Conflict of Laws 

Professor Rhonda Wasserman

Exam from Spring 2006

INSTRUCTIONS

    You may pick up the exam from the Registrar's office any time between 8:30 a.m. and 5:00 p.m. on Thursday, April 27, 2006 and turn your answer in by 5:00 p.m. on Friday, April 28, 2006; OR you may pick up the exam between 4:00 and 5:00 p.m. on Friday, April 28, 2006, and turn your answer in by 10:00 a.m. on Monday, May 1, 2006, OR you may pick up the exam any time between 8:30 a.m. and 5:00 p.m. on Monday, May 1, 2006 and turn your answer in 48 hours later, OR you may pick up the exam between 8:30 and 10:00 a.m. on Tuesday, May 2, 2006, and turn your answer in 48 hours later. In all events, the exam must be completed by Thursday, May 4, 2006 at 10:00 a.m.

    This is an open-book exam. You may consult the casebook, your class notes, outlines, hornbooks, and other study guides. You are bound by the normal in-class exam rules to the extent that they make sense for a take-home exam. For example, you must work alone without the assistance of any other person. Likewise, you must not share or discuss the questions with any other person.

    This exam has fourteen (14) pages; if you do not have all fourteen (14) pages, please inform the Registrar immediately. The exam consists of ten (10) multiple choice questions and one (1) essay question with two (2) sub-parts. The weight assigned to each question (or sub-part or group of questions, in the case of the multiple choice questions) is indicated at the beginning of each question, sub-part or group of questions.

    Please be sure to include your exam number in the appropriate space on the Scantron answer sheet for the multiple choice questions and do not include your name. Please treat the Scantron sheet with care, taking care not to bend it or dog-ear the corners.

    When answering the multiple choice questions on the Scantron answer sheet, please use a No. 2 pencil to facilitate the machine-grading of your answers. Each of the multiple choice questions will be weighted equally. Unless otherwise indicated, the facts of each multiple choice question stand on their own. Choose the best answer. If you find a question or one or more of the answers ambiguous and therefore have difficulty answering the question, you may include a short explanation in your typed answer identifying the ambiguity and explaining how you resolved it.

    The answer to the essay question must be typed. Please use 8½ by 11 inch paper; 12 point type; and one inch margins. Please double-space the answer and number the pages of the answer. The typed copy should not exceed 15 pages (including any explanations of multiple choice questions). Please put your exam number in the upper right hand corner of every page of your answer. Do not put your name on any page. When answering the essay question, please raise, discuss, and decide all issues presented, whether or not they are dispositive, and whether or not your resolution of one issue makes discussion of other issues technically unnecessary. If you need to assume additional facts, please state what those facts are and how they affect your analysis.

    If a constitutional provision, statute, or section of one of the Restatements of Conflict of Laws is relevant, you should refer to it specifically. You are encouraged to refer to other relevant authority, including cases. You should explain fully the relevance of all authority cited.

    Best of luck and enjoy the summer!

MULTIPLE CHOICE QUESTIONS
(30 points; 10 questions worth 3 points each)

1. Sunnyside Hospital ("Sunnyside") is located in Brooklyn, New York. Gauzeco, a New York corporation with its principal place of business in New York, New York, manufactures and sells gauze pads in all sizes. Gauzeco' s gauze pads are made out of cotton. Sunnyside and Gauzeco negotiated and executed a contract in New York that obligated the hospital to buy all of the gauze pads it required during the 2005 calendar year from Gauzeco. The contract contained a price list for all of the different gauze pads Gauzeco sells, by size and quantity ordered. Because of the anticipated high volume of purchases that Sunnyside would make from Gauzeco during 2005, the prices listed in the contract were 10% lower than Gauzeco ordinarily charged its best customers. The contract did not explicitly address the consequences of a spike or drop in cotton prices. The contract contained the following clause: "This agreement shall be governed by and construed in accordance with the laws of Pennsylvania." During the summer of 2005, terrible weather conditions destroyed the cotton crop throughout most of the United States and the price of cotton sky-rocketed. Gauzeco filed a law suit against Sunnyside in New York seeking a declaration that the doctrine of impossibility released Gauzeco from its obligation to honor the price terms in the contract. Please assume that Pennsylvania law does not recognize the defense of impossibility unless the contract specifically addresses the issue, while New York law relieves a party from contractual obligations that become impossible or impracticable to perform through no fault of the party unless the contract specifically provides otherwise. If New York follows the Second Restatement of Conflicts, which state's law should the court apply to determine the extent of Gauzeco's obligations under the contract?

