d 1186, 1189 (11th Cir. 1995). But see Note, An Unnecessary Choice of Law: Volt,
Mastrobuono, and Federal Arbitration Act Preemption, 115 HARV. L. REV. 2250, 2261–62 (2002)
(criticizing the breadth of the courts’ reasoning in these cases).
145. See Homes of Legend, Inc. v. McCollough, 776 So. 2d 741, 747 n.9 (Ala. 2000); 1745
Wazee LLC v. Castle Builders, Inc., 89 P.3d 422, 425 (Colo. App. 2003); Levine v. Advest, Inc.,
714 A.2d 649, 659 (Conn. 1998); Credit Suisse Secs. LLC v. Hunter, LLC, No. 5107-VCN, 2010
Del. Ch. LEXIS 121 (Del. Ch. May 27, 2010); Anderson v. Maronda Homes, Inc., 98 So. 3d 127,
129–30 (Fla. 2012); Autonation Fin. Servs. Corp. v. Arain, 592 S.E.2d 96, 98 (Ga. Ct. App. 2003);
Roubik v. Merrill Lynch, Pierce, Fenner & Smith, Inc. 692 N.E.2d 1167 (Ill. 1998); Schmidt v. UBS
Fin. Servs., 10 N.E.3d 1145, at *13 n.15 (Mass. App. Ct. 2014); Estate of Sandefur v. Greenway,
898 S.W.2d 667, 671 (Mo. Ct. App. 1995); L & L Kempwood Assocs., L.P. v. Omega Builders,
Inc., 9 S.W.3d 125, 127–28 (Tex. 1999); cf. Frizell Constr. Co. v. Gatlinburg, 9 S.W.3d 79, 85–86
(Tenn. 1999). But see Glazer’s Distribs. of Ill., Inc. v. NWS-Ill., LLC, 876 N.E.2d 203, 212–13 (Ill.
App. Ct. 2007) (concluding that choice-of-law clause selecting Illinois law excluded FAA).
146. See Cronus Invs., Inc. v. Concierge Servs., 107 P.3d 217, 224 (Cal. 2005); Moscatiello v.
Hilliard, 939 A.2d 325, 329 (2007) (concluding that a Pennsylvania procedure allowing for a thirty-
day time limit for the enforcement of arbitration proceedings did not conflict with the FAA); Volt
Info. Scis., Inc., 489 U.S. at 476; Sec. Ins. Co. v. Trustmark Ins. Co., 283 F. Supp. 2d 602 (D. Conn.
2003).
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state and federal arbitration law come into direct conflict, however, then
the state law must give way unless the clause evidences an explicit intent
to exclude the federal rule.147 A clause that merely states “this agreement
shall be governed by the law of New York” is not sufficiently explicit to
opt out of the federal regime.
The courts have taken a similar interpretive approach to the question
of whether a federal treaty—the United Nations Convention on
Contracts for the International Sale of Goods (“CISG”)—preempts
Article 2 of the Uniform Commercial Code (“UCC”).148 The CISG
expressly provides that parties may exclude it from their international
sales contracts if they include a statement to that effect in their
contract.149 One question that sometimes arises is whether a choice-of-
law provision selecting the law of a U.S. state is sufficient to exclude the
CISG. The courts have generally held that merely selecting the law of a
state is not enough to opt out of the CISG.150 As the Federal District
Court for the District of Minnesota has explained:
A majority of courts interpreting [generic] choice of law
provisions . . . conclude that a reference to a particular state’s
law does not constitute an opt out of the CISG; instead, the
parties must expressly state that the CISG does not apply. These
courts reason that even if a choice of law clause refers to the
laws of a particular state, the state would be bound by the
Supremacy Clause to the treaties of the United States.
Accordingly, under the Supremacy Clause, the law in every state
is that the CISG is applicable to contracts where the contracting
parties are from different countries that have adopted the CISG.
Thus, absent an express statement that the CISG does not apply,
merely referring to a particular state’s law does not opt out of
the CISG. . . . An affirmative opt-out requirement promotes
uniformity and the observance of good faith in international
trade, two principles that guide interpretation of the CISG.151
Although the court in this case focuses on furthering the objectives of
a treaty rather than the objectives of a federal statute, the rule is
essentially the same as in cases involving the FAA. Again, the court
acknowledges that the parties can draft their choice-of-law clause in
such a way so as to preclude the application of federal law.152 Again, the
court concludes that a clause that merely selects the law of a particular
state will not suffice. The presumption, in other words, is that the
parties’ choice of state law evidences their intent to choose any and all
relevant provisions of federal law. In the event that these two bodies of
law come into conflict, moreover, the courts further presume that the
parties intended that the federal law displace the law of the state. This is
the canon of federal inclusion and preemption.
***
Each of the lexical canons assigns interpretive meaning to a word or
phrase contained in a generic choice-of-law clause. There exists,
however, a second set of interpretive rules that serve a different purpose.
The primary goal of these canons is not to assign meaning to individual
words and phrases in a generic choice-of-law clause but to determine the
breadth of the clause as a matter of law. These canons—the canons
relating to scope—are discussed in the next Part.
151. Travelers Prop. Cas. Co. of Am. v. St.-Gobain Tech. Fabrics Can. Ltd., 474 F. Supp. 2d
1075, 1081–82 (D. Minn. 2007) (internal citations and quotation marks omitted).
152. See, e.g., Salix Pharmaceuticals, Inc., Amended and Restated Supply and Manufacturing
Agreement (Form 10-Q) § 9.7 (Nov. 9, 2012) (“The Parties agree to exclude the application to this
Agreement of the United Nations Convention on Contracts for the International Sale of Goods.”).
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153. GARY B. BORN & PETER B. RUTLEDGE, INTERNATIONAL CIVIL LITIGATION IN UNITED
STATES COURTS 762–63 (5th ed. 2011); see also SYMEONIDES supra note 35 (“American courts do
not seem to doubt the parties’ power to choose in advance a law that will govern a future tort
between them, as long as their intention to that effect appears clearly from the language of the
choice-of-law clause.”).
154. If the parties wanted the clause to apply to claims that are unrelated to the contract, then
they could add the phrase “arising out of the relationship of the parties” to the clause.
155. See JPMorgan Chase Bank v. Traffic Stream (BVI) Infrastructure Ltd., 536 U.S. 88, 90
(2002) (quoting near-identical contract language); J. Alexander Sec., Inc. v. Mendez, 511 U.S.
1150, 1150 (1994) (same); Common Law Settlement Counsel v. Travelers Indem. Co., 759 F.3d
206, 214 (2d Cir. 2014) (same); Goldman, Sachs & Co. v. City of Reno, 747 F.3d 733, 753 n.6 (9th
Cir. 2014) (same).
156. Roadway Package Sys. v. Kayser, 257 F.3d 287, 296 (3d Cir. 2001).
157. See Glenn D. West & W. Benton Lewis, Jr., Contracting to Avoid Extra-Contractual
Liability—Can Your Contractual Deal Ever Really Be the “Entire” Deal?, 64 BUS. LAW 999, 1029–
30 (2009) (discussing issues relating to breadth of choice-of-law clause).
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158. Symeon C. Symeonides, Oregon’s Choice of Law Codification for Contract Conflicts: An
Exegesis, 44 WILLAMETTE L. REV. 205, 225 (2007) (“[C]ourts tend to scrutinize clauses that
purport to encompass tort-like issues much more closely than clauses confined to purely contractual
issues.”).
159. Id. at 11; see also Twinlab Corp. v. Paulson, 724 N.Y.S.2d 496, 496 (N.Y. App. Div. 2001).
160. Knieriemen, 427 N.Y.S.2d at 11 (internal citation omitted).
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York. In 1984, a federal court in the Southern District of New York was
asked to determine whether a clause stating that a contract was to be
“governed by” the laws of the State of New York swept broadly enough
to encompass a cause of action for common law fraud.161 Invoking
Knieriemen, the court concluded that it did not because “it has been held
in New York that a contractual choice of law provision governs only a
cause of action sounding in contract.”162 In 1996, the Second Circuit
similarly held that a choice-of-law clause stating that the contract would
be “governed by and construed in accordance with the laws of the
Commonwealth of Massachusetts” did not cover a claim for fraudulent
misrepresentation.163 The federal courts in New York would go on to
render dozens of decisions interpreting the scope of generic choice-of-
law clauses under New York law.164 In all of these cases, these courts
concluded that the clauses did not apply to tort and statutory claims and
that it was necessary to perform a separate conflict-of-laws analysis to
identify the law to govern these claims.165
The courts in a number of other states have adopted a similar
approach. The Texas Supreme Court, for example, has held that a
choice-of-law clause stating that the agreement was to be “interpreted
and enforced in accordance with the Laws of the State of Texas” did not
cover a plaintiff’s tort claims for personal injury.166 The Fifth and
Eleventh Circuits have similarly held that generic choice-of-law clauses
161. Klock v. Lehman Bros. Kuhn Loeb Inc., 584 F. Supp. 210, 215 (S.D.N.Y. 1984).
162. Id. at 215 (citing Knieriemen, 427 N.Y.S.2d 10).
163. Krock v. Lipsay, 97 F.3d 640, 645 (2d Cir. 1996).
164. See Warman v. Am. Nat’l Standards Inst., No. 15-CV-5486 (RA), 2016 U.S. Dist. LEXIS
87415 (S.D.N.Y. Jul. 6, 2016) (collecting cases).
