Contractual choice-of-law provisions allow parties to specify which jurisdiction’s legal principles should govern a future dispute. But even once a lawsuit has been filed, litigants have an opportunity to tell the court what law applies. For example, the parties might stipulate to the use of a state’s law. Or they might implicitly agree on the governing law simply by citing to cases from a particular jurisdiction in their respective briefs.
But what about the Supreme Court’s pronouncement in Klaxon Co. v. Stentor Electric Manufacturing Co. that federal courts exercising diversity jurisdiction must apply the choice-of-law rules of the state in which they sit? Might litigants skirt that important precedent by stipulating to the applicable law?
More often than not, federal courts analyze the validity of these agreements, which I refer to as intra-litigation choice-of-law agreements, without any consideration of forum state law. This Article argues that courts exercising diversity jurisdiction violate Klaxon when they rule on the validity of these agreements without due consideration of state law. There can be no “independent determinations by the federal courts” in conflicts of law. When federal courts fashion a rule that parties can or cannot displace forum state choice-of-law principles by agreement, they make such an independent determination. Whether intra-litigation choice-of-law agreements are valid is a question to be answered by state law. A contrary rule harms the interests of states, which must be free “to pursue local policies diverging from those of [their] neighbors.”