personal jurisdiction SCOTUS, baby (International Shoe is back)
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Justices Say Cos. Can Be Sued Wherever They're Registered
By Matthew Santoni · Listen to article
Law360 (June 27, 2023, 10:29 AM EDT) -- The U.S. Supreme Court on Tuesday left the door open for companies to be sued in states where they have merely registered to do business, reviving a lawsuit that a Virginia man brought against Norfolk Southern in Pennsylvania despite his alleged injuries occurring in other states.
A black freight train with white stripes and yellow accents moves forward down a railroad track
The U.S. Supreme Court said Tuesday that out-of-state companies can be sued in states where they've registered to do business, siding against Norfolk Southern in a case over a man's alleged exposure to toxic chemicals. (AP Photo/Gene J. Puskar)
A 5-4 majority held that the Supreme Court's 1917 ruling in Pennsylvania Fire Insurance Co. v. Gold Issue Mining & Milling Co. allowed states to have "registration by consent" laws, where an out-of-state company can be subjected to that state's jurisdiction regardless of how much business the company actually does there.
"Norfolk Southern applied for a 'Certificate of Authority' from the Commonwealth which, once approved, conferred on Norfolk Southern both the benefits and burdens shared by domestic corporations, including amenability to suit in state court on any claim. For more than two decades, Norfolk Southern has agreed to be found in Pennsylvania and answer any suit there," Justice Neil Gorsuch wrote for the majority opinion. "To decide this case, the court need not speculate whether any other statutory scheme and set of facts would suffice to establish consent to suit. It is enough to acknowledge that the state law and facts before the court fall squarely within Pennsylvania Fire's rule."
Justices Gorsuch, Ketanji Brown Jackson, Samuel A. Alito Jr., Clarence Thomas and Sonia Sotomayor said the ruling of the Supreme Court of Pennsylvania should be reversed and the case remanded to that court for further proceedings. Chief Justice John Roberts and Justices Amy Coney Barrett, Elena Kagan and Brett Kavanaugh dissented.
Virginia resident Robert Mallory had sued his former employer, Norfolk Southern, over his alleged exposure to toxic chemicals on the job in Virginia and Ohio, but he wanted the case to be pursued in Pennsylvania on the theory that because the railroad had registered to do business in the Keystone State, that gave its courts jurisdiction over the dispute.
The Supreme Court of Pennsylvania had thrown out the case late in 2021, striking down Pennsylvania's so-called long-arm statute, which gave its courts jurisdiction over any out-of-state corporation that had registered there, and finding such statutes violated a defendant's due process rights. The U.S. Supreme Court agreed to hear the case in April 2022.
Mallory's counsel had argued in November that the Pennsylvania Fire precedent allowed such "consent by registration" statutes and was still in effect.
Norfolk Southern, however, said such "consent" had been coerced, since nationwide companies had little choice but to register to do business in Pennsylvania if they wanted to do anything more than just pass through.
The railroad argued that more recent Supreme Court decisions, like 1945's International Shoe Co. v. Washington , 2014's Daimler AG v. Bauman and 2011's Goodyear Dunlop Tires Operations SA v. Brown , had overridden and replaced the Pennsylvania Fire Insurance precedent.
The U.S. Solicitor General's Office had joined the case on Norfolk Southern's side, arguing that allowing such broad jurisdiction over corporations from out-of-state could discourage trade if international corporations grew wary of being hauled into any state's courts.
But the Supreme Court majority said the factual parallels to the Pennsylvania Fire case were unmistakable, where an insurance company headquartered in Pennsylvania was sued to cover a mine fire in Colorado, but the suit was brought in Missouri because the insurer had registered there. Pennsylvania's justices had been mistaken in not following the most applicable precedent, the majority said.
They rejected the railroad's argument that the International Shoe decision — which dealt with specific jurisdiction tied to a company's activities in a state, and general jurisdiction in states that a company had its principal place of business — had "undermined" Pennsylvania Fire.