165. See Champlain Enters., Inc. v. United States, 945 F. Supp. 468, 471 (N.D.N.Y. 1996)
(“Under New York law, a choice-of-law provision indicating that a contract will be governed by a
certain body of law does not dictate the law that will govern non-contract based claims.”); Dessert
Beauty, Inc. v. Platinum Funding Corp., No. 06 Civ. 2279(SAS), 2006 WL 3780902 (S.D.N.Y. Dec.
26, 2006); Drenis v. Haligiannis, 452 F. Supp. 2d 418 (S.D.N.Y. 2006); E*Trade Fin. Corp. v.
Deutsche Bank AG, 420 F. Supp. 2d 273 (S.D.N.Y. 2006); Williams v. Deutsche Bank Secs., Inc.,
No. 04 Civ. 7588(GEL), 2005 WL 1414435 (S.D.N.Y. June 13, 2005); Frazer Exton Dev., LP v.
Kemper Envtl., Ltd., No. 03 Civ. 0637 (HB), 2004 WL 1752580 (S.D.N.Y. July 29, 2004);
Telemedia Partners Worldwide Ltd. v. Hamelin Ltd., No. 95 Civ. 2452 (JFK), 1996 WL 41818
(S.D.N.Y. Feb. 2, 1996).
166. Stier v. Reading & Bates Corp., 992 S.W.2d 423, 433 (Tex. 1999) (“This provision, by its
terms, applies only to the interpretation and enforcement of the contractual agreement. It does not
purport to encompass all disputes between the parties or to encompass tort claims.”); see also Red
Roof Inns, Inc. v. Murat Holdings, L.L.C., 223 S.W.3d 676, 684 (Tex. App. 2007); Covert
Chevrolet-Oldsmobile, Inc. v. GMC, No. 05-00-01170-CV, 2001 Tex. App. LEXIS 5661, at *4–5
(Tex. App. Aug. 21, 2001).
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167. See Cooper v. Meridian Yachts, Ltd., 575 F.3d 1151, 1162 (11th Cir. 2009) (stating that “[a]
choice of law provision that relates only to the agreement will not encompass related tort claims”);
Benchmark Elecs. v. J.M. Huber Corp., 343 F.3d 719, 726–27 (5th Cir. 2003); Green Leaf Nursery
v. E.I. Dupont de Nemours & Co., 341 F.3d 1292, 1301 (11th Cir. 2003); Thompson & Wallace,
Inc. v. Falconwood Corp., 100 F.3d 429, 432–33 (5th Cir. 1996); Caton v. Leach Corp., 896 F.2d
939, 942–43 (5th Cir. 1990).
168. See Black Box Corp. v. Markham, 127 Fed. App’x 22 (3d Cir. 2005); Panthera Rail Car
LLC v. Kasgro Rail Corp., 985 F. Supp. 2d 677, 692–96 (W.D. Pa. 2013); Am. Hearing Aid
Assocs., Inc. v. GN ReSound N. Am., 309 F. Supp. 2d 694, 704 (E.D. Pa. 2004); Coram Healthcare
Corp. v. Aetna U.S. Healthcare Inc., 94 F. Supp. 2d 589, 593–94 (E.D. Pa. 1999).
169. Winsor v. Glasswerks PHX, L.L.C., 63 P.3d 1040, 1042 (Ariz. Ct. App. 2003).
170. See United States Fid. & Guar. Co. v. S.B. Phillips Co., Inc., 359 F. Supp. 2d 189 (D. Conn.
2005); DelMonaco v. Albert Kemperle, Inc., NNHCV146045251S, 2014 Conn. Super. LEXIS
2965, at *18–20 (Conn. Super. Ct. Nov. 26, 2014) (collecting cases).
171. See Florida Evergreen Foliage v. E.I. DuPont De Nemours, Co., 135 F. Supp. 2d 1271 (S.D.
Fla. 2001); Motmanco, Inc. v. McDonald’s Corp., No. 3:04-CV-270-J-99-HTS, 2005 WL 1027261
(M.D. Fla. Mar. 30, 2005).
172. See Schuller v. Great-West Life & Annuity Ins. Co., No. C-04-62-LRR, 2005 U.S. Dist.
LEXIS 37265, at *39–41 (N.D. Iowa Sept. 15, 2005); Jones Distrib. Co. v. White Consol. Indus.,
Inc., 943 F. Supp. 1445, 1458 (N.D. Iowa 1996).
173. Lynch v. Math-U-See, Inc., No. 3:11-CV-233 JD, 2013 U.S. Dist. LEXIS 29460, at *3 (N.D.
Ind. Mar. 4, 2013).
174. See Wright’s Well Control Servs., LLC v. Oceaneering Int’l, Inc., No. 15-1720, 2015 U.S.
Dist. LEXIS 154559, at *31–34 (E.D. La. Nov. 16, 2015) (collecting cases); Thomas v. Fidelity
Brokerage Servs., Inc., 977 F. Supp. 791, 794 (W.D. La. 1997).
175. Comput. Sales Int’l, Inc. v. Lycos, Inc., No. 05-10017-RWZ, 2006 WL 1896192, at *1–2 (D.
Mass. July 11, 2006).
176. AGA Gas, Inc. v. Wohlert Corp., No. 5:98-cv-155, 1999 U.S. Dist. LEXIS 11137, at *6–9
(W.D. Mich. July 20, 1999).
177. See Carrow v. Fedex Ground Package Sys., No. 16-3026, 2017 U.S. Dist. LEXIS 48536, at
*16 (D.N.J. Mar. 30, 2017) (collecting cases).
178. Synovus Bank v. Coleman, 887 F. Supp. 2d 659, 669 (W.D.N.C. 2012).
179. Vesta Corp. v. Amdocs Mgmt. Ltd., 80 F. Supp. 3d 1152, 1163 (D. Or. 2015).
180. Kuehn v. Childrens Hosp., 119 F.3d 1296, 1302 (7th Cir. 1997).
181. It appears that this approach is also followed by the courts in England. See Vichi v.
Koninklijke Philips Elecs., 85 A.3d 725, 766–77 (Del. Ch. 2014) (surveying English case law and
practice and concluding that a generic clause selecting English law did not encompass the plaintiff’s
tort claims). There are scattered hints—but no conclusive evidence—that the courts of Maine,
Puerto Rico, the U.S. Virgin Islands, and Washington also follow this approach. See Fin. Tr. Co. v.
Citibank, N.A., 268 F. Supp. 2d 561, 570–71 (D.V.I. 2003); Shelley v. Trafalgar House Pub. Co.,
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918 F. Supp. 515, 521–22 (D.P.R. 1996); Scotia Prince Cruises Ltd. v. Pricewaterhousecoopers, No.
CV-04-489, 2005 WL 2708311 (Super. Ct. Me. Mar. 25, 2005); Schnall v. AT&T Wireless Servs.,
Inc., 171 Wash. 2d 260, 283, 259 P.3d 129, 140 (2011) (Sanders, J., dissenting).
182. Knieriemen v. Bache Halsey Stuart Shields Inc., 427 N.Y.S.2d 10, 12–13 (N.Y. App. Div.
1980).
183. Valley Juice Ltd. v. Evian Waters, Inc., 87 F.3d 604, 610–11 (2d Cir. 1996); Red Roof Inns,
Inc. v. Murat Holdings, L.L.C., 223 S.W.3d 676, 684 (Tex. App. 2007).
184. Am. Hearing Aid Assocs. v. GN ReSound N. Am., 309 F. Supp. 2d 694, 704 (E.D. Pa.
2004).
185. Panthera Rail Car LLC v. Kasgro Rail Corp., 985 F. Supp. 2d 677, 692–96 (W.D. Pa. 2013).
186. Caton v. Leach Corp., 896 F.2d 939, 942–43 (5th Cir. 1990).
187. Wright’s Well Control Servs., LLC v. Oceaneering Int’l, Inc., No. 15-1720, 2015 U.S. Dist.
LEXIS 154559, at *31–34 (E.D. La. Nov. 16, 2015).
188. Barton v. RCI, LLC, No. 10-3657, 2011 WL 302238, at *3–5 (D.N.J. July 22, 2011).
189. Sherwin-Williams Co. v. BEI Enters., No. 2:12-cv-603, 2012 U.S. Dist. LEXIS 169990, at
*6–10 (W.D. Pa. Nov. 30, 2012); Coram Healthcare Corp. v. Aetna U.S. Healthcare Inc., 94 F.
Supp. 2d 589, 593–94 (E.D. Pa. 1999); Rosenberg v. Pillsbury Co., 718 F. Supp. 1146, 1150
(S.D.N.Y. 1989); Kitner v. CTW Transport, Inc., 762 N.E.2d 867, 871–72 (Mass. App. Ct. 2002);
see also Britelink, Inc. v. Telecorp PCS, Inc., No. 3:03-CV-00207 GTE, 2004 WL 5509416, at *2–3
(E.D. Ark. May 7, 2004); Gloucester Holding Corp. v. U.S. Tape & Sticky Prods., LLC, 832 A.2d
116, 123–24 (Del. Ch. 2003); Young v. W.S. Badcock Corp., 474 S.E.2d 87, 88 (Ga. Ct. App.
1996). Other courts have held that these clauses do select the law for fraudulent inducement claims.
See Nw. Airlines, Inc. v. Astraea Aviation Servs., Inc., 111 F.3d 1386, 1392–93 (8th Cir. 1997); In
re Allegheny Int’l, Inc., 954 F.2d 167, 178 (3d Cir. 1992); Moses v. Bus. Card Express, Inc., 929
F.2d 1131, 1140 (6th Cir. 1991); CIC Grp., Inc. v. Mitchell, No. 5:10-CV-02885, 2013 U.S. Dist.
