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For seventy-five years, Klaxon v. Stentor Electric Manufacturing has provided a one-line answer to choice-of-law questions in federal diversity cases: Erie Railroad v. Tompkins requires the federal court to employ the same law that a court of the state would select. The simplicity of the proposition likely accounts for the unqualified breadth with which federal courts now apply it. Choice of law doctrine is difficult, consensus in hard cases is elusive, and the anxiety that Erie produces over the demands of federalism tends to stifle any reexamination of core assumptions. The attraction of a simple answer is obvious. But Klaxon cannot bear the weight with which it has been loaded.

Like Erie itself, Klaxon combines a core ruling on the limits of federal judicial power with a highly contextual statement of federal jurisdictional policy. Unlike Erie, however, Klaxon has not benefited from a long line of rulings mapping the boundaries of these respective principles. This doctrinal desuetude is no longer sustainable following the enactment of the Class Action Fairness Act (CAFA). CAFA effectuates a shift in the jurisdictional policy of the federal courts that requires a critical examination of the meaning and scope of Klaxon. And by moving increasing numbers of complex state-law cases into federal proceedings that are then consolidated through the multi-district litigation process, CAFA has created increased pressure to undertake that reexamination.

This Article offers a general approach to analyzing choice of law and jurisdictional policy in the federal courts. It begins by placing the spare language of Klaxon in analytical context and tracing the multiple lines of doctrine that intersect in the ruling. Those doctrines were undergoing a transformation at the time the Court issued its decision, yet the Klaxon Court confined its analysis narrowly, a fact that speaks to the limited scope of its holding. The Article then describes the relationship between federal jurisdictional policy and the elements of modern choice of law and maps the jurisdictional changes that Congress effectuated with CAFA and amplified with the MDL statute. Those changes represent a departure from the policies of the general diversity statute and render some of the core assumptions of the Erie doctrine inapposite. The central conclusion of this Article is that federal courts hearing complex cases under the jurisdiction of these specialized federal statutes have the power to develop independent federal answers to one key component of the choice-of-law calculus: how to resolve conflicts between the laws of multiple interested states when each would apply its own law to a dispute. Whether federal courts should exercise that power as a matter of policy is a question that this Article leaves for future examination. What is clear, however, is that Klaxon does not hold sway in this class of cases.

Publication Citation

165 U. Pa. L. Rev. 1847 (2017)