On August 26, 2021, the Florida Supreme Court issued an order, on its own motion,…
Alysa Koloms & Elizabeth R. Bala
On June 27th, 2023, the US Supreme Court issued its decision in Mallory v. Norfolk Southern Railway Company, ruling on the validity of Pennsylvania’s general jurisdiction by consent registration statute. In short, the Court overturned the Pennsylvania Supreme Court’s ruling and held that the statute does not violate the due process clause of the Constitution.
The Pennsylvania statute allows plaintiffs to sue foreign corporations, as long as they are registered to do business in Pennsylvania, even if the controversy or litigants at issue have absolutely no connection to Pennsylvania. The statute essentially allows Pennsylvania courts to exercise general jurisdiction over any company that is registered to do business in the Commonwealth.
The validity of the law was challenged in the Mallory case, in which a suit arose against Norfolk Southern Railroad, a Virginia corporation registered to do business in Pennsylvania, concerning a controversy that took place in Virginia and Ohio. The challenge to the consent registration statute went to the Pennsylvania Supreme Court, which ruled that recent US Supreme Court cases, like Daimler AG and Goodyear, clarifying the bases of both general and specific jurisdiction—and which did not include consent registration statutes—implicitly overruled the Pennsylvania statute.
The US Supreme Court disagreed. The Court held that the issue is actually an old one and was ruled on by the Court in 1917 in the Pennsylvania Fire matter. In that case, the Court considered a similar statute from the state of Missouri and held that the defendant there, by virtue of its consent, agreed to accept suits concerning out-of-state controversies, from out-of-state plaintiffs. The Court noted that this matter does not require a different result. The Pennsylvania law requires an out-of-state corporation to register with the Commonwealth and continuously maintain an office in Pennsylvania in exchange for the same rights and privileges as a domestic entity—which includes the right of Pennsylvania courts to exercise general jurisdiction over such entities.
The court declined to limit jurisdiction to simply general jurisdiction—which gives rise to jurisdiction based upon where the company is incorporated/holds its principal place of business—and specific jurisdiction—which permits suits that arise out of or relate to a defendant’s activities in the state. This is because much of the recent jurisdiction precedent has considered the question of jurisdiction where a corporate defendant has not consented to a suit in the forum state. The Court ruled that this precedent recognizes that express, like here, or implied consent can continue to ground personal jurisdiction. In this matter, foreign corporations are well aware of the consequence of its registration and are required to maintain an office to accept service of process—the Court declined to find the law offensive to any notions of fairness or any derogation of due process.
This decision was rendered 5-4—although Justice Alito’s concurring opinion seems to open the door to a challenge. That is, Justice Alito agreed that the law did not violate the due process clause as it concerned these facts, given Norfolk Railroad was a large out-of-state corporation with significant operations in Pennsylvania. He, however, declined to extend this jurisdictional exception to all consent by registration companies—for instance, where such an entity has very little connection to the forum state. Essentially, then, for opponents of this type of law, this was not the ripest case to go on appeal to challenge this law. Had the suit involved a corporation with very little connection to Pennsylvania, the result likely would have been different.
While the law in Pennsylvania has been in effect for some time, the endorsement by the Supreme Court will likely continue to make Pennsylvania a hot bed for litigation. The law entitles any plaintiff to sue any registered Pennsylvania company concerning a controversy which has absolutely nothing to do with Pennsylvania whatsoever.
Alysa Koloms is a Partner at The Cook Group. She is licensed in New York and Illinois.
Elizabeth Bala is Of Counsel with The Cook Group and is licensed in Deleware and Pennsylvania.
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