United States: The Supreme Court Finds That States May Require Businesses To Consent To Personal Jurisdiction When Registering To Do Business In Their State

Mallory v. Norfolk Southern Railway Co., No. 21-1168, June 27, 2023

June 30, 2023- On Tuesday, June 27, 2023, the United States Supreme Court held in Mallory v. Norfolk Southern Railway Co. that a state may require foreign businesses to consent to personal jurisdiction in the state to operate within the state. Such laws, it held, do not violate the Due Process Clause of the Fourteenth Amendment.

Robert Mallory worked for Norfolk Southern Railway Co. as a freight car mechanic for over twenty years in Ohio and Virginia but filed suit in Pennsylvania state court for claims arising under the Federal Employer's Liability Act (FELA) for his alleged exposure to harmful carcinogens and resulting illness. Norfolk Southern objected to the suit, contending that Pennsylvania had no jurisdiction over it as Mallory resided in Virginia, he was allegedly exposed to carcinogens in Ohio and Virginia, and the company was incorporated and headquartered in Virginia. Mallory argued that jurisdiction was proper where Norfolk Southern was registered to do business in Pennsylvania and Pennsylvania law requires foreign corporations registered to do business in the Commonwealth to agree to appear in its courts on "any cause of action" against them. Norfolk Southern's primary argument was that the statutory scheme violated the Due Process Clause of the Fourteenth Amendment. The Pennsylvania Supreme Court agreed with Norfolk Southern and dismissed Mallory's suit.

Justice Gorsuch, writing narrowly for the Court, reversed the decision of the Pennsylvania Supreme Court and held that Norfolk Southern consented to personal jurisdiction in Pennsylvania by virtue of registering as a foreign business in Pennsylvania and complying with the accompanying requirements that it establish an office there to receive service of process. Justice Gorsuch explained that this case addressed an old question, which was answered by the Court's earlier decision in Pennsylvania Fire Ins. Co. of Philadelphia v. Gold Issue Mining & Milling Co. There, the Court held that a Missouri court had personal jurisdiction over an insurance agency because the insurance agency consented to accept service of process on any suit in Missouri, even where the suit did not arise from any contacts with Missouri.

In addressing Norfolk Southern's fairness argument, Justice Gorsuch, writing for a plurality of the Court, pointed out that Norfolk Southern had been registered in Pennsylvania for many years, had established an office there for purposes of receiving service of process, and took advantage of the opportunity to do business there, even "boasting of its presence" in Pennsylvania through its website. Further, Norfolk Southern employed nearly 5,000 employees in the Commonwealth and maintained over 2,400 miles of track throughout Pennsylvania.

Justice Amy Coney Barrett, writing for the dissenting Justices, argued that the Pennsylvania statute violated the Due Process Clause of the Constitution and that the majority's holding virtually overruled the contacts-based approach the Court has developed for over a century. The dissent argued that the law runs afoul of the Court's decision in International Shoe Co. v. Washington, a seminal decision on the issue of jurisdiction, by subjecting Norfolk Southern to general jurisdiction in Pennsylvania simply by virtue of its registering to do business within the state. Additionally, the dissent argued that the decision jettisons developments in jurisdictional jurisprudence such as Daimler AG v. Bauman and Goodyear Dunlop Tires Operations, S.A. v.
Brown. Writing for a plurality of the Court, Justice Gorsuch described how International Shoe expanded rather than contracted jurisdiction. He wrote that the Court's precedents have recognized that "express or implied consent" continues to ground jurisdiction, and consent may be evidenced by word or by deed. This reflects a divide in the Court's interpretation of the history and doctrine of personal jurisdiction.

Justice Samuel Alito, concurring in the judgment, agreed that the decision was controlled by Pennsylvania Fire, although he raised concerns that Pennsylvania's statutory scheme may violate the dormant Commerce Clause. But because the issue was not addressed by the Pennsylvania Supreme Court, Justice Alito joined the majority opinion in part with the understanding that the state court could adequately address the issue on remand.

The decision currently only directly affects businesses registered in Pennsylvania as it is the only state with a consent-by-registration law, but the Court has now greenlit other States to enact similar laws. Corporations may have to decide whether the benefits of registering as a foreign corporation in Pennsylvania outweigh the risks of greater exposure to lawsuits in Pennsylvania courts. However, given that five members of the Court have expressed concern regarding the constitutionality of Pennsylvania's statutory scheme, the issue may reach the Court again sooner rather than later.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.