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Federalism and Tort Reform:

My colleague Michael Krauss has an excellent column in the Wall Street Journal on federalism and tort reform (subscription-free excerpt available here). Currently, states with unusually stringent tort liability rules can impose them even on products that their residents purchased out of state. As Michael explains:

A manufacturer might want to charge higher prices in West Virginia to cover the legal 'premium' it must pay for unavoidable product-liability rules there. It wouldn't work. Mountaineers could simply purchase the product in neighboring Maryland and bring it back home — and current jurisdictional rules essentially provide that West Virginia tort law will apply to all accidents occurring there, regardless of where the consumer bought the product.

"West Virginia consumers, in other words, obtain the same tort 'coverage' — but for a lower premium — if they buy the product in Maryland. As a result, manufacturers aren't able to lower the price of their products in Maryland to reflect that state's less onerous (or ridiculous) product liability rules, because they may end up incurring the higher liability costs of West Virginia. I believe this helps to explain the product liability mess in the U.S. We have more product liability than we want because of a beggar-thy-neighbor 'Byrd Effect.'

He proposes a federalist solution to the problem:

Suppose, however, a federal law declared that the laws and rules governing product liability applicable to a given product are the rules of the state where that product was first sold at retail.

Thus, if a West Virginian bought his lawn mower in Maryland, it would be Maryland law that determined product liability, even if an accident involving an alleged defect happened later in West Virginia . . . Manufacturers could now price goods in each state to reflect that state's liability rules — allowing consumers to pay for the liability protection they wanted. Competition would provide consumers with knowledge of what this all means. West Virginia retailers would have a keen incentive to explain to consumers how they receive greater protection — in return for a higher purchase price . . .

Of course, consumers might not want to pay for this extra protection. Suppose that the West Virginia retail price of a lawn mower includes a premium reflecting the outlays required by a product liability rule requiring full compensation to a consumer injured through his own misuse of a product. The consumer might say, 'Thanks but no thanks. I'll take my chances,' and buy his lawnmower in Maryland, where this 'misuse protection' is not bundled into the purchase price. West Virginia retailers lose sales; and if the losses became apparent, these retailers would be well placed to pressure political representatives to modify liability rules so as to better reflect consumers' actual preferences.

Michael's proposal is better than the traditional conservative approach of trying to impose one-size-fits-all tort reform through the federal government. There is no reason to believe that the feds will come up with a good solution that reflects the diverse needs of different states. Even if they do, Congress will have little incentive to make efficient adjustments to the rules over time. Michael's approach is also better than the status quo, which in effect allows the most pro-plaintiff states to set prices and product standards for the entire country. States should be allowed to set tort policy for products sold within their own borders. Interstate competition and consumer choice will give them strong incentives to avoid overreaching, while simultaneously addressing legitimate safety concerns. But they should not be allowed to in effect impose their tort liability rules on products sold elsewhere.

More generally, Michael's argument reflects an important theme in the emerging literature on federalism: in order to achieve the benefits of interstate competition and diversity, we must limit not only the powers of the federal government, but also the power of state governments to control people and businesses outside their borders. Northwestern law professor John McGinnis and I made this case in our 2004 article Federalism vs. States' Rights. Most people - even most constitutional lawyers - think of federalism as a system of limitations on central government power. But in many situations, it actually entails limits on the power of state governments as well.

Steve:
This makes perfect sense to me as an economic matter.

But does the federal government really have the power to tell a state court what choice-of-law rules to apply in a state court proceeding?

