Hold On For The Answers.
Alaska Rent-A-Car, Inc. v. Avis Budget Group, Inc., Nos. 10-35137 et al. (9th Cirl Mar. 6, 2013) (published) faced some interesting issues in a situation where a venued diversity action had a “loser pay” statutory fee recovery provision under Alaska law--the venue--but the contract between the parties specified that New York law applied. The prevailing party won $1.605 million in fees under the Alaska “loser pay” statutes, prompting an appeal that presented some thorny choice of law issues. Here is how the Ninth Circuit ruled:
1. Did federal law or state law apply to the fee award under Erie? Answer: State law. (Alyeska Pipeline Service Co. v. Wilderness Society, 421 U.S. 240 (1975).)
2. Given that Alaska was the forum, does Alaska or New York choice-of-law rules apply? Answer: The parties agreed that Alaska choice-of-law rules applied. (Klaxon Co. v. Stentor Elec. Mfg. Co., 313 U.S. 487, 496 (1941).)
3. Was the Alaska fee provision substantive or procedural for choice of law purposes? Answer: It was procedural based on how Alaska state courts would characterize it. Given that it was procedural, Alaska law--the English Rule--applied. However, if it was substantive, then New York law--the American Rule--would have applied (although it didn’t).
Given the answer to No. 3, the procedural issue, the $1.605 million fee award was affirmed on appeal.
Takes us back to law school, doesn’t it?