Last week, the Supreme Court expanded the scope of personal jurisdiction over corporations in Mallory v. Norfolk Southern Railway Co. In this fragmented 5-4 decision, the Supreme Court held that corporations are subject to personal jurisdiction where they register to do business in a state with a consent-by-registration statute. Because personal jurisdiction is the authority of a court to issue judgments that bind the parties before it, this decision has sweeping ramifications for corporate lawsuits.
Ever since its landmark ruling in International Shoe, the Supreme Court has recognized just two types of personal jurisdiction — specific and general — both of which the Supreme Court grounded in a defendant’s contacts with the forum state. Where a court has general jurisdiction over a defendant, it has authority over all claims brought against that defendant. Given this breadth, the Supreme Court had previously held that a corporation was only subject to general jurisdiction in states where it was “at home.” Corporations are at home in the states (1) where they are incorporated and (2) where they have their principal place of business.
Specific jurisdiction, on the other hand, is narrow. It only gives a court jurisdiction over claims that arise out of the corporation’s conduct in that state. Thus, under International Shoe, if a corporation is not at home in the forum state, and the events giving rise to the suit did not occur within that state, then the state did not have personal jurisdiction over the defendant. In other words, it did not have authority to enter a judgment that would bind the defendant.
The facts of Mallory illustrate how these principles should have worked and how the Supreme Court changed them. Mallory worked for Norfolk Southern as a freight car mechanic for nearly 20 years. He first worked for Norfolk Southern in Ohio and then in Virginia. After he stopped working for Norfolk Southern, he developed cancer and attributed his cancer to the work he did for Norfolk Southern, which allegedly included “spraying boxcar pipes with asbestos and handling chemicals.”
When he filed his lawsuit, both he and Norfolk Southern were “at home” in Virginia. He lived in the state, where Norfolk Southern was both incorporated and headquartered. Virginia was therefore the obvious choice and would have undoubtedly had personal jurisdiction over Norfolk Southern.
But Mallory was not constrained to Virginia. If he did not want to file his lawsuit there, Ohio was a likely option as well. Because Mallory also worked for Norfolk Southern in Ohio, and his lawsuit arose out of his employment, Ohio arguably had specific personal jurisdiction over Norfolk Southern.
Mallory chose neither. Instead, he sued in Pennsylvania. Under International Shoe, Pennsylvania should not have had personal jurisdiction over Norfolk Southern. The company is neither incorporated nor headquartered in Pennsylvania, and the events giving rise to this suit — Mallory’s employment at Norfolk Southern — did not occur there either.
Contrary to International Shoe, the Supreme Court held that Norfolk Southern consented to general jurisdiction by registering to do business in Pennsylvania, because Pennsylvania has a consent-by-registration statute that covers all suits. To reach that ruling, the Supreme Court relied on a century-old decision, Pennsylvania Fire, that pre-dated International Shoe and that many thought had been overruled by International Shoe. The Supreme Court, however, held that instead of overruling Pennsylvania Fire, International Shoe expanded it.
Under the Supreme Court’s new view of its International Shoe jurisprudence, corporate defendants are now subject to general jurisdiction in three instances, not two. They are subject to general jurisdiction: (1) where they are incorporated, (2) where they have their principal place of business and (3) where they have registered to do business and the state has enacted “a law making registration sufficient for suit on any cause (as every State could do).”
Considering this ruling, multi-state corporations should familiarize themselves with the consent-by-registration statutes of the states in which they have registered to do business. Broad statutes, like the one at issue in Mallory, are currently rare. But it is foreseeable that states will begin implementing consent-by-registration statutes now that the Supreme Court has affirmed their viability.
That said, it is unlikely that Mallory is the Supreme Court’s final word on the topic. Justice Alito was the fifth vote and concurred only in the judgment and two parts of the majority opinion. He wrote separately to point out that while he did not believe Pennsylvania’s statute failed on the due process grounds raised in the case, it might fail under other constitutional doctrines, like the dormant commerce clause. A dormant commerce clause challenge is therefore likely.
Additionally, Mallory might be distinguishable for corporations that do not have extensive ties to the state in question. The majority made a point of noting that “Norfolk Southern manages over 2,000 miles of track, operates 11 rail yards, and runs 3 locomotive repair shops in Pennsylvania.” The Supreme Court might see things differently if a corporation has no (or few) contacts with the forum state.
For questions about how this case may impact your business, or questions surrounding other litigation matters, please contact Matthew Nelson, Amanda Fielder, Daniel Brookins or your Warner attorney.