It almost seems like you'd have to make such cases automatically removable, and dictate the federal courts' choice-of-law process, which might be more of a headache than you want.
5.4.2007 12:07am
John Armstrong (mail) (www):
Say I purchase some electronic gadget through Amazon.com (headquartered in WA) from an electronics company (based in CA), which ships from Amazon's warehouse (in KY) to me (in CT). Which states' laws apply when the gadget's battery cover melts and the whole thing blows up in my front pants pocket?
5.4.2007 12:18am
Justin (mail):
I don't think what you are describing is federalism at all. I'm not a federalist, of course, but this is starting to sound awfully like "judicial activism" debates.
5.4.2007 12:23am
Dr. T (mail) (www):
Responding to John is easy: The purchase was from California where the company is located that sold the device to you directly. Amazon was just an intermediary. The warehouse locations are irrelevant.

A second connundrum: A man in Memphis buys a Toro lawn mower and claims a defect contributed to an injury five years later. He no longer has a receipt. He could have bought the mower in Tennessee, Mississippi, or Arkansas. Can he file a product liability claim at all? Will he have to choose the state with the least favorable tort laws (from his viewpoint)?
5.4.2007 12:32am
PJT:
I agree with Dr. T. The most obvious dilemma is how to prove state of purchase. I doubt anyone would actually hold on to the majority of their receipts. If that person were only allowed to file the suit in the state with the least favorable tort laws, then that state would be dictating the national tort policy.
5.4.2007 12:50am
Dave Hardy (mail) (www):
Handled a case that illustrated the breadth of the the doctrine.

Suit was in Arizona, because the item caused injury here. All that was provable of its earlier history was that 20 years before an Italian firm (named as defendant) had sold it to a Connecticut company (which has since gone out of business. How it got to Arizona over the next two decades ... did an owner move? Was it sold here? Was it stolen and moved? ... was utterly unclear.
5.4.2007 12:55am
Mark Field (mail):
I fail to see how this advances federalism. Surely the state with the greatest interest in whether the product functions properly is the state where it is used. This rule would deny that state the ability to control what happens within its own borders.
5.4.2007 12:56am
Ilya Somin:
Surely the state with the greatest interest in whether the product functions properly is the state where it is used. This rule would deny that state the ability to control what happens within its own borders.

I don't see why "the state" has an interest above and beyond that of the consumer. The Krauss proposal gives states the best possible incentives to structure their tort law so as to maximize consumer welfare. In cases where the product's failure harms people other than the consumer, the state has many other regulatory options including 1) imposing liability on the user of the product, and 2) simply banning particularly dangerous products from coming within its borders.
5.4.2007 1:06am
Ilya Somin:
I don't think what you are describing is federalism at all.

Why not? The proposal would allow each state to set tort rules for products sold within its own borders, but also forces it to respect the sovereignty of other states by preventing it from establishing rules for products sold elsewhere. If federalism means anything, it is the ability of each state or regional government to establish its own independent policies on certain issues - free of interference by both the central government AND other states.
5.4.2007 1:10am
r78:
Wow, in the initial quote, there is almost a tort deform reactionary tri-fecta: musing about imaginary problems with the tort system plus a bizarre slight directed, apparently, at Senator Robert Byrd.

But that aside, I am wondering what are the "diverse needs" of different states as regards tort laws? Do some states have an interest in preventing residents from being electrocuted by toasters that a neighboring state might not?

And, if the proposed scheme were to come to pass and resident of state A could not recover for his injuries or damages because he purchased the gadget in State B (that does not allow recovery), is it then fair to have the residents of State A bear the burden of paying the insurance /workers compensation/etc. bill occasioned by the injuries?

The proposal is, obviously, not a serious or thoughtful proposal but merely an excuse for someone to fulminate about the perceived "problems" with the tort system.
5.4.2007 1:20am
Realist Liberal:

The most obvious dilemma is how to prove state of purchase. I doubt anyone would actually hold on to the majority of their receipts.

I realize that this would solve the problem only some of the times but what about serial numbers? Companies frequently keep records of where each block of numbers goes in case of a recall. So the injured person could file the suit where they want and it is the responsibility of the company to show that it was purchased somewhere else before the case gets transferred.
5.4.2007 1:30am
Rich B. (mail):
Surprisingly (or not), most people do not cross state lines to make their purchases, even if there is a significant price differential. First, very few people live near a state border where the neighboring state has vastly different laws.

