Background
Imagine a corporation registers to do business in a U.S. state. It is not incorporated there. Its headquarters isn’t there. It has perhaps only opened an office there. If that were your company, you would not expect to be subject to general jurisdiction there. You might think that you’d be subject to personal jurisdiction there only for claims that arise from your in-state business. And you might be wrong.
On April 25, 2022, the U.S. Supreme Court said that it would review Mallory v. Norfolk Southern Railway, a case that asks whether the U.S. Constitution allows a state to compel any out-of-state corporation that does business there to submit to general personal jurisdiction in the state’s courts on any and all claims. If the Court says yes, then corporations may be forced to defend claims in states that have nothing to do with the facts of the underlying claims. Depending on the outcome of Mallory, it might be (for example) that an Oklahoma corporation registered to do business in New York can, consistent with the U.S. Constitution, be sued in New York about a dispute arising from a contract drafted and signed in Oklahoma and governed by Oklahoma law.
A General Jurisdiction Primer
To understand how we got here, it’s necessary to consider recent Supreme Court case law on general (or “all-purpose”) personal jurisdiction. A person subject to general jurisdiction in a forum may be sued there for any claim, regardless of whether that claim bears any connection to the forum. For decades, courts held that corporations were subject to general jurisdiction wherever they had a continuous and systematic presence—sometimes subjecting them to general jurisdiction in many forums. That changed in 2014. That year, the Supreme Court held, in Daimler AG v. Bauman, 571 U.S. 117 (2014), that the U.S. Constitution typically allows a corporation to be subject to general jurisdiction only (1) where the corporation is incorporated, and (2) where the corporation has its principal place of business (usually its headquarters).
The Court left open, however, the possibility that corporations may consent to jurisdiction in other forums. Seizing on that possibility, plaintiffs’ lawyers began asserting that corporations had consented to jurisdiction wherever they register to do business. (Every U.S. state requires that out-of-state corporations doing in-state business register with the state, appoint an in-state agent for service of process, or both.) Many state high courts rejected this notion, saying that nothing in their states’ registration statutes mentioned consent to jurisdiction, so as a matter of statutory interpretation, out-of-state corporations had not consented to suit.[1]
But that is not so in all states. In Pennsylvania, for instance, the statutory scheme forces out-of-state registrants to consent to “any cause of action” asserted in Pennsylvania state courts. 42 Pa. C. S. § 5301(b). Because those statutes can be read as requiring consent, courts must confront whether such consent is constitutional.
Hobson’s Choice: Consent or Don’t Do Business
The lower courts in Mallory considered that constitutional question. In the underlying case, Robert Mallory (a Virginia resident) sued Norfolk Southern Railway (a Virginia corporation, headquartered in Virginia at the time of the suit) in Pennsylvania state court for exposing him to carcinogens while in Ohio and Virginia. Mallory claimed that Norfolk Southern was subject to general jurisdiction in Pennsylvania solely because Norfolk Southern had registered to do business there. The trial court dismissed the plaintiff's case for lack of jurisdiction, and the Pennsylvania Supreme Court affirmed.
The Pennsylvania Supreme Court held the registration statute violated the constitution because consent as a condition of doing business in the state was not truly voluntary. In so holding, the court relied on the “unconstitutional conditions doctrine”—a line of U.S. Supreme Court case law holding that a government cannot condition a benefit on the recipient’s waiver of a constitutional right. And in the Pennsylvania Supreme Court’s view, that’s what the Pennsylvania statute does: it conditions the benefit of doing business in the state on a corporation’s waiver of its right to be free from general jurisdiction where it is neither incorporated nor headquartered.
Much of the fight at the U.S. Supreme Court will therefore likely focus on the unconstitutional conditions doctrine. Is Pennsylvania trying to exact from out-of-state corporations their constitutional right to be free from suit there? Or are corporations free to choose where to do business, knowing that they might be sued where they operate?
Where Will This Matter?
As we’ve noted, not all state courts have considered the constitutional dimensions of a consent-by-registration regime, since some of those courts have held that their statutes do not condition doing business on consenting to jurisdiction. Yet that reality won’t necessarily hold in those states. In New York, for example, the legislature has on several occasions considered bills to require out-of-state corporations to submit to jurisdiction in New York in order to do business there.
In other words, if the U.S. Supreme Court holds that states may validly condition doing business on consenting to jurisdiction, then state legislatures remain free to add that condition into their states’ registration regimes. If, however, the Court concludes otherwise, then the consent-by-registration regime will be a nonstarter. Corporations would then once again know for certain that they are subject to general jurisdiction only where they are incorporated, where they are headquartered, and where they give their voluntary—read, uncoerced—consent to suit.
What’s Next?
The U.S. Supreme Court will receive the parties’ briefs and then hear oral argument—in October at the earliest. The Court won’t decide the case until sometime after that, and possibly as late as June 2023.
That decision will be consequential. On one hand, it may open the gates to expanded jurisdiction over corporations. On the other, it could, once and for all, allay fears that corporations will subject themselves to general jurisdiction simply by registering to do business. One thing is for certain: the Supreme Court’s decision will bind all 50 states and will hopefully bring uniformity and predictability for interstate business in the United States.
[1] See e.g., Aybar v. Aybar, 177 N.E.2d 1257 (N.Y. 2021); Genuine Parts Co. v. Cepec, 137 A.3d 123 (Del. 2016).
