The Illinois Supreme Court rejected State Farm’s argument that a choice-of-law analysis required application of Indiana law, which Indiana federal district courts predicted would have relieved State Farm of its duty to defend its policyholder in a TCPA case.

In an action filed in Illinois state court, State Farm acknowledged that, under Illinois law, it would have a duty to defend its policyholder in an action alleging violation of the Telephone Consumer Protection Act, conversion, and consumer fraud.  State Farm, however, argued that the court must conduct a choice-of-law analysis and apply Indiana law which would relieve State Farm of its coverage obligations.  According to State Farm, Indiana law should apply, because Indiana law conflicts with Illinois law, and Indiana has the most significant contacts with the dispute.  The “conflicting” Indiana law consisted of two unreported federal district court decisions from the Southern District of Indiana, which predicted that the Indiana Supreme Court would hold there is no coverage for the claims raised in the underlying complaint.  The trial court determined that no choice-of-law analysis was required, because a federal district court decision predicting state law does not create a conflict of law.  The appellate court reversed.

The Illinois Supreme Court held that federal district court decisions predicting state law (in the absence of any intermediate state court authority) cannot be the source of an outcome determinative conflict so as to trigger a choice-of-law analysis.  “Because a federal district court’s Erie prediction is not state law, such a prediction cannot, by itself, establish a conflict between state laws.”  The court noted, however, that if a federal court bases its Erie prediction on the holdings of a state’s intermediate courts, that would be a relevant consideration for the circuit court.  The court rejected State Farm’s argument that the mere potential of a conflict of laws is sufficient to require a choice of law analysis.  “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.”  The case is Bridgeview Health Care Center, Ltd. v. State Farm Fire & Cas. Co., No. 116389 (Ill. May 22, 2014).

The holdings in this decision reach well beyond the realm of TCPA claims.  This case should be consulted with regard to any dispute that may involve a choice-of-law analysis to determine whether there is an actual conflict between two or more states’ laws and, if so, where to file suit.