Facts
- U.S. citizens domiciled in Texas sued a U.S. munitions manufacturer for wrongful death and personal injuries after a 105-mm howitzer round prematurely exploded in Cambodia.
- The suit was filed in the U.S. District Court for the Eastern District of Texas under diversity jurisdiction.
- The district court applied Texas strict products-liability law, submitted the case to a jury on that theory, and entered judgment for the plaintiffs.
- The Fifth Circuit affirmed, while acknowledging that if Texas choice-of-law rules were applied, Cambodian substantive law (the place of injury) would control the wrongful-death claim and might control the personal-injury claim.
- The Fifth Circuit declined to apply Texas conflicts rules and instead used a federal conflicts analysis.
Issues
- In a diversity action, may a federal court of appeals disregard the forum state’s choice-of-law rules and apply a federal conflicts approach to select the governing substantive law?
Decision
- The Supreme Court granted certiorari, vacated the Fifth Circuit’s judgment, and remanded.
- The Court held that federal courts sitting in diversity must apply the forum state’s conflict-of-laws rules.
- The Fifth Circuit erred by declining to apply Texas choice-of-law principles and substituting a federal conflicts analysis.
Legal Principles
- Under Klaxon Co. v. Stentor Electric Mfg. Co., federal courts in diversity must apply the conflict-of-laws rules of the state in which they sit.
- A federal court in a diversity case is not free to create exceptions or modifications to the forum state’s conflicts rules based on the federal court’s own policy judgments.
- The Erie principle aims to prevent differing outcomes between state and federal courts in the same state due to the “accident” of diversity jurisdiction, including on choice-of-law questions.
Conclusion
The Supreme Court required the federal courts to follow Texas choice-of-law rules in this diversity products-liability action and rejected the Fifth Circuit’s use of an independent federal conflicts methodology, vacating and remanding for proceedings consistent with Klaxon and Texas conflicts law.