State law, U.S. power, foreign disputes: Understanding the extraterritorial effects of state law in the wake of Morrison V. National Australia Bank

Boston University Law Review

Volumn 92, Issue 2, 2012, Pages 535-576

  Florey, Katherine ^a  

^a UNIVERSITY OF CALIFORNIA   (United States)

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[No Author keywords available]

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EID: 84860138887     PISSN: 00068047     EISSN: None     Source Type: Journal    
DOI: None     Document Type: Review

References (53)

1. Anthony J. Colangelo, A Unified Approach to Extraterritoriality, 97 VA. L. REV. 1019, 1043 (2011);
2. George T. Conway III et al., Harmony and Dissonance in Extraterritorial Regulation, 105 ASILPROC. (forthcoming 2011);
3. William S. Dodge, Morrison's Effects Test, 40 Sw. L. REV. 687, 687-88 (2011);
4. John H. Knox, A Presumption Against Extrajurisdictionality, 104 AM. J. INT'L L. 351, 396 (2010);
5. Jeffrey A. Meyer, Dual Illegality and Geoambiguous Law: A New Rule for Extraterritorial Application of U.S. Law, 95 MINN. L. REV. 110, 142 (2010).
6. See William C. Fredericks, "Foreign-Cubed" and "Foreign-Squared" Securities Litigation in the Wake of Morrison v. National Australia Bank, in "BET THE COMPANY" LITIGATION 2010, at 85, 97 (PLI Litig. & Admin. Practice, Course Handbook Ser. No. H-840, 2010);
7. Roger W. Kirby, Access to United States Courts by Purchasers of Foreign Listed Securities in the Aftermath of Morrison v. National Australia Bank Ltd., 7 HASTINGS Bus. L.J. 223, 225 (2011).
8. Mathias Reimann, A New Restatement - For the International Age, 75 IND. L.J. 575, 576-77 (2000) (stating that, for purposes of much choice-of-law analysis under the Restatement (Second) of Conflict of Laws, foreign law and state law occupy the same footing).
9. See Katherine Florey, State Courts, State Territory, State Power: Reflections on the Extraterritoriality Principle in Choice of Law and Legislation, 84 NOTRE DAME L. REV. 1057, 1059 (2009) ("[W]e are not accustomed to thinking of state courts' routine choice-of-law decisions as raising serious extraterritoriality problems.").
10. See Christopher A. Whytock, The Evolving Forum Shopping System, 96 CORNELL L. REV. 481, 495 (2011) ("[T]he modern [choice-of-law] approaches have an 'inherent forum law preference.'"
11. (quoting FRIEDRICH K. JUENGER, CHOICE OF LAW AND MULTISTATE JUSTICE 148 (spec. ed. 2005))).
12. See Roger P. Alford, The Extraterritorial Application of Antitrust Laws: A Postscript on Hartford Fire Insurance Co. v. California, 34 VA. J. INT'L L. 213, 214 (1993).
13. See id. at 352 (arguing that in the 1990s the Court "detach[ed] the presumption against extraterritoriality from its roots in international law, ma[de] it harder to overcome, and broaden[ed] its application"). Cf. HAROLD HONGJU KOH, TRANSNATIONAL LITIGATION IN UNITED STATES COURTS 71-72 (2008) (asserting that, beginning in the 1990s, the Court "has applied the presumption against extraterritoriality with increasing rigidity").
14. Id. at 2894 n.11 (Stevens, J., concurring). Claims by domestic shareholders involving securities purchased on foreign exchanges are known as "foreign-squared" cases. Elizabeth Cosenza, Paradise Lost: § 10(b) after Morrison v National Australia Bank, 11 CHI. J. INT'L L. 343, 356 (2011).
15. Richard Painter, Douglas Dunham & Ellen Quackenbos, When Courts and Congress Don't Say What They Mean: Initial Reactions to Morrison v. Australia National Bank and to the Extraterritorial Jurisdiction Provisions of the Dodd-Frank Act, 20 MINN. J. INTL L. 1, 2 (2011).
16. See Karen Freifeld, Norex Suit Against Blavatnik, Access over Yugraneft Put on Hold, BLOOMBERG BUSINESSWEEK (May 27, 2011, 6:31 PM), http://www.bloomberg.com/news/2011-05-27/norex-suit-against-blavatnik-access- over-yugraneft-put-on-hold-by-judge.html. On June 22, 2011,
