The Public Policy Exception

Parties who dislike the law a conflicts analysis has selected reach for the public policy exception more often than any other argument, and it succeeds less often than any other argument. Understanding why the threshold is set where it is explains both the rarity and the shape of the cases that do succeed.

What the exception is

A power to decline, not to substitute. The forum refuses to apply a rule of another state that its own conflicts analysis would otherwise select, and applies its own law to that issue instead.

Directed at the result, not the rule. The question is whether applying the foreign rule in this case would offend the forum's policy, which means a rule that is objectionable in one application may be unobjectionable in another.

Narrow by design. A broad exception would swallow the whole conflicts framework, since a forum that applied its own law whenever it preferred it would never apply anyone else's.

Formulated demandingly. The classic statement asks whether the foreign law would violate a fundamental principle of justice, a prevalent conception of good morals, or a deep-rooted tradition of the common weal — language chosen to discourage its use.

And it is distinct from the contractual version. The related but separate question of when a chosen law is displaced by a more interested state's fundamental policy is examined in when a court sets the chosen law aside.

What does not qualify

A more generous rule at home. The forum's own law providing a larger recovery, a longer period or a lower standard of proof is not a policy objection.

A harsh result. Outcomes that seem unfair on the facts are the ordinary consequence of different states making different choices, and courts have repeatedly declined to treat unfairness as sufficient.

The absence of a cause of action. That the other state does not recognize a claim the forum does is a difference rather than an affront, and applying it is generally required.

A damages limitation. Caps, limits on non-economic recovery and restrictions on punitive damages have generally been applied even where the forum has none, which is examined in damages caps that differ between two states.

Disagreement with the policy. A judge who thinks the other state's legislature made the wrong choice has identified a difference of opinion, not a violation of fundamental principle.

What does qualify

Non-waivable statutory rights. Where a legislature has declared that rights cannot be surrendered by agreement, applying a law that surrenders them defeats the statute directly.

Constitutional provisions. A rule inconsistent with a right the forum's constitution guarantees is the strongest form of the objection.

Protective legislation for a class. Employment, consumer, insurance and franchise statutes exist to protect people who did not negotiate, and courts read them as expressing policies not subject to evasion, which is the analysis behind states that refuse to enforce a non-compete.

Rules the forum has expressly rejected. Where a state has legislated to abolish a doctrine, applying another state's surviving version of it engages the policy directly rather than incidentally.

And even then, narrowly. The displacement extends only to the offending issue. The rest of the case continues under the selected law, which is why these outcomes are partial rather than wholesale.

The limit: full faith and credit

Judgments are different from law. The constitutional obligation to give full faith and credit to the judicial proceedings of other states applies with far more force to judgments than to rules of decision.

Public policy is generally not an answer to a judgment. A state must recognize a sister-state judgment whether or not it approves of the law that produced it, and objections have to be jurisdictional or based on fraud.

Which channels the argument. A party unhappy with a judgment attacks it where it was rendered, or attacks the rendering court's jurisdiction, as described in a default judgment entered in another state.

The distinction is deliberate. A system in which every state could decline to honor judgments it disliked would produce exactly the fragmentation the clause exists to prevent.

So the exception lives on the law side. Which is where it should be argued, sparingly, with a statute or a constitutional provision in hand rather than an appeal to fairness, and where it is one input among the several set out in the test courts use for contracts.

How to argue it, and when not to

Lead with the provision, not the outcome. An argument that begins by describing how unfair the result would be signals that no statute or constitutional provision is available. An argument that begins by identifying a specific non-waivable right, quoting it, and showing that applying the foreign rule would defeat it is a different kind of submission and is taken differently.

Show that the forum has actually committed to the policy. Courts look for evidence that the state has taken a considered position: a statute enacted in terms, a constitutional amendment, a legislative history rejecting the contrary rule. A policy inferred from the general tenor of the state's law rarely carries the argument.

Frame it narrowly. Asking a court to disapply one specific rule on one specific issue is far more likely to succeed than asking it to reject another state's law generally. Courts are reluctant to make broad pronouncements about a neighbor's legal system and are comparatively willing to decline one provision.

Accept the partial result. A successful objection displaces the offending rule and leaves the rest of the selected law in place. Parties who argue the exception expecting a wholesale switch to forum law are usually disappointed even when they win.

And consider whether a better argument exists. Very often the real point is not that the foreign rule is offensive but that the conflicts analysis selected the wrong state, or that a protective statute applies of its own force regardless of the choice-of-law outcome. Both are stronger arguments than the exception and both are frequently overlooked in favor of it.

The reason the exception is invoked so often and succeeds so rarely is that it is the argument that feels available when the others have failed. A party facing an unfavorable rule selected by a defensible analysis has run out of technical objections and reaches for principle. Courts recognize the pattern and discount accordingly, which means the occasional genuine case — a non-waivable right about to be waived, a constitutional guarantee about to be circumvented — has to work harder than it should to be distinguished from the many that are simply disappointment expressed in stronger language.

A final observation about where the doctrine is heading. As states diverge more sharply on subjects where they once broadly agreed, the number of cases in which one state's rule is genuinely unacceptable to another rises, and the exception is being asked to do more work than its formulation contemplates. Courts have so far responded by holding the threshold where it is and resolving the pressure through the ordinary analysis instead, deciding which state's law governs rather than declaring another state's law offensive. That is the more durable route, and it is the one a practitioner should generally take: the argument that the forum has the closer connection to the issue succeeds far more often than the argument that its neighbor has gone too far.