The Dormant Commerce Clause, Publishers, the Internet, and Tort Law

[Jack Goldsmith and I will have an article out about the Dormant Commerce Clause, geolocation, and state regulations of Internet transactions in the Texas Law Review early next year, and I'm serializing it here. There is still plenty of time for editing, so we'd love to hear any recommendations you folks might have; in the meantime, you can read the entire PDF of the latest draft (though with some formatting glitches stemming from the editing process) here.]

Considering how various state laws treat nationwide publishers, especially internet publishers, helps show the problems with courts' occasional condemnation of laws for which the "practical effect . . . is to control conduct beyond the boundaries of the State.". This focus shows how the Dormant Commerce Clause has been applied to internet communications, introduces the importance of geographic filtering in this context, and thus sets up the analysis of the more recent social media platform issues addressed in Part V. To make things concrete, imagine a major online publisher—say, Fox News—and the state laws that it might be subject to and therefore must consider. We'll focus on the publisher's own materials, thus avoiding any possible problem under Section 230 of the Communications Decency Act.[1]

For starters, like all publishers, Fox News must worry about libel law. Some basic principles of libel law are of course dictated uniformly by the First Amendment, but beyond that the rules vary. A few states, for instance—including New York, where Fox is headquartered—require a showing of "actual malice" for all statements of public concern, including statements about private figures.[2] Most other states allow recovery of proven compensatory damages for libel based on a showing of mere negligence.[3]

Presumably Fox would want to avoid even negligent mistakes, just as a matter of editorial policy. But even when editors believe that a statement is correct, and that they've reasonably investigated the facts, they may recognize that there's a risk that a jury will see things differently. If so, they may publish if they know they're protected by the "actual malice" standard, but refrain from publishing if they are subject to the negligence standard. Indeed, the purpose of the New York Times v. Sullivan "actual malice" standard, and of some states' decisions to extend the standard to all public-concern speech, is to prevent this chilling effect.[4]

Likewise, all states recognize a "fair and accurate report" privilege that allows news outlets to freely publish reports of government proceedings (such as trials), even if some of the allegations aired by parties or witnesses in those proceedings are false.[5] But some states exclude reports of confidential or sealed proceedings;[6] others don't.[7]

Similarly, some states recognize a "neutral reportage" privilege, under which (to oversimplify slightly) neutral reports of a controversy are immune from libel liability.[8] Say that, for instance, City Councilman Glenn accuses fellow City Councilman Norton of sexual battery; the reporter thinks that Glenn's accusation is nonsense, but wants to publish a story about it, since the accusation reflects badly on Glenn (the accuser) and can shed light on why there's tension in the City Council.[9] In some states, the reporter is free to publish a "neutral report" of the controversy. But other states (such as Pennsylvania) follow the usual "republication rule," under which repeating Glenn's accusation, even in the course of reporting on the dispute, could lead to defamation liability.[10] There are many other important differences among state libel laws as well.[11]

All those state libel rules have potential extraterritorial effect on Fox.

If, for instance, Fox is about to report on the Glenn–Norton feud, it can't just confidently assume that a uniform federal law would apply, or that the law of its main place of business (New York) would apply. Rather, it would likely need to determine where the people it's writing about are domiciled, since under most states' choice of law principles, libel cases follow the law of the plaintiff's domicile.[12] And if, for instance, it learns that Norton is domiciled in Pennsylvania, and Pennsylvania doesn't recognize a neutral reportage privilege, then Fox runs a risk of liability if it repeats Glenn's accusations in the story (however newsworthy they might be), and might decide not to run it as a result. In that respect, Pennsylvania's law is influencing what Fox in New York is allowed to say to people all over the country (indeed, all over the world).

