Bargaining for Exclusive State Court Jurisdiction
University of Illinois College of Law
April 26, 2012
Stanford Journal of Complex Litigation (Fall 2012)
Illinois Public Law Research Paper No. 11-21
Modern jurisdiction of courts is overlapping and multiple, crossing court systems and state and national barriers. Nonetheless, ideas of territorial jurisdiction and “local” law persist, including in the ubiquitous examples of corporate law and insurance. Indeed, states have sometimes tried to “localize” their law, keeping cases within state territory. This Article tells the story of the collision between traditional territorial jurisdiction and the new norm of complex intersystemic jurisdiction. It argues that these can coexist — albeit imperfectly — only through negotiated jurisdiction.
The Article demonstrates that states must negotiate to keep their cases. Full faith and credit requirements and constitutional grants of jurisdiction to federal courts prevent a state from excluding other state and federal courts. These structural aspects of federalism force stakeholders to negotiate with other actors for control of the forum for domestic law. They must negotiate with Congress or other states, with judges from other jurisdictions, or with private parties. In other words, stakeholders who want to “localize” an action in a world of multiplicity and overlap must bargain for exclusive jurisdiction.
The Article’s framework of constitutional limits and bargaining strategies provides a missing piece to a pressing current debate. U.S. corporate law is traditionally state-based, rooted in the concept of the corporation as a creature of state law. In fact, Delaware markets its corporate law as a bundle of substantive provisions and expert decisionmakers. Litigation patterns have put pressure on Delaware, however, with suits applying Delaware corporate law increasingly filed out of state. This Article concludes that, like other states, Delaware cannot unilaterally bundle law and forum and is limited to the negotiation regime described here.
Number of Pages in PDF File: 56
Keywords: Delaware, corporate law, forum, jurisdiction, multijurisdictional litigation, multijurisdictional deal litigation, federalism, full faith and credit, exclusive jurisdiction, state power, insurer insolvency
JEL Classification: H70, H77, K22, K40, K41 ,K20
Date posted: April 26, 2012 ; Last revised: February 26, 2013