The personal jurisdiction landscape for corporations changed a few weeks ago. In Mallory v. Norfolk Southern Railway Co., decided June 27, 2023, the U.S. Supreme Court held that a Pennsylvania statute that conditions an out-of-state corporation’s right to do business in the commonwealth requiring the corporation to consent to general jurisdiction in the commonwealth’s courts did not violate the Due Process Clause of the Fourteenth Amendment. Although the consequences of the Mallory decision cannot yet be fully known, the decision has the potential to upend decades of settled understanding of personal jurisdiction for corporations.
Background
Robert Mallory sued Norfolk Southern in the Philadelphia County Court of Common Pleas for claims arising under the Federal Employers’ Liability Act. Mallory alleged that he was exposed to harmful carcinogens while employed by Norfolk Southern in Ohio and Virginia between 1988 through 2005. He did not live in Pennsylvania at the time of suit or claim to have suffered harmful occupational exposures there. But he argued that Norfolk Southern was subject to suit in a Pennsylvania court based on a Pennsylvania statute stating that out-of-state companies registered to do business in Pennsylvania are subject to suit in Pennsylvania courts on “any cause of action” against them.
Norfolk Southern cried foul, arguing that the Pennsylvania statute violated the Due Process Clause of the Fourteenth Amendment because the company was not incorporated or “at home” in Pennsylvania and the suit had no connection to the company’s Pennsylvania operations. The Pennsylvania Supreme Court sided with Norfolk Southern, holding that its own statute was unconstitutional. But based on the conflict between the Pennsylvania Supreme Court and the Georgia Supreme Court in a similar case, the U.S. Supreme Court agreed to review that decision.
The Supreme Court’s Decision
In a 5-4 decision, the U.S. Supreme Court reversed and found that the Pennsylvania statute comports with the Due Process Clause. Justice Gorsuch announced the judgment and authored an opinion in which a majority of the Court joined in part.
The portion of Justice Gorsuch’s opinion joined by a majority of the Court — i.e., the controlling parts of the opinion — was exceedingly narrow. The majority held that a 1917 Supreme Court decision, Pennsylvania Fire Ins. Co. of Philadelphia v. Gold Issue Mining & Milling Co., “controls this case.” In Pennsylvania Fire, the Court upheld an assertion of personal jurisdiction over a corporation on the basis of a Missouri statute that required any out-of-state insurance company “desiring to transact any business” in Missouri to file paperwork agreeing to (1) appoint a state official to serve as the company’s agent for service of process, and (2) accept service on that official as valid in any suit. The Pennsylvania Fire Court had “no doubt” the insurance company could be sued in Missouri by an out-of-state plaintiff on an out-of-state contract because it had agreed to face any suit in Missouri as a condition of doing business there.
The Mallory Court observed that the Pennsylvania statute at issue similarly required out-of-state corporations that wish to do business in Pennsylvania to register with the Pennsylvania Department of State, to maintain an office in the commonwealth and to be subject to general jurisdiction in its courts. It further noted that Norfolk Southern complied with the law and thus agreed to answer any suit in Pennsylvania for more than 20 years. The Court reasoned that the state law and facts before it fell “squarely within Pennsylvania Fire’s rule,” and it declined to “speculate whether any other statutory scheme and set of facts would suffice” to establish adequate consent to suit in other cases.
In a portion of the opinion joined by only three other Justices, Justice Gorsuch rejected Norfolk Southern’s argument that its reliance on Pennsylvania Fire was inconsistent with the Supreme Court’s subsequent landmark decision in International Shoe Co. v. Washington, 326 U.S. 310 (1945). Norfolk Southern argued that, under International Shoe and its progeny, the Due Process Clause tolerates only two means for states to exercise personal jurisdiction over a corporate defendant as consistent with “fair play and substantial justice.” First, the clause permits states to exercise “specific jurisdiction” over suits that arise out of a corporate defendant’s activities in the forum state. Second, the clause permits states to exercise “general jurisdiction” over all kinds of suits against a corporation only if the corporation is incorporated in the forum state or has its “principal place of business” there — i.e., the corporation is “at home” there.
But Justice Gorsuch concluded that Norfolk Southern oversimplified International Shoe. In his view, International Shoe only described the circumstances in which a state may exercise jurisdiction over out-of-state corporations that have not consented to in-state suits as a condition of doing business in the state. Pennsylvania Fire, by contrast, continued to permit states to exercise jurisdiction over an out-of-state corporation that has consented.
