Dormant Commerce and Corporate Jurisdiction

A look at personal jurisdiction after Mallory.

Personal jurisdiction aficionados have been buzzing about the Court's decision last summer in Mallory v. Norfolk Southern Railway Co. and what it might mean for jurisdiction over interstate corporations. In particular, Justice Alito's concurrence reintroduced some dormant-commerce questions that used to play a major role but have largely been forgotten since International Shoe.

I've got a new paper, forthcoming in The Supreme Court Review, which takes on the question. As it turns out, modern dormant-commerce doctrine puts some limits on state consent-by-registration statutes—but states can still do some important things that they couldn't do through minimum contacts alone. And as an original matter, assuming a "dormant" commerce clause exists, it likely doesn't say much about corporate recognition or internal affairs—or place many limits on a state's personal jurisdiction.

From the abstract:

Since 1945, the Court has sought for substantive rules of personal jurisdiction in the depths of Fourteenth Amendment due process. Mallory v. Norfolk Southern Railway Co. returns "dormant commerce" doctrine to the field—a place it occupied for several decades in the twentieth century, before being swept away and largely forgotten after International Shoe.

This Article assesses the impact of dormant commerce's return. Under today's doctrines, plaintiffs like Robert Mallory may face an uphill battle; yet they also have some good arguments on their side. On original grounds, moreover, it's far from clear that there is any dormant commerce doctrine, or that such a doctrine would have anything to say about the existence, powers, or internal affairs of state-created corporations in other states. At the Founding, states didn't have to recognize the privileges of foreign corporations at all, so they could make consent to local jurisdiction a condition of those privileges' local exercise.

By destroying the foundations of this earlier doctrine, the Supreme Court's turn-of-the-century dormant commerce cases eventually led to the recentering of personal jurisdiction on due process instead—and on complex and contradictory jurisdictional rules, less concerned with enforcing the actual Fourteenth Amendment than with preserving the legacy of International Shoe. If our doctrines of personal jurisdiction aren't going to make sense anyway, they may as well actually be law. Mallory doesn't quite get us there, but at least it points us in the right direction.

And from the introduction:

The intuition here is a simple one: "states don't have to have corporate law." If six Pennsylvanians at the Founding wanted to incorporate their backyard wheatfields, buying supplies and holding property under a common name, they'd have needed a Pennsylvania charter to do it; a permission slip from Virginia's legislature wouldn't have helped. For Pennsylvania to refuse to recognize Virginia's corporate charter wouldn't be to prefer its own goods and services over Virginia's (a potential dormant-commerce problem) or its own citizens over Virginia's (a potential Privileges-and-Immunities problem); at most, it'd prefer its own law over Virginia's for governing affairs inside its borders, something Pennsylvania has every right to do (and not a Full Faith and Credit problem). Nor would it treat these six citizens unfairly or arbitrarily (an equal protection problem); they could ask Pennsylvania to incorporate them on the same terms that anyone else can.

. . . [O]ver the last century or so, the Court developed a set of dormant-commerce limits on state corporate law—which by the early 1900s treated recognition of out-of-state corporations as something of a constitutional requirement, and which eventually extended to all aspects of a foreign corporation's internal affairs. As a matter of economic policy, maybe this wasn't so bad; if the Court's job in dormant-commerce cases is to act as a "junior-varsity Congress," maybe it succeeded in doing what Congress would have wanted done.

But policy decisions like these still need a basis in law—and not just in mistakes preserved as precedents, especially ones that depart demonstrably from the original rules. . . .

If the jurisdictional rules the twentieth-century Court came up with were uniquely sensible as a matter of policy, maybe their shaky origins wouldn't matter so much. But what we've been given is a system in which jurisdiction over a distant drug company turns on whether (unbeknownst to the defendant) a tourist ingested the defective pill in State A or State B; in which the forum for a local car accident turns on whether (unbeknownst to the plaintiff) the Ford Explorer XLT is marketed there or only the base model; and in which all these rules are ostensibly derived from the Fourteenth Amendment. The law may not have to make sense, but if our personal jurisdiction doctrines aren't going to make sense anyway, they may as well actually be law. Mallory doesn't quite get us there, but at least it points us in the right direction.

Or, as Larry Solum puts it:

Magnificent. Highly recommended. Download it while it's hot!

Do what the man says!