MEMORANDUM

TO:            Study Committee

FROM:           Prof. Robert Pushaw

RE:                Uniform Conflict of Laws-Limitations Act

DATE:           June 23, 2004

            This report offers guidance in considering possible revisions to the 1982 Uniform Conflict of Laws–Limitations Act, which NCCUSL withdrew in 1999. Initially, I will provide background information on statutes of limitation and the efforts of the Commission and the American Law Institute to bring uniformity to this subject. I will then summarize the treatment of the Uniform Act in the states. Finally, I will evaluate scholars’ critiques of the Uniform Act and their proposed changes to it.

I. BACKGROUND

            Achieving uniformity in an area as diverse and complex as statutes of limitation (SLs) presents formidable challenges. Each state has imposed a time constraint for bringing any particular legal action and has developed rules for extending this deadline in certain situations. Each SL reflects a policy determination that balances three main concerns: (1) fairness to the plaintiff seeking to vindicate his rights; (2) the interest of potential defendants in not having to face the hazards of litigation after a reasonable amount of time; and (3) the government’s need for an efficient judicial system that processes timely (as opposed to stale) claims through the presentation of reliable evidence.

            This delicate legislative balancing can be upset in interstate litigation, which has increased dramatically as “minimum contacts” jurisdiction has given plaintiffs wide latitude in choosing where to file suit (especially when the defendant is a multistate business enterprise). The court of the forum state must decide whether to apply its own SL or that of another state. This determination often turns on choice-of-law principles, which seek to identify the state that has the most significant contacts with the parties and the transaction at issue.

            Historically, courts deemed SLs “procedural” and hence based on the law of the forum state, even if a different state’s “substantive” law applied. Thus, a plaintiff whose claim was time-barred by the state with the most substantial contacts would seek another state with minimal jurisdictional ties but a longer SL. To deter such forum shopping, most states enacted “borrowing statutes,” which typically required the forum court to use the shorter SL of another state (usually the jurisdiction whose substantive law applied, but sometimes the state where defendant resided). The widespread adoption of such borrowing statutes reflects a consistent legislative judgment that forum shopping is a serious problem.

            There have been two major attempts to increase uniformity and rationality in SLs: the Uniform Conflicts of Law-Limitations Act and the ALI’s Restatement (Second) of Conflicts of Law. These measures incorporated very different approaches.

            The Uniform Act tried to solve the problem of forum shopping by directing

the forum state court to apply its choice-of-law rules to determine which state’s substantive law governs the claim, and then use the SL of that state (as well as its tolling and accrual rules) . However, Section 4 of the Uniform Act allows the forum court to use its own state’s SL if it finds that another state’s SL “is substantially different from the limitation period of this State and has not afforded a fair opportunity to sue upon, or imposes an unfair burden in defending against, the claim.” The Commissioners commented that Section 4's “escape clause” should be invoked only rarely to avoid unjust results caused by rigid application of the Act.

            In 1988, the ALI rejected the Uniform Act’s approach by providing that the SL should be determined by the law of the state with the most significant relationship to the limitations issue, regardless of which state’s substantive law controls. Section 142 of the Restatement Second instructs courts to select the applicable SL by considering the general choice-of-law factors set forth in Section 6 (e.g., the forum state’s policies, the relevant policies and interests of other states, the protection of justified expectations, the policies underlying the subject of law in dispute, certainty and predictability, and ease in determining and applying the law). Section 142 then provides that, “unless the exceptional circumstances of the case make such a result unreasonable,” the forum court should apply its own SL (1) barring the claim, and (2) permitting the claim, unless (a) doing so “would serve no substantial interest of the forum,” and (b) “the claim would be barred under the statute of limitations of a state having a more significant relationship to the parties and the occurrence.”

