Spotting an issue that both parties missed, Bankruptcy Judge Janice D. Loyd of Oklahoma City avoided the circuit split on choice of law rules for cases with exclusive jurisdiction in federal courts. Her Dec. 13 opinion reads like a handbook for deciding which state’s statute of limitations applies.
A former husband filed bankruptcy in Oklahoma. His former wife filed a priority claim for $27,000 in unpaid child support under a Utah divorce decree. The former husband-debtor objected to the claim, contending the allowable amount of the claim was only some $3,000 after applying Utah’s statute of limitations for child support.
The wife agreed that the Utah statute applied but argued that the husband had waived the statute by making voluntary payments after the limitations period expired.
Judge Loyd did not adopt the parties’ agreed choice of law. Instead, she said that neither party raised the “unsettled and potentially determinate choice of law issue.”
Under the Supreme Court’s Guaranty Trust and Klaxon decisions from the 1940s, federal courts sitting in diversity employ the forum state’s choice of law rules to determine controlling substantive law. However, the Supreme Court has never extended the rule to cases under bankruptcy jurisdiction.
In federal question cases, four circuits use choice of law rules of the forum state. Three other circuits, including the Tenth, employ federal common law and the Restatement (Second) of Conflicts of Laws. Under the Restatement, Judge Loyd said that Utah law would apply because it had the most “significant relationship to the parties and the occurrence.”
Judge Loyd decided, though, that federal common law did not apply in view of the federal Full Faith and Credit Child Support Orders Act of 1994, which includes choice of law rules for child support matters. In an action to enforce child support arrears, Section 1738(h) of FFCCOA provides for the application of the statute of limitations of the forum state or the state that issued the order, “whichever statute provides the longer period of limitation.”
Both Utah and Oklahoma had adopted the Uniform Interstate Family Support Act, which similarly invokes the longer statute of limitations.
Oklahoma “clearly provides for the longer statute of limitations in child support actions,” Judge Loyd said, because there is none in the Sooner state. In Oklahoma, child support is owed until it is paid in full, the judge said.
Since the statute will never expire, Judge Loyd directed the parties to recalculate the allowable claim.