Justice Alito did not join the portion of Justice Gorsuch discussing International Shoe. Instead, he explained in a concurring opinion that, in his view, the “sole question” before the Court was whether the Due Process Clause is violated “when a large out-of-state corporation with substantial operations in a State complies with a registration requirement that conditions the right to do business in that State on the registrant’s submission to personal jurisdiction in any suits that are brought there.” In those circumstances, he explained, exercising jurisdiction does not violate the corporation’s right to “fair play and substantial justice.”
Justice Alito emphasized that, in both Pennsylvania Fire and Mallory, the out-of-state business had extensive business operations in that forum state and that, at the time the companies registered to do business in that state, such registration was, “under the express terms or previous authoritative construction of state law,” understood as consent to suit “on all claims.” “Given the near-complete overlap of material facts,” Justice Alito agreed that Pennsylvania Fire must control unless Pennsylvania Fire has been or should be overruled.
As to that question, Justice Alito explained that “Norfolk Southern ha[d] not persuaded” him that Pennsylvania Fire has been or should be overruled. Echoing some of Justice Gorsuch’s reasoning, Justice Alito reasoned that International Shoe did not overrule Pennsylvania Fire because it only concerned jurisdiction over non-consenting corporations. Justice Alito further reasoned that he would not overrule Pennsylvania Fire in this case because the decision did not “strike [him] as ‘egregiously wrong’ in its application here.” Justice Alito pointed again to Norfolk Southern’s “extensive operations in Pennsylvania,” to the “countless occasions” that it had “availed itself of the Pennsylvania courts,” and to the “clear notice” it had that Pennsylvania considered registration to be consent to suit. And he concluded that, given those circumstances, it was “not so deeply unfair” to subject Norfolk Southern to suit in Pennsylvania as to violate the company’s right to due process. In other words, the relatively extensive operations of Norfolk Southern in Pennsylvania was critical in Alito’s view.
Having said that, Justice Alito devoted the last two-thirds of his opinion to explaining why, in his view, “there is a good prospect that Pennsylvania’s assertion of jurisdiction here—over an out-of-state company in a suit brought by an out-of-state plaintiff on claims wholly unrelated to Pennsylvania—violates the Commerce Clause” either by discriminating against out-of-state companies or imposing a significant burden on interstate commerce that is “clearly excessive” compared to any local benefit. No other Justice expressed a view on that theory, but the majority noted that the argument remained open for consideration on remand.
Implications of the Decision
The Mallory result is out-of-step with the trend of the Supreme Court decisions over the past several decades concerning personal jurisdiction over corporate entities. Those decisions largely made it harder for states to exercise jurisdiction over foreign corporations, as the dissent in Mallory argued. Several aspects of the case, however, make it difficult to know how much of a change the Mallory decision represents.
First, the majority and dissent expressed the view that few, if any, states other than Pennsylvania employ consent-by-registration statutes as broad as the Pennsylvania statute at issue. Whether other states will, in light of the Court’s decision, amend or re-interpret their statutes to require, as a condition of doing business in the state, consent to suit as broadly as Pennsylvania’s statute — i.e., to any suit against the registered corporation — remains to be seen. While some states may want to open their courts to such suits, others may not wish to employ their judicial resources in that manner or create such potential discouragement to doing business in their states.
Second, the narrowness of the majority opinion and Justice Alito’s somewhat cryptic concurrence that provided the fifth vote, suggest that the decision may not be as broad as it could appear. In future cases, if a state consent-by-registration law was not as clear at the time of registration or the corporate defendant has less substantial operations in the forum state, a corporate defendant may rely on Justice Alito’s opinion to argue that Pennsylvania Fire does not control or, if it does, it should be overruled by the Supreme Court as “egregiously wrong” as applied in those circumstances.
Finally, the Court’s opinion leaves open whether consent-by-registration laws as broad as Pennsylvania’s violate the dormant Commerce Clause. As noted, Justice Alito came close to endorsing that view in this concurrence. Many of his federalism concerns were echoed by the dissent, albeit under the Due Process Clause, and the majority did not reject the view. To the contrary, it made clear that the question remained opened in the Mallory case on remand.
McGuireWoods’ litigation and appellate teams are monitoring states’ responses to the Mallory decision and related follow-on litigation. Contact the authors of this alert for additional information or for questions about the implications of these developments to your company or litigation.