SCOTUS to Hear Case that Could Broaden Jurisdictions Where Businesses Could Be Sued
By: Monte L. Mann
The U.S. Supreme Court decided last week that it will consider a Pennsylvania case concerning whether state courts can exercise jurisdiction over companies simply because they are registered to do business in the state. Depending on how the high court rules, companies may be exposed to litigation in a significantly greater number of courts around the country.
Mallory v. Norfolk Southern Railway Co.
Virginia resident Robert Mallory sued his former employer, Norfolk Southern Railway Company, in the Philadelphia Court of Common Pleas, claiming he developed colon cancer after being exposed to asbestos while working in Ohio and Virginia for the Virginia-based railroad company. Neither Norfolk Southern Railway nor Mallory have a direct connection to Pennsylvania, and the railroad sought dismissal of the complaint based on a lack of personal jurisdiction. However, Norfolk Southern Railway is registered to do business in Pennsylvania, and Mallory asserted the court had jurisdiction under a Pennsylvania statute requiring companies to consent to the jurisdiction of the state's courts if they register to do business in the state.
The trial court and, later, the Pennsylvania Supreme Court sided against Mallory, holding that Pennsylvania’s general jurisdiction statute violated out-of-state companies’ right to due process under the 14th amendment of the U.S. Constitution, which limits a state’s power to exercise jurisdiction over a defendant.
Prior U.S. Supreme Court Cases
In its decision, the Pennsylvania Supreme Court cited the U.S. Supreme Court’s rulings in 2014 in Daimler AG v. Bauman and 2011 in Goodyear Dunlop Tires Operations, SA v. Brown, which held that corporate defendants are only subject to general jurisdiction in a state if they have substantial affiliations such that they are “at home in the forum state.”
However, while the Supreme Court narrowed where corporations could be sued in those cases, a more recent decision in Ford Motor Co. v. Montana Eighth Judicial District Court creates uncertainty about which way the high court might lean in Mallory.
The Ford matter stemmed from two separate but similar lawsuits from parties claiming they were injured in car crashes that occurred in their respective home states of Montana and Minnesota. The plaintiffs had each purchased their car second-hand in their home state, but the vehicles had originally been sold in other states. In its 2021 decision, the U.S. Supreme Court said Ford could be sued in Montana and Minnesota, rejecting the auto maker’s assertion that, since the two cars were neither designed, manufactured nor sold by Ford within the states where the accidents occurred, there was no direct causal link between Ford’s in-state activities and the plaintiff’s claims. Therefore, personal jurisdiction was lacking.
In his concurring opinion against Ford’s bid to narrow jurisdiction, Justice Neil Gorsuch indicated that the Supreme Court would have to reassess its landmark 1945 decision on jurisdiction in International Shoe Co. v. Washington, which established that, “to the extent that a corporation exercises the privilege of conducting activities within a state, it enjoys the benefits and protection of the laws of that state.”
“Nearly 80 years removed from International Shoe, it seems corporations continue to receive special jurisdictional protections in the name of the Constitution. Less clear is why,” Justice Gorsuch wrote.
State Laws
The Pennsylvania case is part of a burgeoning circuit split on the jurisdiction issue as it relates to due process. Last year, the New Mexico Supreme Court struck down a similar law, finding that out-of-state companies cannot be sued in New Mexico’s courts simply by virtue of registering to do business in the state – that jurisdiction depended on actual contacts in the state. The Georgia Supreme Court went in the opposite direction last year by upholding a law granting its state courts jurisdiction over companies registered to do business in Georgia.
A few other states, including Iowa, Minnesota and Nebraska, still have laws on their books stating that by registering to do business there, companies consent to general jurisdiction in the state.
Potential Impact of U.S. Supreme Court’s Decision
Depending on which way the Supreme Court finds in Mallory, the ruling could have far-reaching implications for businesses across the country. A decision to affirm the Pennsylvania ruling and side with Norfolk Southern Railway would likely have limited impact, since most states do not have laws stating that companies consent to jurisdiction simply by registering to do business there.
However, if the high court comes out in favor of the railroad worker, it could spark a new wave in forum shopping. Certain jurisdictions are seen as friendlier to plaintiffs, whether due to their laws, jury pools or current judiciary leanings, and broadening the venues where jurisdictions could be sued could create a seismic shift in corporate litigation with negative consequences for corporate defendants.
Novack and Macey LLP is a commercial and business litigation law firm that represents closely held businesses, entrepreneurs and other parties in disputes arising out of business relationships and commercial transactions. To contact the author, please email Monte L. Mann at mmann@novackmacey.com or call 312.419.6900.