By Hannah Albarazi
The US Supreme Court’s decision on Monday to take up a case about the reach of a Pennsylvania law could have a “seismic impact” on corporate litigation if the justices rule that a state can exercise jurisdiction over companies registered to do business there, legal experts told Law360.
The underlying case concerns former railroad worker Robert Mallory’s attempt to use Pennsylvania’s courts to hold the Norfolk Southern Railway Co. liable for the colon cancer he developed after being exposed to chemicals during his two decades of work for the railroad in Virginia and Ohio.
While neither Mallory nor Norfolk Southern have a clear connection to Pennsylvania, Mallory says Pennsylvania’s “long-arm statute” expressly states that registration to do business in the state constitutes “consent” to general jurisdiction, meaning that the railroad may be sued there simply because it’s registered there.
Mallory wants the justices to undo a Pennsylvania Supreme Court decision that found the state law unconstitutional. He argues that the 14th Amendment doesn’t bar states like Pennsylvania from having laws holding out-of-state companies that do business there to the personal jurisdiction of their courts.
On Monday, the justices agreed to review his case.
While there is no telling how the justices might rule, Pillsbury Winthrop Shaw Pittman LLP partner and appellate practice leader Dan Bromberg told Law360 he thinks Mallory’s case has a real shot at being revived.
He said such an outcome “could have a seismic impact on corporate litigation.”
Andrew Tauber, a partner in Winston & Strawn LLP’s appellate and critical motions practice, agreed.
“Were the Supreme Court to hold that registration to do business in a state constitutes consent to general jurisdiction in that state, the current limits on general personal jurisdiction will evaporate and forum shopping will have free rein,” Tauber said.
While the Supreme Court under Chief Justice John Roberts has limited over the past decade where out-of-state corporations can be sued, some states including Iowa, Minnesota, Nebraska, Pennsylvania and Georgia still have laws holding that a company registered to do business in those states have consented to general jurisdiction there.
Last year, the Georgia Supreme Court declined to overrule a nearly 30-year-old precedent granting state courts jurisdiction over companies registered to do business in the state, allowing Florida resident Tyrance McCall’s suit against Cooper Tire & Rubber Co. over faulty tires to go forward. The Georgia justices said that while its own precedent might be in “tension” with current U.S. Supreme Court trends, it still remains good law.
Many states have rejected the consent-by-registration rule, while others have yet to reject or embrace it.
A decision in the Mallory case could have far-reaching implications, experts say.
“If the court were to permit states to exercise personal jurisdiction over out-of-state corporations based on consent to operate in the state, it would turn the trend of the last decade on its head and force corporations to completely rethink their litigation strategies,” Bromberg said.
Mallory’s case gives the justices another shot at redrawing the lines around general jurisdiction, which it last addressed in 2014’s Daimler AG v. Bauman and 2011’s Goodyear Dunlop Tires Operations SA v. Brown . In those cases, the Supreme Court held that corporate defendants are subject to general jurisdiction in a state if their affiliations with the state are substantial enough to render them “essentially at home in the forum state.”
Bromberg said there are indicators that a change may be brewing, pointing to a Supreme Court decision from last year, Ford Motor Co. v. Montana Eighth Judicial District Court . He said that case suggests that the court could side with Mallory.
In that decision, the unanimous court held that Ford Motor Co. could be sued in Montana and Minnesota over accidents involving used cars initially sold out of state with purportedly defective tires or airbags.
But in three separate concurring opinions, the justices presented differing reasons for their votes.
While Justice Samuel Alito agreed with the thrust of the majority opinion penned by Justice Elena Kagan — that Ford is subject to products-liability suits in Montana and Minnesota arising from car accidents there — he worried that the majority had unwisely created a single standard requiring a causal link.
Justice Neil Gorsuch, in his concurring opinion, wrote that the high court would have to reassess its canonical 1945 due process decision on personal jurisdiction in International Shoe Co. v. Washington , which established that, “to the extent that a corporation exercises the privilege of conducting activities within a state, it enjoys the benefits and protection of the laws of that state.”
“Nearly 80 years removed from International Shoe, it seems corporations continue to receive special jurisdictional protections in the name of the Constitution. Less clear is why,” Justice Gorsuch wrote.
The opinions in the Ford case suggest that the court may be interested in answering that question.
“What is intriguing here is that some of the conservatives on the Supreme Court have expressed dissatisfaction with the protection afforded corporations under the court’s personal jurisdiction jurisprudence,” Bromberg said.
“As a consequence, this is one of those increasingly rare cases in which it is hard to predict what coalition of justices will form the majority, and the outcome is truly up in the air,” Bromberg said.
If the high court were to side with the railroad company and strike down the Pennsylvania law, it may have a limited impact nationwide, said Sean M. Marotta, a partner at Hogan Lovells who represented Ford before the Supreme Court.
He said most US states have already held that their corporate-registration statutes don’t create the sort of consent-by-registration that Pennsylvania’s statute does.
Tauber of Winston & Strawn, who has litigated personal jurisdiction issues on behalf of railroads and others, explained that a decision in favor of the former railroad worker Mallory would throw open the door to forum shopping.
Because certain jurisdictions are by law, by jury pool, or by judicial proclivity more favorable to plaintiffs than defendants, where a corporation is sued can affect the outcome of litigation, he said.
Tauber argues that the more states there are in which corporations can be sued, the easier it is for plaintiffs to sue in what they believe to be friendlier jurisdictions.
The Supreme Court’s decision in both the Goodyear and Daimler cases held that a corporation is generally subject to general personal jurisdiction in only the state where it is incorporated and the state in which it is headquartered.
But a decision in the Mallory case could change all that.
Jeff Rensberger, a professor at South Texas College of Law Houston whose research includes conflict of laws issues, said long-arm statutes such as the one in Pennsylvania that require corporations to consent to jurisdiction when they register to do business “are a potential end run to evade that limitation.”
Rensberger and other Supreme Court watchers say depending on how the justices rule, the Mallory case threatens to upend corporate litigation, to the benefit of either plaintiffs or corporate defendants.
“What is at stake is whether [a] plaintiff will be able to forum shop from a wide choice of states or instead be limited to suing in a state that is either the defendant’s home state or the state where the cause of action arose,” Rensberger said.
–Editing by Emily Kokoll and Nicole Bleier.
