S:\Townsend\Jones\Conflict of Laws

The exam consists of one long essay problem. Your essay will be graded according to the level of understanding you manifest in discussing and applying the principles of conflict of laws relevant to the question asked. You can get an "A" without citing any cases studied in the course, but if you do remember the name or any identifying feature of any source of the law of conflict of laws, it would help your grade somewhat to mention it. Similarly, I appreciate the frequent use of headings that identify and separate the various parts of your analysis.

You have three hours to read and analyze the problem and to organize and write your essay. Budget your time prudently. Do not spend time describing rules or principles not responsive to the question asked. Similarly, do not spend time simply reciting the facts. However, it is a good idea to refer to the facts, especially the telling details, to support an argument or a conclusion that is responsive to the question asked. Feel free to save time by using abbreviations, including Tr for traditional, R2 for Second Restatement of Conflict of Laws, GI for governmental interest, and SL for statute(s) of limitations.

If you type, double-space your essay and staple all your pages together. If you write, write very plainly using only one side of each page and do not staple anything.

Blue courts still adhere to the traditional approach (Tr) to conflict of laws. In 1999, the Supreme Court of Blue renewed its commitment to it, citing with approval all of the cases assigned in our course that rigorously apply its method of formalistic reasoning and the writings of Professor Beale and the "vested rights" theory.

Red courts now employ "governmental interest "analysis (GI) to choice of law issues. The Supreme Court of Red has cited with approval all of the opinions assigned in our course that purport to follow it, including those by California courts. Red courts apply governmental interest analysis to statutes of limitations (SL) issues and follow the modern trend in dealing with choice of law clauses in contracts.

White courts invariably purport to apply the latest version of the Restatement (Second) of Conflict of Laws (R2) to all choice of law issues. The Supreme Court of White has cited with approval all of the cases assigned in our course that purport to follow the Second Restatement.

D.er (think "defendant" and "employer") does substantial and continuing business in all three states. Hence, it is subject to the adjudicatory jurisdiction (including "personal jurisdiction") of Red, White and Blue courts. D.er was incorporated in Blue where it has its headquarters and its principal place of business.

D.er supplies accounting and information services to select customers. None of its employees belong to a labor union. It is private in many senses: it has no publicly traded stock, no public employees or contracts with any governmental entity, and it has earned a reputation for not divulging information confided to it by its shadiest customers.

D.er's shadiest customer is Whiteco, a company that was incorporated in White where it does most of its business. Even though it makes enormous profits in White, it reports only a small fraction of its income to the White Tax Board (WTB), the White state agency empowered to enforce White's corporate tax law. The president of Whiteco communicates the true (shady) facts to his brother, the president of D.er, in confidence with the understanding that the true financial picture of Whiteco will be confided only to the most trusted employees of D.er and Whiteco. D.er has hidden the fact of tax evasion of White state taxes by Whiteco by reallocating most of Whiteco's income to sources in Red and Blue. (Red and Blue impose no taxes on any corporations.) In aiding and conspiring with Whiteco, D.er also violated the law of White.

Ms. Plee (think "plaintiff' and "employee") was born, raised, educated and still lives in Red. After a thorough background check, the president of D.er mailed to her an offer of employment as an accountant, from Blue to Plee's home in Red. She immediately signed the enclosed copy of the written agreement of employment "at will" and mailed it from Red to D.er in Blue.

The written contract was brief. It was silent on the duration of employment and job security. It stipulated a wage at the standard rate for accountants with Plee's credentials. It also stated:

"It is agreed that the rights and duties of the parties to this agreement shall be governed by the law of Blue as interpreted by the courts of Blue."

For several years thereafter, Plee commuted from her home in Red the fifty miles to D.er's headquarters in Blue. She received praise, promotions and pay increases from time to time. When the president of D.er was persuaded of her loyalty to D.er and its customers, he assigned the Whiteco account to her.

Despite the "corporate culture" at D.er, Plee was shocked to learn of the evasion by Whiteco, aided by D.er, of taxes owed to the state of White. Knowing that her job was in jeopardy, she nevertheless secretly reported all that she knew to the WTB about the tax evasion by Whiteco.

In due course, Whiteco was audited by the WTB. Eventually Whiteco was assessed large amounts of money for back taxes plus fines. Whiteco promptly paid all these sums to the WTB.

The president of D.er correctly suspected Plee of leaking the information. He discharged her immediately. Since he refused to write her a letter of recommendation, she had some difficulty finding a new job. But exactly one month from her dismissal, she found a new job with a small accounting firm in Red for the same pay she had when she was fired.

