The Los Angeles Rams were recently in hot water with the National Football League Players Association over a choice of law provision in the team’s contracts. This clause established that all disputes would be governed by Missouri law, where the Rams had previously played. Missouri law is more favorable to management than employees relative to California law. This is a high-profile example which has made headlines, but choice of law provisions are common in many contracts. They’re often short clauses and can be easy to overlook, but can have major consequences that alter the balance of power between the parties in the event of a dispute.
There are several reasons why a contract drafter may want such a provision. The provision may provide a set of laws that are more favorable to one party than the other, as in this situation. The drafter may have specific statutes in mind when choosing a certain state over another. Here, the Missouri Workers’ Compensation Act was specifically named in the Rams’ provision. The drafter could also prefer the general legal climate in one state over another. Instead of a specific statute or specific set of laws, the drafter may feel that one state may be generally more favorable to plaintiffs or defendant in a particular type of dispute. The drafter’s location could also influence choice of law. A business based in a particular state may want all disputes to be heard on its home turf.
The Rams situation is interesting as it involves a business leaving a state under controversial circumstances but still attempting to take advantage of the favorable laws in its former home. It’s also one of the few opportunities for a common contract provision like choice of law to get any press. Take it as an indication to always read the contracts you sign carefully and be aware that small clauses can have big effects.