A.  Pennsylvania law because on these facts section 187(1) directs the court to apply the law of the state chosen by the parties.

B.  New York law because Pennsylvania has no substantial relationship to the parties or the transaction.

C.  New York law because New York has a materially greater interest than the chosen state in the determination of this particular issue.

D.  New York law because section 187 is irrelevant here, and under section 188, the place of contracting, the place of negotiation of the contract, the place of performance, and the location of the subject matter were all in New York and both parties were located there.

E.  Both B and C.

2. Zelda is a 22-year old college student at the University of Pittsburgh. Throughout her childhood and for the first five semesters of college, Zelda lived in her parents' home in Pittsburgh, Pennsylvania. During her junior year in college, Zelda had the opportunity to spend the spring semester studying at Massachusetts Institute of Technology ("MIT") in Cambridge, Massachusetts. While at MIT, Zelda met and fell in love with an engineering graduate student named Josef, a citizen of Massachusetts. During exam week, Zelda and Josef became engaged and decided they would marry following Zelda's graduation from college. At the end of May, Zelda returned to Pittsburgh, where she had plans to work for the summer at a clothing store. Josef remained in Cambridge. At the end of the summer, Zelda began her senior year at Pitt. Over Christmas break, she returned to Cambridge to spend time with Josef. In early January, before Zelda returned to Pitt, she and Josef bought a condominium as joint tenants in Cambridge and Zelda applied for a Massachusetts driver's license and registered to vote. On her way back to Pittsburgh to finish her last semester of college, Zelda was involved in a serious car accident in northeastern Pennsylvania. Dilbert, the driver of the other vehicle, is a citizen of Pennsylvania. Zelda filed suit against Dilbert in the United States District Court for the Eastern District of Pennsylvania, alleging that Dilbert's negligence caused her injuries. Dilbert moved to dismiss the complaint for lack of subject matter jurisdiction. For diversity purposes, of which state is Zelda most likely to be considered a citizen?

A. Pennsylvania, because Zelda was physically present there on the date she filed the complaint.

B. Pennsylvania, because it was Zelda's state of origin.

C. Massachusetts, because Zelda became a citizen of Massachusetts upon her engagement to Josef.

D. Massachusetts, because while Zelda was physically present there, she appears to have formed the requisite intent to make Massachusetts her permanent home.

E. Both A and B.

3. Penelope, a 47-year old Pennsylvania citizen, suffers from chronic back pain as a result of an injury she sustained years ago. Last year, Penelope's doctor prescribed the pain medication Votox. Votox is manufactured by Drugco, a Delaware corporation with its principal place of business in Dover, Delaware. Four months ago, Penelope suffered a major heart attack. She has been severely incapacitated as a result of the heart attack and has been unable to return to work. Since suffering the heart attack, Penelope learned that Votox greatly increases the risk of having a heart attack and other cardiac problems. Penelope believes that Drugco continued to market Votox even after it learned that Votox causes these problems. Penelope filed a lawsuit stating state-law tort claims against Votox in the United States District Court for the Western District of Pennsylvania. Please assume that if Pennsylvania law governs her claim, Penelope may be able to recover punitive damages while if Delaware law governs her claim, Penelope will not be able to recover punitive damages. Further assume that Drugco filed a motion to transfer the action pursuant to 28 U.S.C. § 1404(a) from the United States District Court for the Western District of Pennsylvania to the United States District Court for the District of Delaware and the court granted the motion. Which state's law should the federal court sitting in Delaware apply to determine if Penelope is entitled to punitive damages on these facts?

