chevron-down Created with Sketch Beta.

ARTICLE

Where Can a Corporation Be Sued for, Well, Anything? (An Evolving Test)

Christina Manfredi McKinley and Joseph V. Schaeffer

Summary

  • The concept of “personal jurisdiction” is an important one in the law. It refers to the ability of a court to take an action that is binding on the parties in front of it. 
  • Nothing in International Shoe or the Supreme Court’s subsequent cases, according to Justice Gorsuch, precluded an out-of-state corporation from consenting to general personal jurisdiction—as Norfolk Southern did when it registered to do business in Pennsylvania.
  • Mallory is undoubtedly a significant development in the Supreme Court’s personal jurisdiction jurisprudence, but its practical impact remains to be seen.
Where Can a Corporation Be Sued for, Well, Anything? (An Evolving Test)
Joe Cicak via Getty Images

The Fourteenth Amendment to the U.S. Constitution provides that no state shall “deprive any person of life, liberty, or property, without due process of law.” U.S. Const. art. XIV, § 1. For corporations, the question of what constitutes due process—and, specifically, where the corporation can be sued for conduct unrelated to the corporation’s conduct in the forum (i.e., “general personal jurisdiction”)—has continued to evolve.

Indeed, over the last century, the Supreme Court’s jurisprudence has contracted the available forums in which a corporation can be subjected to general personal jurisdiction, culminating in 2014 with the concept that there are only two locations in which a corporation is “at home” for general jurisdiction purposes: where it is incorporated and where it maintains its principal place of business. This test has been a practical one and has provided (some degree of) both certainty to corporate defendants and a disincentive to otherwise-inclined forum shoppers.

At the close of this past term, however, the Supreme Court in Mallory v. Norfolk Southern Railway Co. rejected a due process challenge to a Pennsylvania law that requires out-of-state corporations to submit to general jurisdiction in the Commonwealth as a condition of registering to do business within Pennsylvania. Mallory, 600 U.S. ____, slip op. (2023).

Personal and General Jurisdiction

The concept of “personal jurisdiction” is an important one in the law. It refers to the ability of a court to take an action that is binding on the parties in front of it. See id. slip op. at 2 (Barret, J., dissenting). A court that has “general jurisdiction” over a defendant can entertain any cause of action against that defendant, irrespective of whether the defendant’s complained-of conduct has a nexus to the forum. Id. at 13. A court that only has “specific jurisdiction” over a defendant, by contrast, can entertain only those causes of action that arise out of or relate to that defendant’s complained-of conduct in the forum state. Id. This distinction has been part of the legal canon since the Supreme Court’s landmark 1945 decision in International Shoe Co. v. State of Washington, 326 U.S. 310 (1945).

Overview of Mallory

When Robert Mallory sued Norfolk Southern in Philadelphia County, Pennsylvania, for alleged workplace injuries, he did not allege either general or specific jurisdiction. Norfolk Southern was not incorporated in Pennsylvania, nor did it maintain its principal place of business there. And Mallory, a Virginia resident, alleged workplace exposures as having occurred only in Ohio and Virginia.

But Mallory alleged that Philadelphia County, known for its large jury verdicts, was proper for a separate reason. Mallory asserted that Philadelphia County had personal jurisdiction over Norfolk Southern because the company had registered to do business in Pennsylvania. Under Pennsylvania law, a corporation doing business in Pennsylvania must register to do business in the state. 15 Pa. Cons. Stat. § 411(a). But Pennsylvania’s unique corporate registration scheme then takes it one step further: under 42 Pa. Cons. Stat. § 5301(b), any corporation that registers to do business in Pennsylvania necessarily consents that “any cause of action may be asserted against him” in the Commonwealth’s courts, irrespective of whether the complained-of conduct has any nexus to the forum. In essence, Mallory argued that section 5301(b) provided an additional ground for exercising personal jurisdiction beyond those identified in International Shoe—that is, jurisdiction by consent.

Norfolk Southern disputed the enforceability of section 5301(b). It argued that International Shoe established the only two circumstances under which general jurisdiction can be imposed on a corporation within the limits of constitutional due process. When the issue reached the Pennsylvania Supreme Court, that court agreed and limited the application of section 5301(b) to be consistent with International Shoe. The Pennsylvania Supreme Court then affirmed the dismissal of Mallory’s suit for lack of personal jurisdiction.

Supreme Court Decision in Mallory

After granting certiorari, the U.S. Supreme Court reversed. Writing for a four-justice plurality, Justice Neil Gorsuch concluded that the case was controlled by Pennsylvania Fire Insurance Co. of Philadelphia v. Gold Issue Mining & Milling Co. Pennsylvania Fire, 243 U.S. 93 (1917). In Pennsylvania Fire, decided nearly 30 years before International Shoe, the Supreme Court unanimously rejected a due process challenge to a Missouri law that, similar to section 5301(b), required an out-of-state corporation desiring to transact business in Missouri to consent to personal jurisdiction over any suit. See generally id.

Justice Gorsuch’s opinion saw no distinction between the Pennsylvania and Missouri statutes and no conflict with International Shoe. In Justice Gorsuch’s interpretation, International Shoe only established the due process limits of personal jurisdiction when an out-of-state corporation had not registered to do business in the forum state. Nothing in International Shoe or the Supreme Court’s subsequent cases, according to Justice Gorsuch, precluded an out-of-state corporation from consenting to general personal jurisdiction—as Norfolk Southern did when it registered to do business in Pennsylvania.

Justice Amy Coney Barrett, joined by Chief Justice John Roberts and Justices Elena Kagan and Brett Kavanaugh, dissented. In the dissenters’ view, International Shoe had overruled Pennsylvania Fire and established the outer due process limits of general jurisdiction over out-of-state corporations. Mallory, slip op. at 15 (Barrett, J., dissenting). And because Norfolk Southern was neither incorporated in Pennsylvania nor maintaining its principal place of business there, the dissent would have ruled that Pennsylvania lacked general jurisdiction to hear Mallory’s case.

Limited Impact of Mallory?

Mallory is undoubtedly a significant development in the Supreme Court’s personal jurisdiction jurisprudence (and a significant shift, depending on perspective). But its practical impact remains to be seen. First, only Pennsylvania has enacted a statute requiring out-of-state corporations to consent to general jurisdiction as a condition for registering to do business in its state, and it is far from assured that the other states will follow suit. Second, the Supreme Court entered judgment solely on Norfolk Southern’s due process challenge to section 5301(b). Norfolk Southern also had brought a dormant Commerce Clause challenge, which the Supreme Court emphasized had not been addressed below and should be considered on remand. Id. at 4 n.2. And third, Justice Samuel Alito, though concurring in judgment, wrote separately to express his view that section 5301(b) would be struck down under that as-yet-undecided dormant Commerce Clause challenge. In short, there is a fair possibility that section 5301(b) will survive one constitutional challenge only to fall later under another.

Nevertheless, there remains a significant risk that other states will enact similar corporate registration schemes, thereby presenting a corporate defendant with an impossible choice: either decline to do business in a foreign (and sometimes faraway) state, or register at the risk of being haled into that state’s courts for conduct wholly unrelated to any activity the corporation might conduct there.

Conclusion

It is too soon to tell the ramifications of Mallory, so, for now, the measured approach is best. Corporations doing business outside their states of incorporation and principal places of business should not panic but continue to monitor Mallory’s progress on remand and the evolution of such corporate registrations in other jurisdictions.

    Authors