The "corporate culture" at her new job was much more to her liking and the commute was shorter. So for two years, she tried to put her experience at D.er out of her mind, as she only lost one month's income. Recently, however, she began having second thoughts about trying to forget D.er. It has been just a little over two years since Plee was discharged by D.er.

The Positions of Plee and D.er

Ms. Plee needs to overcome the defense of statute of limitations and to avoid the employment law of Blue. She would strongly prefer the employment law of White, and is presently willing to settle out of court only if D.er offers a sum of money substantially in excess of that permitted by the law of Red.

D.er is seeking to bar any action before trial with a statute of limitations defense.
That failing, its preference is for the employment law of Blue to govern, but it is willing
to settle according to the damages law of Red.

Statutes of Limitations of Blue, White and Red

Blue and White have identical three-year statutes of limitations for "all civil actions," whether for breach of contract or tortious injury, measured from the time of breach or injury to the time in which plaintiffs "civil action" is filed with a court with jurisdiction. Red, on the other hand, has a two-year statute of limitations for "contract actions" and a one-year limitation for "tort actions." The time period for either, however, "may be extended by written agreement of the parties."

The Employment Law of Blue, Red and White

As previously indicated, the Supreme Court of Blue is conservative, adhering to the traditional approach to conflict of laws, and reflecting the pro-business position of its legislature (recall: no corporate taxes). Its anti-labor position is reflected in Murphy v. Blue Chip, Inc. (Blue 1998),* in which the Supreme Court of Blue adhered to the traditional American common law doctrine that employment contracts that do not address their duration or job security may be terminated by either party "at will" at any time for any reason, including improper reasons, or for no reason at all. Murphy's complaint alleged the "tort" of "wrongful discharge in violation of public policy." The Murphy opinion replied that such claims were "really contract claims" because they were triggered by a termination of the employment contract and there was no allegation of death, personal injury or property destruction that typified "tort" claims. The Court rejected Murphy's attempt to circumvent the "at will" doctrine, explaining that "unfettered mobility of labor and capital is beneficial for our free market economy" and "any change is for the legislature." Accordingly, the Blue Court scoffed at Murphy's prayer for "compensatory tort damages and such punitive damages as the court and jury find appropriate," and affirmed the trial court's dismissal of Murphy's complaint.

In contrast, the legislatures of Red and White have each enacted an identically worded statute. Red Labor Code section 1102.5(b) and White Labor Code section 1-11111 each state:

"No employer shall retaliate against an employee for disclosing information to a government or law enforcement agency, where the employee has reasonable cause to believe that the information discloses a violation of a state statute, or violation or noncompliance with a state regulation."

However, the courts of Red (another state with no corporate taxes) have treated their statute restrictively. In Smith v. Red-Eve Brewery (Red1950),* the Supreme Court of Red denied Smith's claim for punitive damages because Red Labor Code section 1102.5 (b) was deemed incorporated in the contract of employment and hence created a limited exception to the "at will" interpretation of an employment agreement that otherwise was silent on the duration of employment and job security. It then invoked the statutory law of Red that flatly prohibited punitive damages for any breach of contract. As a result, few cases* have been brought in Red courts against Red employers because the "whistle blowers"' actual contract damages are usually not large enough to make it worth suing for.

In contrast, in Hardy v. The Bad Guys (White 1999),* the Supreme Court of White (the state that taxes corporate income) interpreted White Labor Code Section 111-111 as permitting a "tort" action for "wrongful discharge" and allows the jury to add to any compensatory damages whatever "punitive damages" it thinks appropriate. The Hardy opinion reasoned that Section 1-11111 was designed to encourage employees to report unlawful violations of state law without fear of retaliation, and that the threat of punitive damages would decrease violations of state law. Of course, the jury always has discretion to deny punitive damages.

There is one further difference in the law of employment contracts among these three states. Cases* decided by Red and White courts adhere to the majority common law rule that a contract is made when the offeree puts her acceptance "in the mailbox." Blue, on the other hand, ruled in a case* involving formation of employment contracts by correspondence, that the contract is not formed until the offeror receives the acceptance.

The Question

If Plee were to sue D.er immediately in the state of her choice, is it likely that Plee would recover damages in excess of that allowed by the substantive law of Red? Discuss the choice of law issues involved. Consider the likely outcome in Red, White and Blue separately, but in whatever order you choose. Conclude by advising Plee of the state in which she should prepare to sue D.er in light of your analysis of the question asked.

* All cases marked with an asterisk had no out-of-state complications. All the parties and events were confined to the state that rendered the opinion.