Conflict of Laws for the Age of Cybertorts: A Game-Theoretic Study of Corporate Profiteering from Choice of Law Loopholes and Interstate Torts
48 Pages Posted: 12 Aug 2019 Last revised: 2 Mar 2020
Date Written: August 1, 2019
This Article identifies a choice of law loophole that corporations can exploit to commit interstate torts against individuals without paying damages, by inducing victims to sue in a state where they are guaranteed to lose. The Second Restatement effectively requires plaintiffs bringing interstate tort claims to allege which state has the most significant relationship to their injury, because most federal courts rely on plaintiffs’ allegations to choose a state law for the purpose of resolving motions to dismiss. However, when torts are committed over state lines (for example, over the internet), plaintiffs can be misinformed or misled as to where the tortious conduct really occurred, even if their knowledge of how they were harmed is otherwise correct. Therefore, if a plaintiff is induced to sue under a wrong state’s law, she would waste years litigating only to lose, even if her claims are meritorious. Her complaint would survive a motion to dismiss because her allegations are plausible, but it would be dismissed at discovery because discovery would reveal that her injury originated from a state other than the one she alleged.
This Article has two objectives. First, I show how corporations committing torts remotely can profit from this loophole, using a game-theoretic model and a Third Circuit case in which a corporate defendant apparently misrepresented to the court and plaintiffs the state where the alleged tort originated, resulting in the plaintiffs’ complaint surviving a motion to dismiss but being dismissed after discovery years later. I argue that, if corporations use this loophole often enough, tort victims would be deterred from suing for fear that they would waste years trying cases they are guaranteed to lose. Thus, once a corporation has built a reputation that it will use the loophole, it could commit torts without paying damages or even having to litigate.
Second, I use my study as evidence against the prevailing notion that conflict of laws scholarship is unhelpful to the practice of law. I argue that conflicts scholarship has become notorious for irrelevance because too many scholars employ logically fallacious argumentation and are overly concerned with designing theoretically ideal but practically infeasible choice of law rules. I argue that, by focusing more on studying how existing choice of law rules affect actual litigation, conflicts scholarship can lead the effort to fix our territorially tethered, increasingly unsustainable legal system and to designing one fit to survive the age of cybertorts.
Keywords: conflict of laws, torts, civil procedure, cyberlaw
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