The Mallory Decision – SCOTUS’ Ruling and Potential Impact on Personal Jurisdiction Analyses

July 10, 2023

Legal News

On Tuesday, June 27, 2023, the Supreme Court decided Mallory v. Norfolk S. Ry. Co., which expands general jurisdiction and reaffirms old Supreme Court caselaw that creates an additional avenue for an entity to be sued in the state and for courts there to find general jurisdiction over the entity. Mallory v. Norfolk S. Ry. Co., No. 21-1168, 2023 WL 4187749 (U.S. June 27, 2023).

This decision will have far-reaching effects on entities with nationwide operations. Under this new standard, companies can be sued outside of the jurisdiction in which they are headquartered or where the controversy occurred. Notably, Mallory does not automatically overrule each state’s general jurisdiction statute. This expansion is entirely dependent on each state. If the state has not enacted a consent-by-registration statute – and their state courts have not interpreted it differently, then the traditional standard for general jurisdiction under Daimler and Goodyear still applies. Moving forward, however, companies should be cognizant of where they are registered to do business, as that could lead to them being within that state’s general jurisdiction.

 

The Mallory Decision

In Mallory, a former employee of Norfolk Southern filed a lawsuit against the company in Pennsylvania state court. Norfolk Southern moved to dismiss, arguing that Pennsylvania lacked personal jurisdiction because the railroad company is incorporated and headquartered in Virginia and because the injury did not occur in Pennsylvania, in line with the then-effective standard under Daimler AG v. Bauman, 571 U.S. 117, 118, 134 S. Ct. 746, 749, 187 L. Ed. 2d 624 (2014) (“The paradigm all-purpose forums for general jurisdiction are a corporation’s place of incorporation and principal place of business.”). In response, Mallory argued that jurisdiction was proper because Norfolk Southern is registered to do business in Pennsylvania, and Pennsylvania’s long-arm statute states that any out-of-state entity that registers to do business in the state agrees to appear in its courts on “any cause of action”—a so called “consent by registration” statute. 42 Pa. Cons. Stat. § 5301(a)(2)(i), (b). That statute stated that “When jurisdiction over a person is based upon this section any cause of action may be asserted against him, whether or not arising from acts enumerated in this section.”

The Pennsylvania trial court granted Norfolk Southern’s motion to dismiss for lack of jurisdiction. Mallory v. Norfolk Southern Railway Co., No. 1709001961, 2018 WL 3202860 (Pa. Com. Pl. Feb. 06, 2018). Mallory appealed and the Pennsylvania appellate court transferred the appeal to the Pennsylvania Supreme Court. 241 A.3d 480 (Pa. Super. Ct. 2020). The Pennsylvania Supreme Court found that the Pennsylvania law violated the Due Process Clause because it “strips foreign corporations of the due process safeguards guaranteed in Goodyear and Daimler” and amounts to “[l]egislatively coerced consent”. Mallory v. Norfolk S. Ry. Co., 266 A.3d 542, 571 (Pa. 2021), cert. granted, 212 L. Ed. 2d 605, 142 S. Ct. 2646 (2022), and vacated and remanded, No. 21-1168, 2023 WL 4187749 (U.S. June 27, 2023).

The Supreme Court of the United States reversed the Pennsylvania Supreme Court and upheld Pennsylvania’s consent-by-registration statute. In so holding, the Court relied heavily on its century-old decision in Pennsylvania Fire Ins. Co. of Philadelphia v. Gold Issue Mining & Milling Co., 243 U.S. 93 (1917), where the Court held that an Arizona company could sue a Pennsylvania company in Missouri, based on a Colorado contract because of the presence of the forum’s consent-by-registration statute where the defendant was registered. Pennsylvania Fire evaluated a similar Missouri law and held that an out-of-state corporation that has consented to in-state suits in order to do business in the forum can be sued there. 243 U.S. 93 (1917).

Now, in Mallory, the Supreme Court determined that, despite its age and the glut of newer jurisdiction opinions, Pennsylvania Fire had not been overruled by subsequent developments. The Court distinguished later cases on jurisdiction like International Shoe Co. v. State of Wash., Off. of Unemployment Comp. & Placement, 326 U.S. 310 (1945) as not overruling or abrogating the holding of Pennsylvania Fire. For its part, International Shoe held that an out-of-state corporation that has not consented to in-state suits may be subject to personal jurisdiction in the forum based on “the quality and nature of [its] activity” in the forum. 326 U.S. at 319 (1945). Because of this distinction between when a corporation has or has not consented to general jurisdiction, the Court reasoned that International Shoe did not implicitly overrule Pennsylvania Fire as Norfolk Southern claimed. Instead, “all International Shoe did was stake out an additional road to jurisdiction over out-of-state corporations” which was intended to expand—not limit—state court jurisdiction. Mallory, 2023 WL 4187749, at *8–9 (emphasis added). The Supreme Court further reasoned that a corporation’s presence in a state with a consent-by-registration statute is in line with the traditional tag rule which provides that a defendant may be sued wherever they are found. Id. at *9.

Mallory now clarifies that entities are now subject to general personal jurisdiction in states where they register if the state has a consent-by-registration statute. If the state does not have such a statute, then the otherwise familiar standard for general jurisdiction under Daimler and Goodyear remains. Analyses of specific jurisdiction remain undisturbed.

