Mallory v. Norfolk Southern Railway Co.: Of Corporate Registration Statutes and Personal Jurisdiction

Posted in: Constitutional Law

In Mallory v. Norfolk Southern Railway Co., a case to be argued on November 8, the Supreme Court again is wading into a seemingly mundane area of law that has commanded outsized attention in recent years—personal jurisdiction. As in the Court’s other recent forays in this area, this term’s case involves a corporate defendant’s objections to the exercise of jurisdiction in fora chosen by plaintiffs for strategic reasons. With one exception, the Court has sustained those objections, thereby relieving corporate defendants from litigation in the forum chosen by plaintiffs.

Mallory involves an attempt by a Virginia plaintiff to use Pennsylvania’s corporate registration statute to gain general personal jurisdiction over Norfolk Southern Railway Co. (“Norfolk Southern”), a Virginia railroad, on a claim brought under the Federal Employer’s Liability Act (“FELA”). The plaintiff, Robert Mallory, alleges that Norfolk Southern is responsible for the injuries he suffered due to his exposure to harmful carcinogens while working for the company in Ohio and Virginia from 1988 through 2005.

Significantly, Mallory does not allege that his exposure to the carcinogens occurred in Pennsylvania or that he otherwise suffered any harm in that state. Neither Norfolk Southern nor Mallory is a citizen of Pennsylvania, and the underlying events giving rise to Mallory’s claim did not occur in Pennsylvania. How, then, could a court in that state have personal jurisdiction over Norfolk Southern here? Mallory invoked a Pennsylvania law requiring out-of-state corporations to register in order to do business in the state and providing, according to the Pennsylvania Supreme Court, that such registration “enabled Pennsylvania courts to exercise general personal jurisdiction over a foreign corporation.”

Norfolk Southern challenged the exercise of jurisdiction in Pennsylvania and prevailed on its claim that subjecting it to personal jurisdiction in this case violated the company’s due process rights. Mallory sought review of this judgment in the U.S. Supreme Court, which granted certiorari. As this article discusses, Norfolk Southern is virtually certain to prevail in the Supreme Court. It also asks why this outcome necessarily should be a foregone conclusion.

The Current Era of Limited General Personal Jurisdiction

A debate has long simmered on the question of whether a corporation’s act of registering to do business within a state—a requirement that virtually all states impose—renders that corporation subject to jurisdiction in the courts located in that state. Though lower courts have come out on both sides of that question, the Supreme Court has never addressed it in modern times.

Mallory presents the issue in its starkest terms: unlike the registration statutes of other states, which typically provide that a corporation’s registration to do business is an effective appointment of a state official to receive service of process on the corporation’s behalf, the Pennsylvania statute explicitly provides that registration authorizes general personal jurisdiction over the corporation in Pennsylvania courts.

Since the Supreme Court decided the seminal case of International Shoe v. Washington in 1945, courts considering whether in personam jurisdiction exists over an objecting defendant have divided cases into categories of specific or general jurisdiction. Specific jurisdiction is available when the non-resident defendant’s contacts with the forum state relate to the case, even when the contacts are minimal. For example, when a New York resident drives to Vermont to see the fall foliage and gets into an accident there, the New York resident may be sued in Vermont by the other driver claiming that the New York driver’s negligence caused the accident and any ensuing injuries.

When a defendant is subject to general jurisdiction, it may be sued in the state’s courts on any claim no matter where the underlying events occurred. The quintessential bases for general jurisdiction over a corporate defendant are its state of incorporation and the state where it maintains its principal place of business.

The Court in International Shoe also referred to places in which a corporate defendant does “continuous and systematic business” as another possible basis for personal jurisdiction. In more recent decisions, the Court has clarified that general jurisdiction on that basis would be possible only in a state that equates to an individual defendant’s domicile. That is, general personal jurisdiction would be available only in a state where the non-resident corporate defendant does so much continuous and systematic business that it is “at home.”

The Court adopted that higher standard for general personal jurisdiction in Goodyear Dunlop Tires Operations, S.A. v. Brown in 2011. Three years later, the Court decided Daimler AG v. Bauman, a case presenting the arguably sui generis question of whether an international corporation could be sued in California for its alleged complicity in atrocities visited on citizens of Argentina during the period known as that country’s “dirty war.” In deciding that the corporate subsidiary’s links to California did not support the exercise of general jurisdiction, the Court held that the corporation’s contacts with the state were not so continuous and systematic as to render the corporation essentially “at home” in the state and subject to suit there, especially as to claims of foreign nationals for conduct that did not occur in the state.

Goodyear and Daimler indicate that the Court interprets the concept of general personal jurisdiction restrictively, such that even large multi-national corporations doing copious business in every state are not necessarily considered “at home” for general jurisdictional purposes in places other than their states of incorporation and principal places of business.