17. At least until recently, forum non conveniens doctrine in many states was "significantly less draconian" than the federal equivalent, making such states "magnets" for foreign litigation. Elizabeth T. Lear, Federalism, Forum Shopping, and the Foreign Injury Paradox, 51 WM. & MARY L. REV. 87, 101 (2009).
18. See Jay Tidmarsh, Procedure, Substance, and Erie, 64 VAND. L. REV. 877, 922 n.181 (2011) ("[A]fter the enactment of the Federal Rules of Civil Procedure, many state courts adopted the Federal Rules nearly in toto, and the basic vision of the Federal Rules - liberal pleading, broad discovery, generous joinder, and so on - has exercised an influence even on those states that did not adopt the Rules.").
19. Professor Samuels quotes Lord Denning on the enduring appeal of American courts to damages-seeking foreign plaintiffs: "As a moth is drawn to light, so is a litigant drawn to the United States. If he can only get his case into their courts, he stands to win a fortune." See Joel H. Samuels, When Is an Alternative Forum Available? Rethinking the Forum Non Conveniens Analysis, 85 IND. L.J. 1059, 1072 n.78 (2010) (quoting Smith Kline & French Labs., Ltd. v. Bloch [1983] 1 W.L.R. 730 (C.A.) 733 (Eng.)).
20. See Lea Brilmayer & Charles Norchi, Federal Extraterritoriality and Fifth Amendment Due Process, 105 HARV. L. REV. 1217, 1224 (1992).
21. See Douglas Laycock, Equal Citizens of Equal and Territorial States: The Constitutional Foundations of Choice of Law, 92 COLUM. L. REV. 249, 256-57 (1992).
22. See Daniel C.K. Chow, Limiting Erie in a New Age of International Law: Toward a Federal Common Law of International Choice of Law, 74 IOWA L. REV. 165, 181 (1988) (finding state choice-of-law analyses are often applied to cases with foreign contacts, potentially frustrating "uniformity in foreign relations");
23. See Christopher A. Whytock, The Evolving Forum Shopping System, 96 CORNELL L. REV. 481, 495 (2011).
24. See Gary B. Born, A Reappraisal of the Extraterritorial Reach of U.S. Law, 24 LAW & POL'Y INT'L Bus. 1, 5 n.12-15 (1992).
25. See JOSEPH HENRY BEALE, A TREATISE ON THE CONFLICT OF LAWS OR PRIVATE INTERNATIONAL LAW § 73, at 105 (1916).
26. See, e.g., David F. Cavers, A Critique of the Choice-of-Law Problem, 47 HARV. L. REV. 173, 175 (1933);
27. Brainerd Currie, Notes on Methods and Objectives in the Conflict of Laws, 1959 DUKE L.J. 171, 174-77;
28. Symposium, Comments on Babcock v. Jackson, A Recent Development in Conflict of Laws, 63 COLUM. L. REV. 1212, 1219-57 (1963).
29. See Lea Brilmayer, Rights, Fairness, and Choice of Law, 98 Yale L.J. 1277, 1306 (1989) (explaining that choice of law cannot escape some sort of territoriality). A partial exception might be methodologies that direct courts to select the "better" law or that are more consistent with modern trends. Even these choice-of-law principles, however, rely on territorial contacts to winnow down the available possibilities.
30. See, e.g., Robert A. Leflar, Conflicts Law: More on Choice-Influencing Considerations, 54 CALIF. L. REV. 1584, 1586-88 (1966) (advocating that courts consider several factors, including which law is "better," in resolving choice-of-law issues).
31. For an overview of the different methodologies applied by the states, see Symeon C. Symeonides, Choice of Law in the American Courts in 2010: Twenty-Fourth Annual Survey, 59 AM. J. COMP. L. 303, 331 (2011).
32. Gillian E. Metzger, Congress, Article IV, and Interstate Relations, 120 HARV. L. REV. 1468, 1521(2007).
33. See Mark D. Rosen, State Extraterritorial Powers Reconsidered, 85 NOTRE DAME L. REV. 1133, 1149 (2010) ("American law has been able to deal with conflicts in the many contexts of [overlapping authority] by means of assorted practices and through creating⋯ several conflict-resolution mechanisms.").
