SCOTUS Upholds PA Jurisdiction Over “Any Claim” Against Registered Businesses, But Hints PA Law May Violate Commerce Clause
The U.S. Supreme Court’s recent decision in Mallory v. Norfolk Southern Railway Co. reminds businesses to plan for court battles in any state where they register to do business. In some cases, the forum court might have little to no relationship to parties or the facts in dispute, at least until the Supreme Court can clarify matters further.
07.06.23
In Mallory, a Virginia resident sued his Virginia-based employer, Norfolk Southern, alleging exposure to chemicals and injuries in Virginia and Ohio. Mr. Mallory sued in Philadelphia, Pennsylvania, which his counsel apparently concluded was the best place to achieve a favorable result for him, but which Justice Alito aptly noted was “wholly unrelated” to Mr. Mallory’s claim. The jurisdictional hook? Norfolk Southern had previously registered to do business in Pennsylvania, where out-of-state companies are deemed to consent to being sued for “any cause of action” against them.[1]
Norfolk Southern argued that Pennsylvania’s registration-based jurisdiction statute violated the Fourteenth Amendment’s Due Process Clause and the Commerce Clause. Federal courts have relied on the Commerce Clause (Article I, Section 8, Clause 3) to prevent state legislation from unduly interfering with interstate commerce. In Mallory, the Court ruled that the Fourteenth Amendment did not preclude the Virginia resident from suing his Virginia employer in Pennsylvania, but the Court remanded the case, directing the Pennsylvania courts to consider Norfolk Southern’s Commerce Clause argument. Justice Alito opined that there is a “good prospect that Pennsylvania’s assertion of jurisdiction here . . . violates the Commerce Clause,” but the Pennsylvania courts had not yet addressed that issue.
According to the plurality opinion in Mallory, the case was controlled by the Supreme Court’s 1917 decision in Pennsylvania Fire Insurance Co. of Philadelphia v. Gold Issue Mining & Milling Co. There, the Court held that an out-of-state corporation that has consented to in-state suits when registering to do business in the forum may be sued there to the full extent of its consent.
If a business is sued outside of its home state by a person who is also not a resident of the forum state; here are five tips to consider:
- Analyze the language of the forum state’s business registration-based jurisdictional statute; this analysis will need to occur in addition to your traditional personal jurisdiction analysis (whether there is otherwise general or specific jurisdiction).
- Where possible, distinguish the statute in question from Pennsylvania’s (e.g., some states’ registration-based jurisdictional statutes state that registration is deemed to be consent to jurisdiction in this state only for causes of action arising from your activities in the state).
- If the registration statutes are similar to Pennsylvania’s business registration law, argue that such statutes violate the Commerce Clause[2].
- The doctrine of forum non conveniens remains an available basis to have a case transferred to another forum.
- Choice of substantive law also presents a separate issue and application of the forum state’s law must have a sufficient connection to the claims to not be considered arbitrary or unfair.[3]
The U.S. Supreme Court’s opinion in Mallory is, in Justice Alito’s words, “not the end of the story for registration-based jurisdiction,” but it does serve as a reminder to take steps to minimize unpredictability in where legal battles take place. Adopting forum selection and choice of law clauses in contracts are excellent tools toward that end.
Co-Author Tom Ayala is a partner in the Litigation Department. Co-Author Adam Haft is an associate in the Corporate & Securities Department at Klehr Harrison.
[1] 42 Pa. C.S. § 5301
[2] E.g., Davis v. Farmers Co-operative Equity Co., 262 U.S. 312 (1923).
[3] E.g., Phillips Petroleum Co. v. Shutts, 472 U.S. 797 (1985).