Registered to do business in one state? This alone may subject a business to suit in that state, even if the business is headquartered in and operates its principal place of business in another state, and even if the conduct giving rise to the suit also occurred in another state. This is the result of the U.S. Supreme Court in Mallory v. Norfolk Southern Railway Co.
The Mallory case began when an employee of Norfolk Southern filed suit against his employer in Pennsylvania, alleging that Norfolk Southern exposed him to asbestos and other chemicals. The issue, according to Norfolk Southern, was that it was based in Virginia, the plaintiff lived and worked in Virginia, and the alleged exposure giving rising to the suit occurred in Virginia (and also Ohio). Pennsylvania made little sense.
A Pennsylvania law, however, allowed a company registered to do business in the state (such as Norfolk Southern) to be sued there. Norfolk Southern challenged this law, arguing that it violated the Fourteenth Amendment’s Due Process Clause. Pennsylvania, acting through its trial and later its Supreme Court, agreed with Norfolk Southern, and found that the law violated due process rights.
On June 27, 2023, the U.S. Supreme Court reversed and remanded. While the Court acknowledged that personal jurisdiction typically only exists when a defendant has minimum contacts necessary to satisfy notions of fair play and substantial justice, the Court noted that consent-based jurisdiction exists separate and apart from the traditional contacts-based analysis. Stated simply, a business may consent to personal jurisdiction simply by registering to do business in a state.
Following the Mallory decision, it is possible that other state legislatures could consider enacting similar laws. Justice Sonia Sotomayor, however, pointed out during oral arguments that this should not cause too much concern because states likely would not appreciate suits against out-of-state defendants with no substantive contacts slowing down state courts. Moreover, states interested in recruiting out-of-state businesses likely would think twice about enacting a law that could hamper those efforts.
Interestingly, Pennsylvania is in the minority of states (along with Georgia and Minnesota) with a law allowing for consent to jurisdiction by registration. Businesses with a presence in these states should be on the lookout for an increase in suits following the Court’s apparent endorsement of consent-based jurisdiction laws.