WASHINGTON – The U.S. Supreme Court has decided that companies may be sued in states where they have registered do business but are not based or where the alleged injuries occurred, reinstating the lawsuit of a Virginia man who claimed in a Pennsylvania court his colon cancer was the result of his exposure to carcinogenic substances while working for the Norfolk Southern railroad.
A razor-thin majority of the nation’s high court decreed as such on Tuesday in a 5-4 decision in Mallory v. Norfolk Southern Railway Company, where it affirmed a Pennsylvania law that compels companies who have registered to conduct business in that state as foreign corporations to answer lawsuits brought within its jurisdiction. Pennsylvania is currently the only state in the nation with such a law on the books.
The decision undoubtedly serves as a disappointment and a legal blow for companies doing business in the Keystone State.
An unusual complement of justices was found on each side of the decision, as Supreme Court Justices Neil Gorsuch, Clarence Thomas, Samuel Alito, Sonia Sotomayor and Ketanji Brown Jackson voted to resurrect plaintiff Robert Mallory’s litigation against Norfolk Southern, while Justices Amy Coney Barrett, Chief Justice John Roberts, Elena Kagan and Brett Kavanaugh dissented.
In writing for the majority, Gorsuch posed a hypothetical legal situation in connection with the actual derailment of a Norfolk Southern train in East Palestine, Ohio, in February.
“Imagine a lawsuit based on recent events. A few months ago, a Norfolk Southern train derailed in Ohio near the Pennsylvania border. Its cargo? Hazardous chemicals. Some poured into a nearby creek; some burst into flames. In the aftermath, many residents reported unusual symptoms. Suppose an Ohio resident sued the train conductor seeking compensation for an illness attributed to the accident. Suppose, too, that the plaintiff served his complaint on the conductor across the border in Pennsylvania. Everyone before us agrees a Pennsylvania court could hear that lawsuit consistent with the Due Process Clause of the Fourteenth Amendment. The court could do so even if the conductor was a Virginia resident who just happened to be passing through Pennsylvania when the process server caught up with him,” Gorsuch said.
“Now, change the hypothetical slightly. Imagine the same Ohio resident brought the same suit in the same Pennsylvania state court, but this time against Norfolk Southern. Assume, too, the company has filed paperwork consenting to appear in Pennsylvania courts as a condition of registering to do business in the Commonwealth. Could a Pennsylvania court hear that case too? You might think so. But today, Norfolk Southern argues that the Due Process Clause entitles it to a more favorable rule, one shielding it from suits even its employees must answer. We reject the company’s argument. Nothing in the Due Process Clause requires such an incongruous result.”
A dissenting Barrett explained that for over 75 years, the U.S. Supreme Court has 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 – but that nevertheless, Pennsylvania “continues to claim general jurisdiction over all corporations that lawfully do business within its borders”, a move that Barrett opined, and as she said Pennsylvania courts recognized, “flies in the face of our precedent.”
“The Court finds a way around this settled rule. All a state must do is compel a corporation to register to conduct business there (as every state does) and enact a law making registration sufficient for suit on any cause (as every state could do). Then, every company doing business in the state is subject to general jurisdiction based on implied ‘consent’ – not contacts. That includes suits, like this one, with no connection whatsoever to the forum,” Barrett said.
“Such an approach does not formally overrule our traditional contacts-based approach to jurisdiction, but it might as well. By relabeling their long-arm statutes, states may now manufacture ‘consent’ to personal jurisdiction. Because I would not permit state governments to circumvent constitutional limits so easily, I respectfully dissent.”
Background in Mallory v. Norfolk Southern Railway Company
On April 25, 2022, the U.S. Supreme Court had granted a petition for a writ of certiorari in the case, leading it to be brought to its bench.
According to counsel for Mallory, each federal circuit court and a number of state supreme courts across the country had addressed consent-by-jurisdiction statutes, with a diverse array of results – which, they argued, compelled the top court in the land to step in and restore uniformity to the matter.
Meanwhile, Norfolk Southern replied the consent-by-jurisdiction statute subject was not worthy of continued review, and countered that resurrecting that law in the Keystone State would permit plaintiffs to forum-shop, without any regard for whether the case had any relevant connection the chosen venue.
On Dec. 22, 2021, a unanimous ruling, authored by late Supreme Court of Pennsylvania Chief Justice Max Baer and joined by all of his then-colleagues, found that the practice of out-of-state companies consenting to general jurisdiction in order to conduct business in Pennsylvania, stripped such companies of due process protections.
In the 2014 case Daimler AG v. Bauman, the U.S. Supreme Court decided, barring extraordinary circumstances, conferral of general jurisdiction over an out-of-state defendant would only apply if the corporation in question was “at home,” meaning where it was incorporated or maintained its principal place of business.
