Wayfair Undermines Nicastro: The Constitutional Connection Between State Tax Authority and Personal Jurisdiction
abstract. This Essay exposes connections between two controversial cases that unsettled two ostensibly distinct areas of constitutional law. The Supreme Court’s 2018 decision in South Dakota v. Wayfair held that the Commerce Clause permits enforcement of sales taxes against online retailers with no physical presence in the taxing state. In contrast, the Court’s 2011 decision in J. McIntyre Machinery v. Nicastro held that the Due Process Clause prevents states from exercising personal jurisdiction over nonresident manufacturers who did not target the forum. Wayfair and Nicastro address conceptually similar questions about extraterritorial enforcement of state law yet rely on inconsistent assumptions. A close reading of Wayfair illuminates normative and practical insights that warrant narrowing or overruling Nicastro. More generally, this Essay highlights how situating doctrinal problems in the broader context of horizontal federalism can improve constitutional analysis.
Justice Kennedy’s final majority opinion before his retirement is already reshaping the U.S. economy. South Dakota v. Wayfair held that states may compel merchants to collect and remit taxes on sales to local buyers even if the seller has no physical presence in the taxing state.1 States may therefore require online retailers to collect the same taxes as the brick-and-mortar stores with which they compete. This expansion of regulatory authority will enable states to raise an additional eight to thirty-three billion dollars of annual tax revenue.2
The holding had swift repercussions. Stock prices gyrated,3 lobbyists mobilized,4 and Congress considered reactive legislation.5 Meanwhile, states are rapidly preparing to tap new streams of revenue that the Court’s ruling made available.6
This immediate economic and political salience has obscured an important theoretical implication with broad practical consequences. The Court’s decision links the geographic reach of state power to the nature and magnitude of state interests. Wayfair highlights states’ “reasonable choices,” their need to avoid “serious inequity,” and the consequences of an “extraordinary imposition by the Judiciary on States’ authority to collect taxes and perform critical public functions.”7 The Court thus recognized that states may extend their authority beyond their borders if they have a good reason, subject to ill-defined limits.
Translating the Court’s endorsement of extraterritorial power outside the tax context could unsettle several strands of horizontal federalism jurisprudence—the body of law that considers “how the existence of multiple states limits the power of each.”8 Examples of state action implicating horizontal federalism fall into eight categories that I have defined elsewhere, including,
attempts to exercise dominion over other states’ officers or territory, creation of havens for conduct that other states would prefer to ban or limit, exclusion of activities that other states promote, favoritism for in-state actors at the expense of out-of-state actors, allowing in-state activity to generate negative out-of-state externalities, aggressive rogue behavior that fails to respect the interests of other states, mutually debilitating interstate competition, and overreaching of state borders through extraterritorial regulation.9
This Essay addresses the last example of state action noted above: reaching beyond state borders to assert authority over nonresidents whose conduct has effects in the forum. Extraterritorial regulation is inevitable in a federal system that fragments a national market into political units. State borders cannot contain the effects of local laws or exclude the effects of out-of-state conduct any more than lane markers in a swimming pool can contain or exclude waves. A rigid fixation on territorial borders is therefore an unhelpful approach to complex problems about the scope of state authority. Instead, courts must analyze nuanced factors and recognize that problems arising in ostensibly distinct fields share common features that may warrant similar solutions. This Essay considers Wayfair’s potentially broad implications for horizontal federalism jurisprudence by comparing doctrines governing the states’ tax jurisdiction and personal jurisdiction.