I live half an hour from Delaware ("Home of Tax Free Shopping"), but no one I know goes there to shop. In New Jersey, however, we have comparably low gas prices, but few people drive over the bridge (and pay a toll and burn gas) to save the 10-20 cents per gallon. Some do, however, and guess what! Gas prices are higher near the Pennsylvania border than they are a few more miles away!

This article assumes an inability to price discriminate that is simply factually false.

It also assumes an inability to, say, charge $X in Maryland for a lawnmower, $X+10 in West Virginia, and $X+5 in the stores in Maryland that are near the West Virginia border.

An elegant solution to a non-existent problem.
5.4.2007 1:36am
Milhouse (www):
If I have never set foot in Alaska then I shouldn't have to comply with Alaska's laws, any more than I have to comply with those of China. I shouldn't even have to inquire into what those laws might be. What I do outside AK's borders is simply none of AK's business. If someone buys something from me, and transports it to AK, where he uses it, why should that be any concern of mine? Nor should it be any concern of mine of someone buys a case of my product and takes it to AK to sell it at retail. The principle is the same. I should only ever have to worry about the laws of the states where I actually do business. And it's Congress's job to make sure that is the case, that no foreign state purports to impose its laws on me.
5.4.2007 1:46am
Dru Stevenson (mail) (www):
Some states, like Connecticut, have a "use tax" that consumers are supposed to pay on many items purchased out of state - basically, CT gets its state sales tax even from people who drive up to New Hampshire to buy their appliances. Assuming the consumer is conscientious about paying the required use taxes to their homes state. This would seem to affect this scheme; WV could impose use taxes on good brought in from out of state. (it would be interesting to see a comparison of state sales taxes and liability rules; my hunch is that sales taxes are already higher in states with more consumer protections). Of course, this could encroach on dormant commerce clause problems and unconstitutional protectionist statutes, but the results in those cases are difficult to predict.

Gillian Metzger has an interesting article in the latest issue of Harvard Law Review (120 HLR 1469) that seems very relevant to this discussion - she argues that Article IV allows Congress to authorize states to violate the dormant commerce clauise, comity/FF&Credit, etc.
5.4.2007 2:11am
David M. Nieporent (www):
Rich B, that may be true for gas, because driving a significant distance to save a few cents a gallon is self-defeating. Plus, one needs to buy gas on a regular basis; driving far out of one's way is too inconvenient.

But if you live in New Jersey, I'm surprised you don't realize that New Yorkers come here all the time to buy clothing, because we don't charge sales tax (on clothing) and NY does. (Maybe it's because you live in South Jersey?)
5.4.2007 2:33am
Brian K (mail):
What would happen if I bought a tv at a garage sale in arizona that was bought by the original owner in california?
5.4.2007 3:18am
Ilya Somin:
But if you live in New Jersey, I'm surprised you don't realize that New Yorkers come here all the time to buy clothing, because we don't charge sales tax (on clothing) and NY does. (Maybe it's because you live in South Jersey?)

When I lived in Massachusetts, I (and other MA residents) routinely crossed over into neighboring New Hampshire to make major purchases because NH has no sales tax and may also have had lower prices for other reasons. The same thing is true in many areas where states are close to each other and have different policies from each other on issues that affect product prices.
5.4.2007 3:39am
Ilya Somin:
But does the federal government really have the power to tell a state court what choice-of-law rules to apply in a state court proceeding?