            In sum, under the Uniform Act, the SL is that of the state whose substantive law governs the underlying claim. By contrast, the Restatement Second initially authorizes courts to use a discretionary balancing of factors to choose the SL of the state with the most “significant relationship” to the limitations issue, but then sets forth very specific rules that presumptively favor applying the SL of the forum state, unless the shorter limit of another interested state would make more sense.

II. THE UNIFORM ACT IN THE STATES

            Five states have adopted, and currently use, the Uniform Act: Washington, Colorado, Oregon, North Dakota, and Montana. These jurisdictions have produced only a few pertinent cases; Montana has none. The precedent in the other four states can be summarized succinctly because the courts’ analysis is so cursory.

            A. Washington

            Washington has the most cases on point. The first was Hein v. Taco Bell, in which a Washington resident sued Taco Bell over harm caused by food served in one of its California restaurants. Following the Uniform Act, the Court of Appeals first determined that California’s substantive tort law governed the claim, then applied that state’s one-year SL to bar the action. The court declined plaintiff’s invitation to invoke the Act’s “escape clause” to use Washington’s three-year SL, finding that although the two-year time difference was “substantial,” California’s SL offered plaintiff a “fair opportunity” to sue. In Rice v. Dow Chemical Co., the Washington Supreme Court relied on the Uniform Act to hold that Oregon’s substantive law governed plaintiff’s personal injury claim, and that Oregon’s two-year SL barred the suit (even though Washington’s year-longer limitations period may have allowed it).

            In Williams v. State, the Court of Appeals cited Perkins but did not adhere to its rule of choosing the SL based upon the law underlying the claim. Rather, the Williams court considered the relationship of Washington and Oregon to the accident at issue (an Oregon resident killed when he struck a bridge connecting Washington and Oregon) and each state’s interest in applying its SL. The court concluded that Washington had the greater interest and hence used its longer limitations period, but ultimately dismissed the suit on the separate ground that Oregon’s “nonclaim” statute barred the action. In the later case of Ellis v. Barto, however, the Court of Appeals faithfully implemented the Uniform Act’s two-step test. First, it determined that the claim of a Washington resident, who had been injured in a car accident in Idaho, arose under Idaho’s laws governing traffic safety and torts. Second, Idaho’s two-year SL prohibited the action, even though Washington’s three-year SL would have permitted it.

            B. Colorado

            Two cases are relevant. First, In re the Marriage of Dickson involved a divorce proceeding in which a Colorado trial court had applied its state’s SL to bar a husband’s petition to annul his son’s adoption decree, which had been entered in California. The Colorado Court of Appeals reversed, following the Uniform Act to determine that California substantive law formed the basis of the husband’s claims as to the validity of the adoption decree, and that therefore California’s longer five-year SL should have been used to permit the action. Second, in the diversity case of Brown v. Globe Union, a federal district court decided that Colorado’s substantive law–and hence its SL–would apply because that state had the most significant relationship to the dispute.

            C. Oregon

            In Cropp v. Interstate Distributor Co., a Nevada resident driving in California hit a truck owned by an Oregon resident. The injured plaintiff sued in Oregon and sought the benefit of that state’s two-year SL. The Oregon Court of Appeals, however, implemented the Uniform Act and concluded that plaintiff’s claims were substantively based on California law, and thus that California’s one-year SL controlled and barred the action. Relying upon Cropp, an Oregon federal district court sitting in diversity concluded that the plaintiff’s products liability claims rested on Oregon law (even though the accident at issue had occurred in Washington), and accordingly applied Oregon’s SL to bar the action.

D. North Dakota

            In Perkins v. Clark Equipment Co., an Iowa plaintiff injured in that state brought a diversity suit in the federal court of North Dakota, where the product that caused his injury had been manufactured. Using North Dakota choice-of-law rules, the court held that Iowa law governed because that state had the most significant contacts with the claim and that Iowa’s SL barred the action, even though North Dakota’s limitation period had not expired. Although North Dakota had adopted the Uniform Act so recently that it did not apply to the case, the court mentioned that the result would have been the same under that Act.

