Choice of Law Provision in Contract Does Not Avoid Application of Michigan Procedural Law

In Brazos Higher Educ. Serv. Corp. v. Stinnett, 2017 Mich. App. LEXIS 485, *3, the Court of Appeals ruled on the issue of whether a choice of law provision created an obligation to apply the chosen state’s substantive and procedural law. It held that, unless the contract states otherwise, a choice of law provision applies only to substantive, not procedural, law.  Therefore, Michigan law regarding statutes of limitations and service of summons still apply in cases where choice of law contract provisions are generally defined.

In Brazos, Defendant Ann Stinnett, failed to make payments on a number of student loans. In response, Plaintiff Brazos Higher Education Service Corporation, filed suit for breach of contract and unjust enrichment. Defendant claimed that any action against her for defaulting on the student loan debt was now barred by Pennsylvania’s statute of limitations (4 years), and that any claim against her had already run.  The Defendant relied on a choice of law provision in the contract, stating that Pennsylvania law was to apply.

The Court held that although public policy did favor “the enforcement of contractual… choice-of-law provisions,” the Michigan Supreme Court clearly articulated that courts must apply Michigan procedural law. As such, the designation of “statute of limitations” being procedural rather than substantive, subjected Defendant to having to defend her suit in court, as Michigan law provides a six-year statute of limitations.

Moving forward, sophisticated individuals need to understand that a choice of law provision will not automatically protect them from Michigan’s procedural laws.

 
This article was written by Nezar Habhab, Law Clerk.

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