The US Supreme Court hears orally about where companies can be sued

The constitutionality of Pennsylvania’s “Registration Statute,” which requires corporations registering to do business in Pennsylvania to consent to Pennsylvania’s “general personal jurisdiction,” was the subject of a hearing before the Colonel on November 8, 2022 US Court of Justice.

in the Mallory v Norfolk Southern Railway Co., No. 21-1168, the judges heard arguments about whether Pennsylvania can require companies wishing to do business in Pennsylvania to consent to litigation in a Pennsylvania state court, regardless of where the claim arose. Pennsylvania is the only state that specifically requires corporations to consent to their personal jurisdiction as part of the registration process.

General Personal Jurisdiction

Underlying the law of personal jurisdiction is whether it is “fair” to sue a person or entity in a particular state.

Under General personal jurisdiction, the rule under consideration in Mallory, a state court has personal jurisdiction over every resident of that state. in the Daimler AG against Baumann, 571 US 117 (2014), the Supreme Court ruled that a company is resident in any state where its connections are so continuous and systematic as to make the company “substantially at home” in that state. The simplest example is a corporation incorporated and headquartered, resident, or resident in a particular state.

Pennsylvania’s registration law effectively lowers the bar for general personal jurisdiction. It requires corporations to consent to the jurisdiction of the Pennsylvania state courts simply by registering to conduct business in Pennsylvania. Most states require corporations to register in order to conduct business in their state, but Pennsylvania is the only one that specifically requires corporations to consent to the state’s personal jurisdiction as part of the registration process.

State and federal courts disagree as to whether merely registering to do business in a state subjects a company to that state’s general jurisdiction. State courts in New York and New Mexico have ruled that it is a corporation Not subject to general jurisdiction in a state simply because it is registered to do business there. Georgia state courts ruled the opposite: registration to do business in a state is sufficient to confer general personal jurisdiction.

background

The facts in there Mallory show the paradoxical reach of the consent-by-registration law in Pennsylvania. Petitioner Robert Mallory, a Virginia resident, claims that while working for the Norfolk Southern Railway Company in Virginia, he was exposed to toxic chemicals that caused him to develop cancer. Mallory did not live or work in Pennsylvania, nor did his alleged injury occur in Pennsylvania, but he sued in Pennsylvania State Court under Pennsylvania statute for consent by registration.

Norfolk Southern challenged the state court’s jurisdiction. Ultimately, the Pennsylvania Supreme Court found Pennsylvania’s registration statute unconstitutional. It said: “[A] A court cannot subject a foreign corporation to general, all-purpose jurisdiction solely based on the fact that it conducts business in the court state.” Because it is necessary for registration to do business in Pennsylvania, the Pennsylvania courts have the exercise of personal jurisdiction over a To allow corporations, the Pennsylvania Supreme Court argued that the corporation cannot be said to voluntarily consent to general personal jurisdiction.

Oral argument

At the hearing, the judges appeared divided on the issue as both sides were questioned.

Judge Samuel Alito urged Mallory’s attorney on fairness and whether consenting to jurisdiction is voluntary when it is a condition of doing business in Pennsylvania. Similarly, Chief Justice John Roberts appeared to dismiss Mallory’s argument that consent-of-court laws have a long history in American jurisprudence, stating that “history and tradition carry on.” Noting the potential impact on businesses, Judge Brett Kavanaugh warned that if “any state” enacts a similar law, potential plaintiffs could sue in any state where the company does business, regardless of where the alleged damage occurred is.

Judge Elena Kagan cited the landmark jurisdiction case International Shoe Co. v. Washington326 US 310 (1945), which they argued “avoids the need” for a fictitious consent such as Pennsylvania’s “consent-by-registration scheme”.

On the other hand, Judge Ketanji Brown Jackson said she doesn’t necessarily see a conflict between the Pennsylvania statute and International shoe. Judge Sonia Sotomayor found that Norfolk Southern could not claim Pennsylvania forced it to consent to the jurisdiction because the company has more employees and more miles of railroad track in Pennsylvania than in any other state.

Possible impact on employers

The decision in Mallory v. Norfolk Southern Railway could affect employers doing business in more than one state, particularly on Where Employees could sue. If the Supreme Court agrees that the Pennsylvania statute is constitutional, additional states may require corporations to consent to the broad jurisdiction of their courts through corporate registration. Any company doing business in multiple states would need to be prepared to defend a lawsuit in any state court in which it registers to do business.

We will continue to monitor this case and provide updates. Jackson Lewis attorneys are based across the country and familiar with state courts in the United States and Puerto Rico. They are available to discuss the potential impact of the Supreme Court decision on employers’ operations and to help companies prepare.

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