Choice-of-Law Determination Required only when the Moving Party has Established Actual Conflict between State Laws
In Bridgeview Health Care Center, Ltd. v. State Farm Fire and Casualty, Bridgeview Health Care Center, Ltd. (“Bridgeview”), an Illinois corporation, filed a three-count class action complaint in the federal district court of Northern Illinois against Jerry Clark, d/b/a Affordable Digital Hearing. Jerry Clark (“Clark”) is an Illinois resident who operates Affordable Digital Hearing, a sole proprietorship dealing in the sale and repair of hearing aids, out of Terre Haute, Indiana. Bridgeview’s complaint alleged that Clark sent Bridgeview and others across the United States unsolicited faxes in June of 2006. Clark was insured under a comprehensive general liability policy issued by State Farm Fire and Casualty Company (“State Farm”), an Illinois corporation. The policy was purchased through an agent in Indiana and issued to Clark at his business address in Indiana out of State Farm’s West Lafayette, Indiana office. Relevant here, the policy provided certain business liability coverage under both a “property damage” provision and an “advertising injury” provision. Bridgeview filed a declaratory judgment action against State Farm and Clark in Cook County, seeking a declaration that State Farm had a duty to defend and indemnify Clark because the unwanted faxes fell within both the advertising injury and property damage provisions of the insurance policy. State Farm, in turn, filed a counterclaim against Bridgeview and Clark, seeking a declaration it had no duty to defend or indemnify Clark.
The court reviewed when a federal district court sitting in a sister state makes a prediction that the supreme court of that state would resolve a legal issue in a way that is at odds with Illinois law, does that prediction, in itself, establish an actual conflict between the two states’ laws for purposes of a choice-of-law analysis?
Under Erie R.R. Co. v. Tompkins, 304 U.S. 64 (1938), a federal district court in a diversity action must apply the law of the state in which the court sits with respect to substantive matters. In the absence of prevailing authority from the state’s highest court, the district court “must make a predictive judgment as to how the supreme court of the state would decide the matter if it were presented presently to that tribunal.” Allstate Insurance Co. v. Menards, Inc., 285 F.3d 630, 635 (7th Cir.2002). Such a predictive judgment is not, in fact, state law; it is an “Erie guess” as to what state law would be. Id. at 638. As one commentator has noted, “even if the rule in question is embraced by the state’s highest court at a later date, it remains true that the rule applied in federal court did not, in fact, constitute a sovereign command of the state.”
Applying Illinois law in this case does no injury to State Farm if Indiana law is not in actual conflict with Illinois. Further, it is unclear what the appellate court below and State Farm mean by a “potential” conflict of laws. There is always a “potential” for differences to arise on state-law questions, even on matters that have previously been addressed. A “potential” conflict standard would appear to create substantial uncertainty in deciding what law to apply. We adhere to settled law: a choice-of-law determination is required only when the moving party has established an actual conflict between state laws.
Bridgeview Health Care Ctr., Ltd. v. State Farm Fire & Cas. Co., 2014 IL 116389.
