Friday, January 26, 2018

Academic Corner: Equity Extraterritoriality

Writing this 85-page article was a beast of a process, but I am very glad I did it. My latest academic article, Equity Extraterritoriality, is now published on Duke Journal of Comparative and International Law. The article is available on the journal's website.

Although the article covers a lot of ground, the basic idea is fairly simple: although territoriality is a fundamental feature in the U.S. law, there is almost no concern for territoriality when it comes to court orders. Instead, U.S. courts make extraterritorial orders all the time, as a matter of course, with no second thought given to the territoriality principle. I call this type of extraterritoriality "Equity Extraterritoriality," because such exercise of extraterritorial authority comes U.S. law's equity tradition. 

In contrast to the equity courts, the common law courts historical had a strict territorial limit. The limitation was so strict that, when an English common law court ruled on a dispute between two Englishmen concerning a contract made in Hamburg, the court would actually write: “we shall take it that Hamburg is in London in order to maintain the action which otherwise would be without our jurisdiction, and while in truth we know that Hamburg is beyond the sea, as judges we do not take notice that it is beyond the sea.” Ward's Case, 82 Eng. Rep. 244, 245 (1624–1628).

Equity Extraterritoriality basically works like this:  the court would assert personal jurisdiction over a party, then order the party to do something outside of the court's territorial jurisdiction. In today's interconnected economy, this practically allows the U.S. court any part of the world. For example, the New York court may order an international corporation headquartered in New York to take certain action in Shanghai, in which the corporation does business. (A common form of this type of argument is a document preservation order for international litigants appearing before the U.S. court, which essentially mandates U.S.-style document management worldwide.)

I observe that Equity Extraterritoriality creates the exact same problems associated with extraterritoriality application of any U.S. laws--which is why U.S. law applies the territoriality principle in other aspects of the law in the first place. What is more, the application of stricter territoriality principles on one side of a litigation (i.e. personal jurisdiction) causes litigants to: (1) challenge the outer limits of the personal jurisdiction theory (by engaging in even more aggressive theories of long-arm jurisdiction,) and; (2) lean even harder on the individuals with an extraterritorial reach, such as international banks and brokers.

In this blog, I have been chronicling the development of (1) quite a bit. We have situations in which U.S. District Courts and state courts are keeping alive the flames of long-arm personal jurisdiction despite the Supreme Court's suggestion to the contrary. (Example here, here, here, here and here.) As an academic matter, I think these cases are probably wrongly decided. But as a practitioner, these are all openings which an enterprising litigation counsel could use in the era of shrinking personal jurisdiction doctrine.

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