Risk Regulation, Extraterritoriality, and Domicile: The Constitutionalization of American Choice of Law, 1850-1940

This Article examines the developments leading to the U.S. Supreme Court’s decisions in the 1930s that legitimated the extraterritorial application of state law in civil litigation. Today, these decisions are thought of as having established the basic constitutional limitations on choice-of-law rulings by state courts. But they are better understood as the culmination of an historical process in which the Court first proscribed the extraterritorial application of statutory rules of decision, and then, as the economic relevance of state boundaries receded and the regulatory function of state-created rules of decision increased in importance, emphatically retreated from that position. The 1930s decisions led to a new conception of choice of law in which a party’s domicile — in particular, the state’s power to apply its rules of decision to protect or regulate its own — came to play as important a role as the territorial locus of particular events in resolving conflicts of laws. This conception, which remains central to much of modern conflicts law, contrasts sharply with the Court’s unwillingness (reinforced by recent decisions) to take domiciliary interests into account when determining the constitutional limitations on personal jurisdiction. Before the Civil War, the jurisprudence of conflict of laws did not, by and large, credit the possibility that the Constitution limited a court’s power to apply forum law to a dispute. Since the rules of decision applicable in antebellum private-law litigation were largely based on common law and other nonmunicipal sources of law, there was little occasion for invoking the Full Faith and Credit Clause as a limitation on state courts’ application of lex loci principles. The key development in altering this conception was the enactment, beginning in the 1850s, of state statutes altering or creating rules of decision for certain kinds of civil litigation. These statutes — in particular, the wrongful death statutes and the later employers’ liability acts — were largely directed to the increasing risk of catastrophic injury and loss in an industrializing society. State courts confronting the multijurisdictional problems raised by these statutes concluded that they could not be applied extraterritorially — that is, to injuries incurred outside the state where they had been enacted. The Supreme Court showed little interest in the issue of extraterritoriality until some states began to enact regulations protecting local policyholders from forfeiture provisions in the life insurance policies issued by the major insurers in the Northeast. The Court in 1914 and 1918 struck down as unconstitutional the application by Missouri courts of the state’s protective statutes to insurance agreements deemed to have been made outside of Missouri. Thus a proscription of extraterritoriality, married to the then-prevailing doctrine of liberty of contract, briefly entered the law of the Constitution. These principles concerning extraterritoriality, based as they were on the formalist notion that only one state has regulatory authority over a given event or transaction, were undermined by the widespread enactment of workers’ compensation laws. In the three 1930s cases considering the legitimate scope of such compensation statutes, Justice Stone (building on earlier opinions authored by Justice Brandeis) decisively affirmed the authority of a state to apply its workers’ compensation statute to injuries suffered outside the state. At a stroke, these decisions interred the idea that only one state has regulatory authority over a given event or transaction; eliminated the relevance of extraterritoriality as a touchstone for constitutional analysis of state courts’ authority to apply forum law in civil lawsuits; and provided crucial support for an emerging model of conflict of laws in which state interests — most notably, a concern for state domiciliaries — supplanted territoriality per se as the principal consideration.