In Mallory, there is no connection between the underlying events and the plaintiff’s claim against Norfolk Southern in Pennsylvania—hence there is no specific personal jurisdiction over the company in that state. Furthermore, even though Norfolk Southern does business in Pennsylvania, it surely isn’t so much business that the company could be considered “at home” in that state. Accordingly, general personal jurisdiction isn’t available on the basis of Norfolk Southern’s business activities in Pennsylvania under the Supreme Court’s recent case law.

Corporate Registration Statutes & Consent

Mallory differs from the Court’s recent general personal jurisdiction cases because it involves a corporate registration statute. Such statutes may provide a parallel basis of jurisdiction that has been successfully invoked since pre-International Shoe days: consent. Because the protection of personal jurisdiction protects the defendant’s due process rights, the Court has acknowledged since the 19th century that defendants can waive (or sell) those rights in advance. Many contracts, including consumer contracts over which individuals have virtually no bargaining power, include such waivers, presumably in exchange for lower prices.

Mallory raises the question of whether a state registration statute that expressly allows general jurisdiction in exchange for the corporation’s opportunity to conduct business in the state passes constitutional muster. The rationale would be that by registering to do business in Pennsylvania, the corporation has consented to general jurisdiction—suit on any claim—in Pennsylvania. Constitutional? The Pennsylvania Supreme Court answered that question with a resounding “no,” even though its own legislature had enacted the applicable law.

The question raised by the Pennsylvania law in Mallory is significant now in light of the Supreme Court’s retrenchment of general jurisdiction. May a state legislature authorize a basis for general personal jurisdiction when the facts otherwise do not support it under cases like Daimler?

Here, Norfolk Southern argued successfully that recent Supreme Court case law renders that possibility untenable. Indeed, it notes that in the post-Daimler era, the only state to have found general jurisdiction based on corporate registration to do business is Georgia. And Georgia, the defendant asserts, is itself an anomaly: a quirk of Georgia law excludes foreign corporations from specific jurisdiction if they register to do business, so the Georgia court felt compelled to allow general jurisdiction. In doing so, the Georgia court invited the state legislature to fix the statutory problem.

The Pennsylvania Supreme Court relied on the U.S. Supreme Court’s decisions in cases like Goodyear and Daimler to hold that its “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.” The U.S. Supreme Court is likely to affirm the judgment below as a correct reading of its prior case law.

Another View of Registration Statutes and the Personal Jurisdiction Cathedral

Plaintiffs typically sue at home, and when they do so, that decision is usually vindicated, as it was in last term’s decision in Ford Motor Co. v. Montana Eighth Judicial District. In that case, the Supreme Court held that courts could exercise specific jurisdiction over Ford in cases involving plaintiffs suing in their own home states in which they had suffered harm allegedly because of defendant Ford’s vehicles, even though Ford’s contacts with the state did not directly cause plaintiffs’ harm.

When a plaintiff chooses to sue elsewhere, as here, that choice looks like forum shopping, which the Court generally frowns upon. But why? All litigation decisions are strategic. And many choices made outside the litigation arena are strategic as well.

Courts have long held that contractual forum selection clauses, including those drafted by entities with superior bargaining power, are enforceable. Consumers with no meaningful choice are required to litigate claims in fora with little connection to a dispute because of such contractual provisions. That outcome is justified by the notions that such clauses help would-be corporate defendants control the costs of litigation in advance, thereby keeping consumer prices down, and that they dispel confusion as to the threshold inquiry of what court has jurisdiction.

Could the same be said of consent-by-registration statutes? There is certainly a modicum of control: a corporation wishing to avoid having to litigate in a state could choose not to register to do business there. The Pennsylvania courts rejected this view, saying it put corporations to the Hobson’s choice of declining to do business, thus hobbling their business plans, or consenting to general jurisdiction. Such a choice, the Pennsylvania courts held, was unfair and unenforceable.

Yet that is exactly how contracts operate routinely to constrain the litigation choices of ordinary citizens. And Pennsylvania’s statute, if upheld, would obviate complicated litigation about personal jurisdiction over corporations registered to do business there.

This argument is unlikely to persuade a majority of the Court in Mallory. Nonetheless, it’s worth noting that two Justices have questioned the Court’s protective approach towards corporate defendants with respect to personal jurisdiction. Justice Sonia Sotomayor, the lone dissenter in Bristol-Myers Squibb Co. v. Superior Court lamented that the Court’s approach unduly hampered the prospect of plaintiffs presenting their claims in a single forum when the defendant has engaged in a “nationwide course of conduct.” And Justice Neil Gorsuch suggested last year in Ford Motor Co. that the Court should reconsider whether the International Shoe framework still applies in an era “when corporations with global reach often have massive operations spread across multiple states.” It will be interesting to see what they have to say in Mallory.

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