LEXIS 26878, at *12–17 (N.D. Ohio Feb. 27, 2013); Evangelical Lutheran Church in Am. Bd. of
Pensions v. Spherion Pac. Workforce LLC, No. 04-4791 ADM/AJB, 2005 WL 1041487, at *1–2
(D. Minn. May 4, 2005); Shoney’s, Inc. v. Morris, 100 F. Supp. 2d 769, 774 (M.D. Tenn. 1999);
RESTATEMENT (SECOND) OF CONFLICT OF LAWS § 201 cmt. c (AM. LAW INST. 1971) (discussing
relationship between choice-of-law clause and fraudulent inducement claim).
190. Fin. One Pub. Co. v. Lehman Bros. Special Fin., Inc., 414 F.3d 325, 332–36 (2d Cir. 2005)
(expressly rejecting this approach). But see Turtur v. Rothschild Registry Int’l, Inc., 26 F.3d 304,
309–10 (2d Cir. 1994) (relying on expansive consent-to-jurisdiction clause to give broad reading to
choice-of-law clause).
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191. See Smith v. EMC Corp., 393 F.3d 590, 597 (5th Cir. 2004); RLS Assocs. LLC v. United
Bank of Kuwait PLC, 464 F. Supp. 2d 206, 214–15 (S.D.N.Y. 2006); Walls v. Quick & Reilly, Inc.,
824 So. 2d 1016, 1018–20 (Fla. Dist. Ct. App. 2002); Precision Tune Auto Care, Inc. v. Radcliffe,
815 So. 2d 708, 710 (Fla. Dist. Ct. App. 2002); Midwest Med. Supply Co., L.L.C. v. Wingert, 317
S.W.3d 530, 536–37 (Tex. App. 2010); Fairmont Supply Co. v. Hooks Indus., Inc., 177 S.W.3d 529,
534–37 (Tex. App. 2005).
192. Winter-Wolff Int’l, Inc. v. Alcan Packaging Food & Tobacco Inc., 499 F. Supp. 2d 233,
243–44 (E.D.N.Y. 2007).
193. See Roby v. Corp. of Lloyd’s, 996 F.2d 1353, 1360–62 (2d Cir. 1993); El Pollo Loco, S.A.
de C.V. v. El Pollo Loco, Inc., 344 F. Supp. 2d 986, 988–89 (S.D. Tex. 2004).
194. McPhee v. General Electric Int’l, Inc., 426 F. App’x 33, 34–35 (2d Cir. 2011) (citing to the
clause at issue); Capital Z Fin. Servs. Fund II, L.P. v. Health Net, Inc., 840 N.Y.S.2d 16, 23 (N.Y.
App. Div. 2007) (concluding that a clause stating that it would govern “‘all issues’ concerning
‘enforcement of the rights and duties of the parties’” covered tort and statutory claims).
195. Cooper v. Meridian Yachts, Ltd., 575 F.3d 1151, 1162–63 (11th Cir. 2009).
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196. Mendoza v. Microsoft, Inc., 1 F. Supp. 3d 533, 546 (W.D. Tex. 2014) (alterations in
original).
197. See Mitchell J. Geller, Ensuring Choice-of-Law Provision Includes Non-Contractual
Claims, N.Y. L.J. at 1 (July 7, 2009) (expressing disbelief that “corporate attorneys continue to rely
on ‘standard’ language used in prior agreements that do not contain [expansive choice-of-law
clauses]”).
198. This state of affairs is not at all remarkable. It is common in the law to encounter two
interpretive canons that are in direct conflict with one another. See Daniel B. Kostrub & Roger S.
Christenson II, Canons of Construction for the Interpretation of Mineral Conveyances, Severances,
Exceptions, and Reservations in Producing States, 88 N.D. L. REV. 649, 651 (2012) (discussing
cases that ascribe different meanings to the term “minerals” in different states); Karl
N. Llewellyn, Remarks on the Theory of Appellate Decision and the Rules or Canons About How
Statutes Are to Be Construed, 3 VAND. L. REV. 395, 401–06 (1950) (observing that it is possible to
find two opposing canons on virtually every point).
199. Nedlloyd Lines B.V. v. Superior Court, 834 P.2d 1148 (Cal. 1992).
200. N.W. Airlines v. Astraea Aviation Serv., 111 F.3d 1386 (8th Cir. 1997).
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208. Id. at 1154–55 (emphasis and brackets in original) (citations omitted) (quoting Trident Ctr.
v. Connecticut Gen. Life Ins., 847 F.2d 564, 569 (9th Cir. 1988)).
209. Id. at 1155.
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210. Id. at 1169–70 (Kennard, J., concurring and dissenting) (emphasis in original) (internal
citations and quotation marks omitted).
211. See, e.g., O’Connor v. Uber Techs., Inc., No. C-13-3826 EMC, 2013 WL 6354534, at *2–5
(N.D. Cal. Dec. 5, 2013); Dos Beaches, LLC v. Mail Boxes Etc., Inc., No. 09CV2401-LAB, 2012
WL 506072, at *18–20 (S.D. Cal. Feb. 15, 2012); VFD Consulting, Inc. v. 21st Servs., 425 F. Supp.
2d 1037, 1046–48 (N.D. Cal. 2006); Menlo Logistics, Inc. v. Western Express, Inc., No. C-04-4685
JCS, 2005 WL 2334358, at *8 (N.D. Cal. Sept. 23, 2005); Olinick v. BMG Entm’t, 42 Cal. Rptr. 3d
268, 276–79 (Cal. Ct. App. Apr. 27, 2006).
212. G.P.P., Inc. v. Guardian Prot. Prods., Inc., No. 1:15-cv-00321-SKO, 2015 WL 3992878, at
*15–18 (E.D. Cal. June 30, 2015).
213. See id. at *16.
214. 918 F. Supp. 2d 532, 542–48 (W.D. Va. 2013).
215. Id. at 541.
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the intent of the parties. For that reason, the scope of a choice-
of-law provision should, absent a showing of intent otherwise,
be read to encompass all disputes that arise from or are related to
an agreement. If parties wish to exclude causes of action arising
in tort or by statute from the coverage of their agreement, they
may do so, but they should reflect that intent in their contract. I
believe this disposition will most closely reflect the actual intent
of the parties at the time they reached their agreement.216
In the years since this decision was rendered, a number of other
federal district courts in Virginia have found its reasoning persuasive
and have similarly held that generic choice-of-law clauses reach tort and
statutory claims.217
In 2015, the Montana Supreme Court cited approvingly to Nedlloyd
and to Pyott-Boone in concluding that a generic choice-of-law clause
applied to tort and contract claims.218 The courts of Delaware have also
expressed sympathy for the Nedlloyd approach. In 2006, the Delaware
Court of Chancery held that a clause stating that the agreement was to be
“governed by, and construed in accordance with, the Laws of the State
of Delaware, regardless of the Laws that might otherwise govern under
applicable principles of conflicts of law” encompassed the plaintiff’s tort
claim for fraudulent inducement.219 In justifying this decision, the court
cited to Nedlloyd and offered the following rationale that echoed the one
given by the California Supreme Court in that case:
Parties operating in interstate and international commerce seek,
by a choice of law provision, certainty as to the rules that govern
their relationship. To hold that their choice is only effective as to
the determination of contract claims, but not as to tort claims
seeking to rescind the contract on grounds of misrepresentation,
would create uncertainty of precisely the kind that the parties’
choice of law provision sought to avoid. . . . To layer the tort law
of one state on the contract law of another state compounds that
complexity and makes the outcome of disputes less predictable,
220. Id. at 1048. Transdigm Inc. v. Alcoa Glob. Fasteners, Inc., No. 7135-VCP, 2013 WL
2326881, at *5 (Del. Ch. May 29, 2013) (citing approvingly to ABRY Partners V. L.P., 891 A.2d
1048). But see Gloucester Holding Corp. v. U.S. Tape & Sticky Prods., LLC, 832 A.2d 116, 123–24
(Del. Ch. 2003) (concluding that a standard choice-of-law clause was “not sufficiently broad enough
to cover tort claims such as fraud in the inducement”); Eby v. Thompson, No. Civ.A. 03C-10-
010THG, 2005 WL 1653988, at *3 (Del. Super. Ct. Apr. 20, 2005) (holding that a rental agreement
was not drafted broadly enough to encompass tort claims).
221. Hazout v. Tsang Mun Ting, 134 A.3d 274, 293 n.68 (Del. 2016). The Court decided that the
issue of the clause’s scope was not properly before it and must be “determined in the first instance
by the Superior Court upon briefing by the parties.” Id.
222. 111 F.3d 1386 (8th Cir. 1997).
223. Id. at 1392–93.
224. Id. at 1392.
225. Id. at 1389–90.
226. Id. at 1392.
227. Id.
228. Id.
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229. Id. (emphasis added). The Eighth Circuit has not always been fully consistent in its
treatment of this issue. See Inacom Corp. v. Sears, Roebuck & Co., 254 F.3d 683, 687 (8th Cir.
2001) (concluding that a standard choice-of-law clause was “not broad enough to govern the choice
of law for the fraudulent concealment claim, which sounds in tort”).