A. Under Klaxon, the federal court in Delaware should apply the same law regarding punitive damages that a state court sitting in Delaware would have applied.

B. Under Van Dusen, the federal transferor court should apply the same law regarding punitive damages that the transferee court would have applied.

C. Under Van Dusen, the federal transferee court should apply the same law regarding punitive damages that the transferor court would have applied.

D. Under Semtek, the federal court in Delaware should craft a federal common-law choice of law rule to determine the applicable law.

E. Both A and C.

4. Paulette, a citizen of Mississippi, was treated by St. Jude Children's Hospital (the "hospital") in Memphis, Tennessee when she was 17 years old. The hospital, which does not charge patients for the care it provides, is a non-profit corporation organized under the laws of Tennessee. The hospital qualifies as a charity under both Tennessee law and section 501(c)(3) of the Internal Revenue Code. The hospital diagnosed Paulette with pediatric cancer and treated her with chemotherapy and radiation. After reaching the age of majority, Paulette learned that the hospital had misdiagnosed her and that she never should have received either chemotherapy or radiation. Paulette has prepared a complaint against the hospital, alleging negligence and medical malpractice. Under Tennessee law, charitable organizations are immune from suit. The primary policy underlying Tennessee's charitable immunity law is to shield from liability charities that perform charitable work within Tennessee. Mississippi, on the other hand, no longer recognizes the doctrine of charitable immunity. In repealing its charitable immunity statute, the Mississippi legislature concluded that it was fundamentally important to compensate victims of negligence and other tortious conduct and that, like for-profit businesses, charities can obtain liability insurance to protect themselves from ruinous exposure. Assume that the hospital would be subject to personal jurisdiction in either Mississippi and Tennessee and that neither state follows renvoi. Which statement is most accurate?

A. If Mississippi follows the First Restatement of Conflicts, it would not apply Tennessee's charitable immunity law even though Tennessee is the place of the wrong because Tennessee law violates a fundamental public policy of Mississippi.

B. Paulette should file suit in Mississippi as long as Mississippi applies governmental interest analysis as proposed by Professor Currie.

C. Paulette should file suit in Tennessee as long as Tennessee applies governmental interest analysis as proposed by Professor Currie.

D. Paulette should file suit in Tennessee as long as Tennessee applies the Neumeier rules.

E. Both C and D.

5. The facts are the same as stated in Question # 4 except assume that Paulette has filed suit against the hospital in a state court in Tennessee and further assume that Tennessee follows Neumeier v. Kuehner [p. 195], Schultz v. Boy Scouts of America, Inc. [p. 200] and Padula v. Lilarn Props. Corp. [p. 210]. Which state's law would the Tennessee court apply to determine whether the hospital is immune from suit?

A. Tennessee law because Neumeier rule 1 governs.

B. Tennessee law because Neumeier rule 2 governs.

C. Tennessee law because Neumeier rule 3 governs.

D. Mississippi law because Neumeier rule 2 governs.

E. Mississippi law because Neumeier rule 3 governs.

6. Paul and Mary, both citizens of Pennsylvania, were married in Pennsylvania. Two years later, Mary fell in love with Peter, also a citizen of Pennsylvania. Rather than break off her relationship with Peter or divorce Paul to marry Peter, Mary decided that she would remain married to Paul and seek to marry Peter too. For purposes of this question, please assume that (1) Utah law permits polygamous marriages; (2) Pennsylvania law forbids polygamous marriages; and (3) Mary and Peter were married in Utah while Mary remained married to Paul. Following a short honeymoon in Utah, Mary and Peter returned to Pennsylvania, where they (and Paul) currently live. When Peter's employer refused to provide Mary with the medical insurance benefits it offers to spouses of its employees, Peter and Mary filed suit against Peter's employer in a Pennsylvania state court to compel the employer to provide Mary with the insurance benefits. Which argument or arguments should the employer raise in its defense?

A. While courts following the First Restatement of Conflicts typically apply the law of the place of celebration to determine the validity of a marriage, they are free to invalidate a polygamous marriage that violates the public policy of the state in which the parties are domiciled.

