Rethinking the state sovereignty interest in personal jurisdiction.

• Author: Schmitt, Jeffrey M.

Abstract

The Supreme Court has never articulated a coherent theoretical justification for the law of personal jurisdiction. While some opinions state that the law is based on state sovereignty, others hold that it is instead derived exclusively from the Due Process Clause's concern for fairness. None of the opinions, however, clearly ties either of these theories to the blackletter law of personal jurisdiction. This confusion over the purpose of the doctrine has helped to create divisions both within the Court and among the Circuits on a number of important jurisdictional issues.

This Article argues that the law of personal jurisdiction must take sovereignty into serious account and provides a new interpretation of how sovereignty should inform the doctrine. Sovereignty must be considered because, when a court exercises jurisdiction over an out-of-state defendant, the state projects its sovereign power outside of its borders. The Court has imposed significant constitutional limitations on a state that projects its regulatory power beyond its borders, and analogous constitutional limitations should apply to a state court's assertion of adjudicatory power over an out-of-state defendant.

Using the scope of a state's regulatory power as a guide, this Article contends that the inherent limits of state sovereignty can explain much of the Court's modern personal jurisdiction doctrine. Most significantly, a regulatory model supports the requirement that the defendant-rather than merely the case--have minimum contacts with the forum state. Sovereignty, however, cannot explain all aspects of the doctrine. The purposeful availment requirement, for example, is tied to the subjective intentions of the defendant rather than the sovereign power of the states. Understanding how sovereignty influences the doctrine highlights the fact that some other constitutional value, such as fairness or liberty, must be at play.

Contents Introduction I. The Supreme Court's Consideration of State Sovereignty II. Sovereignty as a Theoretical Justification for Personal Jurisdiction A. The Affirmative Case for Considering Sovereignty B. Responding to Sovereignty's Critics III. Sovereignty's Implications for Personal Jurisdiction A. Rejecting the Choice of Law Model B. The Implications of a Regulatory Approach to Sovereignty in Specific Jurisdiction IV. Nicastro and the Stream of Commerce Conclusion Introduction

Although personal jurisdiction is perhaps the most fundamental subject in Civil Procedure, the Supreme Court has never articulated a coherent account of its theoretical underpinnings. In particular, the Justices have been unable to agree on whether the doctrine is based, even in part, on state sovereignty. Most recently, in J. McIntyre Machinery, LTD. v. Nicastro, (1) Justice Kennedy called state sovereignty a "central concept," (2) whereas Justice Ginsburg, dissenting, asserted that jurisdictional rules "derive from considerations of due process, not state sovereignty." (3) The stakes of this debate are unclear, because the Court has never explained exactly what impact, if any, sovereignty has on the doctrine. (4) This hopeless confusion over the role of sovereignty has helped to create divisions both within the Court and among the Circuits on a number of basic jurisdictional issues, making the modern law of personal jurisdiction frustratingly unsettled. (5)

Most scholars of jurisdiction have rejected state sovereignty as a meaningful basis for personal jurisdiction. (6) They generally argue that, while state sovereignty explains why state lines matter, the substance of the doctrine should be derived exclusively from the Due Process Clause's concern for fairness. Many of these scholars therefore argue that the doctrine should be based solely on the convenience of the parties, (7) the defendant's consent, (8) or fair play resulting from the election of benefits in the forum. (9) A number of scholars even argue that constitutional restrictions on personal jurisdiction are unjustified and should be abandoned altogether. (10)

This Article, however, argues that state sovereignty should be seen as a basic theoretical justification for the constitutional restrictions on personal jurisdiction. Although other scholars have recognized that sovereignty should play some role, (11) this Article directly responds to sovereignty's critics and advances a new argument for its consideration based on a comparison to a state's regulatory jurisdiction. (12) By borrowing principles from the regulatory context, this Article further contributes to the scholarly discussion by developing an original interpretation of how state sovereignty informs the doctrine. In sum, this Article concludes that, as a matter of state sovereignty, a state court may exercise jurisdiction only over a defendant that engaged in conduct that significantly implicated interests within the sphere of the state's sovereign power, that is, the health, safety, and general welfare of its people. (13)

