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The Supreme Court has significantly expanded the possible grounds for personal jurisdiction against corporations, upholding Pennsylvania’s statute requiring foreign businesses registered in the Commonwealth to consent to general personal jurisdiction in its courts. This development is significant for all corporate clients, not only those registered to do business in Pennsylvania, as additional states are likely to follow Pennsylvania, opening registered corporations to general personal jurisdiction in previously unanticipated forums.

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In an opinion that received less press coverage than others issued by the Supreme Court this term but that represents a sea change in the law of vast importance to corporate clients and practitioners, the High Court was asked to consider the constitutionality of a Pennsylvania statute pursuant to which a foreign company “may not do business in this Commonwealth until it registers with the department under this chapter.” 15 Pa. C.S. 411(a). Registration, in turn, “constitute[s] a sufficient basis of jurisdiction to enable the tribunals of this Commonwealth to exercise general personal jurisdiction over such person.”<a href="https://www.bakerlaw.com/Corporate-Consent-Jurisdiction-and-the-Supreme-Courts-Landmark-Mallory-Decision#1">[1]</a>

In&nbsp;Mallory v. Norfolk Southern Railway Co., No. 21-1168, 2023 WL 4187749 (June 27, 2023), the plaintiff sued a Virginia-based railroad in Pennsylvania state court, alleging that his work for the company in Virginia and Ohio caused him to develop cancer. The plaintiff argued that the railroad had consented to personal jurisdiction in Pennsylvania pursuant to 15 Pa. C.S. 411(a). The Pennsylvania Supreme Court held that under&nbsp;Daimler AG v. Bauman, 571 U.S. 117 (2014), and&nbsp;International Shoe Co. v. Washington, 326 U.S. 310 (1945), the statute was unconstitutional; however, the United States Supreme Court has now disagreed and remanded the case back for further proceedings.

International Shoe&nbsp;was a paradigmatic shift in personal jurisdiction law. Under that case, the Due Process Clauses of the Fifth and Fourteenth Amendments require particular court’s exercise of in personam jurisdiction over a defendant to comport with “traditional notions of fair play and substantial justice,” which in turn depends on whether the defendant’s contacts with the forum establish that it purposefully availed itself of the benefits of that state.<a href="https://www.bakerlaw.com/Corporate-Consent-Jurisdiction-and-the-Supreme-Courts-Landmark-Mallory-Decision#2">[2]</a>&nbsp;Before&nbsp;Mallory, traditional wisdom taught that&nbsp;International Shoe&nbsp;typically permitted just two types of personal jurisdiction: specific and general. A federal court may exercise general jurisdiction over a defendant where its contacts with the state “are so ‘continuous and systematic’ as to render them essentially at home in the forum State.”<a href="https://www.bakerlaw.com/Corporate-Consent-Jurisdiction-and-the-Supreme-Courts-Landmark-Mallory-Decision#3">[3]&nbsp;</a>For corporations, courts typically have general jurisdiction only in the corporation’s state of incorporation or principal place of business. By contrast, a court outside a defendant’s home state may exercise specific jurisdiction if the plaintiff’s claim arises from the defendant’s purposeful contacts with that state.

Lurking beneath the dichotomy set up by&nbsp;International Shoe, however, was a third method of obtaining personal jurisdiction: consent. Jurisdiction by “consent” existed long before International Shoe and most frequently arises when a defendant enters into a contract that includes a forum selection clause. Courts also entertain the “legal fiction” that a defendant “consents” to jurisdiction by failing timely to challenge personal jurisdiction after appearing in a particular lawsuit.<a href="https://www.bakerlaw.com/Corporate-Consent-Jurisdiction-and-the-Supreme-Courts-Landmark-Mallory-Decision#4">[4]</a>&nbsp;And now of renewed importance, more than 100 years ago, in&nbsp;Pennsylvania Fire Insurance Co. of Philadelphia v. Gold Issue Mining &amp; Milling Co., 243 U.S. 93 (1917), the Supreme Court upheld a fundamentally different method of obtaining consent to personal jurisdiction based on a Missouri statute that required foreign corporations to “file[] with the superintendent of the insurance department a power of attorney consenting that service of process upon the superintendent should be deemed personal service upon the company so long as it should have any liabilities outstanding in the state.” With little explanation, the Court held that the statute, as construed by the Missouri Supreme Court, was sufficient to establish consent because “[t]he defendant had executed a power of attorney that made service on the superintendent the equivalent of personal service.”