B. The full faith and credit clause of the Constitution does not require Pennsylvania to recognize a polygamous marriage between its domiciliaries.

C. The Defense of Marriage Act, 28 U.S.C. § 1738C, shields states from the obligation to give full faith and credit to polygamous marriages.

D. Both A and B.

E. A, B and C.

7. Jesse, a citizen of Pennsylvania, is a huge Star Wars fan. He found an on-line dating service that purports to help Star Wars fans around the world find one another. The on-line dating service is owned and operated by Starco, a Delaware corporation with its principal place of business in Berkeley, California. Starco promises to screen all those who sign up for its dating service to ensure that they are genuine, card-carrying Star Wars fans. Jesse signed up for a 6-month unlimited dating plan, with photo-posting and anonymous e-mail privileges. He authorized Starco to charge $250 to his credit card for this service. Jesse met four local women through Starco's web site, but when he arranged to meet them, he was very disappointed to discover that only one of them was a true Star Wars fan. When he demanded that Starco refund the $250 charge, the company declined. Jesse filed suit against Starco in a state court in Pennsylvania, alleging breach of contract. Please assume that the Pennsylvania court concluded that it had personal jurisdiction over Starco but that California substantive law would govern Jesse's claim. Jesse sought to discover all documents that discuss or reflect the efforts, if any, that Starco took to ensure that all those who signed up were in fact Star Wars fans. Under California law, documents that were created electronically must be produced in the same format in which they were created (so that they can be searched electronically and so that metadata remains intact). Under Pennsylvania law, documents that were created electronically may be produced as .pdf files or printed out and produced in hard copy. Thus, if Pennsylvania law were applied, Jesse would not be able to search Starco's electronically-created documents and he would lack access to the metadata. Access to the imbedded metadata would make it much easier for Jesse to succeed on the merits of his claim. Which of the following considerations would support the Pennsylvania court's characterization of the electronic discovery law as substantive?

A. Given the effect that access to the metadata would have on Jesse's likelihood of success on the merits, the choice between Pennsylvania and California law may be outcome-determinative.

B. It may be difficult for the Pennsylvania court to monitor document production under California law if the Pennsylvania judiciary is not as technologically sophisticated as the California judiciary or its computer system is not as current.

C. At the time it created the electronic documents, Starco did not envision having to produce its electronic documents in the same format in which they were created.

D. Both A and B.

E. Both A and C.

8. New York requires corporations doing business in the state to pay a franchise tax based upon the firm's capital. Domestic corporations (i.e., those corporations chartered under the laws of New York) must pay tax in an amount equal to 1% of the par value of the firm's stock. Par value is "the arbitrary dollar amount assigned to a stock share by the corporate charter." Domestic corporations have considerable leeway in controlling their tax liability as they may set their stock's par value at a level well below its market value. Foreign corporations (i.e., those corporations chartered under the laws of states other than New York) must pay tax in an amount equal to 1% of the market value of their stock. Unlike domestic corporations, foreign corporations cannot control their tax liability because they cannot adjust the market value of their stock at will. Choco, a Pennsylvania corporation, would like to challenge the constitutionality of the New York tax law on federal constitutional grounds. (Do not concern yourself with potential constitutional challenges under the commerce clause or other claims not studied in class.) Which outcome is most likely?

A. The court will accept Choco's argument that the tax law violates the privileges and immunities clause because the law distinguishes between foreign and domestic corporations without a substantial reason and the discrimination practiced against nonresidents does not bear a substantial relationship to a legitimate state objective.

B. The court will accept Choco's argument that the tax law violates the equal protection clause unless it finds that the tax law is narrowly tailored to serve a compelling state interest.

C. The court will reject Choco's argument that the tax law violates the privileges and immunities clause because Choco is not a "citizen" of a state.

D. The court will reject Choco's argument that the tax law violates the equal protection clause because Choco is a not a "person within its jurisdiction."

