United States Supreme Court Upholds Statutory Scheme that Could Result in Corporations Defending Claims in Unexpected Jurisdictions
October 2, 2023 By Matthew J. Gannett
The United States Supreme Court recently upheld a Pennsylvania statute which requires out-of-state corporations doing business in Pennsylvania to consent to general personal jurisdiction within the state. This resulted in a company that was incorporated and headquartered in Virginia being forced to defend an action in Pennsylvania State Court for injuries to a Virginia resident based on injuries that were sustained while the Plaintiff was in Virginia and Ohio.
In Mallory v. Norfolk Southern Ry., 143 S.Ct. 2028 (2023), the United States Supreme Court considered the constitutionality of Pennsylvania’s statutory scheme that required any foreign company registering to do business in the state to consent to jurisdiction in the state for “any cause of action” against them. The Plaintiff, Robert Mallory, worked for the Defendant, Norfolk Southern, for 20 years in Ohio and Virginia. He was diagnosed with cancer, which he attributed to his time working for Norfolk Southern. Despite living in Virginia at the time, he filed suit against Norfolk Southern in Pennsylvania. Norfolk Southern moved to dismiss arguing that jurisdiction violated the Due Process Clause. Norfolk Southern noted that it was incorporated and maintained its principal office in Virginia and that the cause of action did not arise out of Norfolk Southern’s operations in Pennsylvania. The Supreme Court found that personal jurisdiction was proper in Pennsylvania because Norfolk Southern consented to general personal jurisdiction in Pennsylvania when it registered to do business in Pennsylvania. The Pennsylvania statutory scheme required that out of state corporations may not do business in the state until it registers with the Department of State. Pennsylvania law stated that foreign corporations shall permit state courts to “exercise general personal jurisdiction” over a registered foreign corporation, just as the courts can over domestic corporations. The Court found that this statutory scheme did not violate due process. The Court noted that “[a]fter all, personal jurisdiction is a personal defense that may be waived or forfeited.” Thus, by registering in Pennsylvania, Norfolk Southern consented to general personal jurisdiction in Pennsylvania.
Savvy attorneys could seek to exploit the Mallory decision and state statutory schemes that afford broad general personal jurisdiction over foreign entities, such as the statutory scheme in Pennsylvania, for numerous reasons such as: (1) forum shopping; (2) avoiding a state’s restrictive statute of limitations; or (3) increasing the defendant’s litigation costs. However, corporate defendants also have options to defend against such schemes and avoid being forced to defend against suits in inconvenient jurisdictions. For example, sophisticated corporations may be able to form local operating companies to register in jurisdictions with broad statutory schemes. Additionally, many jurisdictions, including Maryland, recognize the doctrine of Forum Non Conveniens, which permits a court to dismiss or stay an action if “in the interest of substantial justice” the action should be heard in another forum. Therefore, if a corporation finds itself defending an action in a forum that has no connection to the cause of action, there may be options for moving the action, and the corporation should immediately seek local counsel to discuss its options.