Several states have or had similar statutes, but many courts, including the Pennsylvania Supreme Court in&nbsp;Mallory, believed that these statutes were inconsistent with the contacts-based approach of&nbsp;International Shoe&nbsp;and consequently struck them down or construed them in a more limited way. Indeed, after&nbsp;Daimler, the Missouri Supreme Court itself held that its registration statute no longer “provide[s] an independent basis for jurisdiction over foreign corporations that register in Missouri.”<a href="https://www.bakerlaw.com/Corporate-Consent-Jurisdiction-and-the-Supreme-Courts-Landmark-Mallory-Decision#5">[5]</a>

Nonetheless, the Supreme Court in&nbsp;Mallory&nbsp;held that the case was controlled by&nbsp;Pennsylvania Fire&nbsp;and that the Pennsylvania statute established consent to personal jurisdiction. “The company does not dispute that it has filed paperwork with Pennsylvania seeking the right to do business there. It does not dispute that it has established an office in the Commonwealth to receive service of process on any claim. It does not dispute that it appreciated the jurisdictional consequences attending these actions and proceeded anyway, presumably because it thought the benefits outweighed the costs.”<a href="https://www.bakerlaw.com/Corporate-Consent-Jurisdiction-and-the-Supreme-Courts-Landmark-Mallory-Decision#6">[6]</a>&nbsp;The Court rejected the argument that&nbsp;International Shoe&nbsp;had implicitly overturned&nbsp;Pennsylvania Fire, holding instead that&nbsp;International Shoe&nbsp;created additional grounds for personal jurisdiction but did not eliminate jurisdiction by consent. The Court also suggested that Pennsylvania exercising personal jurisdiction would not be unfair in that case: “[T]he company had taken full advantage of its opportunity to do business in the Commonwealth, boasting of its presence [in the state] . . . . All told, when Mr. Mallory sued, Norfolk Southern employed nearly 5,000 people in Pennsylvania. It maintained more than 2,400 miles of track across the Commonwealth. Its 70-acre locomotive shop there was the largest in North America. Contrary to what it says in its brief here, the company even proclaimed itself a proud part of ‘the Pennsylvania Community.’ . . . By 2020, too, Norfolk Southern managed more miles of track in Pennsylvania than in any other state. … And it employed more people in Pennsylvania than it did in Virginia, where its headquarters was located.”<a href="https://www.bakerlaw.com/Corporate-Consent-Jurisdiction-and-the-Supreme-Courts-Landmark-Mallory-Decision#7">[7]</a>

Under the Court’s reading of Pennsylvania’s statute, a foreign corporation is thus treated the same as a domestic corporation and thus considered “essentially at home” for the purposes of general personal jurisdiction.

The potential consequences of&nbsp;Mallory&nbsp;are sweeping. As Justice Barrett stated in her dissent (notably joined by Justice Kavanaugh and Justice Kagan), “[f]or 75 years, [the Court] ha[s] held that the Due Process Clause does not allow state courts to assert general jurisdiction over foreign defendants merely because they do business in the State. … Pennsylvania nevertheless claims general jurisdiction over all corporations that lawfully do business within its borders.” In an age where interstate and even international business is not only normal but necessary, a broad reading of&nbsp;Mallory&nbsp;effectively gives states the power to require “consent” as a cost of registering to do business in a state. Justice Barrett feared that although “[s]uch an approach does not formally overrule our traditional contacts-based approach to jurisdiction … it might as well.”

It is striking that the pre-International Shoe&nbsp;opinion the Court relied upon,&nbsp;Pennsylvania Fire, spans only five difficult-to-parse paragraphs. The&nbsp;Pennsylvania Fire&nbsp;Court appears to have concluded that registration under the Missouri statute was equivalent to “a corporate vote [to] accept[] service in this specific case” or “appoint[ing] an agent authorized in terms to receive service in such cases.” Although it is unclear what it would mean to “accept service,” the current waiver-of-service form provided by the federal judiciary explicitly preserves challenges to the personal jurisdiction and venue. Moreover, the&nbsp;Pennsylvania Fire&nbsp;Court did not analyze the fairness of conditioning the ability to do business in a state on the appointing of an agent there.

