In its recent opinion in the case of Mallory v. Norfolk Southern Railway Company, No. 21-1168 (June 27, 2023), the United States Supreme Court held that an out-of-state company with none of the traditionally recognized “connections” to the Commonwealth of Pennsylvania can still be sued in Pennsylvania. As discussed below, the ruling is significant because it recognizes a “consent-based” test for personal jurisdiction that is entirely separate and apart from the traditional basis for general and specific jurisdiction that has been the norm for more than 75 years.
Mallory held that a Pennsylvania state trial court could exercise personal jurisdiction over a non-Pennsylvania company in a suit arising out of non-Pennsylvania conduct. The court held that Pennsylvania had jurisdiction over the non-resident corporation because it had implicitly consented to personal jurisdiction in Pennsylvania for all matters because of Pennsylvania’s mandatory business registration statute, which mandates that all companies wishing to do any business in the Commonwealth register to do so. The court ruled that a company’s decision to do business in Pennsylvania had the effect of consenting to personal jurisdiction and, importantly, to waiving any right to challenge jurisdiction.
In other words, the Supreme Court has ruled that if a company wants to do business in Pennsylvania, it must consent to being sued in Pennsylvania even when Pennsylvania would otherwise have no jurisdiction whatsoever over the company. The decision to do business in Pennsylvania, in effect, has the same effect as signing a contract where the company agrees to be sued there. It is “consent based,” even though the choice is to consent or be barred from doing business in the Commonwealth.
The Mallory case concerned a lawsuit filed by a Norfolk Southern employee who worked only in Ohio and Virginia, but not in Pennsylvania. The employee contracted cancer and sued the railroad, alleging that exposure to carcinogens during his tenure caused his disease. The plaintiff sued in Pennsylvania, and the railroad moved to dismiss the lawsuit based on the lack of personal jurisdiction. The railroad argued that it could only be sued in Virginia (it’s home state and one of the places where the alleged exposure occurred), or Ohio (the other state where the alleged exposure occurred). The railroad argued that Pennsylvania’s business registration statute was unconstitutional. The Pennsylvania Supreme Court agreed and dismissed the lawsuit. The Supreme Court reversed and remanded the case back to Pennsylvania.
Mallory will almost certainly spawn “litigation tourism” by plaintiffs, who will be lured to the plaintiff-friendly courts of Philadelphia County, Allegheny County (Pittsburgh) and Lackawanna County (Scranton), all of which are particularly problematic for trucking companies, even when the accident occurred far away from Pennsylvania and had no connection whatsoever with Pennsylvania. Instead of examining the traditional elements to support jurisdiction in Pennsylvania, the Supreme Court has ruled that a company automatically consents to being sued in Pennsylvania simply because they signed up to do business there.
The Mallory ruling contradicts decades of Supreme Court jurisprudence, where the court previously held that corporations can be sued only in forums where:
Of course, a party can also consent to jurisdiction in a particular forum by way of contract.
The most significant short-term effect of Mallory is, as noted, the likelihood of litigation tourism, as most corporations, including trucking companies, are registered to do business in Pennsylvania. Under Mallory, plaintiffs may now sue these companies in Pennsylvania even without specific or general jurisdiction.
Moreover, Mallory may encourage other states to enact legislation similar to Pennsylvania’s business registration statute to invite more litigants into their courts. In states where the plaintiff’s bar has outsized influence, the effect to trucking companies could be quite adverse.
In addition, Mallory has created uncertainty in what was previously a rather well-settled area of the law. The Supreme Court’s majority opinion casts doubt on other jurisdiction-related decisions, which held that even substantial business contacts with a particular state do not give rise to personal jurisdiction unless those contacts are related to the actual claim or if the defendant is “at home” in the state.
What if a company decides the risk of being sued in one of Pennsylvania’s “judicial hellholes” outweighs the opportunity to conduct business there? The concurring opinions of some of the justices suggests that this may make Pennsylvania’s business registration statute violative of the Commerce Clause of the United States Constitution, which would negate the effects of Mallory. However, this is a question for another case and another Supreme Court term. For now, Mallory stands, and the floodgates are open. The question is: for how long?
Chief Marketing and Business Development Officer