Client Alert: Your Corporation Could be Sued Virtually Anywhere – New Personal Jurisdiction Decision Causes Concern
Date: July 10, 2023
Companies are now subject to jurisdiction in places that do not have a significant relationship to the dispute.
The Century-old Supreme Court case, Pennsylvania Fire Insurance v. Gold Issue Mining, established the “consent in registration” principle that states can exercise jurisdiction over corporations not headquartered or incorporated in the state as long as they register to do business there. On June 27, 2023, in Mallory v. Norfolk Southern, the Supreme Court held that a Pennsylvania state trial court could exercise personal jurisdiction over a non-Pennsylvania company in a suit arising out of non-Pennsylvania conduct due to this consent. Companies registered to do business in a state can now be sued in that state even when the state has little or no connection to the case.
Mallory v. Norfolk Southern
In a lawsuit filed in Philadelphia, the defendant railroad employed plaintiff for nearly 20 years in Ohio and Virginia. Plaintiff alleged that his colon cancer was caused by exposure to chemicals from his work for the railroad. The Court held that Pennsylvania had jurisdiction over the non-resident corporation because it had implicitly consented to personal jurisdiction in Pennsylvania via Pennsylvania’s mandatory business registration statute. This state statute mandates that all companies wishing to do business in Pennsylvania register to do so. Further, under Pennsylvania Fire precedent, such statutes do not violate a corporation’s due process rights.
This ruling could significantly harm small businesses across state borders. While relatively few states have similar laws, there is always the prospect that other states will amend and mimic this business registration regime.
Litigation Tourism
Usually, a plaintiff can’t travel around and decide which state they bring a claim in because its laws seem favorable. The guidelines for personal jurisdiction have been evident since the Goodyear Dunlop Tires v. Brown and Daimler AG v. Bauman decisions. You can sue where you were hurt or where the company you are suing is “at home.” This standard ensured that plaintiffs sued defendants in states where they actively chose to operate. This new decision recognizes a consent-based test separate from the guidelines above, leaving jurisdictional questions to state law. Mallory is thus likely to spawn further attempts at forum shopping in Pennsylvania and elsewhere, allowing people to pick and choose where they want to sue.
Dormant Commerce Clause Challenge
Fear not - there is still some hope. Justice Alito’s concurrence alluded that Pennsylvania’s statute may still be vulnerable to a dormant commerce clause challenge on the grounds of interstate federalism – the constitutional principle that states are restricted from passing regulations that discriminate against other states or burden interstate commerce – suggesting a possibility that the plaintiff’s victory may be short-lived.
All in all, take this as a warning. Registering to do business in a state could be enough to subject you to suit there.
*Summer Intern, 2023
The information contained here is not intended to provide legal advice or opinion and should not be acted upon without consulting an attorney. Counsel should not be selected based on advertising materials, and we recommend that you conduct further investigation when seeking legal representation.