Did We Consent to Be Sued Here? An Update on Newest U.S. Supreme Court Decision on Personal Jurisdiction in Mallory v. Norfolk Southern Railway Company.

Snell & Wilmer

Snell & Wilmer

It is common knowledge that every state has some requirement that companies doing business in the state register to do so. However, under the most recent U.S. Supreme Court decision addressing personal jurisdiction, the mere act of doing so may constitute a company’s consent to be sued in that state for any cause of action, regardless of whether the case involves a citizen of that state or whether any of the conduct at issue in the case occurred in that state.

On June 27, 2023, the U.S. Supreme Court issued a decision in Mallory v. Norfolk Southern Railway Co., 600 U.S. ___ (2023), its newest decision on personal jurisdiction. Most challenges to personal jurisdiction over a company address either general jurisdiction—which typically exists only in a state where a company is incorporated or has its headquarters and allows it to be sued on any cause of action—or specific jurisdiction—which addresses whether the company has sufficient activities within the given state to form a nexus between the company’s in-state activities and the conduct at issue in the lawsuit. Specific jurisdiction also typically involves an in-state plaintiff who is claiming injury or damages that occurred in the state.

The Mallory decision, however, is based on a different type of jurisdiction — consent by a company to jurisdiction in a state for any cause of action brought there by registering to do business in the state. The Supreme Court posed the question to be decided as “whether the Due Process Clause of the Fourteenth Amendment prohibits a State from requiring an out-of-state corporation to consent to personal jurisdiction to do business there.” The Supreme Court held that Norfolk Southern’s registration to do business in Pennsylvania pursuant to that state’s business statutes conferred personal jurisdiction over it and did not violate the Fourteenth Amendment’s due process clause.

The underlying case involved a former employee of Norfolk Southern who worked for the company in Ohio and Virginia over a period of 20 years. He filed a lawsuit alleging that he was exposed to asbestos while working for Norfolk Southern and developed cancer as a result. After leaving his employment with Norfolk Southern, he moved to Pennsylvania and then later to Virginia, where he was residing at the time, he filed suit. But Mr. Mallory did not file suit in Virginia, where the courts would undisputedly have general jurisdiction over Norfolk Southern because it is incorporated and has its headquarters in Virginia. Instead, he filed suit against Norfolk Southern in Pennsylvania and the company challenged personal jurisdiction over it in Pennsylvania. The Pennsylvania Supreme Court found that there was not personal jurisdiction over Norfolk Southern, but the U.S. Supreme Court vacated the state court ruling and remanded the case.

The Supreme Court found that the 1917 Supreme Court decision in Pennsylvania Fire v. Gold Issue Mining & Milling Co. was determinative. The Pennsylvania Fire opinion held that Pennsylvania Fire could be sued in Missouri even where Missouri was not the plaintiff’s nor the defendant’s home state and Colorado was where the contract at issue was formed and where the underlying fire occurred. In other words, there was no Missouri citizen involved and no conduct by the defendant in Missouri related to the case at all. The Pennsylvania Fire decision held that personal jurisdiction attached because Missouri law required any out-of-state insurance company to agree to appoint a state official as an agent for service of process and “accept service on that official as valid in any suit.”

Relying on the Pennsylvania Fire case as precedent, the Mallory decision likewise found that there was jurisdiction over Norfolk Southern in Pennsylvania because Pennsylvania law provides that an out-of-state corporation must register to do business in order to conduct business in the state and further explicitly requires that qualification to do business in Pennsylvania by out-of-state companies permits the Pennsylvania courts to exercise general jurisdiction over them. Importantly, the Supreme Court separated the “consent” jurisdiction at issue in Pennsylvania Fire and Mallory from the contacts analysis for specific jurisdiction established in the International Shoe case and the cases following it, finding that they were parallel rather than conflicting ways of establishing personal jurisdiction and “sit comfortably side by side.” And the Supreme Court further noted that there was nothing particularly unusual for a business to be required to consent to the jurisdiction of the courts in a state in exchange for the privilege of doing business there, pointing to consent to jurisdiction in other contexts such as through contractual forum selection clauses.

The Mallory opinion does not categorically find that registration to do business always means that a company has consented to jurisdiction. Rather, the opinion states that the Court was not speculating as to whether a state other than Pennsylvania’s statutory scheme and a different set of facts would suffice to establish consent to personal jurisdiction. Thus, it remains to be seen how state and federal courts throughout the country apply the decision to different statutes and facts. However, the Mallory decision certainly will provide plaintiffs with the opportunity to try to gain jurisdiction over companies in jurisdictions that they believe to be favorable. And correspondingly, in order to be ready to defend themselves against such lawsuits, it will be important for companies to clearly understand the statutory scheme in any state where they have registered to do business.

DISCLAIMER: Because of the generality of this update, the information provided herein may not be applicable in all situations and should not be acted upon without specific legal advice based on particular situations.

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