To be sure, if Pennsylvania's law is applied in a lawsuit in New York, because the New York court applies Pennsylvania law pursuant to New York choice-of-law rules, one might argue that Pennsylvania law isn't really being applied extraterritorially, either (1) on the ground that New York law is being applied to Fox, but New York law imports Pennsylvania law libel rules for libel lawsuits brought by Pennsylvanians, or (2) on the ground that New York is choosing to make the Pennsylvania law govern in its courts. But even if one views this situation as non-extraterritorial, which is not obvious, there is no assurance that Norton will sue Fox in New York: Norton may well be able to get personal jurisdiction over Fox in many fora. In particular, under Calder v. Jones,[13] if the story is sufficiently focused on Pennsylvania—for instance, if it expressly discusses Norton and Glenn as being Pennsylvania residents saying things about each other in Pennsylvania—then Pennsylvania may well have personal jurisdiction over the lawsuit against Fox. This conclusion would be even clearer if the publication concerned, for instance, an opinion article urging Pennsylvania voters to react in some way to the controversy.[14] Thus, Pennsylvania courts would be applying Pennsylvania libel law to judge Fox's publications available in the whole country. And Fox, aware of that, would have to consider tailoring its speech about Pennsylvanians to Pennsylvania law. These and other complexities must at least be considered by Fox's legal team; even having to consider them is thus a cost of interstate business. And Fox surely tempers its various legal risks related to the uncertainties of multistate libel law with insurance, which is also a cost.

Libel law at least has a broad nationally uniform baseline, despite some material differences such as the ones we've outlined. The disclosure-of-private-facts tort, on the other hand, is not recognized at all in some states, including New York,[15] though it is recognized in most states. If Fox is producing a story about a Californian, it will need to avoid including sufficiently intimate facts (at least so long as it worries that a judge and jury will find them not to be newsworthy), for fear that California law would apply.[16] Again, a state's law would thus have an extraterritorial effect on what Fox creates in New York and distributes throughout the country.

This is even clearer with the right of publicity, the scope of which varies sharply from state to state. Say, for instance, that Fox, as part of its sports coverage, decides to sell video games involving the names, likenesses, and statistics of Babe Ruth, Ted Williams, Jackie Robinson, and the like. Some state right of publicity laws would make that actionable; some would not, because they only apply to the living;[17] and some (including Fox's New York home) probably would not, because they apply to the dead but exclude "audiovisual works,"[18] a category that likely covers video games.[19] Yet again, the law of one state in which a famous player was domiciled when he died would have an effect on what Fox can sell from New York to all 50 states.

It is conceivable, of course, that some such applications of state tort law might indeed violate the Dormant Commerce Clause, at least when they apply to transactions that are entirely outside the relevant state. Maybe if Fox distributed a video game that depicted a famous baseball player who was domiciled in Alaska when he died, and was careful to avoid distributing it in Alaska,[20] the Dormant Commerce Clause might forbid subjecting Fox to Alaska law.[21] But when a company distributes material into a state, including online, applying state tort law to that material likely doesn't violate the Clause.[22] And though it may be expensive to comply with the law of multiple states, that can't by itself suffice to render all such state laws inapplicable. ^[23]

[1]. 47 U.S.C. § 230. Technically, this was section 509 of the Communications Decency Act, which created § 230 of Title 47, 110 Stat. 133, 137 (1996), but it's colloquially called section 230 of the Communications Decency Act.

[2]. N.Y. Civ. Rts. L. § 76-A.

[3]. See, e.g., Khawar v. Globe Int'l, Inc., 19 Cal. 4th 254 (1998).

[4]. If one looks to variation in damages rules, that is even sharper. Oregon, for instance, rejects punitive damages in libel cases, Wheeler v. Green, 286 Or. 99 (1979); other states allow them. Many (but not all) states limit the availability of presumed damages to certain kinds of "libel per se" categories, with considerable variation about what qualifies as libel per se.

[5]. Restatement (Second) of Torts § 611 (Am. L. Inst. 1977).

[6]. See, e.g., Shiles v. News Syndicate Co., 27 N.Y.2d 9, 14 (1970). But see Miller v. Gizmodo Media Grp., LLC, 994 F.3d 1328, 1335 (11th Cir. 2021) (reading Shiles narrowly).

[7]. See, e.g., Dorsey v. National Enquirer, Inc., 952 F.2d 250, 253 (9th Cir. 1991).

[8]. See Edwards v. National Audubon Soc'y, 556 F.‌2d 113 (2d Cir. 1977) (concluding that the First Amendment mandates such a privilege); Norton v. Glenn, 860 A.2d 48 (Pa. 2004) (rejecting the privilege); Tex. Civ. Prac. & Rem. Code § 73.005(b) (implementing a still broader privilege, under which "[i]n an action brought against a . . . periodical or broadcaster, the defense [of truth] applies to an accurate reporting of allegations made by a third party regarding a matter of public concern").