230. See, e.g., Holden Farms, Inc. v. Hog Slat, Inc., 347 F.3d 1055, 1061 (8th Cir. 2003) (“The
essential principle of Northwest Airlines is that, under Minnesota law, if analysis of the claims
connected to a contract involves interpretation of the contract, then the forum will apply the
contractual choice-of-law provisions to the tort claims.”); Warren E. Johnson Cos. v. Unified Brand,
Inc., 735 F. Supp. 2d 1099, 1102–06 (D. Minn. 2010) (finding a clause stating that the “Agreement
will be construed in accord with the laws of Mississippi” governed only those statutory and tort
claims that were “closely related to the contract’s terms”); Fla. State Bd. of Admin. v. Law Eng’g &
Envtl. Servs., Inc., 262 F. Supp. 2d 1004, 1013 (D. Minn. 2003) (concluding that “plaintiff’s tort
claims are closely related to the parties’ contractual relationship”).
231. 964 F. Supp. 2d 1017 (D. Minn. 2013).
232. Id. at 1031–32.
233. Id. at 1032.
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234. J.D. Fields & Co. v. Nucor-Yamato Steel, 976 F. Supp. 2d 1051, 1064–65 (E.D. Ark. 2013).
235. Id. at 1065; see also Baldor Elec. Co. v. Sungard Recovery Servs. LP, No. 2:06-CV-02135,
2006 WL 3735980, at *3 (W.D. Ark. Dec. 15, 2006).
236. Peter Kiewit Sons’, Inc. v. Atser, LP, 684 F. Supp. 2d 1126, 1134–35 (D. Neb. 2010).
237. Amakua Dev. LLC v. Warner, 411 F. Supp. 2d 941, 955 (N.D. Ill. 2006) (“In addition,
regardless of the breadth of the choice of law provision, tort claims that are dependent upon the
contract are subject to a contract’s choice of law provisions. In deciding whether a tort claim is
‘dependent’ upon a contract, courts examine whether: (1) the claim alleges a wrong based on the
construction and interpretation of the contract; (2) the tort claim is closely related to the parties’
contractual relationship; or (3) the tort claim could not exist without the contract.” (citations
omitted)); Magellan Real Estate Inv. Tr. v. Losch, 109 F. Supp. 2d 1144, 1161 (D. Ariz. 2000)
(“[S]everal of the claims in this action require the application of the law of Ontario, Canada, while
others require application of the law of Arizona.”); Enter. Bank & Tr. v. Barney Ashner Homes,
Inc., Nos. 106,588, 106,882, 106,883, 2013 WL 1876293, at *15 (Kan. Ct. App. 2013) (“This is a
case where both the rule and the choice-of-law clauses should be applied to the tort claims since
they are inextricably tied to the specific debtor-creditor transactions otherwise being litigated.”); see
also Twohy v. First Nat’l Bank of Chicago, 758 F.2d 1185, 1189–91 (7th Cir. 1985); Medline
Indus. Inc. v. Maersk Med. Ltd., 230 F. Supp. 2d 857, 861–64 (N.D. Ill. 2002); Wireless Distribs.,
Inc. v. Sprintcom, Inc., No. 03 C 2405, 2003 WL 22175607, at *4–7 (N.D. Ill. Sept. 19, 2003).
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238. Wright’s Well Control Servs., LLC v. Oceaneering Int’l, Inc., No. 15-1720, 2015 U.S. Dist.
LEXIS 154559, at *31–34 (E.D. La. Nov. 16, 2015) (discussing the two approaches).
239. See Gruson, supra note 9, at 364 n.115 (“New York courts apparently always determine the
effectiveness and scope of governing law clauses according to New York conflict-of-laws rules.”).
240. Fin. One Pub. Co. v. Lehman Bros. Special Fin., Inc., 414 F.3d 325, 332–33 (2d Cir. 2005)
(citations omitted) (citing Krock v. Lipsay, 97 F.3d 640, 645 (2d Cir. 1996)).
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241. Cunningham Charter Corp. v. Learjet, Inc., 870 F. Supp. 2d 571, 574–75 (S.D. Ill. 2012).
242. Tomran, Inc. v. Passano, 891 A.2d 336, 343–46 (Md. 2006).
243. Schwan’s Sales Enters., Inc. v. SIG Pack, Inc., 476 F.3d 594, 597 (8th Cir. 2007); Warren E.
Johnson Cos. v. Unified Brand, Inc., 735 F. Supp. 2d 1099, 1104–09 (D. Minn. 2010).
244. Cypress Pharms., Inc. v. CRS Mgmt., Inc., 827 F. Supp. 2d 710, 724 (S.D. Miss. 2011).
245. Am. Hearing Aid Assocs., Inc. v. GN ReSound N. Am., 309 F. Supp. 2d 694, 704 (E.D. Pa.
2004).
246. Fairmont Supply Co. v. Hooks Indus., Inc., 177 S.W.3d 529, 534–37 (Tex. App. 2005).
247. See Pyott-Boone Elecs., Inc. v. IRR Tr. for Donald L. Fetterolf Dated December 9, 1997,
918 F. Supp. 2d 532, 542–48 (W.D. Va. 2013).
248. Nedlloyd Lines B.V. v. Superior Court, 834 P.2d 1148, 1154 n.7 (Cal. 1992) (emphasis in
original).
249. See, e.g., Narayan v. EGL, Inc., 616 F.3d 895, 899 (9th Cir. 2010); JMP Sec. LLP v. Altair
Nanotechnologies Inc., 880 F. Supp. 2d 1029, 1036 (N.D. Cal. 2012); Sarandi v. Breu, No. C 08-
2118 SBA, 2009 WL 2871049, at *3–5 (N.D. Cal. Sept. 2, 2009).
250. See Vichi v. Koninklijke Philips Elecs., N.V., 85 A.3d 725, 766 (Del. Ch. 2014) (“Where a
choice of law provision is valid, the question of its proper scope is a question of the selected
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***
The preceding Parts have examined the lexical canons, the canons
relating to scope, and the rules for determining which canons to apply in
the event of a conflict. The goal in these Parts was to provide a detailed
descriptive account of the canons and the ways in which courts choose
between them. The next two Parts tackle the normative question of
whether these canons are the right canons for the courts to use. Part IV
discusses several theories of contract interpretation in search of a
normative framework within which to assess current judicial practice.
Part V then applies this framework to the canons discussed in the
preceding Parts in an attempt to separate those canons that track party
expectations from those that do not.
jurisdiction’s laws, as it turns on how the choice of law provision should be read.”); Weil v. Morgan
Stanley DW Inc., 877 A.2d 1024, 1032 (Del. Ch. 2005) (concluding that, as “a matter of hornbook
law,” the scope of a choice of law provision is determined under the law that the provision selects),
aff’d, 894 A.2d 407 (Del. 2005).
251. Razi v. Razavi, No. 5:12-CV-80-Oc-34PRL, 2012 WL 7801361, at *5–7 (M.D. Fla. Dec. 21,
2012).
252. Stagecoach Transp. v. Shuttle, Inc., 741 N.E.2d 862, 867–68 (Mass. App. Ct. 2001).
253. Wachovia Bank, Nat’l Ass’n v. Harbinger Capital Partners Master Fund I, Ltd., 2008 NCBC
6, 105 (N.C. Super. Ct. 2008); see also Bunker Holdings, Ltd. v. Green Pac. A/S, 346 Fed. App’x
969, 973 (4th Cir. 2009) (“The scope of the choice-of-law provisions, however, being a matter of
contract interpretation, must be determined by the law of the state chosen by the parties in the
contract.”).
254. See supra note 52 and accompanying text.
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A. Majoritarian Defaults
An efficient contractual default rule is the one that most parties would
have agreed to ex ante.256 Majoritarian defaults reduce the costs of
drafting a contract.257 They reduce verification costs because there is
often no evidence that the parties intended a result that is any different
from the default.258 And they increase accuracy because the majoritarian
rule is, by definition, broadly consistent with the preferences of most
parties.259
In the boilerplate context, where the notion of party intent is largely a
fiction, the argument that the courts should strive to interpret choice-of-
law clauses in a manner that is consistent with majoritarian preferences
is particularly compelling.260 When a court construes a clause in a
255. Michelle Boardman, Penalty Default Rules in Insurance Law, 40 FLA. ST. U. L. REV. 305,
306 (2013).
256. See ROBERT A. HILLMAN, THE RICHNESS OF CONTRACT LAW 225 (1997) (observing that
“the efficient . . . ‘default’ rule is what most parties would want”); Charles J. Goetz & Robert E.
Scott, The Mitigation Principle: Toward a General Theory of Contractual Obligation, 69 VA. L.
REV. 967, 971 (1983) (default rules should be created by asking “what arrangements would most
bargainers prefer?” (emphasis in original)); Jody S. Kraus, The Correspondence of Contract and
Promise, 109 COLUM. L. REV. 1603, 1631–32 (2009) (noting that “[w]ith a few possible exceptions,
contract default rules are best understood as attempts to impute into contracts terms that most
similarly situated parties would have wanted to include had they considered them” (footnote
omitted)); Alan Schwartz & Robert E. Scott, Contract Interpretation Redux, 119 YALE L.J. 926, 941
(2010); Schwartz & Scott, supra note 24, at 569. But see Steven J. Burton, A Lesson on Some Limits
of Economic Analyses: Schwartz and Scott on Contract Interpretation, 88 IND. L.J. 339, 360 (2013)
(arguing that a “singular focus on efficiency obscures important concerns about the nature of
language, ambiguity and vagueness, the legal context in which interpretation questions arise,
alternatives not based on efficiency, and rule of law values”).
257. Gregory Klass, Intent to Contract, 95 VA. L. REV. 1437, 1462 (2009).
258. Id.
259. Id.
260. See Richard A. Posner, The Law and Economics of Contract Interpretation, 83 TEX. L. REV.
1581, 1581–84 (2005).