Under the current Commerce Clause doctrine (or even a significantly cut back version of it), it certainly does. Under current doctrine, the feds have the power to regulate virtually anything that has even a remote effect on interstate commerce, and choice of law rules in product liability rules surely have such an effect. In my view, Congress would have the power to regulate here even if the Commerce Clause were returned to its original form. States that impose their liability rules on products purchased elsewhere are, in effect, restraining commerce outside their borders, thereby regulating interstate trade - precisely what the Commerce Clause was designed to prevent them from doing.
5.4.2007 3:42am
Harvey Mosley (mail):
IANAL but it's nice to know I got this one right -
But does the federal government really have the power to tell a state court what choice-of-law rules to apply in a state court proceeding?
I was about to post a response very similar to Ilya's directly above. I guess great minds do think alike :)
5.4.2007 7:38am
Ted Frank (www):
What I don't understand is if one is going to argue for a choice-of-law solution to the product liability problem on grounds that there will be competition for the legal regime that consumers like best, why not just go the rest of the way, end the judicial disregard for contractual arrangements in product liability cases, and move the entire regime from state tort law to the law of contract? That would maximize competition and consumer choice, and individual consumers could decide which product liability laws they want without having to relocate. And it would have no more federalism problem than the Federal Arbitration Act does.
5.4.2007 9:54am
Justin (mail):
Though I don't think what people are describing here is unconstitutional, its not federalism either (nor is it good policy). Trying to wipe away the full faith and credit clause (see, for instance, Milhouse's 12:46am post) is not a form of federalism - its a form of corporate liberterianism trying to waive a federalist flag, where federalism means "not allowing legislation that I do not like," just as much as "judicial activism" means "judicial decisions that I do not like."
5.4.2007 11:02am
loki13 (mail):
Prof. Somin,

After reading your original post, I assumed (and you know what happens...) that this was a thought-experiment. But, now that I see your defenses, I can see that this is a serious proposal.

I think it is much better as a thought experiment.

Wtihout getting into an argument with Mr. Frank over the illegitimacy of some aspects of the Tort Reform movement, and without going into the specifics of my many specific objections to the realities of this scheme (some of which have been covered by other commentators), allow me to say the following:

-When all you have is a hammer, every problem looks like a nail. While I understand federalism is a big meme on this blog, and tort reform is occasionally covered, I don't see the intersection of the two. It does help focus the issue on the inherent pricing differentials that might become available in products should it be allowed (the discredited story of ladder manufacturer insurance), but it forces the issue of risk-choice upon consumers who are unlikely to be able to make the optimal decision (as recent non-classical economics studies have shown) and discounts the nature of deterrence the tort system provides.

I am not arguing our current system is perfect; in terms of transaction costs alone it should be rectified, and the occasional 'jackpot' nature of verdicts may need to be dealt with. But this is a draconian (and ultimately, for so many reasons I don't even have time to post) and unworkable solution.
5.4.2007 11:08am
Viscus (mail) (www):

But they should not be allowed to in effect impose their tort liability rules on products sold elsewhere.


This proposal doesn't solve that problem. If California passes law X requiring products sold in California to have safety feature Y, it might not be economical for the manufacturers of such product to produce two versions.

This proposal would only have a marginal effect. Most consumers are not going to be going out of state to buy their products.

Furthermore, the idea that consumers will "choose" to "to pay for the liability protection they wanted" is simply retarded. It amazes me that economics-inclined people tend towards stupidity when it comes to real human behavior. Most consumers will not have any such esoterica in mind as (1) the differences in state Xs versus state Ys tort laws and (2) realize that these differences are reflected in prices. All the consumer will see is a lower price for what seems to be an identical product -- in the vast majority of cases, people simply are not going to do a sophisticated analysis that takes into consideration differences in tort law. This is obvious to anyone who actually deals with real flesh and blood human beings in the real world. Which, I take it, means people other than right wing George Mason pie-in-the-sky professors.

You know what, if you right wing types would realize that when it comes to actual policy, we need to talk about actual people, not models of ideally rational atomistic maximizers that are then called "consumers" but exist nowhere in the real world, then you just might be able to make a sensible policy argument.

