Jurisdictional Discrimination and Full Faith and Credit

• Publication year: 2014

Jurisdictional Discrimination and Full Faith and Credit

Ann Woolhandler

Michael G. Collins

JURISDICTIONAL DISCRIMINATION AND FULL FAITH AND CREDIT

Ann Woolhandler^* Michael G. Collins^**

Abstract

In Hughes v. Fetter (1951), the Supreme Court ruled that state courts are ordinarily required—as a matter of the Full Faith and Credit Clause—to take jurisdiction of claims arising under sister-state law, their own wishes notwithstanding. Hughes remains a foundational case for conflict of laws and interstate relations. It is said to embody the principles that states should maximize one another's policies, and cannot discriminate against sister-state laws. Some scholars, moreover, have argued for extensions of Hughes's nondiscrimination norm to choice of law, to public policy exceptions to applying sister-state law, and to Congress's stripping federal courts of jurisdiction. This Article argues that Hughes was wrong. The decision is justified neither by history nor precedent under the Clause, nor by a policy maximization rationale. And its nondiscrimination norm fits poorly with states' general ability, in the choice-of-law area, to prefer their own law over sister-state law in cases that they choose to entertain. This Article argues that states should be under a much more limited duty, grounded in a litigant's substantive entitlement to redress, rather than a duty not to discriminate against the law of sister states. Arguments that other scholars have made for extension of Hughes's rule of nondiscrimination against the law of other sovereigns in the choice of law, public policy, and jurisdiction-stripping settings should therefore draw little support from the doubtful result in Hughes.

[Page 1024]

Introduction............................................................................................1025

I. The Late Arrival of Full Faith and Credit to Sister-State Laws................................................................................................1028

A. Full Faith and Credit Revisionism ........................................... 1028
B. The Absence of Resort to the Full Faith and Credit Clause..... 1031

II. Broderick V. Rosner and the Problem of Shareholder Liability.........................................................................................1035

A. Corporate Insolvency and Shareholder Liabilities................... 1035

1. Actions by Creditors........................................................... 1036
2. Actions by Statutory Assignees........................................... 1037
3. The Rationale for Requiring Enforcement of Out-of-State Shareholder Liabilities....................................................... 1037
4. Corporate Director Liability.............................................. 1040
5. Mutual Benefit Societies and Insurance............................. 1041

B. Broderick v. Rosner .................................................................. 1044

III. Preludes to Hughes v. Fetter.....................................................1046

A. Wrongful Death and Related Actions....................................... 1047

1. Wrongful Death and Jurisdiction....................................... 1047
2. Personal Injury and Choice of Law.................................... 1050

B. The Battle over Plaintiff Forum Choice and the Development of Forum Non Conveniens ........................................................ 1052

IV. Hughes v. Fetter and Its Rationales.........................................1056

A. The Court's Opinion................................................................. 1056
B. The "Maximum Enforcement" Rationale................................. 1058

1. "Grand Bargain" Methodology......................................... 1059
2. Problems with the Grand Bargain ..................................... 1061

a. Incentives to Entertain Sister-State Actions under a Comity Regime ............................................................. 1061
b. Reasons Why Forums May Wish Not to Entertain Some Sister-State Actions ............................................ 1062
c. Should Substantive Policies Trump Procedure?......... 1064
d. Where No Alternative Forum Is Available .................. 1065
e. A Grand Bargain Favoring Plaintiffs? ........................ 1067

C. The Nondiscrimination Rationale............................................. 1069

1. Jurisdictional Discrimination and Courts of General Jurisdiction ......................................................................... 1070
2. Discrimination in Choice of Law ....................................... 1076

V. Reasoning from Hughes..............................................................1077

A. A Nondiscrimination Principle in Choice of Law? ................... 1077

[Page 1025]

B. Nondiscrimination as Leading to Rejection of a Public Policy Exception? ................................................................................ 1078
C. Jurisdiction Stripping and Nondiscrimination? ....................... 1082

