The Supreme Court has recently issued a decision that we believe Defendants in Product Liability actions, and their insurance carriers, should take note of and consider when registering as a foreign corporation in a state that is not their home state, or in legal terms, their domicile.

In Mallory v. Norfolk Southern Railway Co. , 143 S.Ct. 2028, 216 L.Ed.2d 815 (2023), the Supreme Court of the United States considered whether a Pennsylvania statute requiring a foreign corporation to consent to personal jurisdiction when it registered to do business in the state  is constitutional.  The Court held that its prior decision in Pennsylvania Fire Insurance Co. of Philadelphia v. Gold Issue Mining & Milling Co., 243 U. S. 93 (1917) applied, and that more recent Supreme Court cases addressing and limiting personal jurisdiction over out-of-state corporations had not “implicitly overruled” Pennsylvania Fire.

In so holding, the Court in Mallory overturned a ruling by the Pennsylvania Supreme Court that held the statute at issue denied a foreign corporation due process of law by conditioning the corporation’s right to register to do business in the state on its consent to personal jurisdiction as to all cases that might be brought against it in the state—regardless of whether those claims arise from the foreign corporation’s contacts with the state, or not¹.

Background

Robert Mallory, a Virginia resident, sued his former employer, Norfolk Southern Railway Company (Norfolk Southern), in Pennsylvania state court under the Federal Employers’ Liability Act (FELA), 45 U.S.C. §§ 51-60, seeking to recover damages arising from his alleged exposure to carcinogens during the course of his employment by Norfolk Southern as a freight car mechanic. Mallory was employed by Norfolk Southern in Ohio and Virginia, but not in Pennsylvania, although he had lived in that state briefly after his employment with Norfolk Southern ended. At the time the lawsuit was filed, Mallory was a resident of Virginia. At all times, Norfolk Southern was a Virginia corporation with its principal place of business there. The claims that were the basis of the lawsuit against Norfolk Southern did not arise from its contacts with the state of Pennsylvania.

Norfolk Southern contested personal jurisdiction by arguing the Pennsylvania statute was unconstitutional and violated the Due Process Clause of the Fourteenth Amendment. The Pennsylvania Supreme Court agreed. Mallory appealed, arguing that Norfolk Southern’ s voluntary business registration in Pennsylvania as a foreign corporation, constituted consent to personal jurisdiction on “any cause of action” against the company. See 42 Pa. Cons. Stat. § 5301(a)(2)(i), (b).

International Shoe

The Pennsylvania Supreme Court relied principally on Daimler AG v. Bauman, 571 U.S. 117 (2014), and International Shoe Co. v. Washington, 326 U.S. 310 (1945) in reaching its decision in favor of Norfolk Southern’ s due process claim, holding that Pennsylvania Fire had been implicitly overruled by International Shoe and its progeny.

The Supreme Court disagreed, finding that International Shoe was merely a step in the evolution of personal jurisdiction. The Court rejected Norfolk Southern’ s arguments premised on the “fair play and substantial justice” language in International Shoe, citing numerous other decisions upholding statutes substantially similar to the one challenged by Norfolk Southern. Moreover, the Court specifically held that Pennsylvania Fire controlled its decision, and therefore controlled the ruling of the Pennsylvania Supreme Court on Norfolk Southern’ s challenge to the statute.

Interestingly, the Court also cited to factual evidence establishing that Norfolk Southern had for 20 years complied with the very law it was now challenging, that Norfolk Southern had established an office in Pennsylvania to accept service of process, and that it must have understood it could be sued in that state. The Court specifically cited Norfolk Southern’ s established business presence in Pennsylvania,  highlighting an infographic fact sheet from Norfolk Southern’ s own business website showing its presence and economic impact in Pennsylvania since the time it initially registered to do business there.

Relevance to Personal Jurisdiction in Product Liability Cases

The Mallory decision should be considered by corporations registered to do business in multiple states, most importantly, Pennsylvania.  Justice Alito’s concurring opinion questioned whether the Constitution permits consent-to-register statutes, although not because of the due process issue. Rather, Justice Alito contended that such statutes may be discriminatory to out-of-state corporations, and without a legitimate local interest, the requirement may upset the Dormant Commerce Clause and unduly burden interstate commerce. The Pennsylvania court did not address the Dormant Commerce Clause issue; however, Justice Alito urged it to do so on remand.

As it stands, after the Supreme Court’s decision in Mallory, personal jurisdiction can be established by minimum contacts under International Shoe, by being “at home” under Daimler, and perhaps, by consent-to-register statutes in states that require corporations to consent to jurisdiction when they register to do business under Mallory. The impact of this apparent expansion of personal jurisdiction may eliminate the invocation of the purposeful availment doctrine for manufacturing companies if they are registered to do business in states that have  consent by registration statutes.

Takeaway

Product manufacturers registered as foreign corporations in the state of Pennsylvania should be aware that they are potentially subject to suit in that state for claims that may not arise from their limited contacts there under the SCOTUS decision in Mallory.

¹ NY Metro partner Thomas M. DeMicco previously wrote on a NY Court of Appeals decision dealing with this same issue. Compare  https://www.productliabilityadvocate.com/2021/12/nys-highest-court-issues-noteworthy-decision-on-limits-of-personal-jurisdiction-over-foreign-corporations/#more-2505