Will a Maine court apply the law we chose in the contract?
Yes, under Restatement (Second) of Conflict of Laws § 187(2). In Schroeder v. Rynel, Ltd., Inc. the Law Court said that "[i]n accordance with past decisions favoring the use of the Restatement to resolve choice of law disputes, we adopt the guidelines of the Restatement (Second) Conflicts of Laws section 187(2) to interpret this contractual choice of law provision", and will enforce the clause "unless either (a) the chosen state has no substantial relationship to the parties or the transaction and there is no other reasonable basis for the parties' choice, or (b) the application of the law of the chosen state would be contrary to a fundamental policy of a state which has a materially greater interest than the chosen state in the determination of the particular issue". Either limb of (a) will do: in Schroeder the chosen state's relationship was supplied by incorporation there, "[i]ncorporation in a state constitutes a substantial relationship", and a reasonable basis existed independently, because the parties chose Delaware for its "well-known and established body of law". The Court applied § 187(2) and affirmed a summary judgment against the employee. With no effective choice, Maine applies the Restatement's most-significant-relationship test: contract rights and duties "are to be determined at the forum level by the local law of the state which, with respect to that particular issue, has the most significant relationship to the transaction and the parties" (Zelman v. Zelman, footnote 6, quoting Flaherty v. Allstate Ins. Co.). For a transaction governed by the UCC, 11 M.R.S. § 1-1301(1) lets the parties choose Maine law or another state's only "when a transaction bears a reasonable relation to this State and also to another state or nation"; absent an effective agreement the Code applies "to transactions bearing an appropriate relation to this State".
The trap
Schroeder is the holding; Stenzel v. Dell, Inc. is the case usually cited, and it is the weaker authority. Stenzel does say "[w]hen a contract contains a choice of law provision, we generally will interpret the contract under the chosen state's laws", but the Court then wrote that "we assume, without deciding, that the agreement's choice of law provision controls and that Texas law governs the determination of all of the issues presented by this appeal", and affirmed on arbitration grounds. The real trap is § 187(2)(b), and it runs the opposite way from how it is usually pleaded. Schroeder was an employment agreement in which the employee invoked Maine's wage statutes, 26 M.R.S.A. §§ 621 and 626, as a fundamental policy; the Law Court held that "[a]ssuming sections 621 and 626 set forth a fundamental policy of Maine, the application of Delaware law to Schroeder's claim only violates that policy if there are 'significant differences in the application of the law of the two states'" and that "[w]e will not refuse to apply Delaware law merely because a different result would be reached pursuant to Maine law." So identifying a Maine statute is not enough: the argument has to show a significant difference in how the two states' law operates, not merely a worse outcome. Schroeder lost his Maine wage claims because he "only pled violations of Maine law" under a contract governed by Delaware law: a pleading trap as much as a conflicts one. And the UCC's own § 1-1301 is narrower than § 187 in two ways: subsection (1) requires a reasonable relation to Maine AND to the chosen state, so a wholly unrelated governing-law choice in a goods contract is not carried by that section; and subsection (3) lists eight Code provisions (§ 2-402, §§ 2-1105 and 2-1106, § 4-102, § 4-1507, § 5-1116, § 8-1110, §§ 9-1301 to 9-1307 and § 12-107) whose own choice-of-law rules govern instead, with "a contrary agreement ... effective only to the extent permitted by the law so specified".
16 authorities
The words that state the rule
In accordance with past decisions favoring the use of the Restatement to resolve choice of law disputes, we adopt the guidelines of the Restatement (Second) Conflicts of Laws section 187(2) to interpret this contractual choice of law provision.
The words that state the rule
Pursuant to section 187(2), we will enforce a contractual choice of law provision “unless either (a) the chosen state has no substantial relationship to the parties or the transaction and there is no other reasonable basis for the parties’ choice, or (b) the application of the law of the chosen state would be contrary to a fundamental policy of a state which has a materially greater interest than the chosen state in the determination of the particular issue_” Restatement (SECOND) CONFLICTS OF LAWS § 187(2) (1971). Applying section 187(2), we conclude that the contractual choice of law provision in Sehroeder’s employment agreement requires that Delaware law govern this dispute.