E. Both C and D.

9. David, a citizen of Pennsylvania, was involved in an automobile accident in Pittsburgh. The other vehicle was driven by Phineas, also a citizen of Pennsylvania at the time of the accident. Phineas believes that the accident was David's fault. Six months after the accident, Phineas moved to Alaska and filed suit against David in the United States District Court for the District of Alaska, alleging David's negligence and seeking compensatory damages (including damages for pain and suffering). Please assume that Pennsylvania law permits recovery for pain and suffering only up to the amount of the claimant's proven out-of-pocket losses. So if Phineas could prove that he incurred $80,000 in out-of-pocket losses, under Pennsylvania law he could recover no more than an additional $80,000 for pain and suffering (for a maximum total recovery of $160,000). Further assume that Alaska imposes no limit on the recovery for pain and suffering. David made a motion to dismiss the complaint, arguing that the court lacked personal jurisdiction over him.  Even though David had no contacts whatsoever with Alaska, the federal court denied his motion and concluded that it had personal jurisdiction over him. The parties submitted briefs on the choice-of-law question. Following briefing and oral argument, the federal court concluded that Alaska law regarding recovery for pain and suffering would govern Phineas's claim because Alaska had an interest in compensating him now that he was an Alaska citizen. Following a trial on the merits, the federal court rendered judgment against David in the amount of $450,000. Rather than appeal, David immediately filed suit against Phineas in state court in Pennsylvania, seeking to collaterally attack the federal judgment. Which result is most likely in the Pennsylvania court?

A. The Pennsylvania court will decline to recognize the federal judgment because neither the full faith and credit clause of Article IV nor 28 U.S.C. § 1738 requires state courts to recognize federal judgments and no other constitutional provision or legal doctrine requires state courts to recognize federal judgments.

B. The Pennsylvania court will decline to recognize the federal judgment because the rendering court lacked personal jurisdiction over the defendant and it would violate due process to bind David by the judgment.

C. The Pennsylvania court will decline to recognize the federal judgment because the federal court likely violated both the due process clause and the full faith and credit clause by applying Alaska law regarding recovery for pain and suffering rather than Pennsylvania law.

D. The Pennsylvania court will decline to recognize the federal judgment because the federal court lacked subject matter jurisdiction: both parties were citizens of Pennsylvania at the time that the claim arose and post-accident changes in domicile or citizenship may not be considered.

E. None of the above.

10. In December 2000, Philippe and Denis entered into a contract for the sale of miniature replicas of the Eiffel Tower. Both Philippe and Denis were born in France but have been domiciled in Pennsylvania for at least 15 years. The men negotiated the contract in Philadelphia and the contract called for both parties to perform in Pennsylvania. Under the contract, Denis promised to purchase at least 5000 Eiffel Tower replicas during the course of the 2001 calendar year from Philippe. Denis further agreed to submit purchase orders no later than the 15^th of each month and Philippe agreed to fill such orders no later than the 30^th of each month. A price schedule was attached to the contract and made a part thereto. By the end of December 2001, Denis had purchased only 3500 Eiffel Tower replicas and Philippe demanded that Denis place an additional order for 1500 more replicas or at least pay Philippe the amount that he would have profited from the sale of 1500 additional replicas. Denis refused. More than four years (but less than five years) later, in March 2006, Philippe filed suit against Denis in New Jersey, where both men have summer homes. The Pennsylvania statute of limitations for contract claims is four years. The New Jersey statute of limitations for contract claims is five years. Applying New Jersey choice-of-law rules, the New Jersey court concluded that Pennsylvania substantive law governs Philippe's claim against Denis. Which state's statute of limitations should the New Jersey court apply to determine whether Philippe's claim is time-barred?

A. If New Jersey has a borrowing statute that requires application of the statute of limitations of the state in which the cause of action arose, then the New Jersey court should apply the Pennsylvania statute of limitations.

B. The New Jersey court should apply the New Jersey statute of limitations because the United States Supreme Court in Sun Oil Co. v. Wortman [p. 383] held that states are required by the federal Constitution to treat statutes of limitations as procedural.

