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?