TheCorporateCounsel.net

It is that time of year when the Supreme Court wraps up its term and issues a long list of decisions. While rulings on several high profile cases are expected very soon, the Court recently weighed in on perhaps the more mundane topic of whether a state can require a company, as a condition of doing business in the state, to consent to being sued there for any and all claims. As my colleagues at Morrison Foerster note in this alert, in Mallory v. Norfolk Southern Railway Co., 599 U.S. __ (2023), the Court concluded that such a requirement is consistent with the Fourteenth Amendment’s due process clause, opening the door to a major increase in out-of-state corporations’ exposure to lawsuits if states seek such consents from businesses.

The case involved Pennsylvania’s long-arm statute, which authorizes Pennsylvania courts to exercise “general personal jurisdiction” over any corporation that is registered with the state (which is a requirement of doing business in the state). The MoFo alert notes:

In a fractured opinion, the Supreme Court vacated and remanded, ruling that Pennsylvania’s consent scheme does not violate the Due Process Clause. Although five Justices agreed that the state court ruling should be vacated and remanded, Justice Gorsuch wrote for a majority of the Court only for portions of his opinion. Justice Alito filed an opinion concurring in part and concurring in the judgment, and Justice Barrett filed a dissenting opinion for four Justices. Justice Jackson also filed a concurring opinion.

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Mallory represents a potentially vast increase in out-of-state corporations’ exposure to jurisdiction in unexpected places, often where jury verdicts are excessive. After the decision, states can now require companies to consent to personal jurisdiction as a condition of doing business there (even if another state has a greater interest in the underlying dispute). And while the Court’s opinion is fractured, it is clear that a majority of Justices agree that consent remains an independently sufficient ground for exercising general personal jurisdiction.

What remains unclear, however, is how many states will accept that invitation. As discussed in oral argument, laws like Pennsylvania’s may deter smaller businesses from operating in a particular state. States may conclude that those concerns outweigh any interest in providing a forum for suit. And even if states do enact such laws, a majority of the Court may view them as invalid, between the dissent’s due-process/federalism reasoning and Justice Alito’s dormant-Commerce-Clause analysis, which is likely to be tested in the next phase of this case.

I have to admit, it has been a while since I thought about the dormant Commerce Clause!

– Dave Lynn