As it is, that Mr. Somin's colleague would even write something like this is just embarassing. He thinks he is qualified to write policy when he writes something this stupid??
5.4.2007 12:25pm
Mark Field (mail):

I don't see why "the state" has an interest above and beyond that of the consumer.


As others have pointed out, the state has an interest in not having its citizens harmed (whether the purchaser or a by-stander) and in not having to pay for health costs of the harm.


The Krauss proposal gives states the best possible incentives to structure their tort law so as to maximize consumer welfare.


I think consumer welfare includes not purchasing dangerous products. The proposal actually reduces consumer welfare to the lowest common denominator.


The proposal would allow each state to set tort rules for products sold within its own borders, but also forces it to respect the sovereignty of other states by preventing it from establishing rules for products sold elsewhere.


No, and this is the crux of the dispute. The proposal infringes state sovereignty by preventing states from regulating events which occur entirely and exclusively within their own borders (use of the product). It forces WA, say, to abide by the law of OR.

I think you recognize that this justification doesn't really work because you go on to argue that "In my view, Congress would have the power to regulate here even if the Commerce Clause were returned to its original form." Whatever the merits of this position, it manifestly is NOT a "federalism" argument.
5.4.2007 12:41pm
Doug Sundseth (mail):
What percentage of products are sold by the manufacturer to the consumer without intervening actors? If I manufacture a product in Texas, sell to a distributor in California, who sells to a retailer headquartered in Arkansas, who ships to a store in West Virginia, how am I to set a price for sale in West Virginia?

And why should I then be responsible for that sale in West Virginia when I've never even spoken to someone there?

Now, a scheme of the sort discussed here might be possible if Dr. Miles Medical Co. v. John D. Park &Sons Co. were set aside by the Supreme Court. Otherwise, setting a minimum retail price is an anti-trust violation if I understand current law correctly. I understand that there is a case before the court in which this might occur.

But even in this event, how could we completely retool the distribution system to return that tort premium up through the distribution chain to me as the manufacturer?

The only vaguely similar scheme that I can imagine with any chance of working would be to allow me to prohibit sales in West Virginia (or wherever) with a concomitant ability to then avoid liability for anyone who violates that prohibition.
5.4.2007 1:16pm
markm (mail):
Doug, that's just what I was thinking. Allow manufacturers to label their product, "not for sale in XXXX", avoid shipping to addresses in those areas, and be free from liability under the laws of those areas. I wouldn't free them from all liability - but if a non-federal lawsuit arises from use in a "blacked out" area, it must be filed in the courts serving the manufacturer's home address, under the laws of that vicinity. If you manufacture lawnmowers in Indiana, you should only be subject to the laws of Indiana, the USA, and any states in which you choose to sell the product.
5.4.2007 2:36pm
Crunchy Frog:

This proposal doesn't solve that problem. If California passes law X requiring products sold in California to have safety feature Y, it might not be economical for the manufacturers of such product to produce two versions.

California was, for a long time, the only state that mandated emission controls on it's vehicles. Manufacturers made two versions of their cars, one for CA and one for everywhere else.

For a while it was terribly inconvenient for drivers of CA cars finding unleaded gas out of state.
5.4.2007 5:06pm
jhn:
World-Wide Volkswagen anyone? The interest of a vendor in not getting dragged into court in some crazy jurisdiction vs. the interest of a state in regulating conduct within its own borders is already supposed to be balanced. I don't see how you can have a rule that is both clear and fair to both interests.

Some businesses are just naked ploys to get around laws. Like the fireworks places off of I-25 in Wyoming right outside of Colorado. Nearly all of their customers are Coloradans, at least around July 4. Imagine a similar deal but with appliances or some such, with a state like Wyoming having almost no product liability standards. Seems unlikely and strained, but so is the "problem" that this proposal is trying to "fix."
5.4.2007 9:44pm
David M. Nieporent (www):
I think consumer welfare includes not purchasing dangerous products. The proposal actually reduces consumer welfare to the lowest common denominator.
No. It does no such thing. Every product is a mix of features and price and safety. More features, less safety is not "lower" than fewer features, more safety. What you mean is that consumer welfare ought to be defined by your preferences, rather than the consumer's preference. Some people would prefer a more dangerous product. There's no reason why "least dangerous" is the right standard for everybody.

