Equitable Life Assurance Society of the United States v. McKay
837 F.2d 904 (1988)
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Rule of Law:
In a federal civil action where state law provides the rule of decision, the competency of a witness is determined by state law; however, the forum state's choice-of-law rules dictate whether another state's witness competency statute is considered substantive or procedural and therefore whether it should be applied.
Facts:
- H. David McKay, a Washington resident, purchased six life insurance policies during his lifetime.
- The first four policies correctly named his three children from a prior marriage as beneficiaries.
- A fifth policy, initially naming his current wife Carolyn McKay as beneficiary, was changed in April 1983 to name the children instead; Carolyn McKay signed the change form as a witness but claimed it was without her knowledge.
- For a sixth policy purchased in June 1983, the insurance agent, Michael Gajadhar, stated that David McKay instructed him to make Carolyn McKay the beneficiary but that he mistakenly named the children.
- David McKay's will, executed in July 1983, left his entire estate to Carolyn McKay, stating that he had already provided for his children through life insurance proceeds.
Procedural Posture:
- Carolyn McKay filed a professional negligence lawsuit against insurance agent Michael Gajadhar in Washington State Superior Court.
- Equitable Life Assurance Society filed an interpleader action in the U.S. District Court for the District of Oregon to determine the proper beneficiaries for two policies.
- The District Court granted summary judgment in favor of the decedent's children.
- The basis for the summary judgment was the court's application of the Washington Deadman's Statute, which barred crucial testimony from Carolyn McKay and the insurance agent.
- Carolyn McKay, as appellant, appealed the summary judgment ruling to the U.S. Court of Appeals for the Ninth Circuit.
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Issue:
Under Oregon's choice-of-law rules, is the Washington Deadman’s Statute, which governs witness competency, considered a substantive law that must be applied by a federal court sitting in Oregon, or a procedural law that should be disregarded in favor of Oregon's own procedural rules?
Opinions:
Majority - Pregerson, J.
Undecided. The court did not resolve the issue, instead holding that the question must be certified to the Oregon Supreme Court. Under the 'Klaxon' rule, a federal court in a diversity or interpleader action must apply the choice-of-law rules of the forum state, which in this case is Oregon. Federal Rule of Evidence 601 mandates that state law on witness competency applies, but does not specify which state's law. Oregon's choice-of-law principles require applying Oregon's procedural rules even when using another state's substantive law. Therefore, the critical determination is whether Washington's Deadman's Statute is substantive (and should be applied) or procedural (and should not). As neither Oregon, Washington, nor Ninth Circuit courts have decided this issue, the court found it appropriate to certify the question to the Oregon Supreme Court for a definitive answer rather than speculate on how an Oregon court would rule.
Analysis:
This case exemplifies the intricate choice-of-law analysis federal courts must undertake in diversity jurisdiction cases under the 'Erie' doctrine and the 'Klaxon' rule. It highlights the crucial distinction between substantive and procedural law, which determines which state's rules apply. The court's decision to certify the question to the Oregon Supreme Court demonstrates judicial comity and restraint, recognizing that state supreme courts are the ultimate authorities on their own state's law. This procedural move avoids having a federal court create new state law precedent, thereby preserving the principles of federalism.
