States may require parties to consent to be sued where they have registered to do business

On Tuesday, the U.S. Supreme Court resurrected the consent-by-registration theory of personal jurisdiction. Under the Court's decision in Mallory v. Norfolk Southern Railway Co., a state can require out-of-state businesses to consent to general personal jurisdiction as a condition of registering to do business in that state. That means if your business is registered in a state with this requirement, anyone can bring a lawsuit in that state against your business for anything—even if the case has nothing to do with that state, and none of the parties live in that state.

The Mallory case involved a consent-by-registration statute in Pennsylvania. Courts have also held that the law in Georgia requires out-of-state businesses to consent to general jurisdiction if they want to do business in that state. In the wake of the Mallory ruling, other states may soon join Pennsylvania and Georgia.

Background

Personal jurisdiction refers to a court's power to hear litigation involving the parties to a case. There are two types of personal jurisdiction that can satisfy the Due Process Clause. First, a case may proceed if the court has "specific jurisdiction" over the matter—meaning the case involves the defendant's activities in that state. Second, a case may proceed if the court has "general jurisdiction" over the defendant because the company is incorporated or has its principal place of business in the state. In that instance, the court may hear any case against the company as a defendant, regardless of whether the activities underlying the case have anything to do with that state, because the company is considered "at home" in the state.

In Mallory, the U.S. Supreme Court held that a state can mandate that out-of-state companies agree to the state's courts having general personal jurisdiction over the company as a condition of doing business in that state. The defendant in this case, Norfolk Southern, is a railroad company incorporated and headquartered in Virginia. Plaintiff Robert Mallory worked for Norfolk Southern as a freight-car mechanic in Ohio and Virginia. After retiring, Mallory moved to Pennsylvania, but then moved back to Virginia. Thereafter, he sued Norfolk Southern in Pennsylvania state court based on his exposure to carcinogens while on the job in Ohio and Virginia.

The case had nothing to do with Pennsylvania. The plaintiff didn't live there, the defendant wasn't headquartered there, and the injuries didn't happen there. But Norfolk Southern owns rail lines in Pennsylvania, operates rail yards and repair shops in Pennsylvania, and employs some 5,000 people there, so it was required to register to do business in Pennsylvania as a foreign corporation. And under Pennsylvania law, the state courts may "exercise general personal jurisdiction" over foreign corporations registered in Pennsylvania—meaning "any cause of action" can be asserted against them in state court.[1]

Norfolk Southern argued that the Due Process Clause precluded the state trial court from exercising personal jurisdiction over it in this litigation, and the Pennsylvania Supreme Court agreed. But in a 5-4 decision, the U.S. Supreme Court reversed, concluding that the Due Process Clause did not bar the state from mandating consent to general personal jurisdiction in Pennsylvania as a requirement to register in the state as a foreign corporation. In doing so, the Court relied heavily on its decision in an old case, Pennsylvania Fire Ins. Co. of Philadelphia v. Gold Issue Mining & Milling Co., 243 U.S. 93 (1917), where the Court had concluded that an Arizona company could sue a Pennsylvania insurance company in Missouri, based on a Colorado contract, without violating due process. The Court determined Pennsylvania Fire had not been implicitly overruled by subsequent developments in personal jurisdiction jurisprudence, such as its landmark decision in International Shoe Co. v. Washington, 326 U.S. 310 (1945).

Potential Implications

Before the Mallory decision, state courts were split on whether the Due Process Clause allowed states to require consent for general jurisdiction as a condition for foreign corporations to do business in the state. In recent years, only the Georgia Supreme Court had held that out-of-state businesses consented to general jurisdiction in the state's courts by registering there.[2] Other states, including Delaware,[3] had concluded that such a requirement violated due process.[4]

Now that the Supreme Court has clarified that states constitutionally may require foreign corporations to consent to general jurisdiction as a condition of registering to do business, more state courts may hold that current laws impose such a requirement—and more state legislatures may decide to adopt one. In New York, for instance, the Court of Appeals held in 2021 that the state's registration statute did not create a consent-by-registration requirement,[5] but bills to overturn that holding have repeatedly been introduced.[6]

Mallory may thus cause companies doing business in multiple states to be subject to a wide array of litigation in far more states than before—including in states that are generally perceived to be less friendly to corporate defendants.

There are a few things companies can do to protect themselves from this risk, however. First of all, companies should make sure that they have withdrawn business registrations from any states in which they no longer do business. Second, in deciding to enter a new market—or whether a given endeavor requires registration in a state—businesses should consider whether the state imposes general personal jurisdiction as a condition of doing business in that state, and the costs of potentially being sued on unrelated claims in that state. Third, Mallory increases the importance of carefully analyzing whether to include choice-of-law and venue requirements in some or all contracts. And fourth, we anticipate that business interests may lobby against efforts to expand state consent-by-registration requirements.

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