No, and this is the crux of the dispute. The proposal infringes state sovereignty by preventing states from regulating events which occur entirely and exclusively within their own borders (use of the product). It forces WA, say, to abide by the law of OR.
That's also wrong. The events do not occur entirely and exclusively within their own borders, because the event in question isn't the "use" of the product. If it were, then the manufacturer or seller by definition couldn't be liable, since the manufacturer and seller don't use the products. It prevents states from regulating things -- manufacturing and sale -- which occur outside the state.

To pick your states, if Oregon courts want to (e.g.) make it impossible for companies to make firearms by imposing such extreme liability that it is financially impossible to do so and stay in business, that's fine -- if the companies are in Oregon. But if they're going to bankrupt Washington manufacturers by imposing liability on them for a transaction that took place entirely outside of Washington, that's not consistent with federalism.

Note that under current law, there's simply nothing an out-of-state manufacturer can do. It can't stop selling in the state in question, because it can be held liable even if the transaction had no connection to the state.
5.4.2007 10:22pm
David M. Nieporent (www):
Viscus:

Here's a tip: Reread your post, and think of what people would think if you said this over dinner. If you think people would view you as a crank, a blowhard, or as someone who vastly overdoes it on the hyperbole, rewrite your post before hitting enter.
5.4.2007 10:24pm
Mark Field (mail):

What you mean is that consumer welfare ought to be defined by your preferences, rather than the consumer's preference. Some people would prefer a more dangerous product. There's no reason why "least dangerous" is the right standard for everybody.


No, I'm not defining my personal preferences, but legal standards which represent majority preferences. Moreover, any discussion of "consumer preferences" must account for harm to bystanders, who don't get to express preferences under this proposal and who would lack the protection which current law provides.


The events do not occur entirely and exclusively within their own borders, because the event in question isn't the "use" of the product.


You misstated my post. I did NOT say that "use" was the only event in question. What I DID say was that the event of "use" took place (in the hypothetical) entirely within one state. That state has a clear interest -- a federalism interest -- in regulating conduct which occurs entirely within its borders. Since "use" is such conduct, the proposal infringes on the sovereignty of the "user" state by imposing foreign law.
5.4.2007 11:51pm
J'hn'1:
There is a method that could allow for this currently.
Rebates.
A manufacturer could offer rebates for products sold in, and to be used in, various lower cost areas and states.
If the rebate form requires attesting that the product is going to be used in that area, then later claims from that customer from a higher cost area could be held as having falsely claimed the rebate.
Or maybe even fraudently having claimed that rebate.
5.5.2007 12:29am
David M. Nieporent (www):
What I DID say was that the event of "use" took place (in the hypothetical) entirely within one state. That state has a clear interest -- a federalism interest -- in regulating conduct which occurs entirely within its borders. Since "use" is such conduct, the proposal infringes on the sovereignty of the "user" state by imposing foreign law.
You misunderstand. Yes, the state has an interest in regulating use, and use occurs entirely within its borders. But the tort scheme doesn't merely regulate use. It regulates manufacture and sale as well. And those don't occur entirely within its borders.

If a state designs a tort scheme that only impacts conduct within its borders, then it would be infringing on its province for the federal government to interfere. But once it starts regulating conduct outside its borders, it does so only with the forebearance of Congress.
5.5.2007 1:22am
Mark Field (mail):

But the tort scheme doesn't merely regulate use. It regulates manufacture and sale as well. And those don't occur entirely within its borders.


