Whose State? Whose Law? Choice of Law Redefined In New Jersey

The key issue in any case which touches more than one state is the question of which state's law applies. In New Jersey, the "governmental interest" test has long been the approved approach.

Under this approach, the court determines first the governmental policies evidenced by the laws of each related jurisdiction and then considers the factual contacts between the parties and each related jurisdiction. A state is deemed interested only where application of its laws to the facts will foster that state's policy. The key analysis will turn on which state has a greater interest in having its law applied.

The recent Supreme Court decision in P.V. v. Camp Jaycees, __ N.J. __, 2008 N.J. LEXIS 1694 (2008) arguably changed the analysis which must be performed to determine what state's law is to be applied under New Jersey's Choice of Law analysis.

In P.V., the Supreme Court considered the proper approach to choice-of-law questions in the context of the Charitable Immunity Act. The Court noted that, historically, the Court has denominated the approach to choice-of-law questions as the "governmental interest test," however, it has "continuously resorted to the Restatement (Second) of Conflict of Laws (1971) in resolving conflict disputes arising out of tort." The Court noted that this approach is termed the "most significant relationship" test and adopted it by application in P.V.

Although we have traditionally denominated our conflicts approach as a flexible "governmental interest" analysis, we have continuously resorted to the Restatement (Second) of Conflict of Laws (1971) in resolving conflict disputes arising out of tort... That approach is the "most significant relationship" test. Under that standard, the analysis in a personal injury case begins with the section 146 presumption that the local law of the state of the injury will apply. Once the presumptively applicable law is identified, that choice is tested against the contacts detailed in section 145 and the general principles outlined in section 6 of the Second Restatement. If another state has a more significant relationship to the parties or issues, the presumption will be overcome. If not, it will govern.

The dissenting justices in P.V. asserted that what the majority did was to replace the "governmental interest" test with a different test, the "most significant relationship" test. The majority did not overtly hold that it was substituting the latter test in place of the former, its application of the "most significant relationship" test in P.V. makes it clear that the "most significant relationship" test is the proper analysis for these issues.

The Court explained the process by which this analysis is to be performed. First, the state of injury is to be identified and treated as the presumptive law. The standards in sections 145 and principles in section 6 of the second Restatement are then examined to determine if another state has a "more significant relationship to the parties or issues." If so, then the second state's laws apply.

The contacts detailed in section 145 and the general principles outlined in section 6 of the Second Restatement help to show which state has the most significant relationship to the parties and the issues of the case.

First, section 145 states as follows:

(1) The rights and liabilities of the parties with respect to an issue in tort are determined by the local law of the state which, with respect to that issue, has the most significant relationship to the occurrence and the parties under the principles stated in § 6.

(2) Contacts to be taken into account in applying the principles of § 6 to determine the law applicable to an issue include:

(a) the place where the injury occurred;

(b) the place where the conduct causing the injury occurred;

(c) the domicile, residence, nationality, place of incorporation and place of business of the parties; and

(d) the place where the relationship, if any, between the parties is centered.

These contacts are to be evaluated according to their relative importance with respect to the particular issue.

Restat 2d of Conflict of Laws, § 145. The principals under which this analysis must take place is set out in section 6. That section reads:

(1) A court, subject to constitutional restrictions, will follow a statutory directive of its own state on choice of law.

(2) When there is no such directive, the factors relevant to the choice of the applicable rule of law include

(a) the needs of the interstate and international systems;

(b) the relevant policies of the forum;

(c) the relevant policies of other interested states and the relative interests of those states in the determination of the particular issue;

(d) the protection of justified expectations;

(e) the basic policies underlying the particular field of law;

(f) certainty, predictability and uniformity of result; and

(g) ease in the determination and application of the law to be applied.

Restat 2d of Conflict of Laws, § 6. It must also be recalled the analysis must not only take place on an issue-by-issue basis, but must also be a qualitative and not merely quantitative analysis.

Regardless of whether the New Jersey Supreme Court has established a new test, or merely changed the law to highlight the Restatement (Second) of Conflict of Laws (1971), or overruled previous law, it is clear that the "governmental interest" test is no longer appropriate and the "most significant relationship" test is the correct analysis for choice of law questions.