 

The Impact of Mallory and State Summary

The impact of Mallory will be immediate in subjecting entities that are registered in Pennsylvania or other states with similar statutes to general jurisdiction. Pennsylvania is unique in its statutory text being explicit that registration amounts to consent, but other states have long-arm statutes that their respective state courts have interpreted as consenting to general jurisdiction even though their texts do not explicitly require consent-by-registration. See Georgia, Cooper Tire & Rubber Co. v. McCall, 863 S.E.2d 81, 90 (Ga. 2021) (stating that the state’s prior precedent notifies foreign corporations that their corporate registration “will be treated as consent to general personal jurisdiction in Georgia” even though the statutes do not expressly define consent by registration) and MinnesotaRykoff-Sexton, Inc. v. Am. Appraisal Assocs., Inc., 469 N.W.2d 88, 90 (Minn. 1991) (Minnesota has adopted “the principle that a state may exact from the nonresident, as a condition of performing some activity in the state, consent to personal jurisdiction.”). Whether courts (and, if it reaches it, the Supreme Court) will find consent by registration in these states absent the specific statutory text present in Mallory remains to be seen.

Other states have jurisdictional statutes that, until now, courts have not interpreted as consenting to general jurisdiction, though all of those decisions pre-date Mallory. These states include Arizona, Wal-Mart Stores, Inc. v. Lemaire, 395 P.3d 1116, 1119 (Ariz. App. 2017), California, DVI, Inc. v. Superior Court, 128 Cal. Rptr.2d 683, 694 (Cal. App. 2002), Colorado, Magill v. Ford Motor Co., 379 P.3d 1033, 1038-39 (Colo. 2016), Delaware, Genuine Parts Co. v. Cepec, 137 A.3d 123 (Del. 2016), Florida, Magwitch, LLC v. Pusser’s West Indies Ltd., 200 So. 3d 216 (Fla. App. 2016), Hawaii, Bralich v. Sullivan, 2018 WL 1938297 (D. Haw. April 23, 2018), Illinois, Aspen American Insurance Co. v. Interstate Warehousing, Inc., 90 N.E.3d 440, 447 (Ill. 2017), Louisiana, Taylor v. Arellano, 928 So.2d 55, 58-60 (La. App. 2005), Maryland, Advanced Datacomm Testing Corp. v. PDIO, Inc., 2009 WL 2477559, at *8 (D. Md. Aug. 11, 2009); Michigan, Magna Powertrain De Mexico S.A. De C.V. v. Momentive Performance Materials USA LLC, 192 F.Supp.3d 824, 828 (E.D. Mich. 2016); Mississippi, accord Mullen v. Bell Helicopter Textron, Inc., 136 F. Supp.3d 740, 744 (S.D. Miss. 2015), Missouri, State ex rel. Norfolk Southern Railway Co. v. Dolan, 512 S.W.3d 41, 51-53 (Mo. 2017), Nebraska, Lanham v. BNSF Ry. Co., 939 N.W.2d 363, opinion modified on denial of reh’g, 306 Neb. 124, 944 N.W.2d 514 (Neb. 2020), New Jersey, Dutch Run-Mays Draft, LLC v. Wolf Block, LLP, 164 A.3d 435 (N.J. App. Div. 2017), New Mexico, Chavez v. Bridgestone Americas Tire Operations, LLC, 503 P.3d 332 (N.M. 2021), New York, Aybar v. Aybar, 177 N.E.3d 1257 (N.Y. 2021), North Carolina, Public Impact, LLC v. Boston Consulting Group, Inc., 117 F.Supp.3d 732, 738 (M.D. N.C. 2015), North Dakota, HomeRun Products, LLC v. Twin Towers Trading, Inc., 2017 WL 4293145, at *4 (D.N.D. Sept. 27, 2017), Ohio, Pittock v. Otis Elevator Co., 8 F.3d 325, 328-329 (6th Cir. 1993) (applying Ohio law), Oregon, Figueroa v. BNSF Railway Co., 390 P.3d 1019, 1022 (Or. 2017), Texas, Conner v. ContiCarriers & Terminals, Inc., 944 S.W.2d 405, 416-417 (Tex. App. 1997), Utah, Miller v. Robertson, 2008 WL 270761, at *5 (D. Utah Jan. 29, 2008), Vermont, Bertolini-Mier v. Upper Valley Neurology Neurosurgery, P.C., 2016 WL 7174646, at *4 (D. Vt. Dec. 7, 2016), Washington, Washington Equipment Manufacturing Co. v. Concrete Placing Co., 931 P.2d 170, 173 (Wash. App. 1997), and Wisconsin, Segregated Account of Ambac Assurance Corp. v. Countrywide Home Loans, 898 N.W.2d 70, 77 (Wis. 2017).

Following Mallory, states that do not already have them may enact consent-by-registration statutes, and their courts may be more likely to interpret the existing statutes as consenting to general jurisdiction—particularly state statutes that do not explicitly define consent by registration, but permit jurisdiction to be exercised “to the maximum extent of the U.S. Constitution.” (See, e.g., Ark. Code Ann. § 16-4-101 (2016); Ariz. R. Civ. P. 4.2).

Companies operating nationwide should examine whether the states that they register in have consent-by-registration statutes and the potential implications of being sued in those forums even for conduct that occurs elsewhere. Companies should also review their existing business registration in any state in which they no longer conduct business and consider withdrawing from any state they do not have active business in. Finally, choice of law and venue provisions should take on a renewed focus to help mitigate the impact of Mallory in contract actions.