Supreme Court Holds That Registering to Do Business in a State Can Subject a Corporation to General Personal Jurisdiction

September 12, 2023

The Supreme Court returned this past term to a subject that it analyzes every few years: personal jurisdiction.  The wrinkle the Court wrestled with in Mallory v. Norfolk S. Ry. Co., No. 21-1168, 2023 WL 4187749 (June 27, 2023), was the constitutionality of a Pennsylvania corporate registration statute.  The law in question required a non-resident corporation that registers to do business in Pennsylvania to submit to “general personal jurisdiction” in the state for any suit brought against it, regardless of the parties’ and the case’s connection to Pennsylvania.  A sharply divided Court held that the statute did not offend due process.

Background

The facts in Mallory were simple.  Plaintiff Robert Mallory worked as a freight-car mechanic for defendant Norfolk Southern for almost 20 years.  Mallory initially worked for Norfolk Southern in Ohio, and then worked for the company in Virginia.  After leaving, Mallory was diagnosed with cancer, which he attributed to his work for Norfolk Southern.  Mallory then sued Norfolk Southern in Pennsylvania state court under the Federal Employers’ Liability Act. 

At the time he filed suit, Mallory lived in Virginia – where Norfolk Southern was incorporated and had its headquarters.  Further, Mallory’s complaint alleged that he was exposed to carcinogens while working for Norfolk Southern in Ohio and Virginia. 

Given the lack of any connection to the Pennsylvania forum that Mallory chose for his lawsuit, Norfolk Southern contended that the due process clause of the 14^th Amendment prohibited the Pennsylvania state court from exercising jurisdiction over it.  The Pennsylvania Supreme Court agreed with Norfolk Southern.  In light of tension between that decision and another recent decision by the Georgia Supreme Court, the Supreme Court of the United States granted cert. 

The Supreme Court’s decision in Mallory was narrow and fractured.  Justice Gorsuch wrote an opinion that Justices Thomas, Sotomayor, and Jackson joined, and which found that the Pennsylvania statute did not violate the due process clause.  Justice Alito also joined in portions of the Gorsuch opinion, creating a five-Justice majority in favor of vacating the decision below.  Justice Jackson wrote a separate concurrence, and Justice Alito wrote a separate opinion concurring in part and concurring in the judgment.  Justice Barrett, joined by Chief Justice Roberts and Justices Kagan and Kavanaugh, dissented.  

Majority Opinion

The Gorsuch opinion emphasized that the question in Mallory was not new.  According to Justice Gorsuch, the Court’s decision in Pennsylvania Fire Ins. Co. of Philadelphia v. Gold Issue Min. & Mill. Co., 243 U.S. 93 (1917) – which pre-dates the landmark case of Int’l Shoe Co. v. State of Wash., Off. of Unemployment Comp. & Placement, 326 U.S. 310 (1945), by almost thirty years – permitted the Pennsylvania law and squarely controlled.  Justice Gorsuch explained that Pennsylvania Fire, in an opinion written by Justice Holmes, “unanimously held that laws like Pennsylvania’s comport with the Due Process Clause.”  While the Pennsylvania Supreme Court held that subsequent U.S. Supreme Court cases had “implicitly overruled” Pennsylvania Fire, Gorsuch – writing for a five-Justice majority that included Justice Alito – said that the Pennsylvania high court had “clearly erred.”  Gorsuch stated that “‘[i]f a precedent of this Court has direct application in a case,’ as Pennsylvania Fire does here, a lower court ‘should follow the case which directly controls, leaving to this Court the prerogative of overruling its own decisions.’”   

Writing for a plurality (i.e., without Justice Alito), Justice Gorsuch then denied Norfolk Southern’s request that the Court overrule its 1917 Pennsylvania Fire decision.  Norfolk Southern argued that International Shoe had already done so as a practical matter by “seriously undermin[ing] Pennsylvania Fire’s foundations.”  Gorsuch disagreed because, in his view, “[t]he two precedents sit comfortably side by side.” 

Justice Gorsuch framed International Shoe as a case that expanded on the more traditional bases for personal jurisdiction that already existed.  In Gorsuch’s telling, Pennsylvania Fire had previously “held that an out-of-state corporation that has consented to in-state suits in order to do business in the forum is susceptible to suit there.”  International Shoe took things further by holding that “an out-of-state corporation that has not consented to in-state suits may also be susceptible to claims in the forum State based on ‘the quality and nature of [its] activity’ in the forum.”  As long as the exercise of jurisdiction over the non-resident corporation comported with “fair play and substantial justice,” International Shoe allowed a forum state to exercise jurisdiction over the corporation even when it had not consented to suit in the forum and was not otherwise present in the forum. 

Viewed through that prism, Justice Gorsuch rejected Norfolk Southern’s claim that International Shoe tolerated only two types of personal jurisdiction over a defendant: i.e., the familiar doctrines of “specific jurisdiction” for suits that arise out of or relate to the defendant’s in-state activities, and “general jurisdiction” for all types of suits but only in forums where the defendant is at home.  Gorsuch maintained that other types of jurisdiction can still exist.