But in Pennsylvania, corporations wanting to do in the business in the state are required to register with the Pennsylvania Department of State, as per state law – and that such registration “constitutes a sufficient basis for the exercise of general personal jurisdiction over the foreign corporation.”
In Daimler and other cases, it was argued that Pennsylvania’s business registration leading to general jurisdiction-arrangement violated the Fourteenth Amendment’s Due Process Clause. Pennsylvania is the only state whose law explicitly states that registering to do business allows Pennsylvania courts to exercise personal jurisdiction over a company headquartered elsewhere.
Mallory, a Virginia man, initially brought suit against Norfolk Southern Railway Company, a Virginia corporation, in the Philadelphia County Court of Common Pleas, alleging a claim pursuant to the Federal Employers Liability Act.
Mallory argued he was exposed to carcinogenic substances during the time he worked for Norfolk Southern in Ohio and Virginia, later leading him to develop colon cancer – while Norfolk Southern filed preliminary objections wanting the case dismissed, due to a lack of personal jurisdiction.
Mallory cited the statute which explains Pennsylvania courts can confer general personal jurisdiction over companies classified as foreign corporations under the law, as such a designation required registration to do business within the state.
In contrast, Norfolk Southern, countered that because “all foreign corporations doing business in Pennsylvania are required to register...the ability to do business in the Commonwealth hinges upon compliance with mandatory registration provisions and cannot serve as a voluntary relinquishment of due process rights.”
Ultimately, the Philadelphia County Court of Common Pleas dismissed the complaint with prejudice and sided with Norfolk Southern, believing that since its registration to do business in Pennsylvania led to its consent not being voluntarily obtained.
According to the trial court’s ruling, “Pennsylvania’s statutory scheme creates an impermissible Hobson’s choice between relinquishing its right to due process by registering to do business in the Commonwealth and thereby submitting to the general jurisdiction of Pennsylvania courts, or foregoing the privilege of doing business in Pennsylvania” – and also leads to unconstitutional infringement on the court systems of other states to oversee cases involving businesses from those other jurisdictions.
As the trial court’s ruling found the Pennsylvania general personal jurisdiction statute was unconstitutional, the state Supreme Court received Mallory’s appeal.
The state Supreme Court unanimously upheld the trial court’s decision that Pennsylvania’s general jurisdiction statute was unconstitutional, since it conferred jurisdiction on foreign corporations only because they registered to do business in Pennsylvania.
“The exercise of jurisdiction over defendant in this case does not satisfy due process as required by Goodyear Dunlop Tires Operations, S.A. v. Brown and Daimler AG v. Bauman. Here, a Virginia plaintiff filed the FELA action against defendant, a foreign railway company, which is incorporated in Virginia and has its principal place of business there, alleging injuries in Virginia and Ohio. It is obvious that no specific jurisdiction lies in Pennsylvania, as there is no connection whatsoever between the case and the forum state. It is equally clear that defendant did not incorporate in Pennsylvania and does not have its principal place of business here. Further, there is no indication that this is an otherwise ‘exceptional case,’ where the circumstances demonstrated that defendant is essentially ‘at home’ in Pennsylvania so as to afford our courts general jurisdiction.”
Baer and the rest of the state Supreme Court had found that Pennsylvania’s “statutory scheme of conditioning the privilege of doing business in the Commonwealth on the submission of the foreign corporation to general jurisdiction in Pennsylvania courts, strips foreign corporations of the due process safeguards guaranteed in Goodyear and Daimler.”
“Legislatively coerced consent to general jurisdiction is not voluntary consent and cannot be constitutionally sanctioned. Accordingly, our statutory scheme is unconstitutional to the extent that it affords Pennsylvania courts general jurisdiction over foreign corporations that are not at home in the Commonwealth. Accordingly, we affirm the order of the trial court, which sustained defendant’s preliminary objections and dismissed the action with prejudice for lack of personal jurisdiction,” Baer concluded.
Meanwhile, the Supreme Court of Georgia, citing Pennsylvania Fire Ins. Co. of Philadelphia v. Gold Issue Min. & Mill. Co., came to the opposite conclusion for a similar Georgia law and the U.S. Supreme Court had agreed to resolve the split in authority between the top courts in Pennsylvania and Georgia.
The U.S. Supreme Court’s decision here vacates the ruling of the Supreme Court of Pennsylvania and remands Mallory’s litigation to its court of origin, the Philadelphia County Court of Common Pleas, for further proceedings.
U.S. Supreme Court case 21-1168
Supreme Court of Pennsylvania case 3 EAP 2021
Philadelphia County Court of Common Pleas case 170901961
From the Pennsylvania Record: Reach Courts Reporter Nicholas Malfitano at nick.malfitano@therecordinc.com