Supreme Court Rules That Due Process Allows States to Compel Businesses to Consent to “All-Purpose” Jurisdiction as the Price of Doing Business Within the State

Can a state court, consistent with the Due Process Clause, compel a foreign corporation seeking to do business in the state to consent to general (“all-purpose”) personal jurisdiction?  Until its decision this week in Mallory v. Norfolk Southern Railway Co.,^[1] the majority of courts forecast that the Supreme Court would answer that question with a resounding “no.”  Instead, five Justices in Mallory agreed that Pennsylvania’s business registration statute, which requires foreign corporations to consent to the state’s personal jurisdiction over “any cause of action” brought against them in state court, did not violate the Due Process Clause.^[2] The decision is sure to encourage forum shopping and perhaps lead other states to adopt similar “consent-by-registration” statutes.

Robert Mallory brought personal injury claims against his former employer, Norfolk Southern, under the Federal Employers’ Liability Act.  Mallory alleged that, while employed by Norfolk Southern in Ohio and Virginia, he was exposed to asbestos and other carcinogens and later was diagnosed with cancer.  Although a resident of Virginia, Mallory filed suit in Philadelphia, Pennsylvania – a venue appearing on the American Tort Reform Foundation’s current list of “judicial hellholes.”^[3]  Norfolk Southern argued that the Due Process Clause barred the court from exercising jurisdiction over it because the case lacked any connection to Pennsylvania.  Invoking the Supreme Court’s Goodyear and Daimler decisions, it argued that the Pennsylvania court lacked general jurisdiction because, as a corporation both incorporated and headquartered in Virginia, it was not “at home” in Pennsylvania. 

Foreign corporations wishing to do business in Pennsylvania must register with the Pennsylvania Department of State.^[4] Under the Commonwealth’s jurisdictional statute, registration as a foreign corporation automatically empowers Pennsylvania courts to exercise general personal jurisdiction over registered entities.^[5]  After the trial court dismissed Mallory’s claim for lack of personal jurisdiction, the Pennsylvania Supreme Court affirmed, holding that this statutory scheme “eviscerates the Supreme Court’s general jurisdiction framework set forth in Goodyear and Daimler and violates federal due process by failing to comport with International Shoe’s ‘traditional conception of fair play and substantial justice.’”^[6]  In particular, the court found the scheme directly “contrary to Daimler’s directive that a court cannot subject a foreign corporation to general all-purpose jurisdiction based exclusively on the fact that it conducts business in the forum state.”^[7]  The court also held that the Pennsylvania statute ran afoul of the “concept of federalism set forth by the High Court in Bristol-Myers” by infringing on its sister states’ ability to adjudicate claims against their corporate citizens.^[8]

The U.S. Supreme Court side-stepped those issues, finding that neither Goodyear nor Daimler precludes a state from requiring a foreign corporation to consent to general jurisdiction.^[9]  To the contrary, in the Court’s view, neither of those cases even applies where a foreign corporation has consented.^[10]  Rather, as to a consenting corporation, the constitutionality of a court’s assertion of general jurisdiction is “squarely” and uncomplicatedly governed by the Court’s more than 100-year-old decision in Pennsylvania Fire Insurance Co. of Philadelphia v. Gold Issue Mining & Milling Co.,^[11] in which the Court upheld a similar Missouri statute against a due process challenge.^[12]  When the corporation consents to jurisdiction, the Court added, the federalism concerns expressed in Bristol-Myers are simply not implicated.^[13]

The specific facts of the case bear emphasis and raise questions about whether a different outcome could have obtained under different circumstances.

First, as the Court noted, Norfolk Southern conceded that, in registering to do business in Pennsylvania, it was aware that it would be subject to general jurisdiction.^[14]  On that basis, a majority of the Justices found that Norfolk Southern had consented to general jurisdiction.^[15]  As noted in Justice Barrett’s dissent,^[16] however, the Pennsylvania foreign corporation registration statute (as well as accompanying registration paperwork) nowhere mentions consent or jurisdiction.[17]  Thus, it could have been fairly argued that mere registration pursuant to the Pennsylvania statute did not constitute knowing consent.  It is unclear whether the totality of circumstances would have led the Court to find a knowing consent absent Norfolk Southern’s concession.

Second, the plurality acknowledged that International Shoe dictates that Pennsylvania’s exercise of personal jurisdiction meet the dual requirements of “fair play and substantial justice.”^[18]  In summarily dismissing Norfolk Southern’s fairness arguments as a “dead end,” the Court placed great emphasis on the fact that, at the time the suit was filed, Norfolk Southern had a substantial presence in Pennsylvania: it employed nearly 5,000 people there (more than in its home state of Virginia); maintained more than 2,400 miles of railroad track there (more than in any other state); maintained the largest locomotive shop in all of North America there; and advertised itself as being part of the “Pennsylvania community.”^[19] Query whether the fairness analysis required by International Shoe would command the same result in a situation where the registered corporation had but a negligible presence in the state.

The immediate effect of Mallory is to invalidate any pending objections to an exercise of general jurisdiction in Pennsylvania on due process grounds where the defendant registered to do business in Pennsylvania.  The decision is apt to revive the flow of suits against out-of-state defendants in Pennsylvania that had been blunted by the Pennsylvania Supreme Court’s decision.  It remains to be seen whether other jurisdictions that had rejected similar “consent-by-registration” arguments will reverse themselves in light of Mallory.^[20]  Time will also tell whether such jurisdictions see renewed filings against foreign corporate registrants in cases having no connection to the state.  In any event, in states with registration requirements, registered foreign corporations can no longer safely assume that they are free from suits unrelated to the forum. 

While the Supreme Court landed a broadside hit to due process-based challenges to consent-by-registration statutes like Pennsylvania’s, it left the door open to an alternative constitutional challenge.  The plurality noted that, given that the Pennsylvania Supreme Court did not address Norfolk Southern’s challenge under the dormant Commerce Clause doctrine, the issue was undecided and “remains for consideration on remand.”^[21]  Justice Alito, in his concurring opinion, took that option further, outlining what he believes would be the basis for a fruitful Commerce Clause challenge to registration statutes like Pennsylvania’s.^[22]  Foreign corporations seeking to avoid exercises of such registration-predicated general jurisdiction in certain venues would be wise to accept the Court’s invitation to test the waters of a Commerce Clause challenge.