Jurisdictional Incentives

Abstract:     
For decades, courts and scholars have viewed personal jurisdiction as a function of due process, sovereignty, and fairness. In doing so, they have largely ignored the ways in which jurisdictional rules affect litigant behavior. This Article explores these consequences by providing the first economic analysis of personal jurisdiction. It argues that jurisdictional rules misalign litigation incentives in a socially undesirable way. Unclear and restrictive personal jurisdiction rules increase the likelihood of procedural disputes, inflate litigation costs, and decrease the expected benefit of suit, making it less likely that plaintiffs will file lawsuits. This in turn skewers substantive law incentives — because personal jurisdiction rules make litigation less likely, many injurers escape liability and are inadequately deterred from engaging in wrongful conduct. To remedy this situation, this Article proposes a new “incentives-based” approach to personal jurisdiction. Courts would abandon the traditional “minimum contacts” test, and would restrict personal jurisdiction only when absolutely necessary to protect basic due process rights, such as the right to reasonable notice and an opportunity to be heard. Legislatures would then balance the effects of various substantive and procedural law rules, with the goal of crafting personal jurisdiction rules that properly align private and social litigation incentives.

Number of Pages in PDF File: 51

Keywords: jurisdiction, stream of commerce, procedure, law and economics

JEL Classification: K41

Accepted Paper Series