August 3, 2023
On June 27, 2023, the Supreme Court of the United States decided Mallory v. Norfolk Southern Railway Co. If you have not heard about the case, I am not surprised. It deals with personal jurisdiction over corporations, not exactly a headline-grabbing issue in mainstream media. To the extent that the case did receive media coverage, it was because of the division among the justices. Instead of the usual groupings among the justices, this case had Justices Thomas, Alito, Sotomayor, Gorsuch and Jackson in the majority, and Chief Justice Roberts, Justice Kagan, Justice Kavanaugh, and Justice Barrett in the minority. Justice Alito only joined parts of the Court’s majority opinion and wrote a separate opinion. However, this case could have real life implications for corporations.
The issue in the case was whether Pennsylvania could force Norfolk Southern Railway Co., which is incorporated in Virginia and was headquartered in Virginia at the time the case was filed, to defend a case that had no connection whatsoever with Pennsylvania in a Pennsylvania state court. There are two types of jurisdiction that determine whether a natural person or an entity such as a corporation can be sued in a particular state – specific jurisdiction and general jurisdiction. Specific jurisdiction exists when the facts of the case have a connection to the state, for example a state in which an automobile accident occurs has jurisdiction over the persons involved in the accident regardless of their domicile or citizenship. General jurisdiction means that any action, regardless of where the facts upon which it is based occurred, can be brought in the state. With respect to natural persons, general jurisdiction is easy. General jurisdiction over a natural person exists in the state in which the person is domiciled or in a state in which the person is personally served with a summons from a court in that state (called “tag jurisdiction”). In the 2010s, the Supreme Court narrowed the scope of general jurisdiction over corporate entities to places where the defendant was “at home” in a series of cases, relying on jurisprudence that originated in a 1945 case International Shoe Co. v. Washington. In International Shoe, the Supreme Court held that an out-of-state corporation could be sued in a state in which it had “minimum contacts.” International Shoe Co. was not registered to do business in Washington.
Mr. Mallory, who worked for Norfolk Southern in Ohio and Virginia, sued Norfolk Southern in Pennsylvania for illness he attributed to his work for Norfolk Southern. He did not work for Norfolk Southern in Pennsylvania and there were no “minimum contacts” that would have supported specific personal jurisdiction in Pennsylvania. Instead, Mr. Mallory argued that Pennsylvania had general personal jurisdiction over Norfolk Southern because it was registered to do business in Pennsylvania. Pennsylvania not only requires that out-of-state corporations designate an agent for service of process as a condition of doing business in the state, but also agree to appear in Pennsylvania courts in “any cause of action.” The five-justice majority agreed with Mr. Mallory, relying on a 1917 case, Pennsylvania Fire Ins. Co. v. Gold Issue Mining & Milling Co.
Although most lawyers and scholars believed that International Shoe had implicitly overruled Pennsylvania Fire, the five-justice majority disagreed. The majority reasoned that International Shoe provided an additional basis for jurisdiction but did not limit general jurisdiction over corporations that are registered to do business in a state. This has real life implications for out-of-state corporations doing business in places like Pennsylvania. As of now, any corporation that is registered to do business in Pennsylvania is subject to Pennsylvania jurisdiction for any claim even if it has no connection to the state. Most state corporation statutes do not have a jurisdiction consent provision like Pennsylvania’s. Whether other states will amend their corporate statutes in light of Mallory remains to be seen. On the other hand, Justice Alito’s separate opinion raised the possibility that a state’s requiring a corporation to agree to general jurisdiction as a condition of doing business there may violate the U.S. Constitution’s “dormant Commerce Clause.” The dormant Commerce Clause doctrine prohibits states from enacting legislation that discriminates against interstate commerce. The dormant Commerce Clause argument was not before the Supreme Court in Mallory, but Justice Alito suggested that Norfolk Southern could pursue the argument when the case was remanded to Pennsylvania state court.
So, what does this case with strange bedfellows mean for corporations and state court jurisdiction? In the short term, it means that out-of-state corporations are at risk when they register to do business in Pennsylvania, and need to examine the corporation laws of other states in which they decide to register to do business. In the medium term, corporations should keep an eye on the corporation laws of other states to see if they are being amended to take advantage of Mallory. In the long term, I believe that Justice Gorsuch will jump from one bed to the other if the issue comes back with a dormant Commerce Clause challenge. But, until then, this case has real-life implications for out-of-state corporations doing business in other states.