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B. Penalty Defaults
The notion that majoritarian default rules are efficient default rules is
widely accepted in the literature.264 In a well-known article, however,
Ian Ayres and Robert Gertner argued that courts and legislatures should
sometimes adopt rules that are specifically contrary to the preferences of
most parties.265 The goal of these so-called “penalty default” rules is to
induce the parties to reveal information to one another by contracting
261. See Stephen J. Choi & C. Mitu Gulati, Contract as Statute, 104 MICH. L. REV. 1129, 1131–
32 (2006).
262. Id. at 1132.
263. David Charny, Hypothetical Bargains: The Normative Structure of Contract Interpretation,
89 MICH. L. REV. 1815, 1820 (1991) (proposing a “hypothetical bargains” framework for
determining interpretive conventions); see also Baude & Sachs, supra note 28, at 1117 (“[T]he
‘touchstone’ of legal interpretation ‘is not the specific thoughts in the heads of any particular
historical people . . . but rather the hypothetical understandings of a reasonable person . . . .”).
264. Klass, supra note 257, at 1462.
265. Ian Ayres & Robert Gertner, Filling Gaps in Incomplete Contracts: An Economic Theory of
Default Rules, 99 YALE L.J. 87, 91 (1989) [hereinafter Ayres & Gertner, Filling Gaps]; see also Ian
Ayres & Robert Gertner, Majoritarian vs. Minoritarian Defaults, 51 STAN. L. REV. 1591, 1591–92
(1999).
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C. Contracts Originalism
266. Ayres & Gertner, Filling Gaps, supra note 265, at 91.
267. Ian Ayres & Robert Gertner, Strategic Contractual Inefficiency and the Optimal Choice of
Legal Rules, 101 YALE L.J. 729, 735 (1992). Michelle Boardman has suggested that the rule of
contra proferentem, which directs courts to interpret ambiguities in a contract against the drafter, is
a classic example of a penalty default rule and has further argued that a version of this penalty
default rule should be applied to interpret boilerplate contract provisions in insurance agreements.
Boardman, supra note 255, at 306–07.
268. Russell Korobkin, The Status Quo Bias and Contract Default Rules, 83 CORNELL L. REV.
608, 669 (1998) (“If the status quo bias will cause some parties to fail to contract around default
terms that are inefficient for them, the best response is for lawmakers to create default terms that are
efficient for as many parties as possible, reducing the total social cost of status quo bias friction.”).
269. Choi & Gulati, supra note 261, at 1131–32.
270. Id. at 1161.
271. See, e.g., MITU GULATI & ROBERT E. SCOTT, THE THREE AND A HALF MINUTE
TRANSACTION 109–38 (2013); William W. Bratton, Pari Passu and a Distressed Sovereign’s
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Rational Choices, 53 EMORY L.J. 823, 823 (2004); Lee C. Buchheit & Jeremiah S. Pam, The Hunt
for Pari Passu, 23 INT’L FIN. L. REV. 20, 20 (2004); Lee C. Buchheit & Jeremiah S. Pam, The Hunt
for Pari Passu (Part II), 23 INT’L FIN. L. REV. 47, 47 (2004); Weidemaier et al., supra note 38, at
72.
272. One of the earliest U.S. contracts containing an express choice-of-law clause dates to 1869.
See Kirtland v. Hotchkiss, 42 Conn. 426, 444 (1875) (Foster, J., dissenting) (noting that a bond
issued in 1869 stated that it was “made under, and is in all respects to be construed, by the laws of
the state of Illinois”). In the decades following the Civil War, life insurance companies and
mortgage lenders made extensive use of such clauses as they expanded their operations nationally.
See, e.g., Farrior v. New England Mortg. Sec. Co., 7 So. 200, 200 (Ala. 1890) (discussing choice-of-
law clause in 1886 lending agreement); Union Cent. Life Ins. Co. v. Pollard, 26 S.E. 421, 421–22
(Va. 1896) (discussing choice-of-law clause in 1882 life insurance contract).
273. W. Mark C. Weidemaier, Indiana Jones, Contracts Originalist, 9 CAP. MKTS. L.J. 255, 256–
57 (2014) (footnotes omitted).
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274. See supra note 38 (surveying burgeoning scholarly literature that looks to surveys and
experiments to assist in contract interpretation).
275. This methodological approach may be fairly characterized as empirical majoritarianism. See
supra note 37 (explaining the concept).
276. As noted above, this analysis assumes that the contracting parties are firms that possess
roughly equal bargaining power and that they are entering into a commercial agreement. See supra
note 24. When a choice-of-law clause is set forth in a consumer contract, or where there is a
significant disparity in terms of party bargaining power, a different analytical approach may be
warranted. See supra note 24.
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The canon in favor of internal law likely does generate the result that
most parties would have reached if they had thought about it at the time
of drafting. It is difficult, after all, to see why any contracting party
would ever want to select the whole law of a jurisdiction to govern their
agreement if the goal of the clause is to reduce uncertainty and to ensure
a uniform choice of law. The canon in favor of linguistic equivalence
would also appear to be consistent with general party preferences. Most
parties do not want their contract to be interpreted in accordance with the
laws of one jurisdiction and enforced in accordance with the laws of
another. To the extent that these two interpretive rules give effect to the
unstated preferences of most parties, they should be retained in their
current form.
The canon in favor of substantive law and the canon of federal
inclusion and preemption, by contrast, present more complicated
questions. Whether these two canons constitute efficient majoritarian
default rules is explored below.
The canon in favor of substantive law posits that when the parties
choose to have their contract governed by the “law” or “laws” of a
particular jurisdiction, they intend for courts to apply that jurisdiction’s
substantive law rather than its procedural law.277 Two justifications are
commonly proffered in support of this canon. First, it would be unduly
burdensome to require a court to apply the procedural law of another
jurisdiction.278 Second, parties rarely think about matters of judicial
administration when they are contracting and generally do not intend for
their choice-of-law clauses to encompass the procedural law of the
chosen jurisdiction.279
As applied to certain rules—pleading rules, for example—each of
these justifications is quite compelling. It would be administratively
challenging if the courts in one state were required to apply the pleading
rules of another. And it is quite unlikely that most contracting parties
would have intended this result when they wrote their choice-of-law
clause. As applied to certain other rules—statutes of limitation, for
example—these justifications are less compelling. It is not particularly
difficult for the courts in one state to apply the statute of limitations of
another. And it is at least plausible that when the parties choose to have
their contract governed by the “law” of a particular jurisdiction, they
expect this law to include any relevant statutes of limitations.
These intuitions about party intent notwithstanding, there is a dearth
of information about how contracting parties perceive the relationship
between choice-of-law clauses and statutes of limitations. Do these
parties generally intend for their choice-of-law clauses to select the
statutes of limitations of the chosen jurisdiction? Or do they generally
intend to exclude statutes of limitations from the scope of their choice-
of-law clauses? In an attempt to answer these questions, I contacted
fifty-three lawyers. Thirty-nine of these lawyers worked at law firms.
Fourteen worked as in-house counsel. There were twenty-two lawyers
who practiced in North Carolina, eleven in Texas, five in New York,
three in Oklahoma, three in Tennessee, and two in Georgia. The
remaining lawyers hailed from Arizona, California, Colorado, the
District of Columbia, Kansas, Pennsylvania, and Utah. The questions
that I asked each of these lawyers are reproduced in the Appendix.
The overall goal of the inquiry was to determine whether these
lawyers generally intend to select the statutes of limitations of a
jurisdiction when they name that jurisdiction in their choice-of-law
clause. The results of these exchanges were striking. The overwhelming
majority of the lawyers—forty-five out of fifty—stated that they
generally want their choice-of-law clause to cover statutes of
limitations.280 When the contract selects the law of a particular state, in
other words, the expectation among most of the lawyers was that this
selection included that state’s statutes of limitations. As one attorney
commented: “I always thought you were signing up for substantive and
procedural laws, unless otherwise specified.”281 Another stated that
“when we have accepted Choice of Law, it was our understanding that it
covered all aspects of that state’s law.”282 Still another observed that “I
would think that the statute of limitations for contract actions . . . would
be governed by the [statute of limitations] of the identified state.”283
Notwithstanding the fact that almost all of the lawyers wanted their
choice-of-law clause to cover statutes of limitations, a majority—thirty-
two out of fifty-three—confessed that they had never really given the
matter much thought. One explained that, “in terms of choice of law
issues, the statute of limitations is unlikely to be the most pressing
difference in the laws that I would care about.”284 Another noted that
“this rarely comes up and, but for those few instances where it’s been an
issue in the contracts I’ve worked on, I wouldn’t have thought of
singling out statute of limitations provisions.”285 Still another
commented that “I would anticipate that the [statute of limitations]
provisions of the identified state would govern, but it is not generally the
top of mind issue around why a given state was chosen.”286 So while the
lawyers were in general agreement that choice-of-law clauses should
generally cover statutes of limitations, this was more of a shared
intuition than a carefully researched position.