C. The New Jersey court should apply the Pennsylvania statute of limitations because the United States Supreme Court in Guaranty Trust Co. v. York [p. 572] held that statutes of limitations are outcome-determinative for Erie purposes and therefore substantive for choice-of-law purposes.

D. Both A and C.

E. None of the above.

ESSAY QUESTION
(70 points; two sub-parts weighted unequally)

    Harold and Maude, both Pennsylvania domiciliaries, grew bored with their jobs and decided they needed a change. So they quit their jobs, formed a partnership called Western Adventure, and began a new business. Western Adventure promotes, hosts and supervises vacations to New Mexico for recent high school graduates. Scott and Zelda Fitzgerald lived in Pennsylvania with their son, Robert, a recent high school graduate. Robert bought one of the tours offered by Western Adventure and went to New Mexico with a group of other high school graduates, including his best friend, George, also from Pennsylvania. Harold and Maude had represented to the Fitzgeralds that the graduates would be adequately supervised and that alcohol and drug use would be prohibited on the tour. Harold and Maude also had represented that if they discovered alcohol or drug abuse by any graduate, they would send the graduate home and end his or her participation in the tour.

    As it turned out, Harold and Maude did not adequately supervise the students. While the group was touring in New Mexico, George wandered off and bought a gun at Herman's, a sporting goods store that is part of a national chain with stores in all fifty states. Herman's is a New Mexico corporation with its principal place of business in Albuquerque, New Mexico. The night before the group was to leave New Mexico, Harold and Maude threw a party for the graduates in their hotel room. Even though George became visibly inebriated, Harold and Maude continued to serve him more alcohol. After drinking even more, George had a terrible argument with Robert. In the heat of the moment, George drew the weapon he had purchased in New Mexico, and shot and killed Robert.

    Scott and Zelda have decided to bring a wrongful death action for their son's death. Before filing suit, they learned that George and his parents have few assets and no insurance. The most likely other defendants are Western Adventure and Harold and Maude for serving alcohol to George after he was already intoxicated, and Herman's, the sporting goods store from which George purchased the gun.

    New Mexico law imposes a three-day waiting period during which sellers of handguns are obliged to determine whether a prospective buyer has a criminal record. New Mexico law bars sellers from selling handguns to those with criminal records. George had identified himself as a Pennsylvania resident when he purchased the gun. Herman's sold George the gun without complying with the waiting period and without learning that George had a prior conviction in Pennsylvania for involuntary vehicular homicide. Under New Mexico law, a seller who violates the gun control law is civilly liable to any third parties injured as a result of the buyer's misuse of the gun. Pennsylvania has no such gun law.

    Pennsylvania has a statute, known as the social host dram shop immunity statute, which affords immunity to social hosts (as opposed to liquor licensees) from negligence claims for supplying alcohol. The Pennsylvania statute provides as follows:

No similar immunity is afforded by Pennsylvania law to bars, restaurants, clubs and other liquor licensees that serve alcohol to the public. Under New Mexico law, any person who serves alcoholic beverages to persons who appear to be intoxicated are liable to those subsequently injured by the intoxicated person; no immunity for social hosts exists.

SUBPART A
(50 points)

    For purposes of Subpart A only, assume that the Fitzgeralds decide to sue Harold and Maude for negligently serving George after he was already intoxicated and thereby causing Robert's death. Further assume that Pennsylvania follows the First Restatement of Conflict of Laws, while New Mexico applies the Second Restatement. While the Fitzgeralds would prefer to sue in Pennsylvania because it would be more convenient, they are prepared to file in New Mexico if it would afford them more favorable law. In which of the two jurisdictions should the Fitzgeralds file suit against Harold and Maude? Discuss in detail your reasoning.

SUBPART B
(20 points)

    For purposes of Subpart B only, assume that the Fitzgeralds decide to sue Herman's in the United States District Court for the Western District of Pennsylvania. Further assume that Pennsylvania follows governmental interest analysis. Which jurisdiction's law should the court apply to determine whether Herman's is liable to the Fitzgeralds for their son's death? Discuss in detail your reasoning.

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