"All International Shoe did was stake out an additional road to jurisdiction over out-of-state corporations," the majority opinion said. "Pennsylvania Fire 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 held 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."
Justice Gorsuch also rejected Norfolk Southern's argument that facing suits in Pennsylvania would not follow the "fair play and substantial justice" principle in International Shoe, embedding in the opinion some of Norfolk Southern's own marketing graphics showing its railroads criss-crossing the Keystone State, the tonnage of freight it moved, and its facilities there to demonstrate that the company was no stranger to Pennsylvania.
Justice Jackson wrote in a concurring opinion that the court's 1986 opinion in Insurance Corp. of Ireland v. Compagnie des Bauxites de Guinee, which held that personal jurisdiction was a waivable right, also applied, and that Norfolk Southern could not claim it had been "compelled" into waiving its right to fight jurisdiction of a state where it did so much business.
Justice Alito said he concurred with the final result, but was not convinced that the U.S. Constitution allowed states to impose consent-by-registration laws. The Supreme Court of Pennsylvania had not addressed Norfolk Southern's argument that the law violated the Constitution's dormant Commerce Clause, and the railroad could presumably press the court to make such a ruling on remand, Justice Alito wrote.
"In my view, there is a good prospect that Pennsylvania's assertion of jurisdiction here — over an out-of-state company in a suit brought by an out-of-state plaintiff on claims wholly unrelated to Pennsylvania — violates the Commerce Clause," he wrote. "Aside from the operational burdens it places on out-of-state companies, Pennsylvania's scheme injects intolerable unpredictability into doing business across state borders. … I am hard-pressed to identify any legitimate local interest that is advanced by requiring an out-of-state company to defend a suit brought by an out-of-state plaintiff on claims wholly unconnected to the forum state."
For the dissenting opinion, Justice Barrett said International Shoe had established that just doing business in a state was not enough to establish jurisdiction there, and she said that state statutes like Pennsylvania's "manufacture consent" to jurisdiction.
She pointed to similarities between Mallory's case and BNSF v. Tyrrell, another suit where a railroad worker sued over cancer contracted on the job. But in the BNSF case, the U.S. Supreme Court had ruled against letting the case be brought in Montana.
Pennsylvania's law was not clear enough in stating that an out-of-state corporation's registration included consent to its courts' jurisdiction, the dissent said, and letting just any state's long-arm statute convey consent could violate companies' due process rights and impinge on other states' rights to have cases affecting them brought on their home turf.
"On the court's reasoning, corporations that choose to do business in the state impliedly consent to general jurisdiction," Justice Barrett wrote. "The result: A state could defeat the due process clause by adopting a law at odds with the due process clause."
Counsel for Norfolk Southern declined to comment Tuesday.
"I am so honored that Mr. Mallory and his superlative trial counsel trusted me to argue this important case," said Ashley Keller of Keller Postman, one of the attorneys representing Mallory. "And I am obviously grateful that the Supreme Court correctly interpreted our nation's Constitution to permit his suit to continue in the court where he filed it."
Mallory is represented by Ashley Keller, Zina Bash, Warren Postman, Matthew A. Seligman and Noah Heinz of Keller Postman LLC; Daniel C. Levin and Frederick S. Longer of Levin Sedran & Berman; and Charles J. Cooper of Cooper & Kirk PLLC.
Norfolk Southern is represented by Carter G. Phillips, Tobias S. Loss-Eaton, Daniel J. Hay and Chike B. Croslin of Sidley Austin LLP; Ralph G. Wellington and Bruce P. Merenstein of Schnader Harrison Segal & Lewis LLP; and Daniel B. Donahoe and Ira L. Podheiser of Burns White LLC.
The government is represented by Curtis E. Gannon of the U.S. Solicitor General's Office.
The case is Mallory v. Norfolk Southern Railway Co., case number 21-1168, in the Supreme Court of the United States.
--Editing by Alyssa Miller.
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