34. Friedrich K. Juenger, The Need for a Comparative Approach to Choice-of-Law Problems, 73 TUL. L. REV. 1309, 1333 (1999) ("Because of the 'minimum contacts' requirement for judicial jurisdiction, a court will rarely lack the necessary 'significant contacts.'" (footnotes omitted)).
35. See Larry Kramer, Return of the Renvoi, 66 N.Y.U. L. REV. 979, 988-89 (1991).
36. Id. at 989 (quoting David F. Cavers, The Two "Local Law" Theories, 63 HARV. L. REV. 822, 823 (1950)).
37. See Patrick H. Martin, The BP Spill and the Meaning of "Gross Negligence or Willful Misconduct," 71 LA. L. REV. 957, 976 (2011) (explaining that "[b]ecause much of tort law in the United States came from an original common source, the common law of England, we often operate from an assumption that tort law is the same from state to state," then going on to explain that this assumption is "an illusion, albeit an occasionally attractive one").
38. The burden of having to travel to Arizona may itself be substantially more severe for a French defendant than an American one who merely happens to live in another state. This is partly because the French defendant has farther to travel and perhaps language and cultural barriers to surmount and partly because Europeans are frequently skeptical of many aspects of American civil procedure and thus "are said to fear U.S. courts like medieval torture chambers." Ralf Michaels, Two Paradigms of Jurisdiction, 27 MICH. J. INT'L L. 1003, 1006(2006).
39. See John A. Spanogle, The Enforcement of Foreign Judgments in the U.S. - A Matter of State Law in Federal Courts, 13 U.S.-MEX. L.J. 85, 86 (2005) (describing the rise of comity-based principles in state courts). An overwhelming majority of states (all but Michigan, which repealed the statute in 2008, See MICH. COMP. LAWS § 691.1143 (2008), and Vermont) have enacted the Uniform Foreign Money Judgments Recognition Act, which promotes the presumptive recognition of foreign judgments.
40. See ROBERT A. SOLOMON ET AL., INTERNATIONAL ENFORCEMENT ORDERS OF FOREIGN JUDGMENTS 554 (Paul Hopkins ed., 2006).
41. See Walter W. Heiser, Forum Non Conveniens and Retaliatory Legislation: The Impact on the Available Alternative Forum Inquiry and on the Desirability of Forum Non Conveniens as a Defense Tactic, 56 U. KAN. L. REV. 609, 624 (2008) (explaining that most state courts apply the same forum non conveniens doctrine as articulated by the Supreme Court in Piper Aircraft Co. v. Reyno, 454 U.S. 235 (1981)).
42. See Michael E. Solimine, The Quiet Revolution in Personal Jurisdiction, 73 TUL. L. REV. 1, 15-16 (1998) (providing empirical evidence suggesting that foreign defendants "see federal courts as more congenial, and when able will remove the case to that forum"); see also Whytock, supra note 113, at 530 n.215 (providing several citations suggesting that foreign litigants have historically preferred federal court, while acknowledging that this preference may be changing).
43. See, for example, John Manning, Clear Statement Rules and the Constitution, 110 COLUM. L. REV. 399, 399 (2010), who argues that many clear statement rules "impose a clarity tax on Congress by insisting that Congress legislate exceptionally clearly when it wishes to achieve a statutory outcome that threatens to intrude upon some judicially identified constitutional value." Id.
44. For example, in a review of the book Preemption Choice: The Theory, Law, and Reality of Federalism's Core Question, Michael Greve summarizes the contributors' view of concurrent regulation: Congress, the contributors agree, should use its powers to set a regulatory "floor" underneath the states. In the absence of federal minimum requirements (for example, for product safety or environmental quality), states are likely to "race to the bottom." Above the floor, however, states should be left free to adopt more stringent, protective regulations. Concurrent state and federal regulation - and, for producers in interstate commerce, a polyphony of at least fifty-one regulators for any given product or transaction - ought to be the general rule.
