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As stated above, the Court will apply State A's choice-of-law approach, the most
significant relationship approach. Under the most significant relationship approach, the
Court will look to relevant contacts and controlling principles to determine which state
has the most significant relationship with the present action. Under contract law, relevant
contacts include: the place of negotiating, contracting, and performing; the parties'
domiciles or where they are subject to personal jurisdiction; and the subject matter of the
contract. Moreover, relevant controlling principles include the relevant states' interests
and policies underlying their laws; certainty, uniformity, and predictability of result;
protection of justified expectations; and ease of applying the chosen law.
In a contract case, however, prior to engaging in the most significant relationship
approach, the Court will first look to whether the parties have a valid and enforceable
choice-of-law provision. If the matter that the parties contracted to is a matter that is
given full freedom of contract, then the Court will enforce the choice-of-law provision.
If, however, the matter that the parties contracted to is not an area in which parties are
given full freedom of contract, the Court will still enforce the choice-of-law provision,
provided that the chosen law belongs to a state has relevant contacts with the parties or
the chosen law does not violate the forum's fundamental public policy.
In this case, a non-compete provision is not a matter in which parties have full freedom of
contract. As evidenced by the conflicting State A and State B laws, covenants not to
compete must fall within reasonable terms of geographic scope and duration. Thus, the
Court will only enforce the non-compete provision between the woman and Taxes if
State A has a relevant interest and State A's law does not violate public policy of State B.
Here, State A clearly has a relevant interest: Taxes is incorporated in State A, its
corporate headquarters is in State A, and Taxes operates three of its offices in State A.
Moreover, the woman used to work in State A, and formerly lived in State A. Lastly,
State A was the place of negotiating, contracting, and performing between the woman
and Taxes. However, State B has a statute that provides that choice-of-law clauses in
employment contracts are unenforceable. Thus, to enforce State A law would violate
State B's public policy. Thus, the woman and Taxes' choice-of-law provision as stated in
the contract does not apply.
Hence, the Court should turn to the relevant contacts. As stated above, many of the
relevant contacts are located in State A. However, the woman has established domicile in
State B. Moreover, the subject matter of the contract, the covenant not to compete, was
violated in State B, by the opening of the woman's tax preparation practice. Since both
State A and State B have relevant contacts, the Court will turn to controlling principles.
In upholding non-compete covenants, State A seeks to protect its businesses and citizens
from unfair competition, and protect the freedom to contract with expect to employment.
Since Taxes is a State A corporation, State A likely seeks to protect Taxes from unfair
competition, as part of its underlying policy in its non-compete law. However, State B,