Corporations and the Market for Law

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 of the single state of Delaware. This article challenges the traditional view. It shows that the corporate law market is best understood as a special application of the general market for law. Parties to many types of contractual relationships are able to choose the law they wish to govern their relationship, and states compete to provide the law that the parties most desire. Any differences between the corporate and general law markets are matters of degree rather than kind and are explained by applying the general forces underlying the law market to particular sets of circumstances. Theories of corporate competition that ignore the broader law market context are incomplete, and 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 constitutional status of the IAD, the scope of the IAD, and for the relationship between state and federal law