“No taxation without representation.” This paradigmatic mantra of the American Revolution constitutes an important foundational premise of the dormant Commerce Clause. Although it is most often associated with its anti-protectionist function of prohibiting protectionist state regulations that discriminate against out-of-state commerce, I posit that the Clause serves an important (and often overlooked) ancillary function. It protects the polity of each state from regulatory intrusions by sister states regarding policies that they had no hand in creating. This sovereign-capacity function implicitly underlies the so-called per se rule of invalidity. As the Supreme Court explained in Brown-Forman Distillers Corp. v. New York State Liquor Authority, when a state’s law “directly regulates” extraterritorial commerce, the Court has “generally struck down the statute without further inquiry.” The Commerce Clause’s sovereign-capacity function protects “the autonomy of the individual States within their respective spheres” by dictating that “[n]o state has the authority to tell other polities what laws they must enact or how affairs must be conducted . . . .”
This Article challenges CAFA’s conception that federal court respect for Hague-Shutts’s due process limitations provides the antidote to false federalism. I argue that the dormant Commerce Clause, not due process, provides the Constitution’s principal bulwark against intrusion upon state sovereignty by sister states.
Part I explores the evolution of dormant Commerce Clause jurisprudence. I assert that, in addition to its familiar anti-protectionist function, the Clause also serves a sovereign-capacity function, protecting “the autonomy of the individual States within their respective spheres” by dictating that “[n]o state has the authority to tell other polities what laws they must enact or how affairs must be conducted.”
Part II examines how the problem of false federalism prompted Congress to enact CAFA. Congress premised CAFA on the belief that false federalism stemmed from the failure of state jurists to adhere to “constitutionally required . . . due process and other fairness protections” recognized by the Supreme Court in Shutts.
Part III examines the Court’s holding in Shutts and its predecessor, Allstate Insurance Co. v. Hague. Hague-Shutts requires that, to certify a multistate class under its law, a state “must have a ‘significant contact or significant aggregation of contacts’ to the claims asserted by each member of the plaintiff class, contacts ‘creating state interests,’ in order to ensure that the choice of [the state’s] law is not arbitrary or unfair.” CAFA’s Senate Report highlighted four state appellate court decisions which it characterized as emblematic of the false federalism problem. It suggested that these decisions stemmed from a failure to comply with Hague-Shutts’s due process limitations. In all of these decisions, the state courts certified the classes under the law of the corporate defendant’s home state. It is well settled that the presence of a corporation’s “principal place of business” in a state alone “creat[es] significant contacts to the state.”
Part IV examines BMW of North America, Inc. v. Gore. Gore recognized that a state court cannot impose punitive damages upon a defendant to coerce it to conform its conduct in other states to the forum’s law. Citing the Commerce Clause’s sovereign-capacity jurisprudence, Gore concluded that “one State’s power to impose burdens on the interstate market for automobiles” is “constrained by the need to respect the interests of other States.” I argue that Gore is the first, and to date the only, Supreme Court decision to adequately respond to the false federalism problem because it applied the dormant Commerce Clause, not due process.
Part V explores the relationship between the Due Process and dormant Commerce Clauses. Although the two Clauses frequently “overlap,” they “[im]pose distinct limits” on state action. Due process’s touchstone is “fairness for the individual defendant.” The Clause’s central inquiry focuses on whether a litigant had sufficient “contacts” with a state so as to afford her “fair warning,” and to ensure that she encounters “no element of unfair surprise” at the prospect of being subjected to that state’s law. Conversely, the dormant Commerce Clause is “informed not so much by concerns about fairness for the individual defendant” but rather by “the autonomy of the individual States within their respective spheres.” I argue that the Clauses impose separate and distinct limits on state action—both legislative and judicial. I posit that courts have historically overlooked the Commerce Clause in adjudicating choice of law problems because the Clause is not concerned about fairness to the individual litigants in the action, but about the sovereign interests of state polities, which are not generally parties to private law disputes.
Part VI, addresses the familiar axiom of conflicts law that no choice of law issue exists unless there is a “true conflict” between the laws of the affected jurisdictions. I posit that the Constitution presents no impediment to the certification of multistate class actions when they are governed by federal or state law that is truly identical among affected jurisdictions. But I assert that the Constitution bans the certification of classes under state consumer protection laws. Although all such statutes generically render “unfair” commercial practices unlawful, they prescribe myriad different remedies for such conduct. “[T]he variation in policies of punishment, even where the conduct is unlawful in all states, amounts to an important distinction in policy.” In my view, the imposition of Alaska’s probusiness policy’s more lenient punishment upon a commercial transaction in consumer-friendly California offends the latter’s sovereignty (and vice versa).
Finally, Part VII addresses the argument made by many conflicts scholars that states possess the constitutional authority to regulate the extraterritorial conduct of corporations headquartered within their borders. In my view, this argument fails because it ignores the well-established tenet that “[c]onsumer protection matters are typically left to the control of the states precisely so that different states can apply different regulatory standards based on what is locally appropriate.” Maine possesses a sovereign interest in regulating consumer transactions within her borders—even if the defendant is a Texas-based corporation.