[9]. This is based on the facts of Norton, 860 A.‌2d 48.‌

[10]. Indeed, that's what the Pennsylvania Supreme Court held in Norton. 860 A.‌2d at 58–59; see also Martin v. Wilson Pub. Co., 497 A.2d 322 (R.I. 1985). (If A's accusation is made in court proceedings, then that would be covered by the separate, broadly recognized "fair report" privilege, Restatement (Second) of Torts § 611 (Am. L. Inst. 1977), but let's assume that A's accusation is made outside court proceedings.‌)

[11]. See, e.g., 1 Rodney A. Smolla, Law of Defamation § 4:22 (2d ed.) (discussing "innocent construction rule," recognized only in Illinois and Ohio); id. § 4:23 (discussing "single-instance rule," recognized only in New York).

[12]. Restatement (Second) of Conflict of Laws § 150 (Am. L. Inst.).

[13]. 465 U.S. 783 (1984).

[14]. See, e.g., Silver v. Brown, 382 F. App'x 723, 729–30 (10th Cir. 2010) (holding that New Mexico courts had personal jurisdiction over a Florida blogger, because the post was sufficiently focused on "a New Mexico resident and a New Mexico company" and their actions mainly in New Mexico"); Tamburo v. Dworkin, 601 F.3d 693, 697 (7th Cir. 2010) ("Applying Calder v. Jones, we conclude that specific personal jurisdiction lies in Illinois over the individual Canadian and American defendants on Tamburo's intentional tort claims. These defendants are alleged to have used their websites—or in the case of the Canadian defendant, blast emails to the online dog-pedigree community—to defame and tortiously generate a consumer boycott against Tamburo, knowing that he lived and operated his software business in Illinois and would be injured there. Indeed, some of the messages specifically listed Tamburo's Illinois address and urged readers to harass him."); Wagner v. Miskin, 2003 ND 69, ¶ 20 ("Printed copies of Miskin's website indicate its Internet address is 'www.undnews.com.' On the website, the subjects of linked articles relate to UND issues and staff, demonstrating a North Dakota university was the focus of her website."); Baldwin v. Fischer-Smith, 315 S.W.3d 389, 398 (Mo. Ct. App. 2010); Kauffman Racing Equip., L.L.C. v. Roberts, 126 Ohio St. 3d 81, 90 (2010); Kubyn v. Follett, 2019-Ohio-3152, ¶¶ 31–34; Baronowsky v. Maiorano, 326 So. 3d 85, 90 (Fla. Dist. Ct. App. 2021); Goldhaber v. Kohlenberg, 395 N.J. Super. 380, 389–90 (App. Div. 2007); see also TV Azteca v. Ruiz, 490 S.W.3d 29, 52–55 (Tex. 2016); Renaissance Health Pub., LLC v. Resveratrol Partners, LLC, 982 So. 2d 739, 742 (Fla. Dist. Ct. App. 2008); Bickford v. Onslow Mem'l Hosp. Found., Inc., 2004 ME 111, ¶ 12; Johnson v. TheHuffingtonPost.com, Inc., 21 F.4th 314, 319 (5th Cir. 2021) (finding no jurisdiction because defendant's "story about Johnson has no ties to Texas. The story does not mention Texas. It recounts a meeting that took place outside Texas, and it used no Texan sources.").

[15]. See Brunson v. Ranks Army Store, 73 N.W.2d 803 (Neb. 1955); Howell v. New York Post Co., 612 N.E.2d 699 (N.Y. 1993); Hall v. Post, 372 S.E.2d 711 (N.C. 1988); Anderson v. Fisher Broadcasting, 712 P.2d 803 (Or. 1986); Evans v. Sturgill, 430 F. Supp. 1209 (W.D. Va. 1977); see also Doe v. Methodist Hospital, 690 N.E.2d 681 (Ind. 1997) (splitting 2-2-1 on whether the tort should be recognized, with one Justice expressing no opinion).

