Supreme Court Upholds State Rule That Companies Can be Sued Anywhere Where Registration Provides Consent to Jurisdiction
In a 5-4 opinion authored by Justice Neil Gorsuch on June 27, the U.S. Supreme Court held that companies can be sued in any state in which they register to do business if that state requires consent to general jurisdiction as a prerequisite to registration. Previously, absent specific jurisdiction, companies could only generally be sued in their place of incorporation and/or where their principal place of business was located. This is a significant development that will impact where marine and energy companies may face litigation in the years to come.
In Mallory v. Norfolk Southern R. Co., a plaintiff had formerly worked for Norfolk Southern as a freight car mechanic for almost 20 years in both Ohio and Virginia. After he left the company, Mallory briefly moved to Pennsylvania before he returned to Virginia. Mallory was later diagnosed with cancer due to alleged exposure to asbestos, chemicals and carcinogens while working with Norfolk Southern. Mallory sued Norfolk Southern in Pennsylvania, despite being a current resident of Virginia and only including allegations of exposure in Ohio and Virginia in his complaint.
Because Norfolk Southern consented to general personal jurisdiction in Pennsylvania when it registered to do business there, the Court held that the suit in Pennsylvania did not violate due process under the Fourteenth Amendment. The Pennsylvania law at issue provided that an out-of-state corporation “may not do business in this Commonwealth until it registers with” the Department of State. 15 Pa. Const. Stat. § 411(a). In registration, the company must identify an office that it will continuously maintain in Pennsylvania. § 411(f); 412(a)(5). And, importantly, Pennsylvania law recites that “qualification as a foreign corporation” shall permit state courts to “exercise general personal jurisdiction” over a registered foreign corporation just as they can over domestic corporations. 42 Pa. Const. Stat. § 5301(a)(2)(i). As a Pennsylvania-registered company for over two decades, the Court ruled Norfolk Southern had “both the benefits and burdens shared by domestic corporations—including amenability to suit in state court on any claim.”
The Court relied on its 1917 decision in Pennsylvania Fire that held there was “‘no doubt’ that a Pennsylvania insurance company could be sued in Missouri by an out-of-state plaintiff on an out-of-state contract because it had agreed to accept service of process in Missouri on any suit as a condition of doing business there.”
The Court also distinguished the standards set out in International Shoe and its progeny, on the basis that International Shoe only created an additional theory of personal jurisdiction over out-of-state corporations when the corporation had not consented to a state’s jurisdiction (i.e. minimum contacts). Pennsylvania Fire, however, stands for the proposition that an out-of-state corporation can consent to jurisdiction.
Justice Samuel Alito joined the majority but wrote separately to suggest that on remand Norfolk Southern might prevail because the exercise of jurisdiction might violate the dormant commerce clause given the lack of a connection to Pennsylvania.
Justice Amy Coney Barrett wrote the dissent and questioned that “[o]n the court’s reasoning, corporations that choose to do business in the state impliedly consent to general jurisdiction…” such that the “result [could be that a] state could defeat the Due Process Clause by adopting a law at odds with the Due Process Clause.”
As a result of the Court’s ruling, marine and energy companies should evaluate each state’s foreign business registration law to understand the potential impact Mallory may have on their ability to be sued outside their place of incorporation and/or where their principal place of business is located.
Please contact Claire M. Zeringue, Magdalini Galitou or any member of Phelps’ Marine and Energy team if you have questions or need advice or guidance.