In explaining their answers to this question, which implicates the
canon in favor of substantive law, several of the lawyers made reference
to the canon in favor of internal law.287 One observed that the sample
clause provided failed to address the statutes of limitation issue because
it did not “exclude[] conflicts of law principles that would cause the laws
of another jurisdiction to apply.”288 Another responded to this query by
observing that generic clauses generally “include statute of limitations of
[the] selected state because [we] intend to be governed by all the
‘internal’ laws of that state.”289 Still another lawyer suggested that
adding the phrase “without regard to its conflict of laws provisions” to
the clause would ensure that the clause would cover statutes of
limitation.290 In each case, the lawyer was mistaken as to the effect of the
additional language relating to conflict-of-laws rules. A number of
courts have similarly misunderstood the import of a contractual clause
excluding a particular state’s conflict-of-laws rules in cases in which the
court is asked to classify a particular rule as substantive or procedural.291
When the lawyers were asked to predict how a court in their home
state would rule on this question, the vast majority—forty-two out of
284. E-mail from Lawyer at N.C. Law Firm to author (Oct. 18, 2016) (on file with author).
285. E-mail from Lawyer at N.Y. Law Firm to author (Oct. 18, 2016) (on file with author).
286. E-mail from Lawyer at Ga. Company to author (Oct. 26, 2016) (on file with author).
287. Compare section II.A, with section II.B.
288. E-mail from Lawyer I at Tex. Law Firm to author (Nov. 17, 2016) (on file with author).
289. E-mail from Lawyer II at Tex. Law Firm to author (Nov. 17, 2016) (on file with author).
290. E-mail from Lawyer at Tenn. In-House Counsel to author (Oct. 18, 2016) (on file with
author).
291. See, e.g., PNC Bank v. Sterba, 852 F.3d 1175 (9th Cir. 2017) (Tashima, J., concurring);
OrbusNeich Med. Co. v. Bos. Sci. Corp., 694 F. Supp. 2d 106, 113 (D. Mass 2010); Brill v. Regent
Commc’ns, Inc., 12 N.E.3d 299, 306–08 (Ind. Ct. App. 2014).
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When the parties write an arbitration clause into their agreement, they
relinquish their right to bring suit in a court and choose instead to submit
their disputes to a private arbitrator. These arbitral proceedings will be
initiated and conducted in accordance with the rules selected by the
parties in their contract. In the event that the contract does not specify
the relevant rules, the judge will look to the parties’ choice-of-law clause
for guidance. When a generic clause selects the law of California, the
courts will ordinarily (per the canon of federal inclusion and preemption)
interpret this clause as selecting both the state arbitration law of
California and the FAA. Where there is no conflict between these two
bodies of law, there is no issue. When a conflict exists, however, the
question that arises is whether the parties intended to select California
state arbitration law or federal arbitration law as set forth in the FAA.
In the arbitration context, there are good reasons to think that—
consistent with the canon of federal inclusion and preemption—the
parties generally intend the FAA to apply and to preempt state law when
they use a generic choice-of-law clause.297 For better or worse, the FAA
is the bright sun and the dark moon of U.S. arbitration law. The U.S.
Supreme Court has repeatedly held that the FAA preempts state
arbitration law across a range of issues and it is fairly common for
parties to expressly name the FAA as the governing law in their choice-
298. See Circuit City Stores, Inc. v. Adams, 532 U.S. 105, 114–19 (2001); Southland Corp. v.
Keating, 465 U.S. 1, 16–17 (1984). But see Christopher R. Drahozal, Federal Arbitration Act
Preemption, 79 IND. L.J. 393, 407–09 (2004) (identifying unresolved questions relating to the extent
of FAA arbitration). The state and federal courts interpret the FAA far more frequently than they do
the Uniform Arbitration Act. A LexisNexis search in all state and federal courts for the term
“federal arbitration act” between July 25, 2014 and July 25, 2016 resulted in 2744 hits. This same
search for the term “uniform arbitration act” during the same time period resulted in only 340 hits.
299. John F. Coyle, The Role of the CISG in U.S. Contract Practice: An Empirical Study, 38 U.
PA. J. INT’L L. 195, 195 (2016).
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300. See id. at 210–15 (describing the methodology by which this dataset was assembled and
discussing its limitations).
301. In two cases, a company responded merely to inform me that it would not provide an answer
to the question.
302. E-mail from In-House Counsel at U.S. Pharmaceutical Company I to author (Feb. 29, 2016)
(on file with author).
303. Telephone Interview with General Counsel at U.S. Manufacturing Company (Apr. 11,
2016).
304. E-mail from In-House Counsel at U.S. Technology Company to author (Mar. 4, 2016) (on
file with author).
305. E-mail from In-House Counsel at U.S. Pharmaceutical Company II to author (Feb. 29, 2016)
(on file with author).
306. E-mail from In-House Counsel at U.S. Energy Company I to author (Mar. 18, 2016) (on file
with author).
307. Telephone Interview with General Counsel at U.S. Investment Company (Apr. 15, 2016).
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another responded stated that he “would bet that the folks on both sides
of the agreement were not aware of the CISG and the manner in which it
trumps local law.”308
These responses suggest that the canon of federal inclusion and
preemption does not accurately capture the baseline preferences of U.S.
companies when it comes to the question of governing law. It is
possible, however, that this canon does capture the baseline preferences
of foreign companies who transact with U.S. counterparties. When given
a choice between litigating a dispute under the UCC or the CISG, for
example, a foreign company may prefer the CISG because it is more
likely to have been translated into their native language, because it is
more favorable to their interests, or because it is more familiar to them.
More research is necessary to determine the expectations of foreign
companies that enter into contracts with U.S. counterparties containing
choice-of-law clauses selecting the law of a U.S. state. For now,
however, it is sufficient to note that the canon of federal inclusion and
preemption does not appear to produce outcomes that are consistent with
the preferences of many U.S. companies in the CISG context.
The fact that a canon of construction does not accurately reflect the
intent of some subset of the parties to a contract does not mean, of
course, the canon serves no purpose. In some cases, the goal of a
particular canon is not to capture private preferences but, rather, to
advance some government policy.309 The courts should, therefore, be
cautious when they are called upon to apply the canon of federal
inclusion and preemption in CISG cases. In deciding how best to
construe the choice-of-law clause, they should carefully weigh (1) the
expectations of the U.S. party, (2) the expectations of the foreign
counterparty, and (3) any applicable federal policies.310
308. E-mail from In-House Counsel at U.S. Energy Company II to author (Mar. 3, 2016) (on file
with author).
309. Baude & Sachs, supra note 28, at 1085.
310. Some courts have suggested that the CISG promotes the federal policy of promoting good
faith in international trade. See Travelers Prop. Cas. Co. of Am. v. Saint-Gobain Tech. Fabrics Can.
Ltd., 474 F. Supp. 2d 1075, 1081–82 (D. Minn. 2007). Others have suggested that the application of
the CISG serves to promote worldwide uniformity in the law relating to international sales
agreements. See BP Oil Int’l, Ltd. v. Empresa Estatal Petroleos de Ecuador (PetroEcuador), 332
F.3d 333, 337 (5th Cir. 2003). In the view of the author, it is far from clear that the U.S. government
is strongly committed, as a matter of policy, in promoting worldwide uniformity in commercial law
in situations where it would upset the settled expectations of U.S. parties. The CISG is the
quintessential private law treaty. It does not bind public actors. It merely operates to define the
rights and obligations of private actors who transact with foreign counterparties. Whether the
federal government has a strong interest in having the CISG apply in cases where the U.S. company
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chose the law of a particular U.S. state without realizing that this selection would result in the
application of the CISG is a topic that warrants further research.
311. See supra Part III.
312. See supra section III.A.
313. See supra section III.B.
314. Four attorneys declined to answer the question.
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315. It was not possible to evaluate the accuracy of every attorney’s prediction because many of
them hailed from jurisdictions where the courts have yet to adopt a clear rule on the issue.
316. With respect to the issue of relatedness, the overwhelming majority of lawyers surveyed
commented that the standard choice-of-law clause could not cover claims that were unrelated to the
contract. As one attorney put it: “[i]f wholly unrelated, I don’t think I can reasonably expect to bind
my counterparty to a negotiated choice of law that does not relate to the agreement we are
negotiating.” E-mail from In-House Lawyer at Kansas Company to author (June 7, 2016) (on file
with author).
317. E-mail from In-House Counsel at Major U.S. University to author (June 6, 2016) (on file
with author).
318. E-mail from Lawyer at California Law Firm to author (June 7, 2016) (on file with author)
(“At least when considering trade secret issues—my area of practice—and without going into
anything privileged, companies generally want a single, unified choice of law.”).
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319. E-mail from Lawyer at Colorado Law Firm to author (June 16, 2016) (on file with author).
See also E-mail from Lawyer at New York Law Firm to author (July 29, 2016) (on file with author)
(“A majority of the deals I have worked on apply the choice of law provision to ‘any action or
proceeding arising out of or relating to’ the Agreement at issue.”).
320. E-mail from Firm Lawyer at North Carolina Law Firm to author (June 8, 2016) (on file with
author).
321. E-mail from Lawyer at Colorado Law Firm II to author (June 16, 2016) (on file with author).
322. E-mail from In-House Lawyer at Minnesota Law Firm to author (June 28, 2016) (on file
with author).
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While more empirical work is sorely needed in this area, the evidence
discussed above suggests that attorneys across a range of jurisdictions
generally prefer the canon in favor of non-contractual claims to the
canon against non-contractual claims.323 When it comes to making
educated guesses about the preferences of hypothetical real world
parties, in other words, the guess made by the California court in
Nedlloyd would appear to be closer to the mark than the guess made by
the New York court in Knieriemen.
Defenders of the Knieriemen approach might argue that courts should
give effect to the written text of a generic choice-of-law clause rather
than to the general preferences of the parties. The parties are perfectly
capable of drafting broad choice-of-law clauses, so this argument goes,
and it is not the court’s job to fix their drafting mistakes. Because a
generic choice-of-law clause lacks any language stating that the chosen
law shall apply to claims “relating to” the contract, the court should give
effect to the clause as written and apply the chosen law exclusively to
contract claims. To do otherwise is to rewrite the parties’ agreement
without their consent. On this account, the decision rendered by the New
York court in Knieriemen was correct because it is a faithful reading of
the contractual text. The Nedlloyd decision rendered by the California
Supreme Court, by contrast, was flawed because the Court rewrote the
parties’ agreement without their consent.
