On June 27, 2023, the Supreme Court of the United States held 5-4 that a Pennsylvania statute requiring an out-of-state company to submit to general personal jurisdiction within the Commonwealth when registering to do business there did not violate the Due Process Clause of the Fourteenth Amendment. Mallory v. Norfolk S. Ry. Co.,—U.S.—, 2023 WL 4187749 (2023). The Court left open, however, whether Pennsylvania’s statute might violate the dormant Commerce Clause doctrine, a question which will likely be considered by the Pennsylvania Supreme Court on remand.
Plaintiff worked for defendant railway company as a mechanic for nearly 20 years, first in Ohio and then in Virginia, but never in Pennsylvania (although he lived for a period of time in Pennsylvania after retiring from the company). After plaintiff left the company, he was diagnosed with cancer, which plaintiff alleged was caused by his work for defendant. Id. at *3. At the time he filed suit, plaintiff was a Virginia resident and defendant was incorporated and headquartered in Virginia. Id. Plaintiff, however, brought suit against the company in Pennsylvania state court, asserting claims under a federal workers’ compensation law. Id.
Plaintiff argued that, because defendant had registered to do business in Pennsylvania, it had submitted to general personal jurisdiction in the Commonwealth by virtue of a Pennsylvania law requiring out-of-state companies that register to do business in Pennsylvania to agree to appear in a Pennsylvania court on “any cause of action” against them. See id. (citing 42 Pa. Cons. Stat. § 5301(a)(2)(i), (b) (2019)). Although the Pennsylvania Supreme Court agreed with plaintiff’s reading of the statute as purportedly authorizing the exercise of personal jurisdiction over defendant, it held (while acknowledging that its reasoning conflicted with the Georgia Supreme Court’s recent decision in Cooper Tire & Rubber Co. v. McCall, 863 S.E.2d 81 (2021)) that Pennsylvania’s statute violated the Due Process Clause.
The Supreme Court reversed. A narrow majority (Justices Gorsuch, Thomas, Sotomayor, Jackson, and Alito) concluded that the case was squarely controlled by the Supreme Court’s 1917 decision in Pennsylvania Fire, which had held that the Due Process Clause does not prohibit a State from exercising personal jurisdiction over a non-resident corporation, even with respect to claims having no connection to the State, if the corporation has consented (or effectively consented) to submit to such jurisdiction. Id. at *7 (citing Pa. Fire Ins. Co. of Philadelphia v. Gold Issue Mining & Milling Co., 243 U.S. 93 (1917)). The Supreme Court rejected the Pennsylvania Supreme Court’s conclusion that Pennsylvania Fire had been “implicitly overruled” by subsequent Supreme Court decisions (and explained that it was error for the Pennsylvania Supreme Court to refuse to follow Pennsylvania Fire based on its own interpretation of those subsequent Supreme Court cases). Id. at * 7 (citing Rodriguez de Quijas v. Shearson/American Express, Inc., 490 U.S. 477, 484 (1989) (“If a precedent of this Court has direct application in a case,” a lower court—even if it thinks the precedent is in tension with “some other line of decisions”—“should follow the case which directly controls, leaving to this Court the prerogative of overruling its own decisions.”).
Defendant argued that even if the Pennsylvania Supreme Court was bound by Pennsylvania Fire, the Supreme Court was not, and should overrule that case as inconsistent with the Court’s jurisprudence respecting “specific” and “general” jurisdiction as developed in International Shoe Co. v. Washington, 326 U.S. 310 (1945), and its progeny. Specifically, defendant argued that Due Process does not permit the exercise of personal jurisdiction over a corporate defendant on any other grounds.[1] On this question, Justice Gorsuch’s plurality opinion—joined by Justices Thomas, Sotomayor, and Jackson—explained that International Shoe did not delimit the exclusive bases permitted by Due Process for the exercise of personal jurisdiction over a corporate defendant. Rather, according to the plurality, Pennsylvania Fire addressed instances in which an out-of-state corporation has consented to in-state suits, and International Shoe concerned instances in which an out-of-state corporation has not consented to in-state suits. Here, like in Pennsylvania Fire, defendant was found to have effectively consented to be sued in the forum, and International Shoe was therefore inapplicable. Mallory, 2023 WL 4187749 at *8.[2]
The plurality emphasized that the Court has never held that International Shoe superseded every traditional method for securing personal jurisdiction. Id. at *9. And the plurality observed that even considering the “fair play and substantial justice” analysis required by International Shoe, defendant had an extensive presence in the forum (for example, employing more people in Pennsylvania than in Virginia where it was headquartered). Id. at *10. The plurality similarly rejected the suggestion that the Pennsylvania registration statute improperly infringed on the sovereignty of other states, noting that federalism concerns are not implicated when a party consents to being sued in a particular state, because personal jurisdiction defenses are waivable. Id. at *11.
