Van Dusen v. Barrack

As a reminder, these are the four questions:

(1)   Must the federal district court transfer or dismiss?  The answer here is easy to state:  A federal district court must dismiss if venue is improper or if it cannot exercise jurisdiction over the person/property (either one).

(2)   May the federal court transfer, or must it dismiss?  The answer depends on whether another federal district exists in which venue is proper and jurisdiction over the person/property is present.  If so, the federal court may transfer. If not, it cannot do so; it must dismiss.

(3)   If the federal court need not transfer (#1 is "no"), but may transfer (#2 is "yes"), should it transfer?  The answer here is easy to state:  apply the forum non conveniens analysis.

(4)   If the federal court transfers, what consequences are there for the applicable law?  The answer here is not easy to state.  You need the Greiner Happy Court rule.

You also need to understand how the presence of a forum selection clause alters the answers to questions (3) and (4).

This case concerns question (4).  In particular, it concerns the issue of horizontal choice of law in diversity cases.

By way of background for this case and the next two cases: one of the most hotly disputed issues in the history of the United States federal court system is what law should apply when a federal district court sits in diversity.  Very generally speaking, the current rule is that the federal district court uses federal law for matters of procedure and state law for matters of substance.  The rule was not always this way, but it is the rule now. Even under this current rule (federal law for procedure, state law for substance), we need to have some way to separate things into either "substance" or "procedure."  This challenge is called "vertical choice of law," and the general area of law is called the "Erie doctrine."  We will spend much of the next two class periods discussing precisely this matter.  For now, however, all you need to know is two things:

First, the dividing line between "substance" and "procedure" for horizontal choice of law is different from the dividing line between "substance" and "procedure" for vertical choice of law/the Erie doctrine.  Many things considered "procedural" in the horizontal context are considered "substantive" in the vertical context. One example is statutes of limitations.   We will assume in this class that all limitations are procedural for horizontal purposes, but as we will learn in the next couple of class periods, limitations periods are substantive for vertical purposes (unless Congress passes a limitations period for state causes of action, which it hasn't so far).

Second, a federal court sitting in diversity uses the horizontal choice of law rules of the state in which it sits to resolve conflicts of state law. Klaxon Company v. Stentor Electric Manufacturing Company, 313 U.S. 487 (1941).  Thus, choice of law rules are substantive for vertical choice of law purposes:  state law (not federal law) governs.

Now, recall the horizontal choice of law rule that a forum will always use its own law for matters of procedure, such as limitations periods.

Putting all of this together, we have the following rule:  a federal court sitting in diversity will apply the choice of law rules of the state in which it sits.  As just stated, we will assume in this course that limitations periods are always procedural for horizontal purposes (which is almost always true in the real world).  Ergo, a federal court sitting in diversity will apply the limitations period of the state in which it sits.

The problem then arises:  when there is a transfer, which state supplies the limitations period, the transferor court's state or the transferee court's state?  This case (in summary form only) and the two cases after it concern this question.