Corporations and the Market for Law

Abstract

The state competition for corporate law has long been studied as a distinct phenomenon. Under the traditional view, corporations are subject to a unique choice-of-law rule, the internal affairs doctrine (IAD). This rule is explained as a historical accident, or by the special logistics of the corporate contract. The resulting market for corporate law appears to have special characteristics, particularly including the dominance by the single state of Delaware. This paper challenges the traditional view. It shows that the corporate law market is best understood as a special application of the general market for law. Any differences are matters of degree rather than kind, and are explained by considerations underlying enforcement of all choice-of-law contracts rather than by factors unique to corporations. It follows that theories of corporate competition that ignore the broader law market context are incomplete, and that the competition for corporate law carries lessons for the law market generally. Moreover, the connection between the corporate and other law markets has implications for the nature of corporate law, the constitutional status of the IAD, the scope of the IAD, and for the relationship between state and federal law.