The concept of “tax jurisdiction” can be confusing, but for present purposes a simple framework suffices. Analyzing tax jurisdiction requires asking two distinct questions: (1) can states tax a particular transaction; and (2) how can states enforce the tax?10 When out-of-state merchants sell products to local buyers, states can tax the transactions based on their local nexus.11 The difficult issue is whether states can enforce taxes effectively. In routine transactions, the burden of enforcement falls on either the buyer or the seller. States can require local buyers to disclose purchases and remit tax payments to the state, or states can compel out-of-state sellers to collect and remit taxes as part of the sales process. Relying on sellers is far more effective than relying on buyers, who often neither know nor care about their compliance obligations.12 Before Wayfair, the Court had interpreted the Commerce Clause to foreclose imposing burdens on sellers who lacked a “physical presence” in the taxing state.13 Wayfair removed this impediment to effective tax enforcement, raising a question about whether the Court should reconsider other judicially imposed obstacles to effective extraterritorial enforcement of valid state laws.
Justice Kennedy’s exaltation of state interests in Wayfair is strikingly inconsistent with his 2011 plurality opinion rejecting personal jurisdiction in J. McIntyre Machinery, Ltd. v. Nicastro.14 The Nicastro plurality held that New Jersey lacked jurisdiction over the manufacturer of an allegedly defective product that maimed a local worker despite the state’s “strong” regulatory interest.15 Scholars have extensively criticized Nicastro, describing the plurality opinion as “territoriality on steroids”16 and a “retrogressive” boon for manufacturers at the expense of consumers.17 Lower courts hoping for guidance from the fractured decision have instead encountered “a bit of mystery.”18 A close reading of Wayfair and Nicastro reveals several inconsistencies that call for reconsidering the Court’s approach to personal jurisdiction. For example, the decisions rely on conflicting approaches to the relevance of state interests, fairness, market dynamics, and outlier fact patterns.
This Essay explores connections between Wayfair and Nicastro and makes two contributions. Part I illuminates overlooked parallels between the evolution of constitutional limits on state tax authority and personal jurisdiction. Part II explains why Wayfair warrants rethinking the Court’s excessively restrictive approach to personal jurisdiction.
I. parallel evolution of constitutional limits on personal jurisdiction and state tax authority
A. Conceptual Similarities
A state’s power to exercise personal jurisdiction over nonresidents is ostensibly distinct from its power to compel nonresidents to collect and remit sales taxes. These powers address different problems, promote different interests, entail different remedies, and implicate different constitutional provisions. The legal academy reinforces these distinctions by addressing personal jurisdiction and tax law in separate courses and separate fields of scholarship.
Formal differences between state authority to enforce taxes and to exercise personal jurisdiction obscure conceptual similarities. Consider a simple hypothetical scenario that illustrates the overlap. A seller (S) in State X sells a product to a buyer (B) in State Y without ever physically entering State Y. The legislature of State Y believes that transactions of this type implicate legitimate regulatory interests and therefore has enacted a statute containing two sections. Section 1 compels S to collect and remit sales taxes. Section 2 compels S to appear in State Y’s courts in any civil suit by B arising from the sale.
Both statutory obligations raise at least three similar questions. First, there is a question about State Y’s capacity to act: does economic activity in State Y justify allowing State Y to compel conduct by an actor outside its borders? Second, there is a question about S’s rights: is S immune from State Y’s power if S never physically enters State Y? And third, there is a question about dormant federal preemption: can State Y regulate a commercial actor in State X without congressional authorization?
All three questions are difficult for the same reason: the Constitution empowers fifty coequal states without providing clear guidance for addressing overlapping jurisdiction. This ambiguity engenders myriad disputes. States challenge interference from other states, individuals resist state authority, and Congress claims power to intervene that states in turn contest. I have argued elsewhere that these disputes implicate a constellation of doctrines regulating horizontal federalism.19 Unfortunately, the Court and commentators typically view each problem in isolation, which obscures inconsistent assumptions, priorities, and methods.20 Doctrine governing personal jurisdiction and state tax authority illustrates both the allure of fragmenting related problems into discrete components and the incoherence that fragmentation can produce.
