The Scope of Generic Choice of Law Clauses

Abstract

Non-proceduralists have the perception that questions of jurisdiction or choice of law are just preliminary issues that need to be dealt with before getting to the real dispute, the things that matter. What they do not realize is that these preliminary issues are often, themselves, the real dispute. They are the lever which permits litigation to proceed or which stops a claim dead in its tracks. Thus, these procedural matters — often dismissed as technicalities — have the potential to shape the dispute in significant ways. Take for instance, a staple of commercial and consumer contracting: the ubiquitous choice of law clause. The choice of law clause in a contract usually does not matter. Until, of course, it does. When claims are viable under the law of one jurisdiction and not viable under the chosen law, the choice of law clause matters a great deal. Litigants now have the opportunity to craft a legal argument based on just a handful of words. How a court interprets these words will determine whether the gateway will be opened for litigants to advance their claims or whether they will, literally or figuratively, be sent home. The interpretation of choice of law clauses normally proceeds according to customary principles of contractual interpretation. For the most part, courts are on the same page when it comes to interpreting clauses that do not leave much wiggle-room — e.g., clauses that provide that “all disputes arising from or related to the contract will be governed by [x] law.” Where things get dicey is where parties have agreed to a generic choice of law clause. A generic choice of law clause is one that provides that “the contract” will be “governed by” or “subject to” the chosen law. Here, there is a split of authority on how to interpret such language. Some courts hold that a generic choice of law clause should be interpreted narrowly. That is, the parties’ chosen law should be applied to contractual claims and contractual claims only. By contrast, come courts interpret a generic choice of law clause in the polar opposite way. These courts hold that the parties’ chosen law should apply to any and all disputes between the parties, including, for instance, tort and statutory claims. This Article examines this interpretative debate and sides with those courts that interpret generic choice of law clauses narrowly. It examines in detail the textual arguments in support of such an interpretation and advances arguments in favor of the textual approach that courts have not considered. It also engages with the broad approach on the merits, arguing that the assumptions underpinning such an approach are questionable at best, and flawed at worst. While this is an Article that zooms in to the granular details of the technicalities, it does so based on the reality that these technicalities have profound implications for the litigants and for the broader administration of justice