All lawyers should include basic provisions in contracts for their clients. One basic provision designates or chooses the state’s law that applies. If your client has the bargaining power, and is located in Connecticut, well, you choose Connecticut. But the language you use in your “choice of law” provision is critical. Simply stating that, for example, “Connecticut law governs the interpretation and enforcement of this agreement” will not guarantee that Connecticut law applies to extra-contractual torts. One of those tort claims can be found in Connecticut’s Unfair Trade Practice Statute, a powerful weapon for and against businesses because the winner can recover attorney’s fees and punitive damages. But as the Connecticut Supreme Court just held, even if the contract that created the relationship that ended up going sour chooses Connecticut law to govern it, if the “injury causing conduct” occurred in another state, Connecticut’s unfair trade practice statute may not apply. It’s a tough read, but if you want to you can read the decision here. The Connecticut Supremes decided that New Mexico’s unfair trade practice statute governed the dispute, not Connecticut’s.
The upshot is to draft choice of law provisions so that they cover extra-contractual torts. Something like “Connecticut law governs not only the interpretation, validity and enforcement of this Agreement, but also governs any claim, dispute, or disagreement between the parties that is related in any way to this Agreement or the relationship it creates.” This way, you have a better chance of applying your state’s law to the entire dispute, not just dispute surrounding the parties’ contractual obligations. We prevailed on a summary judgment motion in federal court on this same issue, where our client’s contract chose Rhode Island law, but we convinced the court to apply Connecticut’s Unfair Trade Practice Statute to the case. You can read that decision here, and read our client’s comments about the case on our testimonials page here, all the way at the bottom, written by Dr. Dan Dunlop, Managing Partner, Empower Health, LLC.
While, when it comes to state unfair trade practice statutes, which state’s law applies may not make much of a difference because the laws are so similar, other tort claims like bad faith or fraud may be significantly different among states. So it’s worth looking at the laws of the states that could apply to your client’s contract when making a choice.
