Two primary arguments are advanced for the contemporary functional importance of federalist constraints on centralized political power. The first is captured in Justice Brandeis's famous invocation of the states as the laboratories of democracy in which "a single courageous State" may blaze new paths by trying "novel social and economic experiments." The second ties the smaller, decentralized scale of subnational units to a more robust democratic accountability, by which "government is brought closer to the people, and democratic ideals are more fully realized." This Article is largely about circumstances in which these two arguments for federalism fail. The question that concerns us is what happens when one state's experimentation poses "risks to the rest of the country," in the form of spillover effects that adversely affect citizens of other states. In such circumstances, not only may the benefits of heterogeneity fail, but also the citizens of other states are deprived of the political means of compelling democratic accountability on economic actors shielded by other states' claims of sovereignty.
In this Article, we address the emergence of partial federalization of areas historically governed by state law. Our approach is to think of the battles over federalism as running across two dimensions. The more familiar is the question of which law controls, state or federal. But a second dimension is the battle over which forum should control, state or federal, and which is to be the catalyst for new legal norms. Focusing on the rise of federal preemption of state law, on the expansion of the federal forum through federal question subject matter jurisdiction or the newly minted Class Action Fairness Act, and on the constitutional override of matters formally assigned to state law, such as punitive damages, we hope to highlight and explain a quiet federalization of vital areas of law—one far less noticed than the heavily (and perhaps overly) publicized limitations on federal regulation of internal matters of state governance. Our main argument is that the U.S. Supreme Court has, in preemption and forum allocation cases, attempted to capture the considerable benefits that flow from national uniformity and to protect an increasingly unified national (and international) commercial market from the imposition of externalities by unfriendly state legislation. We hope to give a broader rendition of the legal response to market pressures toward predictability and uniformity than would emerge from a narrow focus on formal constitutional doctrine. We also aim to underscore aspects of "horizontal federalism"—namely, policing relations between the states—that have tended to be obscured by the looming shadow of "vertical federalism"—namely, the balance of power and division of labor between federal and state sources of authority.40_53UCLALRev13532005-2006