[16]. See Shulman v. Group W. Prods.‌, Inc.‌, 955 P.‌2d 469 (Cal. 1998) (describing California's version of the tort).‌

[17]. See, e.g., Eagle Forum v. Phyllis Schlafly's Am. Eagles, No. 3:16-CV-946-DRH-RJD, 2017 WL 4785792, *4 (S.D. Ill. Oct. 20, 2017) (Missouri law); Heinz v. Frank Lloyd Wright Foundation, 229 U.S.P.Q. 201 (W.D. Wis. 1986) (Wisconsin law).

[18]. See N.‌Y. Civ. Rts. L. § 50-f.‌

[19]. See, e.g., Tetris Holding, LLC v. Xio Interactive, Inc., 863 F. Supp. 2d 394, 400 (D.N.J. 2012).

[20]. Say Curt Schilling moves back to Alaska, where he's from, and then dies while domiciled there.‌

[21]. See, e.‌g.‌, Puerto Rico Coffee Roasters LLC v. Pan Am. Grain Mfg. Co.‌, 2016-1 Trade Cases ¶ 79,466, *9–*10 (D.‌P.‌R. Dec. 11, 2015) (refusing to apply P.‌R. trademark law to alleged infringement in Florida); Alamo Recycling, LLC v. Anheuser Busch InBev Worldwide, Inc.‌, 239 Cal. App. 4th 983, 997–98 (2015) (refusing to apply California misrepresentation law and intentional interference with economic advantage law to labeling of products outside California).‌

[22]. See, e.‌g.‌, Experience Hendrix L.‌L.‌C. v. Hendrixlicensing.‌com Ltd.‌, 762 F.‌3d 829, 837 (9th Cir. 2014) (rejecting a Dormant Commerce Clause challenge brought by a Nevada company to a Washington right of publicity law, apparently because the law was limited to sales of products in Washington, and thus didn't "affect transactions occurring wholly outside Washington"); Knapke v. PeopleConnect Inc.‌, No. C21-262 MJP, 2021 WL 3510350, *10 (W.‌D. Wash. Aug. 10, 2021) (rejecting a Dormant Commerce Clause challenge to a right of publicity claim brought under Ohio law, based on a Washington company's practice of selling records drawn from school yearbooks); cf. Ades v. Omni Hotels Mgmt. Corp.‌, 46 F. Supp. 3d 999, 1012–14 (C.‌D. Cal. 2014) (rejecting claim that California law banning unannounced recording of phone calls by one party was unconstitutionally extraterritorial as to calls from Nebraska, partly because "there is at least a triable issue of fact as to whether it would be 'futile' for Omni to differentiate among Californian and non-Californian callers"); Krause v. RocketReach, LLC, No. 21 CV 1938, 2021 WL 4282700, *4 (N.‌D. Ill. Sept. 21, 2021) (concluding that whether Illinois right of publicity law violates the Dormant Commerce Clause turns on facts about the relative burdens and benefits that can't be resolved on a motion to dismiss).‌‌

[23]. See, e.g., Heffner v. Murphy, 745 F.‌3d 56, 76 (3d Cir. 2014) (noting, in context of upholding Pennsylvania law regulating funeral director licenses, that "virtually all state regulation involves increased costs for those doing business within the state, including out-of-state interests doing business in the state," and thus "virtually all state regulation 'burdens' interstate commerce" but does not violate the Dormant Commerce Clause); Am. Beverage Ass'n v. Snyder, 735 F.‌3d 362, 379–81 (6th Cir. 2013) (Sutton, J.‌, concurring) (noting in context of Dormant Commerce Clause that the "modern reality is that the States frequently regulate activities that occur entirely within one State but that have effects in many"); Int'l Dairy Foods v. Boggs, 622 F.‌3d 628, 647–48 (6th Cir. 2010) (rejecting argument that Ohio food label law violated Dormant Commerce Clause due to the out-of-state firm's costs of complying with the law); Nat'l Elec. Mfrs. Ass'n v. Sorrell, 272 F.‌3d 104, 110–11 (2d Cir. 2001) (upholding Vermont consumer protection law even though it imposes significant compliance costs on out-of-state firms and noting that "manufacturers [bearing] some of the costs of the Vermont regulation in the form of lower profits does not cause the statute to violate the Commerce Clause").‌