1. The Argument for Use of a Nondiscrimination Principle ... 1082
2. Critique of the use of a Nondiscrimination Principle ........ 1083

Conclusion................................................................................................ 1087

Introduction

The Constitution declares that "Full Faith and Credit shall be given in each State to the public Acts, Records, and judicial Proceedings of every other State."¹ The states' obligation to respect other states' judgments—their "judicial Proceedings"—is probably the most familiar aspect of the Clause, and questions as to the scope of that obligation have a history going back to the early Republic. In addition, the modern Court has read the Full Faith and Credit Clause as sometimes requiring state courts, as a matter of choice of law, to apply sister-state law (their "public Acts") in cases that they entertain. Related to this requirement, the modern Court has also read the Clause to require states to open their courthouse doors and take jurisdiction of claims under sister-state law even if they would prefer not to entertain them.²

The last of these obligations—the door-opening obligation—is distinguishable from the choice-of-law obligation, although the Court treats both as deriving from the obligation to give full faith and credit to the laws of sister states. The choice-of-law obligation merely tells a state that chooses to exercise jurisdiction over an action that it might have to apply sister-state law rather than its own law; but it does not tell states that they must hear the particular action. Full faith and credit constraints on choice of law, however, have proved to be quite minimal,³ whereas the Court has articulated a stronger full faith and credit obligation to hear sister-state causes of action. In this Article, we critique the jurisdictional, or door-opening obligation, of the Full Faith and Credit Clause.

The Supreme Court's 1951 opinion in Hughes v. Fetter is the canonical decision establishing duties to take jurisdiction of sister-state causes of action

[Page 1026]

as a matter of full faith and credit.⁴ In Hughes, the Court required Wisconsin's courts to entertain a wrongful death action arising under the law of Illinois, which the Wisconsin courts had refused to hear.⁵ The Hughes Court found precedent for its door-opening rule in an earlier decision⁶ —Broderick v. Rosner—in which the Court held that New Jersey had to entertain an action under New York law against New Jersey shareholders of an insolvent New York corporation.⁷ Hughes and Broderick added a layer of constitutional compulsion to what had theretofore been a regime of interstate comity, which embodied a general respect for sister-state laws, but under which states generally retained the option whether to hear claims based on sister-state law.

Despite the relatively late appearance of a constitutionally driven state-court duty to entertain sister-state causes of action, Hughes has become a foundational case for interstate relations and conflict of laws. It rests upon and provides support for a notion that the Full Faith and Credit Clause has a largely self-executing effect, respecting the obligation of states to apply the statutory and common law of other states.⁸ The Hughes Court also stated that the Full

[Page 1027]

Faith and Credit Clause looks to the "maximum enforcement" of sister-state laws,⁹ and stands for a principle that forum states cannot "discriminate" against the laws of sister states.¹⁰

Moreover, scholars enlist Hughes to argue for a number of extensions of its supposed principles. First, they have argued that Hughes supports a generalizable nondiscrimination principle respecting the law of sister states, thereby restricting states from routinely preferring their own law in choice-of-law decisions.¹¹ Second, they have argued that the nondiscrimination principle should invalidate state public policy exceptions in choice of law, such as when states deny recognition to out-of-state same-sex marriages.¹² And third, in an extension of Hughes into the federal courts arena, scholars have argued that its nondiscrimination principle should prevent Congress from carving out federal court jurisdiction over constitutional claims that it disfavors.¹³

[Page 1028]

This Article takes issue with the decision in Hughes, including its claims of maximizing state interests and its nondiscrimination principle. In addition, this Article takes issue with those scholars who support Hughes and who seek to expand it into other areas. Part I shows that the Full Faith and Credit Clause was long understood as not requiring states to apply sister-state laws, nor to entertain unwanted jurisdiction over sister-state claims. Part II then traces the development of a limited constitutional duty to entertain causes of action under sister-state law in shareholder liability actions, leading to the Court's decision in Broderick v. Rosner. Part...