Proskauer Rose International Practice Guide Proskauer Rose LLP |
      Proskauer on International Litigation and Arbitration:
       Managing, Resolving, and Avoiding Cross-Border Business or Regulatory Disputes
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  1. A party should be sure to advocate the law most favorable to each of its claims and damages, separately. Under the doctrine of “depeçage,” the choice of law analysis is conducted on an issue by issue basis. Indeed, the various choice of law regimes describe themselves as applying to each of the particular “issues” in a case. See Second Restatement §145 cmt. d ("each issue is to receive separate consideration if it is one which would be resolved differently under the local law rule of two or more of the potentially interested states"); Babcock v. Jackson, 12 N.Y.2d 473, 484 (1963) (“there is no reason why all issues arising out of a tort claim must be resolved by reference to the law of the same jurisdiction. Where the issue involves standards of conduct, it is more than likely that it is the law of the place of the tort which will be controlling but the disposition of other issues must turn, as does the issue of the standard of conduct itself, on the law of the jurisdiction which has the strongest interest in the resolution of the particular issue presented.”) California courts also use the term "issue" in writing about the choice of law interest analysis. See, e.g., Application Group, Inc. v. Hunter Group, Inc., 61 Cal. App. 4th 881, 896 (1998).
  2. This doctrine is critically important where the non-U.S. law regime does not recognize a category of damages. For example, French law does not recognize punitive damages. Selecting French law to apply to the substantive claims does not sacrifice the pursuit of punitive damages under U.S. law. Rather, “[s]ince punitive damages serve a completely different purpose than compensatory damages, it is only logical that courts have determined that the issue of punitive damages is distinct from the issue of compensatory damages and, therefore, the application of different laws to these different issues may be appropriate.” In re Air Crash at Belle Harbor, 2006 U.S. Dist. LEXIS 27387, *72 (S.D.N.Y. May 9, 2006) (recognizing the principle of “depeçage”, i.e. “that in a single action different states may have different degrees of interests with respect to different operative facts and elements of a claim or defense.”); In re Air Crash Disaster near Chicago, 644 F.2d 594, 611 (7th Cir.), cert. denied, 454 U.S. 878 (1981) (applying California choice of law, the Court specifically approved the principle of depeçage stating “[c]ritical to conflicts analysis is the notion that we must examine the choice-of-law rules not with regard to various states’ interest in general, but precisely, with regard to each state’s interest in the specific question of punitive damages.”).
  3. Practice Tip: A non-U.S. plaintiff suing a U.S. defendant in the U.S. is well advised to pursue a claim for punitive damages even if simultaneously advocating non-U.S. law that does not recognize punitive damages on the substantive claims. Under the government interest analysis, a non-U.S. government’s interest in not recognizing punitive damages is to protect its defendants from excessive penalties. This interest is not implicated where the defendant is in the U.S. But if the defendant is in the non-U.S. state, a court would likely enforce that foreign law’s prohibition against punitive damages since the non-U.S. state in that case has the overriding interest in punishing, or controlling the burden upon, its own citizens. Hernandez v. Aeronaves de Mexico, S.A., 583 F. Supp. 331, 334 (N.D. Cal. 1984) (because the purpose of punitive damages is deterrence and any wrongful acts would have been committed in Mexico by Mexican citizens employed by a Mexican corporation, the law of Mexico applied: "Mexico has the overriding interest in any punishment of its own citizens."). Franklin Supply Co. v. Tolman, 454 F.2d 1059, 1076 (9th Cir. 1971) (Venezuelan law applied where the work in question had been performed by defendants in Venezuela and "the burden of punitive damages will be laid upon a citizen or entity of Venezuela.")

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