Article IV, Section 1:
Full Faith and Credit shall be given in each State to the public Acts, Records, and judicial Proceedings of every other State. And the Congress may by general Laws prescribe the Manner in which such Acts, Records and Proceedings shall be proved, and the Effect thereof.
Although the language of section one suggests that the same respect should be accorded to
public acts that is accorded to
judicial proceedings (
full faith and credit shall be given in each State to the public acts, records, and judicial proceedings of every other State), and the Court has occasionally relied on this parity of treatment, 1 the Court has usually differentiated
the credit owed to laws (legislative measures and common law) and to judgments. 2 The current understanding is that the Full Faith and Credit Clause is
exacting with respect to final judgments of courts, but
is less demanding with respect to choice of laws. 3
The Court has explained that, where a statute or policy of the forum state is set up as a defense to a suit brought under the statute of another state or territory, or where a foreign statute is set up as a defense to a suit or proceedings under a local statute, the conflict is to be resolved, not by giving automatic effect to the Full Faith and Credit Clause and thus compelling courts of each state to subordinate their own statutes to those of others, but by weighing the governmental interests of each jurisdiction. 4 That is, the Full Faith and Credit Clause, in its design to transform the states from independent sovereigns into a single unified nation, directs that a state, when acting as the forum for litigation having multistate aspects or implications, respect the legitimate interests of other states and avoid infringement upon their sovereignty. But because the forum state is also a sovereign in its own right, in appropriate cases it may attach paramount importance to its own legitimate interests. 5
As such, a state need not
substitute for its own statute, applicable to persons and events within it, the statute of another state reflecting a conflicting and opposed policy, so long as the state does not adopt a
policy of hostility to the public acts of that other state in so doing. 6 In recent years, the Court has, in protracted litigation by a Nevada citizen in a Nevada court over alleged abusive practices by a California state agency, twice interpreted the
policy of hostility standard. 7 In 2003, in Franchise Tax Board of California v. Hyatt, the Supreme Court held that the Nevada Supreme Court did not exhibit
hostility in declining to apply a California law affording complete immunity to state agencies, because the state high court had, in considering
comity principles with a healthy regard for California’s sovereign status, legitimately relied on
the contours of Nevada’s own sovereign immunity from suit as a benchmark for its analysis. 8 Thirteen years later, after the case had been remanded and the Nevada Supreme Court had crafted a
special rule for damages in the matter wherein the California state agency could not rely on the Nevada sovereign immunity statute limiting liability to $50,000, the Supreme Court reviewed whether the Nevada court’s ruling conflicted with the Full Faith and Credit Clause. 9 In contrast to the 2003 ruling, the 2016 ruling held that the Nevada Supreme Court had acted in violation of the Full Faith and Credit Clause. Specifically, the High Court concluded that upholding the Nevada Supreme Court’s
special rule—which was supported by a
conclusory statement respecting California’s lack of oversight of its own agencies and was viewed by the Court as reflecting a
policy of hostility to the public Acts’ of a sister State—would allow for a
system of special and discriminatory rules that conflicted with the Constitution’s
vision of 50 individual and equally dignified States. 10 While the Franchise Tax Board litigation demonstrates that the
policy of hostility standard still exists as a threshold inquiry into whether a state is providing full faith and credit to the public acts of a sister state, ordinarily a state has significant discretion in applying their own choice of law provisions in matters arising in that state’s courts, and the Court will not engage in any broad
balancing-of-interests approach to determine the appropriate application of a given state law. 11
Transitory Actions: Death Statutes
The initial effort in this direction was made in connection with transitory actions based on statute. Earlier, such actions had rested upon the common law, which was fairly uniform throughout the states, so that there was usually little discrepancy between the law under which the plaintiff from another jurisdiction brought his action (lex loci) and the law under which the defendant responded (lex fori). In the late 1870s, however, the states, abandoning the common law rule on the subject, began passing laws that authorized the representatives of a decedent whose death had resulted from injury to bring an action for damages. 12 The question at once presented itself whether, if such an action was brought in a state other than that in which the injury occurred, it was governed by the statute under which it arose or by the law of the forum state, which might be less favorable to the defendant. Nor was it long before the same question presented itself with respect to transitory action ex contractu, where the contract involved had been made under laws peculiar to the state where made, and with those laws in view.