Putting sovereignty into focus could help to resolve some of the most intractable issues in personal jurisdiction. For example, sovereignty helps to explain why the Court focuses on the defendant's contacts with the forum state, an approach that has troubled many scholars. (14) Understanding the theoretical basis of the doctrine could also guide the courts in a number of concrete doctrinal issues that are currently dividing the Justices and the lower courts. (15) This Article focuses on the stream of commerce issue that prompted the Court's most recent debate over sovereignty in Nicastro. Although Justice Kennedy's plurality opinion purported to rely on sovereignty, his restrictive approach to jurisdiction in the stream of commerce context is not based on the inherent limits of the sovereign power of the states. Notwithstanding his assertions to the contrary, Justice Kennedy's opinion therefore must be based on dubious fairness concerns regarding out-of-state corporate defendants that benefit from sales in the forum state.

This Article proceeds as follows. Part I sets the stage by explaining how the Court has discussed the state sovereignty interest in personal jurisdiction. Part II argues that state sovereignty should be seen as a necessary theoretical justification for the constitutional law of personal jurisdiction and responds to academic arguments to the contrary. Part III argues that a regulatory model for understanding sovereignty is superior to the choice of law model used by other scholars and provides a general outline of how sovereignty should inform the constitutional doctrine. Part IV applies this understanding to the stream of commerce issue in Nicastro.

1. The Supreme Court's Consideration of State Sovereignty

   The Supreme Court first stated that the Constitution restricts the power of state courts to assert jurisdiction in Pennoyer v. Neff. (16) The Court in Pennoyer asserted that, because "[t]he authority of every tribunal is necessarily restricted by the territorial limits of the State in which it is established," a state court could not constitutionally assert jurisdiction over an unconsenting defendant who was not served within the state. (17) Pennoyer's territorial framework was therefore justified by the inherent territorial limits of a state's sovereignty. (18) The Court used the Due Process Clause as the textual hook for its constitutional doctrine by reasoning that, if a state court lacked jurisdiction, any resulting decision would violate Due Process. (19) Because the contours of the individual right protected by Due Process were wholly defined by the power of the state, sovereignty occupied center stage under the Pennoyer framework. (20)

   When the Court rejected Pennoyer's rigid territorial framework in International Shoe, (21) it provided no clear theoretical basis for its new approach to personal jurisdiction. (22) The Court famously held that "due process requires only that in order to subject a defendant to a judgment in personam, if he be not present within the territory of the forum, he have certain minimum contacts with it such that the maintenance of the suit does not offend 'traditional notions of fair play and substantial justice.'" (23) But what are "traditional notions of fair play and substantial justice"? The Court references party convenience, (24) reciprocal benefits arising from "the privilege of conducting activities within a state," (25) and "the context of our federal system of government." (26) The Court therefore did not clearly embrace or reject Pennoyer's reliance on state sovereignty. (27)

   To this day, the Court has never presented a coherent account of whether or how state sovereignty informs the law of personal jurisdiction. In Hanson v. Denckla, (28) the Court explained that the constitutional restrictions on personal jurisdiction "are a consequence of territorial limitations on the power of the respective States." (29) The Court in Shaffer v. Heitner, (30) however, asserted that "the mutually exclusive sovereignty of the States" was no longer the "the central concern of the inquiry into personal jurisdiction." (31) World-Wide Volkswagen Corp v. Woodson (32) then changed course again and, echoing Pennoyer, stated that a key function of the doctrine is "to ensure that the States through their courts, do not reach out beyond the limits imposed on them by their status as coequal sovereigns in a federal system." (33) Just two years later, however, Insurance Corp. of Ireland v. Compagnie des Bauxites de Guinee (34) inexplicably rejected World-Wide's analysis. (35) The Court asserted:

   The restriction on state sovereign power described in World- Wide Volkswagen Corp., however, must be seen as ultimately a function of the individual liberty interest preserved by the Due Process Clause. That Clause is the only source of the personal jurisdiction requirement and the Clause itself makes no mention of federalism concerns. (36) One scholar...