At first glance, questions about the scope of state authority seem to require different answers in the jurisdiction and tax contexts. For example,
- B’s interest in a convenient local forum may justify State Y’s assertion of personal jurisdiction over S, but there is no corresponding individual interest justifying State Y’s assertion of tax authority;
- A legal fiction that S consented to State Y’s authority may more (or less) readily justify tax enforcement than personal jurisdiction;
- Collecting and remitting a tax may be more (or less) burdensome than appearing in a distant court; and
- Federal preemption may be more (or less) appropriate when a state enlists interstate merchants as tax collectors than when the state compels merchants to appear in civil litigation.
These potential distinctions weigh against a simplistic rule making a state’s authority to enforce sales taxes coextensive with its adjudicative jurisdiction. However, considering the two contexts concurrently highlights relevant facts and facilitates a more nuanced analysis of state power, individual rights, and federal preemption. This nuance is missing from current case law, resulting in inconsistent applications of similar principles across multiple doctrines. Wayfair’s inconsistency with Nicastro is the latest evidence of this longstanding pathology in horizontal federalism jurisprudence.
B. Doctrinal Evolution
Conceptual similarities between personal jurisdiction and extraterritorial tax authority are evident in the Supreme Court’s decisions. Doctrine governing each area evolved independently yet followed parallel paths. This parallelism underscores the theoretical connections between Wayfair and Nicastro that make the rhetorical and substantive inconsistencies between the decisions so striking.
The historical sketch in this Section is brief and necessarily simplified. My goal is not to provide a definitive account of two complex areas of law. Instead, I highlight a few often overlooked historical and thematic connections that confirm the importance of analyzing personal jurisdiction and state tax authority as two related strands of horizontal federalism jurisprudence.
The Supreme Court initially imposed strict territorial limits on both personal jurisdiction and tax authority. Consider two opinions by Justice Field that use similar language. In re State Tax on Foreign-Held Bonds held in 1872 that the state in which a bond issuer was incorporated could not tax interest on bonds owned by nonresidents.21 Justice Field’s opinion observed that state “tax laws . . . can have no extra-territorial operation”22 because
property lying beyond the jurisdiction of the State is not a subject upon which her taxing power can be legitimately exercised . . . . The power of taxation, however vast in its character and searching in its extent, is necessarily limited to subjects within the jurisdiction of the State . . . . So far as they are held by non-residents of the State, they are property beyond the jurisdiction of the State.23
One year later, in Galpin v. Page, Justice Field reiterated (without citing) this territorial approach when he defined the scope of a state’s personal jurisdiction:
The tribunals of one State have no jurisdiction over the persons of other States unless found within their territorial limits; they cannot extend their process into other States, and any attempt of the kind would be treated in every other forum as an act of usurpation without any binding efficacy.24
Territorial limits on state adjudicative and tax jurisdiction eventually became constitutionally enshrined in the Due Process Clause.25 The Supreme Court’s decisions in both contexts stressed that the presence of property within a state could not authorize state action against an owner located outside the state.26 Over time, domicile-based exceptions to territorial limits emerged in both contexts. States could: (1) exercise personal jurisdiction over a nonresident domiciliary,27 and (2) tax a domiciliary’s intangible property deemed to have a “real situs” at the domicile.28 States could also tax nonresidents’ tangible property within their territory.29 But the Court cited personal jurisdiction precedent to hold that a state’s remedies were limited to the property; the state could sell the property to cover an unpaid tax, but could not levy an assessment against the nonresident owner.30
Just as two opinions by Justice Field illustrate the parallel rise of the territorial approach, two opinions by Chief Justice Stone illustrate its parallel decline. In the famous case of International Shoe Co. v. Washington, the Court held that Washington could exercise personal jurisdiction over a foreign corporation operating within its borders.31 In the relatively obscure case of Curry v. McCanless, the Court held that Alabama and Tennessee could tax the same intangible property based on the property’s distinct connections to each state.32 Both cases presented an opportunity for the Court to frame the due process inquiry in terms of an ethereal “presence” within a state’s territory.33 The corporation in Shoe could have been deemed to be present in Washington (among other states), while the property in Curry could have been deemed to be present either in Alabama, Tennessee, or both. Yet Chief Justice Stone in Shoe and Curry rejected the Court’s prior fixation with situating incorporeal legal concepts in physical space. Both opinions: (1) eschew unrealistic “fictions” about presence,34 (2) reject “mechanical” tests of due process,35 (3) justify state power in part because regulated entities received the “benefit” and “protection” of state law,36 and (4) emphasize that the state’s regulatory interests provide a foundation for asserting authority.37