Actions upon Contract
In Chicago & Alton R.R. v. Wiggins Ferry Co., 13 the Court indicated that it was the law under which the contract was made, not the law of the forum state, that should govern. Its utterance on the point was, however, not merely dictum, but was based on an error, namely, the false supposition that the Constitution gives
acts the same extraterritorial operation as the Act of 1790 does
judicial records and proceedings. Notwithstanding which, this dictum is today the basis of
the settled rule that the defendant in a transitory action is entitled to all the benefits resulting from whatever material restrictions the statute under which plaintiff's rights of action originated sets thereto, except that courts of sister states cannot be thus prevented from taking jurisdiction in such cases. 14
However, the modern doctrine permits a forum state with sufficient contacts with the parties or the matter in dispute to follow its own law. In Allstate Ins. Co. v. Hague, 15 the decedent was a Wisconsin resident who had died in an automobile accident within Wisconsin near the Minnesota border in the course of his daily employment commute to Wisconsin. He had three automobile insurance policies on three automobiles, each limited to $15,000. Following his death, his widow and personal representative moved to Minnesota, and she sued in that state. She sought to apply Minnesota law, under which she could
stack or aggregate all three policies, permissible under Minnesota law but not allowed under Wisconsin law, where the insurance contracts had been made. The Court, in a divided opinion, permitted resort to Minnesota law, because of the number of contacts the state had with the matter. On the other hand, an earlier decision is in considerable conflict with Hague. There, a life insurance policy was executed in New York, on a New York insured, with a New York beneficiary. The insured died in New York, and his beneficiary moved to Georgia and sued to recover on the policy. The insurance company defended on the ground that the insured, in the application for the policy, had made materially false statements that rendered it void under New York law. The defense was good under New York law, impermissible under Georgia law, and Georgia's decision to apply its own law was overturned, the Court stressing the surprise to the parties of the resort to the law of another state and the absence of any occurrence in Georgia to which its law could apply. 16
Stockholder Corporation Relationship
The protections of the Full Faith and Credit Clause extend beyond transitory actions. Some legal relationships are so complex, the Court holds, that the law under which they were formed ought always to govern them as long as they persist. 17 One such relationship is that of a stockholder and his corporation. Hence, if a question arises as to the liability of the stockholders of a corporation, the courts of the forum state are required by the Full Faith and Credit Clause to determine the question in accordance with the constitution, laws and judicial decisions of the corporation's home states. 18 Illustrative applications of the latter rule are to be found in the following cases. A New Jersey statute forbidding an action at law to enforce a stockholder's liability arising under the laws of another state and providing that such liability may be enforced only in equity, and that in such a case the corporation, its legal representatives, all its creditors, and stockholders, should be necessary parties, was held not to preclude an action at law in New Jersey by the New York superintendent of banks against 557 New Jersey stockholders in an insolvent New York bank to recover assessments made under the laws of New York. 19 Also, in a suit to enforce double liability, brought in Rhode Island against a stockholder in a Kansas trust company, the courts of Rhode Island were held to be obligated to extend recognition to the statutes and court decisions of Kansas whereunder it is established that a Kansas judgment recovered by a creditor against the trust company is not only conclusive as to the liability of the corporation but also an adjudication binding each stockholder therein. The only defenses available to the stockholder are those which he could make in a suit in Kansas. 20
Fraternal Benefit Society: Member Relationship
The same principle applies to the relationship that is formed when one takes out a policy in a
fraternal benefit society. Thus, in Royal Arcanum v. Green, 21 in which a fraternal insurance association chartered under the laws of Massachusetts had been sued in the courts of New York by a citizen of the latter state on a contract of insurance made in that state, the Court held that the defendant company was entitled under the full faith and credit clause to have the case determined in accordance with the laws of Massachusetts and its own constitution and by-laws as these had been construed by the Massachusetts courts.
