Judges weigh the limits of state jurisdiction in commercial disputes

A majority of US Supreme Court justices appeared skeptical that companies could be forced to face litigation in states where they are not based simply as a condition of doing business there.

Pennsylvania law gives its state courts that kind of general jurisdiction over disputes that have no connection with the state when corporations with another headquarters register to operate in the Commonwealth. Judges hearing on Tuesday weighed whether that regime is constitutional in a case against Norfolk Southern Railway Co., which could make it much easier to sue companies for alleged wrongdoing.

Judge Elena Kagan questioned whether a company agrees to be sued in Pennsylvania courts by filling out a piece of paper to register to do business in the state.

“All the piece of paper does is comply with a state legal requirement that anyone doing business in the state must identify themselves and say, ‘Here I am. I do business in the state,'” she said. “Where’s the consent to jurisdiction in that?”

The case stems from a lawsuit Robert Mallory filed against the railroad in a Pennsylvania court. The Virginia resident claimed the company was responsible for negligently exposing him to cancer-causing toxins while he was working for the Virginia and Ohio railroad. Virginia was the principal place of business for Norfolk’s Southern at the time.

A Pennsylvania trial court dismissed the lawsuit for lack of jurisdiction, a decision later upheld by the Supreme Court.

compulsion in question

Mallory argued that Norfolk Southern consented to general jurisdiction when it voluntarily incorporated to conduct business in Pennsylvania. Norfolk Southern says it never gave its consent and was forced by Pennsylvania to give its consent by registering to do business there.

Not all members of the court’s liberal wing seemed to agree with the company’s reasoning. Judge Sonia Sotomayor said Norfolk Southern does more business in Pennsylvania than anywhere else.

“How can I say you were forced to sign a general jurisdiction waiver? I can see where we could have doctrine that says there is coercion in an individual application, but I can’t see how in your situation we could say there is coercion for a company,” she said.

Judge Ketanji Brown Jackson echoed Mallory’s argument that Norfolk Southern has a choice: do business in the state and consent to universal jurisdiction or not.

“Certainly, a company that doesn’t want to be bound by that standard could go to the legislature and ask for an exemption,” she said. “I mean, you have the option to bypass it if you want, but you don’t have to do business in the state, so why is it a compulsion?”

Norfolk Southern attorney Carter Phillips, a partner at Sidley Austin LLP, said it’s not like the company actually has a choice. “The federal government will require us to continue doing business in the state of Pennsylvania,” he said.

Judge Samuel Alito acknowledged that Norfolk Southern is a large corporation that can litigate anywhere in the US, so the practical ramifications for a Pennsylvania case may not be as severe. But he asked about smaller units that just wanted to ship products to consumers in the state.

What are the ramifications if all states can make shipping a few products in the state conditional on that small company agreeing to common jurisdiction, he asked.

Unique regime

Pennsylvania is the only state with this type of registry jurisdiction, but opponents say a ruling upholding it could pave the way for other states to pass similar laws. That seemed to concern Judge Brett Kavanaugh.

“If you win, every state could have a statute like that, assuming every company across the country is home,” he told Mallory’s attorney.

Opponents have argued that a ruling for Mallory would lead to forum shopping, with litigants able to seek out the courts most likely to rule in their favour.

“States have no legitimate interest in assuming jurisdiction over unrelated claims, and allowing them to do so invites shenanigans, forum buying and unfairness,” Norfolk Southern argued in a court brief.

The Justice Department joined the argument in support of Norfolk Southern on Tuesday. A decision upholding Pennsylvania law would also give states general jurisdiction over foreign defendants and foreign lawsuits, which could significantly affect diplomatic relations and foreign trade, the attorney general argued in a brief to the court.

The case is Mallory v. Norfolk S. Railway Co., US, No. 21-1168, argument 11/8/22.

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