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Tag, You're It! SCOTUS Ruling Against Norfolk Southern Extends Reach of Personal Jurisdiction Upon Corporate Defendants

Chris Joseph  Billy Wright

A plurality of the United States Supreme Court recently issued a ruling that will likely permit plaintiffs to forum shop in lawsuits against corporate defendants. In Mallory v. Norfolk Southern Railway Co., the Court held that statutes that require businesses to consent to state-court jurisdiction do not violate the Due Process Clause of the U.S. Constitution.

This ruling likely means that lawsuits against corporate defendants that do business across multiple states can be filed anywhere a state law requires consent to jurisdiction as part of registering to do business within the state – even those lawsuits with little or no connection to the state. Moreover, business should exercise extreme caution when registering to do business in a new state, since it may come with the price of being subject to the jurisdiction of the state’s courts for matters that are unrelated to activities in that state.

I. The Chase

In Mallory, the plaintiff was employed by Norfolk Southern as a freight-car mechanic for nearly 20 years in Ohio and Virginia. After he left the company, the plaintiff moved to Pennsylvania before returning to Virginia. Along the way, he was diagnosed with cancer and attributed his illness to his employment with Norfolk Southern.

The former employee filed suit in Pennsylvania state court asserting claims under federal law. Norfolk Southern, a company incorporated in Virginia and headquartered there, sought to dismiss the lawsuit on the basis that a Pennsylvania court’s exercise of personal jurisdiction over it would offend the Due Process Clause of the Constitution.

In response, Mallory highlighted that Pennsylvania required out-of-state companies such as Norfolk Southern to consent to the general jurisdiction of its courts, and appoint an agent for service of process in Pennsylvania, in exchange for the right to do business within Pennsylvania. He noted that Norfolk Southern had 2,000 miles of track in Pennsylvania, operated 11 rail yards, runs 3 locomotive repair shops, and transacts regular business there. He argued that a longstanding theory of personal jurisdiction, called “tag jurisdiction,” permitted plaintiffs to sue defendants in any place where they may be found, and that this theory should be no different for corporate defendants.

A plurality of the Court agreed with Mallory, relying upon a prior case, Pennsylvania Fire Ins. Co. of Philadelphia v. Gold Issue Mining & Milling Co., which reached the same conclusion. The plurality also believed that “consent to jurisdiction” statutes are tantamount to waiver of a defense to personal jurisdiction as some kind of “benefit of the bargain” for the right to do business within a state.

However, four members of the Court, led by Justice Amy Coney Barrett, dissented, finding the plurality’s decision to improperly expand general jurisdiction, and ignores the longstanding, contacts-based test – established by International Shoe v. Washington in 1945 – for determining whether an out of state defendant is amenable to jurisdiction. Noting multiple cases where forced waivers of constitutional rights as a condition of doing business were disallowed, Justice Barrett argues that the Pennsylvania statute essentially forced consent to jurisdiction, which is, in fact, neither consent, nor waiver of a personal jurisdiction defense. She also noted that International Shoe, a watershed case for personal jurisdiction over out of state defendants and decided after Pennsylvania Fire, eradicated “tag jurisdiction.” Finally, and most critically, she expressed concern that recent Supreme Court decisions on personal jurisdiction are now on tenuous footing due to the principles articulated in the plurality opinion.

Justice Alito, in a critical concurrence, noted that, while he agreed that Pennsylvania Fire controlled the case, the Pennsylvania statute may violate the “Dormant Commerce Clause.” The Commerce Clause of the Constriction grants the federal government the right to govern interstate commerce. However, there is a “negative component” to the Commerce Clause, called the “Dormant Commerce Clause.” The Dormant Commerce Clause prohibits states from imposing undue burdens on interstate commerce. Justice Alito submitted that the Pennsylvania consent to jurisdiction statute may violate the Dormant Commerce Clause, providing an avenue to Norfolk Southern to challenge the statute again in the Pennsylvania courts.

II. These are “It”

This case presents multiple noteworthy effects.

First, and most important, plaintiffs may strategically file lawsuits against out-of-state corporate defendants in plaintiff-friendly jurisdictions within states with “consent to jurisdiction” statutes – and possibly even states with statutes that require corporate registration or designation of an agent, and are silent on consent to jurisdiction, but where the courts interpret compliance with those statutes as consent to jurisdiction. At this point, it appears that only Georgia, Iowa, Kansas, Minnesota, and Puerto Rico – in addition to Pennsylvania – are in this category.

Second, it is possible that state legislatures may enact “consent to jurisdiction” statutes. Further, as noted by Justice Barrett’s concurrence, states may amend their “long arm statutes,” laws that permit jurisdiction and service of process upon defendants that have requisite contacts with the state, to the extent permitted by Norfolk Southern. Thus, businesses should not only be careful when registering to do business in a new state, but also they should review the current state of the corporate registration, as well as long arm service, laws of each state in which they conduct business.

Third, and finally, Justice Alito’s concurrence questioned whether the Pennsylvania law could survive a dormant Commerce Clause challenge, an argument the Pennsylvania Supreme Court is likely to address.

At this point, the question remains whether Norfolk Southern is a temporary aberration in the personal jurisdiction landscape, particularly as it relates to corporate defendants that conduct business across multiple states, or the harbinger of further expansion of personal jurisdiction. Businesses need to now be aware and/or consult legal counsel of whether registering to do business in a state comes with a consent to that court’s jurisdiction. 

About Billy Wright: Billy Wright, a Partner in the Adams and Reese New Orleans office, focuses on general insurance defense, professional liability, management liability, and employment law. He devotes the remainder of his practice to a wide array of litigation, including contract disputes, business torts, and disputes pertaining to successions, wills, and trusts. Billy has been recognized among Louisiana’s Super Lawyers “Rising Stars” and Best Lawyers “Ones to Watch.”

About Chris Joseph: Chris Joseph, an Associate in the Adams and Reese Baton Rouge office, practices primarily in the intersection of business and government, construction litigation, surety litigation, commercial industry contracts and litigation, insurance defense, and property litigation. Chris is recognized by peers among Louisiana’s Super Lawyers “Rising Stars.”