A recent decision by the U.S. Supreme Court will encourage forum shopping by enterprising plaintiffs, particularly to out-of-state jurisdictions where a defending business has few or no contacts. In Mallory v. Norfolk Southern Railway Co., 600 U.S. ____ (2023), the Supreme Court rejected a due process clause challenge to Pennsylvania’s corporate registration law, which requires out-of-state companies registering to do business there to concede personal jurisdiction and appear in the state on “any cause of action” against them. While acknowledging the “federalism implications of one State’s assertion of jurisdiction over the corporate residents of another,” the Court found controlling the fact of consent—even if procured by statute.
The case involved a mechanic who was employed in Ohio and Virginia for nearly two decades by Norfolk Southern Railway Co., a company incorporated and headquartered in Virginia. Following a cancer diagnosis, the mechanic sued his former employer in Pennsylvania, alleging that his on-the-job exposure to carcinogens was the cause. To establish jurisdiction, the plaintiff noted Norfolk Southern’s compliance with the state’s registration laws, as well as the company’s significant in-state activities. Norfolk Southern opposed Pennsylvania’s exercise of jurisdiction.
On appeal, Pennsylvania’s highest court sided with Norfolk Southern, holding that the registration statute violated due process because “it allows for general jurisdiction over foreign corporations, absent affiliations within the state that are so continuous and systematic as to render the foreign corporation essentially at home in Pennsylvania.”
The U.S. Supreme Court disagreed with the Pennsylvania Supreme Court in a 5–4 decision. Writing for the majority, Justice Gorsuch relied on a line of precedent originating with Pennsylvania Fire Ins. Co. of Philadelphia v. Gold Issue Mining & Milling Co., 243 U.S. 93 (1917), as supporting the consensual waiver of personal jurisdiction regardless of the quality and nature of the defendant’s contacts. In turn, the dissent, penned by Justice Barrett, argued that the majority opinion was fundamentally inconsistent with 75 years of jurisprudence that prohibited state courts from asserting general jurisdiction over foreign defendants “merely because they do business in the State” (citing International Shoe Co. v. Washington, 326 U.S. 310, 317 (1945)).
Importantly, in his concurrence, Justice Alito pointed to Norfolk Southern’s dormant commerce clause argument, which was raised before the Pennsylvania Supreme Court without adjudication. Justice Alito asserted that there is reason to believe “that Pennsylvania’s registration-based jurisdiction law discriminates against out-of-state companies” and that “at the very least, the law imposes a ‘significant burden’ on interstate commerce by requiring a foreign corporation to defend itself with reference to all transactions including those with no forum connection.”
The majority directly addressed this point and noted that Norfolk Southern could raise the commerce clause argument on remand.
Why Does It Matter?
For businesses with out-of-state operations, Mallory creates a great deal of uncertainty. Nonetheless, at least three lessons are apparent:
- The Commerce Clause Argument: The dissent and Justice Alito’s concurrence signal that consent-by-registration schemes may ultimately be deemed unconstitutional, particularly under a commerce clause argument. While we can expect the issue to be litigated on remand in Mallory, the argument will be hampered by Norfolk Southern’s significant presence in Pennsylvania—a fact that the majority decision explored at length (e.g., the company “employed nearly 5,000 people” and “maintained more than 2,400 miles of track” within the state). A lawsuit involving a defendant company with little to no in-state presence may prove to be a better vehicle to challenge consent-by-registration schemes.
- More Consent-Based Litigation: With Mallory as the latest in a line of cases approving consent-based jurisdiction, there remains the issue of what constitutes consent—indeed, the majority opinion expressly opted not to “speculate whether any other statutory scheme and set of facts would suffice to establish consent to suit.” Enterprising plaintiffs will argue that registration alone, or any other iteration of in-state acts, by a foreign company will constitute consent to be sued. As a protective measure, Justice Alito predicted, sophisticated businesses will “resort to creative corporate structuring to limit their amenability to suit.” Either way, the issue of consent to be sued will be litigated in trial courts across the nation.
- Renewed Emphasis on Forum Selection Clauses: As long as personal jurisdiction is determined by a defendant’s manifestations of consent, express contractual provisions to that effect—i.e., forum selection clauses—remain the clearest method for a business to manage its exposure. Perhaps Mallory would not have made its way to the Supreme Court had there been a forum selection clause in the operative employment agreement.
We thank Summer Associate Brent Dinino for his contributions to this article.