45. Michael S. Greve, Preemption Choice in Context, 26 CONST. COMMENT. 679, 680-81 (2010)
46. (reviewing WILLIAM W. BUSBEE, PREEMPTION CHOICE: THE THEORY, LAW, AND REALITY OF FEDERALISM'S CORE QUESTION (2009)) (footnote omitted). In some respects, it seems obvious that Congress must have some such intentions; if Congress did not intend to supplement state law in some way, why would it regulate at all in areas of traditional state concern?
47. Further, such constraints are grounded both in the Due Process and Full Faith and Credit Clauses. To the extent they are based in the latter, they may not even be fully applicable in the international context. This is significant because more exacting efforts to limit state choice-of-law freedom have generally relied more on the Full Faith and Credit Clause than the Due Process Clause. See, e.g., Michael Steven Green, Horizontal Erie and the Presumption of Forum Law, 109 MICH. L. REV. 1237, 1257-60 (2011) (arguing that the Full Faith and Credit Clause imposes independent limits on the way in which states apply the law of sister states).
48. See Gary Lawson, Proving the Law, 86 Nw. U. L. REV. 859, 898 (1992) ("The traditional common-law rule in this country has been to treat questions of foreign law as, for the most part, questions of fact which must be pleaded and proved in accordance with the ordinary rules of evidence."). In federal court, the issue is governed by FED. R. Civ. P. 44.1, which provides that in determining the content of foreign law, "[t]he court⋯ may consider any relevant material or source, including testimony, whether or not submitted by a party or admissible under the Federal Rules of Evidence." Some state courts now have analogous provisions. See Tidmarsh, supra note 93, at 922 n.181. While it may be permissible for courts to raise forum non conveniens arguments sua sponte, they have seldom done so.
49. See Lonny S. Hoffman, Forum Non Conveniens - State and Federal Movements, in CIVIL PRACTICE AND LITIGATION TECHNIQUES IN FEDERAL AND STATE COURTS 441, 454 (ALI-AB A Course of Study Materials, No. SG046, 2002) (stating that "federal courts typically do not invoke the forum non conveniens doctrine sua sponte" but citing List v. List, 224 N.J. Super. 432, 540 A.2d 916 (1988) as an example of a state court doing so).
50. See Friedrich K. Juenger, The Complex Litigation Project's Tort Choice-of-Law Rules, 54 LA. L. REV. 907, 915 (1994) ("In the past, the large majority of tort conflicts cases were prompted by such obsolete and draconian precepts as guest statutes, or their functional equivalent, common law rules on interspousal immunity."). These disputes occasionally involved Canadian provinces rather than states, but courts employed the same principles for both. See, e.g., Neumeier v. Kuehner, 286 N.E.2d 454, 455 (N.Y. 1972) (weighing the use of Ontario law).
51. See William S. Dodge, The Public-Private Distinction in the Conflict of Laws, 18 DUKE J. COMP. & INT'L L. 371, 384 (2008).
52. See William S. Dodge, Extraterritoriality and Conflict-of-Laws Theories: An Argument for Judicial Unilateralism, 39 HARV. INT'L L.J. 101, 104 (1998) (stating that, for example, Timberlane borrows from the Restatement (Second) of Conflicts). (Pubitemid 128429180)
53. See Susan Burke, Panel: The Increasing Focus of Public International Law on Private Issues, 86 AM. SOC'Y INT'L L. 456, 476 (1992) (reporting on a panel discussion in which Brilmayer stated, "[A]t least some areas currently governed by state law should be preempted by the federal foreign affairs power.").