Second Generation Law and Economics of Conflict of Laws: Baxter's Comparative Impairment and Beyond

Abstract

In his 1963 article in the Stanford Law Review, "Choice of Law and the Federal System," Professor William F. Baxter criticized the choice-of-law approach of the First Restatement of the Conflict of Laws. According to the Restatement, courts should apply the law of the state where the last act or event deemed necessary to create a cause of action occurred. In contrast, Baxter advocated a comparative-impairment approach, whereby judges were obligated to apply the law of the state whose public policy would suffer the greatest impairment if its law was not applied. The authors contend that although Baxter's approach caries intuitive appeal for one interested in economic theory, available empirical evidence and public choice insights together indicate that Baxter's approach cannot work efficiently in practice. Because judges in practice have neither the data nor the intuitive understanding of the complexities of any legal problem to make the comparative-impairment determination in the scrupulous way that Baxter suggested, William H. Allen and Professor Erin A. O'Hara recommend a modified Restatement approach. They believe an approach that keeps the basic concepts of the Restatement but modifies rules that have not worked well in practice will generate greater predictability and less bias in decisionmaking