The words that state the rule
A substantial relationship exists between Delaware and the employment agreement because Rynel is incorporated in Delaware. See Restatement (Second) Conflicts of Laws § 187(2)(a) (1971). Incorporation in a state constitutes a substantial relationship.
The words that state the rule
In addition, a reasonable basis existed for the parties choice of Delaware law. See Restatement (Second) Conflicts of Law § 187(2)(a) (1981). If parties choose a state’s laws to govern because of that state’s well-known and established body of law, then a court will enforce that choice of law provision.
The words that state the rule
Assuming sections 621 and 626 set forth a fundamental policy of Maine, the application of Delaware law to Schroeder’s claim only violates that policy if there are “significant differences in the application of the law of the two states.”
The words that state the rule
We will not refuse to apply Delaware law merely because a different result would be reached pursuant to Maine law. See, e.g., Restatement (Second) Conflicts of Law § 187 cmt. g (1971); Tele-Save, 814 F.2d at 1123 ; Barnes Group, Inc. v. C & C Products, Inc., 716 F.2d 1023, 1031 (4th Cir.1983). After examining the relevant statutory provisions pursuant to Maine and Delaware law, we decline to hold unenforceable the choice of law provision on the ground that the application of Delaware law to Schroeder’s claim violates a fundamental policy of Maine.
The words that state the rule
We have adopted the Restatement (Second) Conflict of Laws’ “most significant contacts and relationships approach.” Flaherty v. Allstate Ins. Co., 2003 ME 72, ¶ 16, 822 A.2d 1159. For contract disputes, the “rights and duties of the parties with respect to an issue in contract are to be determined at the forum level by the local law of the state which, with respect to that particular issue, has the most significant relationship to the transaction and the parties.”
- statute11 M.R.S. § 1-1301enactment date not established
The words that state the rule
Except as otherwise provided in this section, when a transaction bears a reasonable relation to this State and also to another state or nation the parties may agree that the law either of this State or of such other state or nation shall govern their rights and duties.
- statute11 M.R.S. § 1-1301enactment date not established
The words that state the rule
In the absence of an agreement effective under subsection (1) and except as provided in subsection (3) the Uniform Commercial Code applies to transactions bearing an appropriate relation to this State.
- statute11 M.R.S. § 1-1301enactment date not established
The words that state the rule
If one of the following provisions of the Uniform Commercial Code specifies the applicable law that provision governs and a contrary agreement is effective only to the extent permitted by the law so specified: (a). Section 2‑402 ;
The words that state the rule
When a contract contains a choice of law provision, we generally will interpret the contract under the chosen state’s laws.
The words that state the rule
we assume, without deciding, that the agreement’s choice of law provision controls and that Texas law governs the determination of all of the issues presented by this appeal.
The words that state the rule
Accordingly, the trial court did not err in dismissing Stenzel and Gerber’s claims against all of the defendants, including BancTec and QualXServ, and in granting Dell’s motion to compel arbitration. The entry is: Judgment affirmed.
The words that state the rule
Rynel, however, had plans to incorporate in Delaware at the urging of potential investors who sought a predictable body of corporate law to govern their investment.
The words that state the rule
The trial court did not err when it upheld the choice of law provision providing that Delaware law applies to disputes arising from the employment agreement. Schroeder only pled violations of Maine law, and, as a result, the trial court did not err when it granted a summary judgment for Rynel.
The words that state the rule
Schroeder’s assertions fail to raise a genuine issue of material fact with respect to the defense that the employment agreement was a contract of adhesion. The entry is: Judgment affirmed.
“Defective” means that reading found something to correct. What you are reading is the rule as it stands after that reading.