State Courts, State Territory, State Power: Reflections on the Extraterritoriality Principle in Choice of Law and Legislation

Article excerpt


       A. Theories of Extraterritoriality
       B. The Supreme Court and Extraterritoriality
          1. Constitutional Limits on State Choice of Forum
          2. Restrictions on State Powers to Legislate

       A. The Punitive Damages Cases
       B. The Internet and Extraterritoriality Concerns
       C. Nationwide Injunctions Pursuant to State Law and Other
          Problematic Judicial Remedies
       D. The Question of Contractual Choice of Law

       A. Choice of Law and Extraterritorial Legislation: The Case for
       B. Choice of Law and Extraterritorial Legislation: The (Possible)
          Case for (Some) Divergence
       C. A Final Note: The Case for Revising Both Tests



Do state courts--say, the courts of California--have the power to prescribe the standards of conduct that should apply to events in another state--say, Massachusetts? Is this power lesser or greater than the power of the California legislature to enact extraterritorial laws? And if these two powers are different in scope, to what extent and why?

To illustrate this rather abstract problem, an example may be helpful. Suppose gun manufacturers have the ability to design guns using a trigger design that, while much more expensive, causes fewer accidental deaths. (1) Suppose that California would like to promote usage of the safer design as widely as possible, even among gun manufacturers who operate out of state. There might be several reasons, of course, why California wishes its laws to have broad geographical scope. California might have an interest that most people would regard as legitimate. It might be the case, for example, that most guns brought into or stored in California are manufactured in other states. Or perhaps California simply wants to make its power felt as widely as possible. But whatever the reason, California would like to change the conduct of gun manufacturers outside California as well as within it. Does California have the power to do this?

Conventional choice-of-law theory gives us two answers, depending on the route that California takes. Suppose California attempts to affect the manufacturers' nationwide behavior through the imposition of damages or the issuance of injunctions in California courts. If it does so, few constitutional alarms are likely to be sounded. Indeed, according to Allstate Insurance Co. v. Hague, (2) state courts may apply whatever law they please so long as the state possesses a "significant aggregation of contacts, creating state interests, with the parties and the occurrence or transaction." (3) This standard strongly resembles the "minimum contacts" test for personal jurisdiction, and--especially outside the class action context (4)--it is normally a fair assumption that, so long as a state court has personal jurisdiction over the defendant, it probably has the power to apply forum law to her actions as well. (5) This assumption is also relatively uncontroversial; after decades of academic efforts to expunge territorial formalism from choice-of-law theory, (6) we are not accustomed to thinking of state courts' routine choice-of-law decisions as raising serious extraterritoriality problems.

But what if the California legislature attempts to shape the manufacturers' conduct prospectively, through some form of regulation that functions as a direct command--say, levying a fine on manufacturers unless they certify that they comply with California's safety standards in their operations nationwide? Under an orthodox choice-of-law understanding, this form of regulation might initially appear also to present little difficulty. In theory, both the application of forum law by state courts and the enactment of legislation by state legislatures are simply two aspects of states' legislative jurisdiction--that is, the power to dictate the substantive legal rules that apply to a given situation. …