Subsequent decisions—most notably Quill Corp. v. North Dakota38—clarified that the due process inquiry in personal jurisdiction and state tax authority cases converged, at least at an abstract level. In both contexts, Quill held that due process required “minimum contacts” between the state and an entity subject to its authority.39 The Court’s decisions in tax cases occasionally cited personal jurisdiction cases,40 and vice versa.41
The vague “minimum contacts” test offered minimum guidance to judges. Efforts to implement it can be described charitably as multifaceted and more accurately as muddled. But some parallel themes emerged in personal jurisdiction and state tax authority cases.42 Analyzing contacts often required examining the “nature and extent” of the regulated party’s local activities,43 the correlation between “protection” that a state provided and obligations it imposed,44 and the state’s regulatory interest.45 Personal jurisdiction cases also emphasized that an actor’s contacts with the forum state must be “purposeful.”46 Tax cases generally did not emphasize purpose, presumably because purpose was obvious when the regulated actor knew where transactional counterparties were located.47 In contrast, when an out-of-state merchant did not know or control a product’s destination, the Court rejected both state tax authority48 and personal jurisdiction.49
Although constitutional limits on personal and tax jurisdiction evolved in parallel, an important twist involving the Commerce Clause complicates analysis of the sales taxes upheld in Wayfair. Until 1992, the Supreme Court’s interpretation of both the Due Process and Commerce Clauses anachronistically prohibited states from enforcing sales and use taxes against merchants who lacked sufficient “presence” in the taxing state.50 In 1992, the Court partially changed course in Quill, which considered whether North Dakota could require a vendor to collect use taxes arising from sales of office supplies to customers in the state.51 The vendor argued that it was beyond the reach of North Dakota’s authority because it lacked a local presence and instead transacted business by mail and telephone.52 The Court held that the Due Process Clause did not condition state tax authority on a merchant’s physical presence.53 However, this due process holding had little practical effect because Quill also held that the presence requirement remained in the Commerce Clause.54 So North Dakota won the due process battle but still lost the case.
Quill’s preservation of the presence test under the Commerce Clause was a stubbornly persistent relic of territorial reasoning. Even the Court acknowledged that the test was “artificial” and at best “not inconsistent” with modern doctrine governing state regulatory authority.55 The Court hoped that Congress would provide a more nuanced solution.56 But Congress remained silent for the next twenty-six years. Wayfair then abandoned the Court’s unrequited preference for legislative action. Instead, Wayfair extended Quill’s due process holding to the Commerce Clause.57 Both clauses now permit states to enforce sales taxes against merchants with no physical presence in the forum.58
Although Wayfair exclusively addressed the Commerce Clause, its analysis is still relevant to Nicastro, which exclusively addressed the Due Process Clause.59 First, both clauses are part of an overlapping web of constitutional provisions governing horizontal federalism that are best understood together rather than in isolation.60 Despite imposing different tests for different reasons, the two clauses are “closely related”61 and generate “parallel”62 inquiries.63 Even beyond the tax context, personal jurisdiction doctrine occasionally implicates the Commerce Clause.64 Second, doctrines interpreting both clauses share a similar history. Supreme Court decisions from the 1920s and 1930s denied “jurisdiction” over defendants due to the “necessities of commerce.”65 These cases relied on the Commerce Clause to serve a function that the Court later allocated to the Due Process Clause. Meanwhile, the Commerce Clause’s role as a constraint on state tax authority evolved in parallel with Due Process Clause jurisprudence, but the Court’s decisions before Quill often failed to distinguish between the two clauses.66 And as noted above, Chief Justice Stone helped nudge both Due Process Clause and Commerce Clause jurisprudence away from stilted formal tests and toward practical consideration of competing interests.67 Third, Wayfair and Nicastro both relied heavily on abstract contentions about state power rather than technical inquiries into obscure elements of doctrine. Inconsistencies between Justice Kennedy’s analysis in the two cases therefore raise questions about Nicastro’s continuing vitality. Just as the due process holding in Quill precipitated the Commerce Clause holding in Wayfair, Wayfair’s Commerce Clause holding should precipitate reconsideration of Nicastro’s due process holding.