Nor has the Court manifested any disposition to depart from this rule. In Sovereign Camp v. Bolin, 22 it declared that a state in which a certificate of life membership of a foreign fraternal benefit association is issued, which construes and enforces the certificate according to its own law rather than according to the law of the state in which the association is domiciled, denies full faith and credit to the association's charter embodied in the status of the domiciliary state as interpreted by the latter's court.
The beneficiary certificate was not a mere contract to be construed and enforced according to the laws of the State where it was delivered. Entry into membership of an incorporated beneficiary society is more than a contract; it is entering into a complex and abiding relation and the rights of membership are governed by the law of the State of incorporation. [Hence] another State, wherein the certificate of membership was issued, cannot attach to membership rights against the society which are refused by the law of domicile. Consistent with that, the Court also held, in Order of Travelers v. Wolfe, 23 that South Dakota, in a suit brought therein by an Ohio citizen against an Ohio benefit society, must give effect to a provision of the constitution of the society prohibiting the bringing of an action on a claim more than six months after disallowance by the society, notwithstanding that South Dakota's period of limitation was six years and that its own statutes voided contract stipulations limiting the time within which rights may be enforced. Objecting to these results, Justice Black dissented on the ground that fraternal insurance companies are not entitled, either by the language of the Constitution, or by the nature of their enterprise, to such unique constitutional protection.
Insurance Company, Building and Loan Association: Contractual Relationships
Whether or not distinguishable by nature of their enterprise, stock and mutual insurance companies and mutual building and loan associations, unlike fraternal benefit societies, have not been accorded the same unique constitutional protection; with few exceptions, 24 they have had controversies arising out of their business relationships settled by application of the law of the forum state. In National Mutual B. & L. Ass’n v. Brahan, 25 the principle applicable to these three forms of business organizations was stated as follows: where a corporation has become localized in a state and has accepted the laws of the state as a condition of doing business there, it cannot abrogate those laws by attempting to make contract stipulations, and there is no violation of the Full Faith and Credit Clause in instructing a jury to find according to local law notwithstanding a clause in a contract that it should be construed according to the laws of another state.
Thus, the Court held in Brahan, when a Mississippi borrower, having repaid a mortgage loan to a New York building and loan association, sued in a Mississippi court to recover, as usurious, certain charges collected by the association, the usury law of Mississippi rather than that of New York controlled. In this case, the loan contract, which was negotiated in Mississippi subject to approval by the New York office, did not expressly state that it was governed by New York law. Similarly, when the New York Life Insurance Company, which had expressly stated in its application and policy forms that they would be controlled by New York law, was sued in Missouri on a policy sold to a resident thereof, the court of that state was sustained in its application of Missouri, rather than New York law. 26 Also, in an action in a federal court in Texas to collect the amount of a life insurance policy which had been made in New York and later changed by instruments assigning beneficial interest, it was held that questions (1) whether the contract remained one governed by the law of New York with respect to rights of assignees, rather than by the law of Texas, (2) whether the public policy of Texas permits recovery by one named beneficiary who has no beneficial interest in the life of the insured, and (3) whether lack of insurable interest becomes material when the insurer acknowledges liability and pays the money into court, were questions of Texas law, to be decided according to Texas decisions. 27 Similarly, a state, by reason of its potential obligation to care for dependents of persons injured or killed within its limits, is conceded to have a substantial interest in insurance policies, wherever issued, which may afford compensation for such losses; accordingly, it is competent, by its own direct action statute, to grant the injured party a direct cause of action against the insurer of the tortfeasor, and to refuse to enforce the law of the state, in which the policy is issued or delivered, which recognizes as binding a policy stipulation which forbids direct actions until after the determination of the liability of the insured tortfeasor. 28
