UNLIMITED SHAREHOLDER LIABILITY THROUGH A PROCEDURAL LENS

Corporate law scholars have recently called for the reconsideration of the doctrine of limited shareholder liability. Specifically, Professors Henry Hansmann and Reinier Kraakman have proposed that shareholders could be made liable for their pro rata share of a corporation's excess tort liability through changes in state tort law. In this Article, Professor Alexander argues that Professors Hansmann and Kraakman drastically underestimate the procedural obstacles that may frustrate their proposal's implementation or significantly increase its costs. Professor Alexander asserts that state courts will often lack personal jurisdiction over out-of-state shareholders who have insufficient contacts with the forum state apart from their shares in the liable corporation. Additionally, Professor Alexander argues that choice of law rules may require the forum court to apply the shareholder liability rules of the state of incorporation, and not of the state in which the tort occurred. Professor Alexander concludes with an evaluation of alternative means of imposing liability on shareholders through federal legislation. Professors Hansmann and Kraakman respond by offering a critique of Professor Alexander's doctrinal analysis of applicable personal jurisdiction and conflicts of law jurisprudence.