While this argument has a certain surface appeal, it suffers from a
number of weaknesses. First, courts routinely read language into generic
choice-of-law clauses. A court applying the canon in favor of internal
law, for example, will read the phrase “excluding its conflict of law
rules” into a clause that omits it.324 A court applying the canon in favor
of substantive law will read the phrase “substantive but not procedural”
into a clause that omits it. In neither of these instances, however, is there
an explicit textual basis for the court to do what it does. If the practice of
reading words and phrases into generic choice-of-law clauses is
acceptable in these other contexts, as it appears to be, then it is difficult
323. Burton, supra note 37, at 1072 (observing that “there are few empirical studies to support
particular defaults”).
324. In other contexts, the New York Court of Appeals has been perfectly willing to look past the
presence (or absence) of words in a choice-of-law clause to construe that clause in a manner that it
believes to be consistent with the preferences of most contracting parties. See, e.g., IRB-Brasil
Resseguros, S.A. v Inepar Invs., S.A., 982 N.E.2d 609, 612 (N.Y. 2012) (stating that the omission of
the words “without regard to conflict of laws principles” from a choice-of-law clause was
“inconsequential as a matter of law”).
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325. See E-mail from In-House Lawyer at Minnesota Law Firm to author (June 28, 2016) (on file
with author). In theory, contract drafters respond to judicial decisions interpreting contract language
by revising their agreements to account for those decisions. In practice, lawyers are frequently
unaware of these decisions and their contracts go unrevised.
326. See supra note 24 (stating that the analysis in this Article relating to choice-of-law clauses
presupposes that such clauses are being deployed in contracts between two businesses).
327. See supra section IV.B.
328. See supra section V.B.1 (reporting that fifty-four out of fifty-seven attorneys wanted their
choice-of-law clause to cover tort and statutory claims in addition to contract claims).
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329. See, e.g., RUSSELL J. WEINTRAUB, COMMENTARY ON THE CONFLICT OF LAWS 492 (4th ed.
2001) (“[T]he primary goal for adjudication is to reach a uniform and predictable result no matter
where the forum.”).
330. It would be especially odd if the court reached this conclusion in a case where the choice-of-
law clause specifically stated that the contract was to be “interpreted in accordance with” the laws
of Ohio. The same result should, however, obtain even if the parties use the word “govern” or
“construe,” per the canon of linguistic equivalence. See supra section II.C.
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Third, applying the canons of the chosen state is consistent with the
approach suggested by the Second Restatement of Conflict of Laws.331
When it is possible to determine the actual intent of the contracting
parties, the Restatement directs the court to apply the rules of the forum
to interpret the contract.332 When the intent of the parties cannot be
satisfactorily ascertained, however, the Restatement directs the courts to
apply the canons of the state named in the choice-of-law clause.333 As
discussed above, it will not be possible to satisfactorily ascertain the
actual intent of the parties with respect to the scope of a generic choice-
of-law clause in the vast majority of cases. Under the logic of the
Restatement, therefore, the courts should apply the canons of the
jurisdiction chosen by the parties rather than the canons of the forum.
Fourth, and finally, it is universally acknowledged by conflict-of-laws
commentators that the parties generally possess the ability to choose the
body of law that will be used to interpret their contract.334 If the parties
331. The Restatement specifically directs the courts to enforce choice-of-law clauses under most
circumstances. RESTATEMENT (SECOND) OF CONFLICT OF LAWS § 187 (AM. LAW INST. 1971).
332. Id. § 204 cmt. a (“The forum will first seek to interpret the contract in the manner intended
by the parties. It will consider the ordinary meaning of the words, the context in which they appear
in the instrument, and any other evidence which casts light on the parties’ intentions, including an
intention, if any, to give a word the meaning given it in the local law of another state. The forum
will apply its own rules in determining the relevancy of the evidence, and it will use its own
judgment in drawing conclusions from the facts. This process, which is called
interpretation . . . does not involve application by the forum of its choice-of-law rules.”).
333. Id. § 204 cmts. a & b (“When the meaning which the parties intended to convey by words
used in a contract cannot satisfactorily be ascertained, the forum must determine the meaning of
these words by a process . . . called construction. This process involves the application of the rules
of construction of a particular state. Consequently, a choice-of-law problem arises whenever a
contract has a substantial relationship to two or more states with different rules of
construction. . . . The courts will give effect to a provision in the contract that it should be construed
in accordance with a particular law.”). While the Restatement makes a great deal of the distinction
between interpretation and construction, this distinction is widely ignored by most courts today. See
supra note 25.
334. WILLIAM M. RICHMAN ET AL., UNDERSTANDING CONFLICT OF LAWS 238 (4th ed. 2013)
(“Interpretation of contractual language . . . is what § 187(1) permits; and interpretation, no matter
what form it takes, can always be controlled by the parties to the contract.”); EUGENE F. SCOLES ET
AL., CONFLICT OF LAWS 956 (4th ed. 2004) (“When the parties choose a law solely for the purpose
of construing or interpreting the items of their contract, their choice is not restricted.”); CLYDE
SPILLENGER, PRINCIPLES OF CONFLICT OF LAWS 127–28 (2010) (arguing that “a state’s rules with
respect to contract interpretation are ‘default rules’” and that the parties may therefore “‘contract
around’ such rules if they wish” in accordance with Section 187(1)); WEINTRAUB, supra note 329,
at 492 (“When the conflicts problem concerns the construction of a contract, permitting the parties
to determine the issue by a choice-of-law clause in the contract raises no objection similar to those
voiced above when discussing validity.”); see also Allstate Ins. Co. v. Hague, 449 U.S. 302, 328
(1981) (Stevens, J., concurring) (“Contracting parties can, of course, make their expectations
explicit by providing in their contract that the law of a particular jurisdiction shall govern questions
of contract interpretation . . . .”).
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can write a broad choice-of-law clause that covers tort and statutory
claims into their agreement, then surely it must be permissible for them
to achieve this same end by selecting the law of a jurisdiction that directs
its courts to interpret generic choice-of-law clauses broadly.
These practical and doctrinal arguments notwithstanding, a surprising
number of courts in the United States currently do not apply the chosen
canons to determine the scope of a choice-of-law clause.335 Indeed, a
number of courts have specifically held that it is inappropriate to apply
these canons because it might violate the public policy of the forum
state.336 As the federal district court for the Western District of Virginia
has explained:
Although applying chosen law may lead to greater certainty in
future interpretations of a choice-of-law provision, such an
approach is inconsistent with the manner in which modern
courts evaluate the enforceability of these provisions.
Enforceability is a threshold issue determined according to
forum law. Most states give effect to these provisions absent a
showing that the chosen law has no substantial relationship with
the agreement or would contravene the public policy of the
forum state. Courts in Virginia enforce these agreements unless
the provision is unfair or unreasonable or the result of unequal
bargaining power. Whether a provision violated the public
policy of a state, or whether it is unfair or unreasonable, will
often depend on the scope of that provision’s application and
335. This is not the universal practice. Some courts apply the law of the state named in the clause
to determine its scope. See supra notes 248–53. The more common practice, however, is for the
courts to apply the law of the forum to determine the scope of a choice-of-law clause. See supra
notes 239–47.
336. Michael Hoffheimer has argued that the law of the forum should be applied to interpret
contractual provisions generally. See Hoffheimer, supra note 25, at 656. The essence of his
argument is the chosen law may sometimes assign a meaning to the contract term that was
unintended by the parties and that, in these situations, the decision to “enforc[e] choice of law
neither furthers intent nor promotes party autonomy.” Id. at 650. Hoffheimer also argues that
“applying chosen law to interpretation and construction aggravates uncertainty, increasing the
probability of conflicts.” Id. at 651. With respect to the first point, it is certainly possible that an
interpretive rule in the chosen law could result in a reading of the contract that was not intended by
the parties. It is also possible, however, that an interpretive rule of the forum could generate the
same result. Unless one is willing to peek behind the curtain of the choice-of-law analysis to see
what the outcome will be—which is generally disfavored—there is no way to know whether the
problematic interpretation will arise as a result of the application of the chosen law or the forum
law. With respect to the second point, applying the chosen law to interpretation and construction
arguably results in less uncertainty because the whole contract will be interpreted and enforced—
with the exception of this issue of validity—in a manner consistent with the law of a single
jurisdiction. Given the potential for gamesmanship and forum shopping with respect to questions of
scope, this certainty is desirable and can only be achieved by applying the chosen law.
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337. Pyott-Boone Elecs., Inc. v. IRR Tr. for Donald L. Fetterolf Dated December 9, 1997, 918 F.
Supp. 2d 532, 543 (W.D. Va. 2013) (emphasis added) (citations omitted) (quoting Paul Bus. Sys.,
Inc. v. Canon U.S.A., Inc., 397 S.E.2d 804, 807 (Va. 1990)); see also Schwan’s Sales Enters., Inc.
v. SIG Pack, Inc., 476 F.3d 594, 597 (8th Cir. 2007) (stating that interpreting a choice-of-law
clause’s scope under the chosen law rather than the forum law would “give effect to that provision
before the court’s analytical determination of what effect it should have”); Fin. One Pub. Co. v.
