This summer, the U.S. Supreme Court issued a split opinion addressing whether Pennsylvania’s business registration statute requiring out-of-state companies to consent to the subjugation to any suit in its court as a condition to do business in the Commonwealth violates the Fourteenth Amendment’s Due Process Clause. See Mallory v. Norfolk S. Ry. Co., 143 S. Ct. 2028 (2023). The short answer? It does not. This ruling has the potential to derail what is commonly assumed to be black letter law about asserting personal jurisdiction over out-of-state corporations in claims brought by out-of-state plaintiffs.
In Mallory, the Supreme Court distinguished its holding from the infamous personal jurisdiction precedent that bifurcated personal jurisdiction into general and specific jurisdiction. As background, personal jurisdiction was originally tied directly to a defendant’s presence within the forum state. Pennoyer v. Neff, 95 U.S. 714, 722 (1877). That traditional analysis was modified by International Shoe Co v. Washington, 326 U.S. 310 (1945), resulting in what many thought to be a well-established and clear-cut process to establish jurisdiction over corporate defendants. Until now, International Shoe taught every law student that a court can have jurisdiction over a corporate defendant where the defendant is incorporated or headquartered (general jurisdiction) or where a suit arises out of or relates to a corporate defendant’s activities in the forum state (specific jurisdiction), which is more commonly described as the corporation having the appropriate “minimum contacts” with the jurisdictional forum. However, International Shoe and its progeny never clarified whether the minimum-contacts specific and general jurisdictional analysis was the only test to prove jurisdiction over a foreign corporation. Mallory addressed that question.
Petitioner Robert Mallory worked at Norfolk Southern Railway Company (Norfolk Southern) for nearly 20 years in both Ohio and Virginia. After leaving the company, Mallory moved to Pennsylvania for a while, but then returned to live in Virginia. Mallory alleged that during his tenure with the company, his job required him to handle items that allegedly contained carcinogens. After receiving a cancer diagnosis, Mallory sued Norfolk Southern in Pennsylvania state court, even though he resided in Virginia at the time he filed suit. Norfolk Southern, a company incorporated and headquartered in Virginia, contested personal jurisdiction in Pennsylvania on constitutional grounds. Norfolk Southern argued that Mallory resided in Virginia, his complaint alleged that his exposure to carcinogens was in Ohio and Virginia, and the company itself was incorporated and headquartered in Virginia. In response, Mallory argued that those facts were irrelevant because not only had Norfolk Southern registered to do business in Pennsylvania, but it also had over 2,400 miles of track, 11 rail yards, and 3 locomotive repair shops in Pennsylvania. Norfolk Southern moved to dismiss Mallory’s claim, arguing that the exercise of personal jurisdiction by the Pennsylvania court violated due process. Mallory, in turn, reiterated that Norfolk Southern’s registration there constituted the company’s consent to personal jurisdiction.
The trial court dismissed the suit for lack of personal jurisdiction, and the Pennsylvania Supreme Court affirmed, agreeing that Pennsylvania law states that registration by out-of-state corporations requires them to “agree to appear” in its courts on any cause of action against them, but that Mallory could not invoke that law because that law violated the Due Process Clause. Mallory v. Norfolk S. Ry. Co., 266 A.3d 542, 547 (Pa. Dec. 22, 2021). The Pennsylvania Supreme Court relied on the U.S. Supreme Court’s recent decisions in Daimler AG v. Bauman, 571 U.S. 117 (2014), and Ford Motor Co. v. Montana Eighth Judicial District Court, 141 S. Ct. 1017 (2021), which further defined the International Shoe contacts-focused analysis for personal jurisdiction into the recognition of two categories of personal jurisdiction: specific (case-linked) jurisdiction and general (all-purpose) jurisdiction. Ford Motor, 141 S. Ct. at 1024. Specific jurisdiction is the power of a judge to adjudicate claims that arose out of an out-of-state corporation’s continuous and systematic in-state business activities. Id. General jurisdiction is the power of the court to adjudicate any claim over which the court has subject-matter jurisdiction against a corporation, regardless of where the claim arose. Id. However, in Daimler, the U.S. Supreme Court further narrowed the concept of general personal jurisdiction, ruling that a court may exercise general personal jurisdiction only when an entity’s “affiliations with the state are so ‘continuous and systematic’ as to render the entity essentially at home in the forum state” or where the corporation is incorporated or has its principal place of business. Daimler, 571 U.S. at 139. Consequently, following Daimler, the fact that a corporation “regularly conducts business” in the state (or advertises, has employees, or generated substantial revenues in the state) is insufficient to prove the corporation is “at home” in the state. Id.; see also BNSF Ry. Co v. Tyrrell, 581 U.S. 402 (2017).