            E. Arkansas

            Arkansas enacted the Uniform Act, but then repealed it in 1999. Nonetheless, a federal diversity case in 1992 is noteworthy because it is the lone example of a court’s reliance on Section 4's “escape clause” to avoid the general rule. In American General Fire & Casualty v. Wal-Mart Stores, an American General policyholder in Louisiana bought from Wal-Mart a Black & Decker iron, which malfunctioned and caused a home fire. American General paid his claim and sued Wal-Mart and Black & Decker in Arkansas, where the iron had been stored before being shipped to Louisiana.

            Initially, the court recognized that Louisiana substantive law applied, and that therefore under the Uniform Act that state’s one-year SL ordinarily should govern (as Wal-Mart contended). However, the court invoked the Act’s “escape clause” to conclude that Louisiana’s SL (1) was “substantially different” from Arkansas’ three-year period and (2) had not “afforded a fair opportunity to sue” because of the necessary and time-consuming investigations that followed the fire. The court emphasized that the drafters of the Uniform Act had created this exception precisely to address this type of unusual situation where the plaintiff faced a short SL and practical barriers prevented filing within that period.

            Overall, only a handful of cases in a few states contain interpretations of the Uniform Act. Court have tended to apply its provisions in a very straightforward fashion, without suggesting that the Act had any deficiencies that made it unworkable in practice or that led to unfair results. Therefore, the Act seems to be faring well in the states that have adopted it.

III. SCHOLARSHIP ON THE UNIFORM ACT AND SUGGESTED REFORMS

            Commentators have harshly criticized the Uniform Act. For example, Louise Weinberg argues that courts should apply general conflict-of-laws analysis to the specific context of statutes of limitations, and therefore rejects the “substantive” approach of the Uniform Act. Indeed, she attacks the very premise of the Act by stressing that modern conflicts law has abandoned uniformity as a goal because it often leads to irrational and unfair results. More specifically, Weinberg identifies two key flaws in the Act. First, it requires the forum court to select a single state’s substantive law as governing, despite the reality that different state laws may apply to distinct issues in the same case. In such situations, the court must determine which issue--and substantive law–to connect to the SL. Second, the SL of the “substantive law” state must be applied even if its own courts would use a different SL (e.g., based upon its state’s borrowing statute).

            In Professor Weinberg’s view, the soundest approach is found in the first sentence of Section 142 of the Restatement Second, which directs courts to employ the familiar conflicts principles of Section 6 by exploring the relative interests of the forum and the other concerned states. She finds it unfortunate that the drafters then added black-letter rules defining what the forum state “ordinarily” should do, which courts tend to apply mechanically without consulting the Section 6 factors. Weinberg laments that this addition injected the “substantive” model of SLs into the Restatement, thereby undercutting its initial (and proper) focus on using regular conflicts law to determine the appropriate SL.

            Echoing Professor Weinberg, Russell Weintraub argues that states, instead of adopting the Act, should repeal their borrowing statutes and thereby allow their courts “to give limitations the independent functional conflicts analysis that they require.” He specifically assails the Act’s “escape clause” as inviting courts to choose forum law if they feel the alternative is unfair. Professor Weintraub offers the following statutory proposal:

            1.         Statutes of limitations should be given the same conflict-of-laws analysis as is given to other issues in transjurisdictional occurrences.

            2.         A court of this state may, in the interests of efficient administration of justice, dismiss a suit without reaching a result on the merits, when this state’s limitations period has expired but conflicts-of-laws analysis does not indicate that the limitations law of this state should preclude suit elsewhere.

He characterizes the Restatement Second as moving “a halting step closer to a functional treatment of statutes of limitations,” particularly through its provisions permitting application of the SL of another state if the forum has no substantial interest in maintaining the claim and the other state’s SL would preclude the claim. Weintraub believes that this Restatement section will help alleviate forum shopping, but is still unjustifiably oriented toward the forum state.