II. the tension between justice kennedy’s opinions in nicastro and wayfair
In Nicastro, the defendant manufactured machines that sheared scrap metal. The manufacturer hoped to sell its machines throughout the United States and assisted in marketing them.68 A scrap-metal recycler in New Jersey installed one of the manufacturer’s machines, which severed four of an employee’s fingers.69 The injured worker filed a product liability action in New Jersey.
If the manufacturer had sold directly to the buyer, the Court probably would have upheld jurisdiction.70 However, the manufacturer instead marketed through a distributor in Ohio, which in turn sold to the buyer before eventually becoming insolvent (and thus judgment-proof).71 The record did not clearly indicate any other direct contacts with New Jersey.72 Because sales were through an intermediary, the manufacturer successfully argued that its contacts with New Jersey were not purposeful. The Court therefore rejected New Jersey’s attempt to exercise personal jurisdiction over the manufacturer.
Justice Kennedy’s analysis in Nicastro involves a chain of five linked propositions. The points flow roughly as follows:
- Constitutional limits on personal jurisdiction ensure that states exercise only “lawful” power.73
- State power is lawful with respect to outsiders only when the outsider has “purposefully” sought to benefit from or obstruct state law, regardless of whether the state has an “interest” in providing a forum.74
- When jurisdiction is premised on selling a defective product that reaches a buyer in the forum, contacts are purposeful only when the forum has been “targeted.”75
- Evidence of targeting can be found only in the defendant’s “actions” rather than in its “expectations.”76
- The manufacturer’s only relevant action was selling to the distributor in Ohio. Thus, there was no action targeting New Jersey and no basis for jurisdiction.77
This reasoning is tenuous. The manufacturer’s targeting of the entire U.S. market also targeted New Jersey, which is a component of the national market. Moreover, the concept of targeting is a red herring. As I have argued elsewhere, a lack of targeting should not be dispositive when the defendant benefits from conduct that causes harm in the forum.78
But even if Nicastro was defensible at the time it was decided, Wayfair undermines the plurality’s analysis for five reasons.
First, Wayfair and Nicastro give inconsistent weight to state interests. In Wayfair, the Court sought to avoid an “extraordinary imposition” on states that would enable market participants to “escape” reasonable regulations.79 But Nicastro facilitated such an escape because the plurality contended that protecting state interests would elevate “expediency” over “liberty.”80 The two decisions do not provide any guidance for distinguishing legitimate state priorities from expedient shortcuts. One might think that these discordant approaches to state interests arise from distinctions between the Commerce Clause inquiry in tax cases and the Due Process Clause inquiry in personal jurisdiction cases. However, as Wayfair notes, the two inquiries are “closely related,”81 and the Court’s analysis of personal jurisdiction before Nicastro often prioritized state interests.82 Accordingly, if South Dakota’s interests justified taxation of nonresident merchants, then New Jersey’s interests could have justified jurisdiction over nonresident manufacturers and should not have been so casually dismissed.