The Pennsylvania Supreme Court did recognize the potential independent basis for a corporate defendant to consent to personal jurisdiction “by appearance, contractually agreeing to personal jurisdiction, or stipulating to personal jurisdiction” “assuming that the consent is given voluntarily.” Mallory, 266 A.3d at 568 (internal citations omitted). The trial court concluded that the purported consent to jurisdiction by registering to do business in the Commonwealth “was involuntary, and thus invalid,” because the “choice” was to either consent to personal jurisdiction or not do business in Pennsylvania at all, which violates the Due Process Clause of the Constitution. Id. at 570. While the Pennsylvania Supreme Court noted that the U.S. Supreme Court had upheld a similar state law in Pennsylvania Fire Insurance Co. of Philadelphia v. Gold Issue Mining & Milling Co., 243 U.S. 93 (1917), prior to International Shoe, the Pennsylvania Supreme Court concluded that decision (and others like it) had been implicitly overruled by the subsequent U.S. Supreme Court decisions. The Pennsylvania Supreme Court ultimately rejected the argument that Norfolk Southern consented to the general jurisdiction by registering to do business, holding that the Commonwealth’s statutory consent requirement violated due process. Mallory, 266 A.3d at 557–58, 566–67.
The U.S. Supreme Court agreed to hear the case to decide “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.” Mallory, 143 S. Ct. at 2033. In a 4–1–4 plurality decision, the U.S. Supreme Court vacated and remanded, holding that it was improper for the Pennsylvania Supreme Court to decline to follow Pennsylvania Fire based on the Pennsylvania Supreme Court’s view that the decision had been implicitly overruled.
Justice Gorsuch’s majority opinion (which was 5–4 in the parts joined by Justice Alito) holds that while International Shoe created specific and general personal jurisdiction, Pennsylvania Fire validated a supplemental consent-based rationale as an alternative basis for exercising personal jurisdiction. Pennsylvania Fire is not inconsistent with International Shoe because “all International Shoe did was stake out an additional road to jurisdiction over out-of-state corporations,” expanding (rather than contracting) traditional bases for jurisdiction that are based on a corporation’s physical presence in a state. Id. at 2039. The Court held that express or implied consent can continue to ground personal jurisdiction—and “consent may be manifested in various ways by word or deed.” Id. Justice Jackson’s separate concurrence emphasizes that the personal jurisdiction requirement is an “individual, waivable right, and I agree with the Court that Norfolk Southern waived that right by choosing to register as a foreign corporation under the circumstances presented in this case” and therefore there is “no due process problem with the registration statute at issue here.” Id. at 2046–47 (Jackson, J., concurring).
Justice Alito concurred in part (agreeing with the majority that Pennsylvania Fire Ins. Co. of Philadelphia governed the outcome in this case), including the judgment remanding the case to the Pennsylvania Supreme Court. However, Justice Alito focused on the dormant Commerce Clause issue the railway raised in its appeal to the Pennsylvania Supreme Court (that was not addressed in the Pennsylvania Supreme Court’s decision). Justice Alito’s concurrence states that if you “assume” (his word) that the Constitution allows a state to impose a registration requirement like Pennsylvania’s statute, then a suit against a company that has registered in that state (i.e., voluntarily consented) would not violate the corporation’s right to fair play and substantial justice. Id. at 2047 (Alito, J., concurring). However, Justice Alito then discussed why he was not convinced that the Constitution permits a state to impose such a submission-to-jurisdiction requirement. Id. The dormant Commerce Clause prohibits the Pennsylvania statute from imposing a discriminatory or unduly restrictive limitation on interstate commerce. Id. at 2051. Justice Alito concluded that “[i]n my view, there is a good prospect that Pennsylvania’s assertion of jurisdiction here—over an out-of-state company in a suit brought by an out-of-state plaintiff on claims wholly unrelated to Pennsylvania—violates the Commerce Clause.” Id. at 2053–54. Where a state law discriminates “against interstate commerce ‘either on its face or in practical effect,’” it is “subject to a ‘virtually per se rule of invalidity.’” Id. at 2053.