Furthermore, the&nbsp;Mallory&nbsp;Court also indicated that allowing jurisdiction under Pennsylvania’s registration statute was similar to allowing jurisdiction where the defendant “sign[s] a contract with a forum selection clause.”<a href="https://www.bakerlaw.com/Corporate-Consent-Jurisdiction-and-the-Supreme-Courts-Landmark-Mallory-Decision#8">[8]</a>&nbsp;But contracts with forum selection clauses apply only to claims involving particular subject matters or parties. Pennsylvania’s statute involves “consent” to jurisdiction as to any plaintiff on any claim. The Court also suggested that the statute was similar to allowing jurisdiction for “[f]ailing to comply with certain pre-trial court orders.”<a href="https://www.bakerlaw.com/Corporate-Consent-Jurisdiction-and-the-Supreme-Courts-Landmark-Mallory-Decision#9">[9]</a>&nbsp;But similar to forum selection clauses, failing to comply with a rule or order confers personal jurisdiction only&nbsp;in that case. Moreover, treating the failure to properly raise personal jurisdiction as a type of “consent” fundamentally ignores the nature of procedural waivers or “forfeitures”: Forfeitures are not a type of consent and say nothing about the merits of the underlying right. By analogizing Pennsylvania’s statute to a procedural forfeiture, the Court implicitly is not holding that the exercise of jurisdiction is fair and comports with due process, but merely that the defendant is not allowed to complain about it.<a href="https://www.bakerlaw.com/Corporate-Consent-Jurisdiction-and-the-Supreme-Courts-Landmark-Mallory-Decision#10">[10]</a>&nbsp;Notably, this analogy ignores the logical connection between procedural forfeitures and a state’s interest in enforcing its courts’ procedural rules — an interest that is not implicated by Pennsylvania’s statute.

It is possible that subsequent decisions will narrow&nbsp;Mallory’s reach. Indeed, the Court stated that “[t]o decide this case, we need not speculate whether any other statutory scheme and set of facts would suffice to establish consent to suit. It is enough to acknowledge that the state law and facts before us fall squarely within&nbsp;Pennsylvania Fire’s rule.”<a href="https://www.bakerlaw.com/Corporate-Consent-Jurisdiction-and-the-Supreme-Courts-Landmark-Mallory-Decision#11">[11]</a>&nbsp;Mallory&nbsp;thus could be construed as limited by the Court’s fairness analysis and Norfolk’s specific contacts with Pennsylvania. That interpretation, however, would still be a significant expansion of personal jurisdiction under&nbsp;International Shoe. Justice Alito also stated in a concurring opinion that Pennsylvania’s statute might be unconstitutional under the Commerce Clause but concurred in the judgment of the Court because certiorari had not been granted on that issue. Thus, on remand, the Pennsylvania Supreme Court might still invalidate Pennsylvania’s statute on other grounds.

Nonetheless, companies need to be aware of&nbsp;Mallory’s potential reach in Pennsylvania and beyond. If additional states begin enacting similar consent statutes (or construing their existing statutes as requiring consent) in the wake of Mallory, companies should be cognizant of where they are registering to do business and the risks associated with litigating in those states’ courts.<a href="https://www.bakerlaw.com/Corporate-Consent-Jurisdiction-and-the-Supreme-Courts-Landmark-Mallory-Decision#12">[12]</a>

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<a></a>[2]&nbsp;Int’l Shoe Co., 326 U.S. at 316.

<a></a>[3]&nbsp;Daimler&nbsp;AG, 571 U.S. at 127.

<a></a>[4]&nbsp;See, e.g., Fed. R. Civ. P. 12(h).

<a></a>[5]&nbsp;State ex rel. Norfolk Southern Ry. v. Dolan, 512 S.W.3d 41 (Mo. 2017).

<a></a>[6]&nbsp;Mallory, 2023 WL 4187749, at *11.

<a></a>[7]&nbsp;Id.&nbsp;at *10.

<a></a>[8]&nbsp;Id.&nbsp;at *12.

<a></a>[10]&nbsp;Cf., e.g., Johnson v. Commonwealth, 609 S.E.2d 58, 60 (Va. 2005) (holding that defendant forfeited claim on appeal and stating that “in making that decision, we do not examine the underlying merits of [that claim]-for that is the very thing being waived by the appellant as a result of his failure to raise the point on appeal”).

<a></a>[11]&nbsp;Mallory, 2023 WL 4187749, at *7.

<a></a>[12] See&nbsp;Mallory, 2023 WL 4187749, at *16 (Alito, J., concurring in part) (“If having to defend this suit in Pennsylvania seems unfair to Norfolk Southern, it is only because it is hard to see Mallory’s decision to sue in Philadelphia as anything other than the selection of a venue that is reputed to be especially favorable to tort plaintiffs.”).

Corporate Consent Jurisdiction and the Supreme Court’s Landmark Mallory Decision

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