Consistent with the latter holding are the following two involving mutual insurance companies. In Pink v. A.A.A. Highway Express, 29 the New York insurance commissioner, as a statutory liquidator of an insolvent auto mutual company organized in New York, sued resident Georgia policyholders in a Georgia court to recover assessments alleged to be due by virtue of their membership in it. The Supreme Court held that, although by the law of the state of incorporation, policyholders of a mutual insurance company become members thereof and as such liable to pay assessments adjudged to be required in liquidation proceedings in that state, the courts of another state are not required to enforce such liability against local resident policyholders who did not appear and were not personally served in the foreign liquidation proceedings but are free to decide according to local law the questions whether, by entering into the policies, residents became members of the company. Again, in State Farm Ins. Co. v. Duel, 30 the Court ruled that an insurance company chartered in State A, which does not treat membership fees as part of premiums, cannot plead denial of full faith and credit when State B, as a condition of entry, requires the company to maintain a reserve computed by including membership fees as well as premiums received in all states. Were the company's contention accepted,
no State, the Court observed,
could impose stricter financial standards for foreign corporations doing business within its borders than were imposed by the State of incorporation. It is not apparent, the Court added, that State A has an interest superior to that of State B in the financial soundness and stability of insurance companies doing business in State B.
Workers' Compensation Statutes
Finally, the relationship of employer and employee, insofar as the obligations of the one and the rights of the other under worker's compensation acts are concerned, has been the subject of differing and confusing treatment. In an early case, the injury occurred in New Hampshire, resulting in death to a workman who had entered the defendant company's employ in Vermont, the home state of both parties. The Court required the New Hampshire courts to respect a Vermont statute which precluded a worker from bringing a common-law action against his employer for job related injuries where the employment relation was formed in Vermont, prescribing a constitutional rule giving priority to the place of the establishment of the employment relationship over the place of injury. 31 The same result was achieved in a subsequent case, but the Court promulgated a new rule, applied thereafter, which emphasized a balancing of the governmental interests of each jurisdiction, rather than the mere application of the statutory rule of one or another state under full faith and credit. 32 Thus, the Court held that the clause did not preclude California from disregarding a Massachusetts’s workmen's compensation statute, making its law exclusive of any common law action or any law of any other jurisdiction, and applying its own act in the case of an injury suffered by a Massachusetts employee of a Massachusetts employer while in California in the course of his employment. 33 It is therefore settled that an injured worker may seek a compensation award either in the state in which the injury occurred or in the state in which the employee resided, his employer was principally located, and the employment relation was formed, even if one statute or the other purported to confer an exclusive remedy on the workman. 34
Less settled is the question whether a second state, with interests in the matter, may supplement a workers' compensation award provided in the first state. At first, the Court ruled that a Louisiana employee of a Louisiana employer, who was injured on the job in Texas and who received an award under the Texas act, which did not grant further recovery to an employee who received compensation under the laws of another state, could not obtain additional compensation under the Louisiana statute. 35 Shortly, however, the Court departed from this holding, permitting Wisconsin, the state of the injury, to supplement an award pursuant to the laws of Illinois, where the worker resided and where the employment contract had been entered into. 36 Although the second case could have been factually distinguished from the first, 37 the Court instead chose to depart from the principle of the first, saying that only if the laws of the first state making an award contained
unmistakable language to the effect that those laws were exclusive of any remedy under the laws of any other state would supplementary awards be precluded. 38 Although the overwhelming number of state court decisions since follow McCartin, and Magnolia has been little noticed, all the Justices expressed dissatisfaction with the former case as a rule of the Full Faith and Credit Clause, although a majority of the Court followed it and permitted a supplementary award. 39
Full Faith and Credit and Statutes of Limitation
The Full Faith and Credit Clause is not violated by a state statute providing that all suits upon foreign judgments shall be brought within five years after such judgment shall have been obtained, where the statute has been construed by the state courts as barring suits on foreign judgments, only if the plaintiff could not revive his judgment in the state where it was originally obtained. 40