Boring Supreme Court Decision on Jurisdiction Has Real Consequences for Litigants
The Supreme Court is on a tear, ignoring precedent and settled legal principles with seeming abandon. However, in its recent, less controversial decision, Mallory v. Norfolk S. Ry. Co., No. 21-1168, 2023 WL 4187749 (U.S. June 27, 2023), the Court affirmed century-old precedent and held that a corporation would have to defend a lawsuit in the State of Pennsylvania based on a Pennsylvania statute requiring out-of-state corporations to consent to personal jurisdiction as a condition of registering to do business and that this exercise of jurisdiction did not violate the Due Process Clause. Although this decision will not blaze across editorial pages, it is of substantial importance to litigants.
The employee, plaintiff Robert Mallory, worked for Norfolk Southern as a freight-car mechanic for nearly twenty years, first in Ohio, then in Virginia. After he left the company, Mallory moved to Pennsylvania for a period before returning to Virginia. At some point he was diagnosed with cancer. Because he attributed his illness to his work at Norfolk Southern, Mallory sued his former employer under the Federal Employers’ Liability Act, a federal workers’ compensation statute. Mallory filed his lawsuit in Pennsylvania state court.
Norfolk Southern—a company incorporated in Virginia and headquartered there—moved to dismiss the suit on the basis that a Pennsylvania court’s exercise of personal jurisdiction over it would offend the Due Process Clause of the Fourteenth Amendment to the U.S. Constitution. Norfolk Southern noted that when the complaint was filed, Mr. Mallory resided in Virginia, and the complaint alleged that Mr. Mallory was exposed to carcinogens only in Ohio and Virginia. Mr. Mallory in turn relied upon Norfolk Sothern’s presence in Pennsylvania, noting that Norfolk Southern manages over 2,000 miles of track, operates eleven rail yards, and runs three locomotive repair shops in the state. Norfolk Southern had registered to do business in Pennsylvania, and Pennsylvania requires out-of-state companies that register to do business in the Commonwealth to agree to appear in its courts on “any cause of action” against them. The Pennsylvania Supreme Court sided with Norfolk Southern, citing the Fourteenth Amendment’s Due Process Clause.
The U.S. Supreme Court vacated the judgment. In Judge Gorsuch’s decision (which was 5-4 as to the sections concurred in by Justice Alito), the Court held that the dispute is controlled by Pennsylvania Fire Ins. Co. of Philadelphia v. Gold Issue Mining & Milling Co., 243 U.S. 93 (1917), which rejected a Due Process argument where a party had consented to jurisdiction under a state’s registration procedures. Justice Alito, in a concurrence, attempted to put forward a Commerce Clause argument for rejecting jurisdiction, but stood alone in doing so.
Justice Gorsuch’s majority opinion pays little heed to the Court’s recent history of pruning back jurisdiction over corporations. For decades, the central case on the topic was International Shoe Co. v. Washington, 326 U.S. 310 (1945), which held that a corporation’s substantial activities in a state could lead to its being sued in such state, whether or not its activities were directly tied to the claims in the lawsuit. This type of jurisdiction had made any number of states fair game jurisdictionally, for corporations with a nationwide presence.
More recently, however, in Daimler AG v. Bauman, 134 S. Ct. 746 (2014), and Goodyear Dunlop Tires Operations, S.A. v. Brown, 564 U.S. 915 (2011), the Court narrowed this doctrine, holding that under the Due Process Clause corporations could only be sued where they are incorporated or have a principal place of business, or where they engaged in substantial conduct directly related to the dispute. Many thought that jurisdiction under state registration laws, which would give rise to jurisdiction without a logical connection between the claims at issue and the state, might fall by the wayside as well, and this reasoning led Justice Barrett (joined by Justices Roberts, Kagan and Kavanaugh) to dissent. However, the majority opinion, held that consent, even if mandated by a state’s registration standard, was sufficient to avoid a Due Process challenge.
It should be noted that the Pennsylvania registration statute is unusually welcoming to litigants, and that the Mallory decision might well lead state legislatures to review the jurisdictional consequences of such statutes. As for New York State, merely registering to do business does not confer jurisdiction over corporations. See Chufen Chen v. Dunkin’ Brands, Inc., 954 F.3d 492, 499 (2d Cir. 2020); Aybar v. Aybar, 37 N.Y.3d 274, 283 (2021).
This article is intended as a general discussion of these issues only and is not to be considered legal advice or relied upon. For more information, please contact RPJ Counsel Mark Moore who counsels clients on employment disputes, disputes in a university setting, securities matters, intellectual property issues, and other commercial matters. Mr. Moore is admitted to practice law in New York, the United States Courts of Appeal for the Second and Third Circuits and the United States District Courts for the Southern and Eastern Districts of New York.