Klaxon Co. v. Stentor Electric Manufacturing Co.

[*494] Me. Justice Reed delivered the opinion of the Court.

The principal question in this case is whether in diversity cases the federal courts must follow conflict of laws rules prevailing in the states in which they sit. We left this open in Ruhlin v. New York Life Insurance Co., 304 U. S. 202, 208, n. 2. The frequent recurrence of the problem, as well as the conflict of approach to the problem between the Third Circuit’s' opinion here and that of the First Circuit in Sampson v. Channell, 110 F. 2d 754, 759-62, led us to grant certiorari.

In 1918, respondent, a New York corporation, transferred its entire business to petitioner, a Delaware corporation. Petitioner contracted to use its best efforts to further the manufacture and sale of certain patented devices covered by the agreement, and respondent was to have a share of petitioner’s profits. The agreement was executed in New York, the assets were transferred there,' and petitioner began performance there although later it moved its operations to other states. Respondent.was voluntarily dissolved under New York law in ‘1919. Ten years later it instituted this action in the United States District Court for the District of Delaware, alleging that petitioner had failed to perform its agreement to use its best efforts. Jurisdiction rested on diversity of citizenship. In 1939 respondent recovered a jury verditít of $100,000, upon which judgment was entered. Respondent then moved to correct the judgment by adding in [*495] terest at the rate of six percent from June 1, 1929, the date the action had been brought. The basis of the motion was the-provision in § 480 of the New York Civil Practice Act directing that in contract actions interest be added to the principal sum “whether theretofore liquidated or unliquidated.” [1]