The current product liability system manifestly does NOT regulate sales. It doesn't tell sellers how much to charge, how they advertise, or anything else about the sale. It does affect, indirectly, the manufacturer, but it does so only by regulating what happens when the product is used. That's a classic form of federalism.


But once it starts regulating conduct outside its borders, it does so only with the forebearance of Congress.


I completely agree, but as I noted above, that's not a federalism argument.
5.5.2007 11:38am
David M. Nieporent (www):
The current product liability system manifestly does NOT regulate sales. It doesn't tell sellers how much to charge, how they advertise, or anything else about the sale.
It tells them what to sell, which seems like a pretty fundamental part of the sale.


And incidentally, although the original post mentions "product liability," the suit could be styled something else to fit into this discussion. Think suits against gun dealers, for instance (which as of 2005 are limited by federal law).
5.5.2007 5:03pm
Mark Field (mail):

It tells them what to sell, which seems like a pretty fundamental part of the sale.


No, it just makes them responsible for the products they sell. And even then, they have a good indemnity claim against the manufacturer. That's consistent with my point: that the state is regulating the ultimate use of the product.

Think suits against gun dealers, for instance (which as of 2005 are limited by federal law).
5.5.2007 7:08pm
Mark Field (mail):
Damn it. I hit post by mistake.


Think suits against gun dealers, for instance (which as of 2005 are limited by federal law).


I have no problem with Congress passing laws to that effect. But let's not pretend that they are examples of federalism. They are the opposite of that.
5.5.2007 7:09pm
David M. Nieporent (www):
But let's not pretend that they are examples of federalism. They are the opposite of that.
No, they're not. Federalism != "states rights." Federalism says that there's a proper role for the states and a proper role for the federal government. This is consistent with that.

"The opposite of that" would be, e.g., simply to create a federal tort scheme and displace the states entirely. The proposal which sparked this comment thread is, on the other hand, an attempt to allow states as much latitude to control activities within their borders without allowing them to interfere in interstate commerce.
5.5.2007 7:40pm
Mark Field (mail):

Federalism != "states rights."


To my understanding, "federalism" is merely a euphemism for states rights.
5.5.2007 9:39pm
Viscus (mail) (www):
David M. Neiporent:


Here's a tip: Reread your post, and think of what people would think if you said this over dinner. If you think people would view you as a crank, a blowhard, or as someone who vastly overdoes it on the hyperbole, rewrite your post before hitting enter.


First of all, I don't take tips from someone who denies that their should be a human right to food. If you have that bad of judgment in this area, you are likely to have bad judgment in other areas.

Second, there are genuinely stupid people out there who make genuinely stupid comments. This is one of those cases.
5.5.2007 10:23pm
Ted Frank (www):

To my understanding, "federalism" is merely a euphemism for states rights.

While there are some who misuse "federalism" in this way, that's not what the word means.

"Loki13" protests any system that gives consumers contractual control over the legal regime because consumers might choose incorrectly. That (1) raises the question why legislatures or courts would choose correctly, and (2) what decisions Loki13 would entrust to the people. People enter bad relationships and make bad sexual decisions, too; a choice of a spouse or unwanted conception is far more significant than a choice of law in an automobile purchase contract. Shall marriages and sexual decisions be arranged by the government to protect consumers from bad decisions? (I certainly could've avoided my first divorce!) Why is more important that the state of Illinois to tell me that I must pay a hundred dollars extra for a car so I can continue to have the right to sue my auto manufacturer for an accident where I didn't wear my seatbelt without the jury finding out of my carelessness?

The idea that a purely contractual system would have no "deterrence" just isn't so. Look how many millions of dollars Wendy's lost in business from a faked claim of finding a finger in chili, and discount that lost revenue stream over the rest of time if Wendy's hadn't been able to quickly refute the charge: the amount outstrips any damages claim legitimately imposed by the judicial system.
5.8.2007 7:58am