U.S. Supreme Court Rejects Challenge to Registration Statute Requiring Consent to Jurisdiction
- The U.S. Supreme Court narrowly ruled that the Due Process Clause of the Fourteenth Amendment does not prohibit states from requiring out-of-state corporations to consent to personal jurisdiction as a condition of doing business in those states.
- The Court's ruling raises the prospect that if other states enact similar registration statutes, corporations could be subject to general personal jurisdiction in many of the states where they do business.
- However, the justices' various opinions also leave open the possibility that such statutes run afoul of a different constitutional provision, the Commerce Clause. Thus, the full significance of the decision remains to be seen.
In Mallory v. Norfolk Southern Railway Co., Robert Mallory (a Virginia resident) sued his former employer, Norfolk Southern (a Virginia-based railroad), over his alleged exposure to toxic chemicals while working for Norfolk Southern in Virginia and Ohio. Mallory pursued the case in Pennsylvania under the theory that Norfolk Southern consented to suit in Pennsylvania by registering to do business there.
Under Pennsylvania law, all out-of-state corporations that wish to do business in Pennsylvania must register as foreign corporations. Pennsylvania law is explicit that "qualification as a foreign corporation" permits state courts to "exercise general personal jurisdiction" over the corporation.
Norfolk Southern argued that Pennsylvania's statutory scheme violated the Due Process Clause. The Pennsylvania courts agreed, but the U.S. Supreme Court reversed.
Justice Neil Gorsuch announced the judgment of the Court, but only two sections of his opinion were joined by a majority of the Court (i.e., Justices Clarence Thomas, Samuel Alito, Sonia Sotomayor and Ketanji Brown Jackson). In those sections, Gorsuch concluded that the case was controlled by the Supreme Court's 1917 decision in Pennsylvania Fire Ins. Co. of Philadelphia v. Gold Issue Mining & Milling Co., in which the Court upheld a similar Missouri law.
The critical fifth member of the majority, Alito, did not join the other sections of Gorsuch's opinion. In a separate opinion, Alito emphasized that "[t]he sole question before us is whether the Due Process Clause of the Fourteenth Amendment is violated when a large out-of-state corporation with substantial operations in a State complies with a registration requirement that conditions the right to do business in that State on the registrant's submission to personal jurisdiction in any suits that are brought there." He agreed with the Court that the answer to that question is no.
Alito, however, strongly suggested that the Pennsylvania statute is open to other Constitutional challenges – in particular, a challenge under the dormant Commerce Clause: "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 unrelated to Pennsylvania – violates the Commerce Clause."
Specifically, Alito said, "[t]here is reason to believe that Pennsylvania's registration-based jurisdiction law discriminates against out-of-state companies," but, "at the very least, the law imposes a 'significant burden' on interstate commerce by 'requiring a foreign corporation … to defend itself with reference to all transactions,' including those with no forum connection." "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."
Because only the Due Process question was before the Court, Alito nevertheless agreed that the Pennsylvania Supreme Court's judgment should be vacated and the case remanded for further proceedings (presumably, including arguments related to the dormant Commerce Clause).
In a dissent joined by Chief Justice John Roberts and Justices Elena Kagan and Brett Kavanaugh, Justice Amy Coney Barrett contended that the Court's decision "flies in the face" of 75 years' worth of precedent holding "that the Due Process Clause does not allow states to assert general jurisdiction over foreign defendants merely because they do business in the State." Barrett suggested that the majority opinion "finds a way around this settled rule": "All a state must do is compel a corporation to register to conduct business there (as every State does) and enact a law making registration sufficient for suit on any cause (as every State could do). Then, every company doing business in the State is subject to general jurisdiction based on implied 'consent' – not contact." "Such an approach," she continued, "does not formally overrule our traditional contacts-based approach to jurisdiction, but it might as well. … If States take up the Court's invitation to manipulate registration, Daimler and Goodyear will be obsolete, and, at least for corporations, specific jurisdiction will be 'superfluous.'"
Notably, the dissent echoed many of the same federalism concerns raised by Alito. Barrett went so far as to say that the case "provides a 'textbook example' of overreach at the expense of other states." Although Barrett raised these federalism concerns in the context of the Due Process Clause, not the Commerce Clause, the comments nonetheless suggest that the four dissenting justices may be receptive to the type of dormant Commerce Clause challenge that Alito suggested. Thus, it remains to be seen whether Mallory will represent the type of sea change about which Barrett warned.
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