Lehman Bros. Special Fin., Inc., 414 F.3d 325, 333 (2d Cir. 2005) (“[C]ourts consider the scope of a
contractual choice-of-law clause to be a threshold question like the clause’s validity. Courts
therefore determine a choice-of-law clause’s scope under the same law that governs the clause’s
validity—the law of the forum.”); Cypress Pharms., Inc. v. CRS Mgmt., Inc., 827 F. Supp. 2d 710,
724 (S.D. Miss. 2011).
338. Symeon C. Symeonides, Choice of Law in the American Courts in 2001, 50 AM. J. COMP. L.
1, 21 (2002) (identifying “existence, validity, scope, and enforceability” as “the four sequential
logical steps that a court takes before applying the law chosen by the clause”); see also Michael
Gruson, Governing-Law Clause in International and Interstate Loan Agreements—New York’s
Approach, 1982 U. ILL. L. REV. 207, 223 (1982) (“The parties to a contract cannot change this
conflict-of-laws rule relating to the validity of governing-law clauses.”).
339. The validity of a choice-of-law clause will typically be determined in accordance with a
two-step analysis. In the first step, the court asks whether the particular issue could have been
resolved by an explicit provision in the parties’ agreement. RESTATEMENT (SECOND) OF CONFLICT
OF LAWS § 187(1) (AM. LAW INST. 1971). If so, then the clause is valid. If not, then the court
proceeds to step two. In the second step, the court will inquire into whether (1) the chosen state has
a substantial relationship to the parties or the transaction, and (2) the application of the law of the
chosen state would be contrary to a fundamental public policy of another state (usually the forum
state) with a materially greater interest in the transaction than the chosen state. Id. § 187(2). If there
exists a substantial relationship with the chosen state, and if the selection of that state’s law is not
contrary to a fundamental public policy of another state with a materially greater interest, then the
clause is valid and will be enforced by the courts. See also U.C.C. § 1-301(a) (AM. LAW INST. &
UNIF. LAW COMM’N, amended 2008) (“[W]hen a transaction bears a reasonable relation to this state
and also to another state or nation the parties may agree that the law either of this state or of such
other state or nation shall govern their rights and duties.”). Issues of contract interpretation can
always be resolved by an explicit provision in the parties’ agreement. Accordingly, the question of
interpretation falls under § 187(1), and there is no need to look to § 187(2).
340. RESTATEMENT (SECOND) OF CONFLICT OF LAWS § 204 cmt. b (AM. LAW INST. 1971)
(“If . . . the law chosen by the parties is not applied to govern issues involving the validity of the
contract, this [chosen] law will nevertheless be applied to determine questions of construction.”).
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no logical reason why the issue of scope should be conflated with the
issue of validity in the general run of cases.341
To be sure, there may be cases in which the validity of contract is
intertwined with the issue of its scope. In cases where the forum state’s
public policy would be offended by the application of the tort law of the
chosen state but not by its contract law, for example, then the scope of
the clause will impact the question of its validity. To argue that a court
should always apply the canons of the forum in order to address these
unusual cases, however, is to use a sledgehammer to crush a gnat. In the
overwhelming majority of cases, the public policy of the forum state will
not distinguish between the chosen jurisdiction’s tort and contract law.342
The courts should not adopt a rule of general application to resolve an
issue that arises only rarely.343 In cases in which the public policy of the
forum state distinguishes between the tort and contract law of the chosen
state, and where the issue of a clause’s scope therefore has a direct and
immediate impact on its validity, then it is appropriate for a court to
apply the canons of the forum. In all other cases, however, the court
should apply the canons of the jurisdiction named in the clause when
construing its scope.344 This approach (1) will produce consistent
interpretations of the clause regardless of forum, (2) is more consistent
with the terms of the hypothetical bargains likely to be struck by most
parties ex ante, (3) is in keeping with the Second Restatement of
Conflict of Laws, and (4) respects the ability of the parties to choose the
body of law that will be used to interpret their contract.
341. Cf. Martinez v. Bloomberg LP, 740 F.3d 211, 220 (2d Cir. 2014) (“It would undermine the
predictability fostered by forum selection clauses, however, if federal law—rather than the law
specified in a choice-of-law clause—were to govern the interpretation as well as the enforceability
of a forum selection clause.”) (emphasis in original).
342. See SPILLENGER, supra note 334, at 127 (“[M]ore often than not, choice-of-law clauses
operate to clarify matters of performance and interpretation, rather than fundamental questions of
enforceability.”). The Restatement “assigns to the lex fori issues of misrepresentation, duress, undue
influence, or mistake, and to the chosen law all other issues of formation and validity, including
capacity and form.” HAY ET AL., supra note 20, at 1129–30.
343. Where the public policy of the forum state does draw this distinction, moreover, there is no
obvious reason to why applying the forum state’s canons of construction will help to resolve the
problem.
344. This insight is not new. See Note, Choice-of-Law Rules for the Construction and
Interpretation of Written Instruments, 72 HARV. L. REV. 1154, 1164 (1959) (observing that “express
stipulations of the legal system to be applied in interpreting the contract have not been considered
objectionable”); Note, Commercial Security and Uniformity Through Express Stipulations in
Contracts as to Governing Law, 62 HARV. L. REV. 647, 649 (1949) (“When the issue concerns only
the construction or interpretation of the contract, there is no valid reason for denying full effect to
the expressed intent of the parties. For once, the authorities are in unanimous accord. The parties
may freely select any law, even if totally unconnected with their contract.” (footnotes omitted)).
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CONCLUSION
345. See William N. Eskridge, Jr., Overriding Supreme Court Statutory Interpretation Decisions,
101 YALE L.J. 331, 332 (1991) (discussing instances where Congress enacted legislation to overturn
the Supreme Court’s interpretation of a statute).
346. Cape Flattery Ltd. v. Titan Mar., LLC, 647 F.3d 914, 923 (9th Cir. 2011) (“There is a good
reason to indicate clearly to contracting parties what specific language will signify that the scope of
their agreement is narrow. Once they know the specific language that is required, they can rely on
that language to . . . produce a result they jointly desire.”); Gerhard Wagner, The Dispute Resolution
Market, 62 BUFF. L. REV. 1085, 1151 (2014) (“[W]here the court [in a prior judgment] interpreted
contract language, the litigants of the future will know better which words and phrases to use and
which to avoid.”).
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347. The proposed clause omits any language relating to the Federal Arbitration Act to guard
against the possibility that a court would inadvertently interpret the choice-of-law clause as a de
facto arbitration clause. If the contract contains a separate arbitration clause, however, and if the
parties wish to clearly signal that they want the FAA to govern that arbitration, then they may add
the following language to the end of the clause: “Any arbitration conducted pursuant to the terms of
this Agreement shall be governed by the Federal Arbitration Act.”
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APPENDIX
Question 1
When your company enters into a contract that contains a choice-of-law
clause selecting the laws of State X, does it generally intend to select the
statutes of limitations of State X? Or does your company generally intend to
exclude statutes of limitations from the scope of its choice-of-law clauses?
Question 2
Had you ever thought about the questions posed in Question 1 before
just now?
Question 3
There is a contract that contains the following choice-of-law clause:
Without conducting any research, please select the answer that reflects
your best guess as to how a court in your home state would interpret
this clause.
348. Ultimately, I eliminated forty-nine contracts from the secondary dataset because they opted
out of the CISG, forty-four contracts because the counterparty had its place of business in a country
that had not ratified the CISG, thirty-seven contracts because they selected the law of a country that
had ratified the CISG, and one contract because it opted in to the CISG. The remaining seventy-four
contracts were excluded because they (1) were repeats, (2) were amendments to previous contracts,
(3) were formatted in a manner that made them unreadable, or (4) did not contain a choice-of-law
clause.
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the CISG. I then sent letters to the forty-four U.S. companies that were
party to each of these contracts to ask what they intended when they
selected the law of a U.S. state. I received nine responses. Each of these
responses is reproduced in the main body of the Article. It should be
emphasized that all of these responses came from attorneys at public
companies. To the extent that public companies are larger and wealthier
than the typical U.S. company, the views of the attorneys who work
there may not be representative of the views of attorneys who work at
smaller companies.
Question 1
When your company enters into a contract that contains a choice-of-law
clause selecting the law of State X, what is your general preference as to
the scope of that clause? Do you want the law of State X to apply only
to contract claims (such as breach of contract) that may arise between
you and your counterparty? Or do you also want the law of State X to
apply to any tort claims (such as fraud) and statutory claims (such as
theft of trade secrets) that may arise between you and your counterparty?
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Question 2
If you indicated in Question 1 that you wanted the law of State X to
apply only to contract claims, please skip this question. If you indicated
in Question 1 that you wanted the law of State X to apply to tort and
statutory claims, do you want the law of State X to apply to all such
claims, including claims that are unrelated to the contract? Or do you
want the law of State X to apply only when the tort and statutory claims
are related to the contract in some way?
Question 3
There is a contract between Party A and Party B that contains the
following choice-of-law clause:
Without conducting any research, please select the answer that reflects
your best guess as to how a court in your home state would interpret
the scope of this clause.
a) The law of State X will apply to all contract claims brought by Party
A against Party B but it will not apply to tort or statutory claims.
b) The law of State X will apply to all contract claims brought by Party
A against Party B. It will also apply to tort and statutory claims brought
by Party A that are related to the contract. The Law of State X will not,
however, apply to tort and statutory claims brought by Party A that
are unrelated to the contract.
c) The law of State X will apply to all contract, tort, and statutory claims
brought by Party A against Party B regardless of whether these claims
are related to the contract.