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. Timing of the decision
    1. A party intending to rely on non-U.S. law must give notice by pleading or other reasonable written notice. Fed. R. Civ. P. 44.1. As there is no temporal limit on the notice, notice may be given as late as the trial stage; however, there is a requirement that the notice be “reasonable” and the stage of the case at the time of the notice, the reason for the timing of the notice, and the importance of the issue of non-U.S. law to the case, will be factors in determining whether the notice was reasonable. Fed. R. Civ. P. 44.1 advisory committee’s notes.
      1. Practice Tip: The flexibility in the timing of a decision on whether to propose non-U.S. law is tactically advantageous for several reasons. First, the benefits of applying non-U.S. law will depend on the factual strengths of the case, something that cannot be known at the early pleading stage. For example, under French law, tort claims cannot be asserted alongside breach of contract claims, but certain liquidated damages provisions are subject to a broader range of exceptions under French law. Only after discovery would it be clearer whether the facts support a tort claim that is worth preserving at the expense of application of a law that is more beneficial, but exclusive, to a breach of contract claim. Second, the process of proving foreign law, see Guide Chapter 8 below, could be costly, and a distraction from preparing for the trial itself. With the flexibility of waiting before deciding on non-U.S. law, that process may be avoided if information later learned supports application of U.S. law.
      2. Practice Tip: However, once sufficient facts have been gathered, parties are well advised to determine what law they want to apply and push the court to resolve the matter. Continuing to argue motions and prepare a case for trial without resolution of what law applies adds costs and distractions. And preparing a case under several of various potentially applicable laws is difficult.
  2. Factors to consider in deciding what law to advocate
    1. A party selecting non-U.S. law to apply must be sensitive to the effect of the choice on what claims can be asserted and what damages sought. However, the ability to apply a separate choice of law analysis to claims versus damages, and the ability to characterize unfavorable non-U.S. law principles as procedural versus substantive, tempers somewhat those effects.
    2. Claims preclusion
      1. Selecting non-U.S. law impacts the claims that can be brought. Under French law, for example, the doctrine of non-concurrency generally bars tort claims from being asserted where there is a contract between the parties, and limits claims to those for breach of contract.
      2. However, even at the cost of multiple claims, there may be advantages to asserting a single claim under such non-U.S. law. French law recognizes exceptions to limitations of liability clauses where there has been an intentional breach, grossly negligent conduct in the execution of the contract, or where the limitation of liability clause deprives the debtor’s obligation of its purpose. So, asserting French law, and losing the ability to allege a tort claim, may still be an advantage where there are limitations of liability in the contract that can be avoided under French law.
      3. Moreover, even if the court applies a non-U.S. law that includes the principle of non-concurrency, it will not necessarily apply the non-U.S. law to bar claims from being asserted and presented to the jury in the alternative. If the non-U.S. doctrine is considered a substantive principle, courts may give it full effect at the judgment stage of the case. If it is procedural, it will not be given any effect at all.
      4. Practice Tip: In our experience representing a French plaintiff in a breach of contract and tort suit in which French law was advocated, the court held that both the tort and contract claims could proceed to the jury notwithstanding that under French law, the doctrine of non-concurrency could ultimately bar the tort claim.
    3. Damages: non-U.S. law generally will not permit as broad a recovery of damages as under U.S. law. Specifically, punitive damages are not generally recognized in civil law systems. However, damages may be given a separate choice of law analysis than the underlying claims under the doctrine of depeçage. A party may therefore properly consider advocating non-U.S. law to govern a claim and U.S. law to apply to the damages claim if, under the applicable choice of law rules, there is a good argument that U.S. law governs the separate damages issue.
  3. Difficulties in applying non-U.S. law
    1. While parties may initially seek to apply non-U.S. law to avoid the known undesirables of U.S. law, there are potentially adverse consequences that should be factored.
    2. First, how are jury instructions crafted when the governing law is that of a non-U.S. state that does not have jury trials?
      1. For example, the French civil code contains a single article governing tortious conduct, and does not break torts down by elements, or by sub-type (e.g. negligence, intentional torts). One way to proceed is to propose that the forum law’s jury instructions apply if the laws of the two states do not substantively conflict. Where U.S. courts have found non-U.S. law similar to U.S. law, they have borrowed from U.S. law in crafting jury instructions based on foreign law. See Tschira v. Willingham, 135 F.3d 1077, 1084 (6th Cir. 1998) (trial court determined that “mandate relationship” under German law was “very similar to the agency relationship in American law” and properly instructed jury that defendants owed the plaintiff a fiduciary duty). See also Banque Paribas v. Dana, 755 F. Supp. 523, 527 (D. Conn. 1990) (in case governed by French law, court applied American law on mistake where neither party suggested that French law differed on the point).
      2. The process of crafting the instructions, and preparing objections and responses to an opposing party’s instructions, is made the more difficult where the parties are analogizing the foreign law to domestic law. Which state’s laws are most analogous? Moreover, a party may have just litigated through the government interest analysis process, having taken pains to prove that the non-U.S. law is materially different from domestic law and that the non-U.S. law has a more significant interest in the application of its laws. To revert to an analogy to domestic law may undo that effort and, at a minimum, will negatively impact the credibility of the party.
      3. Practice Tip: One alternative is to prepare jury instructions crafted off of the broadly-worded tort provision of the civil code. This may benefit plaintiffs seeking to include a broad range of conduct in the claim.
    3. Second, how will the court determine the contents of non-U.S. law?
      1. The court, in determining non-U.S. law, may consider “any relevant material or source, including testimony, whether or not submitted by a party or admissible under the Federal Rules of Evidence.” Fed. R. Civ. P. 44.1. There is no obligation by the court to give notice that it has conducted its own research and, what is more, there is no formal mechanism to counter the court’s independent research and conclusions; the legal analysis is in some measure out of the non-U.S. law proponent’s control.
      2. Thus, while a party may determine that is advantageous on the basis of its own understanding and intended use of that law, the courts in this area have significant discretion in coming to their own understanding of law that may or may not accord with that of the proponent of the non-U.S. law.
      3. The court’s development of its understanding of non-U.S. law will be limited by its lack of knowledge and experience of the law, and will be in some large measure out of the proponent’s control. The court, by requesting briefing and hearings on choice of law issues, may pull a significant amount of the parties’ time and efforts away from trial preparation.
      4. A party’s failure to prove non-U.S. law may result in application of the forum law. See, for e.g., Nedlloyds, 3 Cal. 4th at 469 & n.7.
      5. Please see Chapter 8 of this Guide for a complete discussion of the challenges and opportunities presented by the proof of non-U.S. law in U.S. courts.

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