313 U.S. 487 (1941)
Klaxon Co. v.
Should a federal court sitting in a diversity case apply the choice-of-law rules of the state in which it is located?
Federal courts must apply the conflict-of-laws rules of the states in which they sit when determining which state's substantive law applies in diversity cases.
Yes, the Supreme Court held that federal courts must apply the choice-of-law rules of the state in which they sit when deciding conflicts of law in diversity cases.
The Klaxon decision is significant because it harmonizes the application of choice-of-law principles between state and federal courts in diversity cases, thereby promoting consistency and respecting states' rights to control their own legal affairs. It addresses the tension between nationalism and federalism, providing students a profound example of how judicial decisions uphold the federal structure by ensuring federal courts cannot undermine state policies via procedural means.