            Taking a different critical tack in their treatise, Professors McDougal, Felix, and Whitten concede that the Uniform Act is clear and specific, but reject as simplistic its characterization of SLs as purely “substantive.” Rather, they contend that SLs may be supported by substantive or procedural policies (or both), and that it is unreasonable to deny application of the forum state’s

SL merely because it reflects procedural concerns. These authors agree with the Uniform Act’s goal of simplifying “borrowing statutes,” which have caused confusion because few state statutes are identical or even similar. Nonetheless, they maintain that the Act created new problems by deeming all SLs substantive, thereby undermining the procedural purpose of a state’s shorter SL. Finally, these authors assert that “unless the escape clause is applied in a way that eviscerates the statute, the act will essentially result in borrowing the longer, as well as the shorter, statutes of other states whose law controls other issues in the case.” Their general conclusion is that the Uniform Act is “misconceived” and should be withdrawn.

            In a separate article, Ralph Whitten recommends an ALI study of conflict of laws, which could serve as the basis for uniform national legislation. He uses SLs to illustrate the need for such reform. Whitten argues that existing approaches to SLs have not adequately addressed “the problems of determining what kinds of policies actually support a particular statute, a determination which is necessary under modern conflicts analysis in order to determine when the concerned states have interests in the application of their statutes in a multistate setting.” For example, he contends:

            [T]he Uniform Act, unless the escape clause is applied in a way as to completely

            undermine the principal provision, will require a forum state whose shorter statute

            is supported by policies of preventing inaccurate determinations based on stale

            evidence to always abandon its policies in favor of the longer statute of the state

            of the otherwise applicable law. This will be so even if that state’s statute is also

            based purely on “procedural” policies applicable only to the nonforum state’s own

            courts. This is surely not the kind of analysis modern conflicts thinking would

            commend.

Similarly, he criticizes Section 142 of the Second Restatement for failing to explain how a court should determine what policies (procedural, substantive, or both) support any particular SL. Accordingly, the ALI could fruitfully study

            how the forum should go about determining which policies actually support

            another state’s limitations period in a conflicts case and what the consequences

            should be of an inability to do so in any given situation. Useful also would be

            an examination of how “true” conflicts between limitations periods should be

            handled when they can be identified. Although other conflicts questions may

            be too controversial to solve with a uniform national rule, there seems to be a

            reasonable chance of reaching consensus on these matters, given the seemingly

            broad agreement that the forum should sometimes apply the limitations period

            of another state.

Professor Whitten’s blueprint would seem to be equally helpful to NCCUSL.

            Finally, a few commentators have been kinder to the Uniform Act. For instance, student author Christopher Stanton declares that the Act “sets forth a consistent and rational method for selecting a statute of limitation in a conflict situation.” Nonetheless, he concludes that the Act has created difficulties for courts in determining which state’s law forms the substantive basis for a particular claim, as judges have gotten bogged down in peripheral substantive issues. Thus, he recommends interpreting the Act to focus on the particular state law that invokes the SL.

            In sum, most scholars have condemned the Uniform Act for directing courts to choose the SL based upon the substantive law underlying the claim. Such an approach, they contend, is out of step with modern conflict-of-laws analysis, which suggests that a court’s multi-factor balancing of competing state interests and policies will yield the most rational SL.

IV. CONCLUSION

            The Uniform Act aimed to end forum shopping by adopting a single and plain rule for determining the appropriate statute of limitations, but with some judicial discretion to handle exceptional cases. In my opinion, the most intellectually defensible revision to the Act would authorize courts to apply ordinary conflicts principles to SLs through a case-by-case weighing of interests, but perhaps with added emphasis on the important concern of preventing forum shopping. Such a revision would create a uniform approach, but would by its very nature produce non-uniform results. Whether such an amendment, or any other changes, would be practically and politically feasible is a different question, which I do not purport to answer.