Justice Alito’s concurrence, while making clear that he agreed Pennsylvania Fire controlled and was not inconsistent with International Shoe, nevertheless expressed substantial doubt that the statue in question could survive a dormant Commerce Clause challenge. Justice Alito argued that there was “a good prospect” that the Pennsylvania statute violated the Commerce Clause because there was “reason to believe that [it] discriminates against out-of-state companies” and because “at the very least, the law imposes a ‘significant burden’ on interstate commerce by ‘[r]equiring a foreign corporation … to defend itself with reference to all transactions,’ including those with no forum connection.’” Id. at *18-19. In Justice Alito’s view, the Pennsylvania law not only imposes “operational burdens” on out-of-state companies but “injects intolerable unpredictability into doing business across state borders” with respect to differing “liability regimes, damages caps, and local rules in each State.” Id. at *19.
In dissent, Justice Barrett—joined by Chief Justice Roberts and Justices Kagan and Kavanaugh—wrote that upholding the Pennsylvania law was inconsistent with the Court’s Due Process precedent making clear that simply doing business in a State is not a sufficient basis for the exercise of general jurisdiction over an out-of-state corporation. Id. at *20. Rather, the dissent explained, a corporation, absent exceptional circumstances, is “subject to general jurisdiction only in a State where it is incorporated or has its principal place of business.” Id. at *21 (citing Goodyear Dunlop Tires Operations, S. A. v. Brown, 564 U.S. 915 (2011); Daimler AG v. Bauman, 571 U.S. 117 (2014)). According to the dissent, the Pennsylvania statute infringes on other States’ prerogatives by allowing Pennsylvania to assert general jurisdiction over every company that is merely doing business in Pennsylvania. Id. at *23. This “power grab,” added the dissent, “infringes on more than just the rights of defendants—it upsets the proper role of the States in our federal system.” Id. at *23. Finally, the dissent disputed the plurality’s consent rationale, expressing the view that Pennsylvania had overreached in demanding that out-of-state corporations relinquish their Due Process rights as a condition of doing business in the Commonwealth. Id. at *22. The dissent asserted that upholding the Pennsylvania statute ran the risk of rendering Daimler and Goodyear “obsolete” and specific jurisdiction for corporations “superfluous,” because States may attempt to “manipulate” the registration process in order to manufacture consent by all out-of-state businesses to the submission of general personal jurisdiction. Id. at *28.
The majority specifically noted that defendant’s dormant Commerce Clause argument had not been addressed by the Pennsylvania Supreme Court. Especially in light of Justice Alito’s concurrence and the dissent’s expressed federalism concerns, it will be interesting to see how the dormant Commerce Clause issue is addressed by the Pennsylvania Supreme Court on remand.
[1] Specific jurisdiction permits a court to exercise jurisdiction over a corporate defendant in suits that arise out of or relate to the corporation’s activities in the forum; general jurisdiction allows a court to exercise jurisdiction over a corporate defendant in all kinds of suits against it but typically only in a state where the corporation is incorporated or has its principal place of business.
[2] The plurality explained that, while the statute in question did not expressly use the word “consent,” a “variety of legal arrangements” can show express or implied consent to jurisdiction, including requiring consent to suit “in exchange for access to [a State’s] markets.” Id. at *11 n.10. The plurality similarly rejected the contention that the formalities required of defendant as a condition of registering to do business in Pennsylvania (such as filing paperwork to do business and establishing an office in Pennsylvania to receive service of process) were meaningless to establish consent, concluding that courts regularly honor and enforce such formalities. Id. at *11.
Links & Downloads -
Mallory v. Norfolk S. Ry. Co.
[View source.]
