A more thorough explanation:

Conflict of laws refers to a situation where there is a difference between the laws of two or more jurisdictions that are connected to a case. This means that the outcome of the case depends on which jurisdiction's law will be used to resolve each issue in dispute. The conflicting legal rules may come from U.S. federal law, the laws of U.S. states, or the laws of other countries.

For example, if a person from New York gets into a car accident while driving in California, there may be a conflict of laws issue. The laws of New York and California may be different when it comes to determining who is at fault in a car accident. The outcome of the case will depend on which state's law is applied.

The process by which a court determines what law to apply is sometimes referred to as "characterization" or "classification." This determination must be made in accordance with the law of the forum. A federal court in a case before it based on diversity of citizenship, for example, determines the conflict of law issue as if it were the highest court in the state in which it is sitting.

Courts faced with a choice of law issue generally have two choices:

• A court can apply the law of the forum (lex fori) -- which is usually the result when the question of what law to apply is procedural.
• Or the court can apply the law of the site of the transaction or occurrence that gave rise to the litigation in the first place (lex loci) -- this is usually the controlling law selected when the matter is substantive.

For example, if a person from New York sues a person from California in a New York court over a contract that was signed in California, the court may apply California law (lex loci) because that is where the contract was signed.

Federal courts play by different rules than state courts because federal jurisdiction is limited to what has been enumerated in the Constitution. The rules that federal courts must obey regarding which laws to apply are extremely complex.