The possibility that Wayfair affects only merchants who engage in a larger volume of local business than the manufacturer in Nicastro cannot support the Court’s inconsistent approach to state interests.83 The record is not clear, but arguably the volume of local sales in Nicastro was almost identical to the minimum threshold that the Court upheld in Wayfair.84 Even if Wayfair requires a greater volume of local sales than occurred in Nicastro, sales volumes are irrelevant when considering whether states have an interest in regulating particular transactions, as opposed to considering whether regulations impose excessive burdens. Analyzing a state’s assertion of power over nonresidents requires considering two sides of an equation: the state’s reason for acting and the consequences of its action. A regulatory interest may be a good reason to impose tax obligations and to exercise personal jurisdiction even when the volume of local business is small.85 But exercising power over an entity based on a small volume of business can cause disproportionate consequences—such as compliance burdens—that outweigh state interests. A court cannot know whether burdens outweigh state interests until it assesses whether the state interests are important. This is where the Court went astray in Nicastro. By dismissing state interests as mere “expediency,” the Court never engaged in a nuanced balancing analysis. Burdens on the manufacturer easily tipped the scales because there was no meaningful counterweight. Now that Wayfair has recognized the importance of acknowledging state interests, the balancing in Nicastro is amenable to reconsideration.
Second, Wayfair recognized that allowing extraterritorial tax enforcement might impose “burdens” that raise “legitimate concerns in some instances, particularly for small businesses” with a “small volume” of local sales.86 These concerns were not a basis for rejecting state power because “other theories” and “other aspects” of doctrine were available to protect deserving claimants.87 Wayfair thus endorsed broad state power while reserving questions about outlier cases. Nicastro took the opposite approach, in effect allowing the tail to wag the dog. The Court invoked fears about burdening low-volume small businesses—such as a Florida farmer sued in Alaska88 or an “Appalachian potter” sued in Hawaii89—to deny jurisdiction over all businesses that did not directly target the forum. A more sensible solution would have been to recognize state power while deploying other doctrines—such as potential constitutional limits on venue—to protect outlier defendants.90
Third, Wayfair criticized “[d]istortions” arising from Quill’s “incentive” for merchants “to avoid physical presence in multiple States” by operating only through the internet or mail.91 In other words, doctrine should not encourage market participants to structure their conduct in an inefficient manner simply to evade local regulation. Yet Nicastro achieves the opposite result. Its emphasis on targeting the forum incentivizes manufacturers to use intermediaries as a means of insulating themselves from jurisdiction.
Fourth, Wayfair stressed the importance of “[f]airness,” observing that corporations that “avail themselves of the States’ benefits” should bear correlative burdens.92 In contrast, the Nicastro plurality condemned “[f]reeform notions of fundamental fairness.”93 The manufacturer therefore was immune from burdens imposed by New Jersey. From a “benefits” perspective, both the seller in Wayfair and the manufacturer in Nicastro were similarly situated: both benefited from state laws creating a stable market for their products. If collecting a sales tax is a reasonable price to pay for access to the market, submitting to adjudicative jurisdiction might also be reasonable. However, one potentially meaningful distinction between the two contexts is that Wayfair involved benefits from a direct sale while Nicastro involved benefits from a sale through an intermediary. The next point addresses that distinction.
Finally, Wayfair noted that doctrine must be “grounded in functional, marketplace dynamics” that respect state efforts to address economic “realities.”94 This principle helped explain why states regulating a modern economy may tax sales through the internet in the same way as sales through competing physical outlets. Extending Wayfair’s functional approach to personal jurisdiction undermines Nicastro’s emphasis on directly targeting the forum. In the real world, manufacturers of industrial machinery do not necessarily target individual states. They target the entire country. Indeed, the manufacturer in Nicastro attended national rather than state-specific sales conventions and told its distributor “[a]ll we wish to do is sell our products in the [United] States—and get paid!”95 States seeking to hold manufacturers accountable for injuries caused by defective products therefore must be able to reach defendants who did not focus on that individual state’s market. If one takes Wayfair’s functional approach seriously, then Nicastro’s emphasis on direct sales and state-specific targeting seems needlessly myopic.
