A plaintiff, a citizen of California, files a lawsuit against a defendant corporation in the United States District Court for the Central District of California. The defendant corporation is incorporated and has its principal place of business in Nevada. The plaintiff's claim is for breach of contract, and the suit is properly based on diversity jurisdiction. The contract specifies that it is to be governed by California law. Which law will the federal court apply to decide the substantive contract claim?
In diversity jurisdiction cases, the Erie doctrine requires federal courts to apply state substantive law and federal procedural law. For choice-of-law issues, Klaxon Co. v. Stentor Electric Mfg. Co. requires the federal court to apply the choice-of-law rules of the state in which it sits. Here, the federal court is in California, so it will apply California's choice-of-law rules. Since the contract validly specifies California law, California's choice-of-law rules would direct the court to apply California's substantive contract law to resolve the dispute.
Ask Bash
Bash is our AI bot, trained to help you pass your exam. AI Generated Content may display inaccurate information, always double-check anything important.
What is diversity jurisdiction?
Open an interactive chat with Bash
Why does the federal court use California state law in this case?
Open an interactive chat with Bash
What is the significance of applying state law in federal court?