As evidence of this, Justice Gorsuch cited the Supreme Court’s decision in Burnham v. Superior Ct. of California, Cnty. of Marin, 495 U.S. 604 (1990).  The Court in Burnham upheld the traditional “tag rule,” by which an individual who was physically served while in the forum state was subject to suit there regardless of whether the individual was subject to either specific or general personal jurisdiction.  The defendant in Burnham had contended that International Shoe implicitly overruled the “tag rule,” but the Court explained that the precedent “simply provided a ‘novel’ way to secure personal jurisdiction that did nothing to displace other ‘traditional ones.’”  Gorsuch underscored that it would be “incongruous” for the tag rule to have survived International Shoe (in the context of individuals who lived out-of-state and traveled to the forum), but for International Shoe to have overruled Pennsylvania Fire sub silentio (in the context of corporations who resided out-of-state and who had consented to jurisdiction in the forum). 

Justice Alito’s Concurrence

Justice Alito concurred in part and concurred in the judgment.  Alito agreed with Gorsuch that the “parallels between Pennsylvania Fire and th[is] case [ ] are undeniable,” that Pennsylvania Fire “held that there was no due process violation in these circumstances,” that “[g]iven the near-complete overlap of material facts, th[e] [Pennsylvania Fire] holding, unless it has been overruled, is binding here,” and that “Pennsylvania Fire’s holding, insofar as it is predicated on the out-of-state company’s consent, is not ‘inconsistent’ with International Shoe or its progeny.”  Alito also stated that he would not overrule Pennsylvania Fire on this record.  Justice Alito emphasized that, because this was the sole question before the Court, he agreed with Justice Gorsuch that the judgment below should be vacated. 

Most of Justice Alito’s opinion, however, analyzed another issue.  Alito explained that Norfolk Southern asserted a defense below based on the “dormant commerce clause.”  Although the commerce clause grants Congress the power to regulate interstate commerce, the Supreme Court has long held that the clause also includes a negative component.  This is the so-called “dormant commerce clause,” which prohibits state laws that unduly restrict interstate commerce.  The Pennsylvania Supreme Court did not address this issue, but Justice Alito presumed that Norfolk Southern can litigate the defense on remand. 

Justice Alito wrote that a state law may violate the dormant commerce clause in two circumstances:  “when the law discriminates against interstate commerce or when it imposes ‘undue burdens’ on interstate commerce.”  Alito stressed that the Pennsylvania registration statute “seems to discriminate against out-of-state companies by forcing them to increase their exposure to suits on all claims in order to access Pennsylvania’s market while Pennsylvania companies generally face no reciprocal burden for expanding operations into another State.”  Justice Alito therefore said that “there is a good prospect that Pennsylvania’s assertion of jurisdiction here – over an out-of-state company in a suit brought by out-of-state plaintiff on claims wholly unrelated to Pennsylvania – violates the Commerce Clause.”  Alito acknowledged, nonetheless, that no commerce clause challenge was before the Court at this juncture.  

Justice Barrett’s Dissent

Justice Barrett’s dissent viewed things very differently.  Barrett pointed out that, for 75 years since International Shoe, the Court has held that allowing state courts to assert general jurisdiction over a foreign defendant merely because it does business in a state violates due process.  Barrett claimed that the majority found “a way around this settled rule.”  According to Justice Barrett, “[a]ll 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).”  Barrett objected to “permit[ting] state governments to circumvent constitutional limits so easily[.]”   

Justice Barrett also found Justice Gorsuch’s analysis of Burnham unpersuasive.  According to Barrett, the Court in Burnham confirmed the vitality of the “tag rule” in part because, at the time of the decision, the Court did “not know of a single state” that had abandoned the doctrine.  By contrast, the parties in Mallory apparently agreed that Pennsylvania was the only state with a statute treating registration as sufficient to confer general jurisdiction.  Further, Justice Barrett questioned Justice Gorsuch’s analogy to tag jurisdiction at its root.  Barrett disputed the notion that tag jurisdiction over an individual based on physical presence is “essentially the same thing” as registration jurisdiction over a corporation based on deemed consent.  Barrett called this “a non sequitur.” 

Justice Barrett stated that the majority’s “approach does not formally overrule our traditional contacts-based approach to jurisdiction, but it might as well.”  Barrett warned that, “[i]f States take up the Court’s invitation to manipulate registration, [precedents like] Daimler and Goodyear will be obsolete, and, at least for corporations, specific jurisdiction will be ‘superfluous.’”  Barrett opposed “this sea change.” 

Impact

Mallory may have a dramatic impact on civil litigation, including intellectual property cases.  But it is too soon to tell.  As Justice Barrett warns, if other states enact statutes similar to the Pennsylvania registration law that survived in Mallory, then corporate defendants may get dragged into litigation in plaintiff-friendly forums that they would have previously been able to avoid.  However, state legislatures may not be in any rush to pass such statutes.  Companies – especially smaller ones – might decide that doing business in states with Pennsylvania-style registration laws is not worth the risk.  This possibility might dissuade State legislatures from copying the Pennsylvania approach.  

Moreover, the Pennsylvania statute survived here by a razor-thin margin.  Led by Justice Barrett, four Justices believe that the Pennsylvania law violated due process.  And Justice Alito is on record as saying that the statute likely violated the dormant commerce clause.  As a result, registration statutes that subject corporations to general jurisdiction in this fashion might ultimately get struck down by the Court.  Only time will tell.   

Author: Marc J. Pernick