November 15, 2009
By Ken Krayeske • 5:45 PM EST

A young man selling leeks, onions, lettuce and other wares in Al Quayser, Egypt, Nov. '07. It's not America, and not related to the court case mentioned in this story, but I wanted an image that showed veggies, and I love this previously unpublished picture.
Of the few pleasures in law school, I enjoy learning about the America of old. And comparing it with the country we are today.
For example, reading one case recently, I realized that at the turn of the 20th century, the Mississippi legislature made it a misdemeanor crime to trade cotton futures. Ole' Miss determined it was against the public interest to engage in Wall Street-style gambling on Mississippi's main economic engine.
Go figure. A legislature stood up to the monied interests of its day. If only we could have found a legislature to outlaw trading of credit default swaps, and other exotic securities that are now toxic, we could have prevented the housing bubble, and maybe saved ourselves from this recession.
It's not like human history has not seen the negative impact of bubbles and futures trading before. But it was a surprise to me when I apprehended this gem about futures' regulation in my Conflicts of Laws class.
Conflicts, of course, is the study of what happens when the right thing changes from state to state, and how courts determine which law to apply when a contract made in Connecticut by people from Delaware and Michigan, to be paid in California is breached in Ohio, when it should have been performed in Illinois.
Each state has its own interests, and courts have to weigh these against Constitutional considerations, and most consider the area of conflicts to be hopelessly confused. It’s pretty much a coin flip, even where seemingly simple things like land transactions don’t always go by the rules of the state where the land is.
Generally, I find conflicts to be the study of how corporations manage to evade lawful restrictions on their aggregations of capital and pursuit of profit. Fauntleroy v. Lum, 210 U.S. 230 (1908), the case focused on illegal cotton futures trading, is run of the mill, and the bad guy wins.
Written by Mr. Justice Oliver Wendell Holmes, that giant of American jurisprudence, Fauntleroy v. Lum holds that despite the illegal status of cotton futures trading in Mississippi, a man can win money on illegal cotton futures in Mississippi, go to Missouri to win a judgment against the debtor, then return to Mississippi and have a court enforce that judgment.
Holmes reasoned that the full faith and credit clause of the United States Constitution demanded Mississippi to enforce the judgment even though trading on cotton futures is illegal in Mississippi and against its interests.
The guy who did it in Mississippi and won, and went to a court in Missouri to enforce his winnings against a Mississippi resident can do so, with impunity.
Mississippi's interest in preventing activities that could destroy its economy is subservient to Missouri's interest in having a stable judgment that will be honored in all 50 states, at least according to Holmes and the Supreme Court of 1908. I reckon that the Roberts Supreme Court would do the same today.
It is an unpalatable decision at best, and one that subverts the power of sovereign states. It should be expected from a Constitution written to place the rights of property and slaveholding on the same plane as civil rights, if not a higher plane than civil rights.