Of course, Wayfair does not formally hold that targeting an individual state is irrelevant because the merchants in Wayfair presumably did target South Dakota.96 However, that targeting does not animate the Court’s holding. To see why, suppose that the Delaware-based Acme Corporation creates a website that sells widgets. Acme conducts no marketing beyond buying a single national television advertisement during the Super Bowl. The advertisement generates a million sales, including ten thousand sales to residents of South Dakota. Wayfair’s reasoning leads inexorably to the conclusion that South Dakota can require Acme to collect sales taxes even though Acme’s marketing did not specifically target the state. Yet Nicastro seems to draw a line between entities that target the forum and entities that target the national market. Wayfair’s emphasis on the “functional” “realities” of how merchants generate sales is inconsistent with Nicastro’s assumption that only state-specific rather than national marketing justifies state authority over manufacturers who sell through intermediaries.
In sum, Wayfair and Nicastro take incongruent approaches to conceptually similar problems. Wayfair extolls state interests, tries to craft rules that recognize how markets work and avoid distorting behavior, promotes fairness, and does not allow outlier scenarios to drive analysis. Nicastro impugns state interests, ignores how markets actually work while incentivizing inefficient behavior, rejects fairness, and emphasizes outlier hypotheticals. The sensible analysis in Wayfair should eclipse the thinly reasoned decision in Nicastro.97
Wayfair poses an especially compelling challenge to Nicastro because Nicastro is an unstable precedent that is unusually amenable to being overruled or narrowed into obscurity. First, although six Justices concurred in Nicastro’s judgment, there was no majority opinion. Justice Kennedy wrote a plurality opinion joined by only three other Justices (Roberts, Scalia, and Thomas). Half the plurality is no longer on the Court, raising a question about whether the opinion’s analysis would survive reexamination. Second, the two concurring Justices (Breyer and Alito) expressly noted their willingness to consider “a change in present law” in a future case with a more developed record.98 Third, the concurrence can be interpreted as agreeing with the dissent’s view of applicable law and supporting the plurality only due to ambiguities in the record.99 Under that interpretation, Nicastro’s holding has minimal precedential force and should be read narrowly.100 Fourth, the Court has conspicuously declined to cite Nicastro in its subsequent decisions addressing personal jurisdiction.101 Accordingly, Justice Kennedy’s reasoning in Nicastro is ripe for reconsideration in light of his subsequent opinion in Wayfair.102
Wayfair and Nicastro address similar scenarios. Both cases involved: (1) conduct by an entity outside the state (selling/manufacturing); that (2) had consequences within the state (taxable event/physical injury); which (3) motivated the state to react by compelling the entity to take a particular action (collect a tax/appear in court). Labelling Wayfair as a tax case and Nicastro as a personal jurisdiction case impedes analysis rather than informing it.
Viewing state tax authority and personal jurisdiction as two related strands of horizontal federalism jurisprudence reveals historical and conceptual connections. These connections help illuminate the Supreme Court’s inconsistent assumptions and preferences. In particular, Wayfair’s functional, interest-oriented endorsement of state power is inconsistent with Nicastro’s rigid fixation on targeted contacts. The Court should invoke Wayfair to reconsider Nicastro’s excessive limit on state authority.
More generally, the Court should be wary of its tendency to construct doctrinal silos that obscure similarities between horizontal federalism problems. The Constitution allocates power to and among states in myriad circumstances using diverse methods. Comparing these contexts rather than addressing them in isolation can provide a richer understanding of the constitutional values at stake, the optimal frameworks for analyzing those values, and the factors that courts should consider.
Allan Erbsen is a Professor of Law at the University of Minnesota Law School. Thanks to Diana Erbsen, Jill Hasday, Amy Monahan, Alan Morrison, and Mark Rosen for helpful comments.