The dissent, authored by Justice Barrett (and joined by Chief Justice Roberts, Justice Kagan, and Justice Kavanaugh), emphasized that “[f]or 75 years, we have held that the Due Process Clause does not allow state courts to assert general jurisdiction over foreign defendants merely because they do business in the State” (citing to International Shoe). Id. at 2055 (Barrett, J., dissenting). Allowing Pennsylvania’s registration statute to stand would overturn Daimler and other International Shoe progeny, and likely subject any major corporation to the type of nationwide jurisdiction those decisions specifically curtailed and allow states to “manufacture ‘consent’ to personal jurisdiction.” Id. Justice Barrett pointed out that the Mallory majority’s reasoning casts doubt on the scope and effect of other recent personal jurisdiction decisions, which have held that substantial business contacts with a forum do not give rise to personal jurisdiction unless the contacts are suit-related or the defendant is “at home” in the state.
The Mallory decision derails the collective understanding of corporate personal jurisdiction (i.e., that corporations may be sued only where they are “at home” or where the facts of the case establish sufficient ties between the corporation and the jurisdiction). So, what are the practical implications of the decision for the corporate entities that have registered in multiple states, particularly given the recent trend of plaintiffs bringing state or local environmental (largely climate change–based) claims against large corporations?
Corporations should closely review the state statutes under which they have registered and also monitor pending legislation. After Mallory, states likely will have a heightened interest in the topic of corporate jurisdiction, and certain groups may attempt to amend their corporate registration statutes to include consent-to-jurisdiction provisions like Pennsylvania. Furthermore, plaintiff-friendly states might change their interpretations of existing state laws to mirror Pennsylvania’s. At the time of briefing, the Supreme Court identified at least 20 other states with similar statutes. Although the language and interpretation of those statutes vary significantly, the statutes appear to authorize general personal jurisdiction over out-of-state companies based on a company’s registration to do business in that state.
Companies also should be prepared for plaintiffs that may engage in forum shopping in state courts that have either amended or interpreted their corporate registration statutes to align with Pennsylvania’s, especially in public trust suits or suits alleging environmental damages. Parties may strategically choose a court in a state that has these consent-to-jurisdiction provisions and where they believe the judges, legal precedent, or public sentiment will be more sympathetic to their case, or where the state or jurisdiction has a more favorable interpretation or application of the public trust doctrine to hold companies responsible for alleged environmental harms and damages. The recent swath of climate change lawsuits brought against large oil and gas companies by states and counties that allege nationwide harms and damages is an example of the types of lawsuits that the ruling in Mallory could arguably facilitate. In those cases, defendants have argued that the state and local governments do not have jurisdiction to bring such claims, and that at the very least if they do, the claims should be in federal court. See, e.g., City of New York v. Chevron Corp., 993 F.3d 81 (2d Cir. 2021); Bd. of Cnty. Comm’rs of Boulder Cnty. v. Suncor Energy (U.S.A.) Inc., 25 F.4th 1238 (10th Cir. 2022). The Mallory decision may deprive corporate defendants of a federal due process defense to state court litigation in such cases.
In mid-September 2023, the State of California sued five major oil companies in San Francisco Superior Court alleging that they misled consumers for decades about their products’ role in contributing to climate change, even though all but one of the companies is based outside of the state. This mirrors a lawsuit (settled in 2019) that 10 California city and county governments brought against three companies alleging the companies (or companies they acquired) knew for years about the health risks of lead paint but covered it up. Cnty. of Santa Clara v. Atl. Richfield Co., No. 1-00-CV-788657 (Santa Clara Super. Ct, case filed Mar. 23, 2000). In many cases, government agencies (cities, counties, and state) are considered to have a better chance of winning such suits in state court (rather than federal). Mallory could be used to bolster the reach of such local and state suits.
At the end of the day, these concerns about Mallory could be short-lived. In addition to the due process concerns raised by the dissent, Justice Alito’s concurrence places another substantial constitutional question next in line for decision: Does the Pennsylvania law run afoul of the Dormant Commerce Clause? Justice Alito observed that the Commerce Clause “remains a vital constraint on States’ power over out-of-state corporations.” Mallory, 143 S. Ct. at 2053 (Alito, J., concurring). Both the plurality and Justice Alito noted that Norfolk Southern could raise this challenge on remand. Thus, the Court left the door open to further litigation to reestablish limits on general jurisdiction. Corporations engaged in interstate commerce should keep a close eye on Mallory’s progression through the Pennsylvania courts on remand as the courts have an opportunity to address this important question.
