Originalist arguments and business interests clash in a dispute over where companies can be sued

CASE PREVIEW
Originalist arguments and business interests clash in a dispute over where companies can be sued

Norfolk Southern Railway locomotives at a railroad yard near Harrisburg, Pennsylvania. (Caseyjonz via Wikimedia Commons)

The Supreme Court will hear oral argument on Tuesday in a major dispute over personal jurisdiction – a court’s power to hear a lawsuit against a defendant. The question in Mallory v. Norfolk Southern Railway Co. is whether a Pennsylvania court can hear a lawsuit brought against a Virginia-based railroad company by a Virginia man who worked for the railroad in Virginia and Ohio. If the justices answer “yes,” businesses could soon be sued for all types of claims in many or all of the states where they do business.

Background

Under the law of personal jurisdiction, a plaintiff can always sue a company in the state where the company is incorporated or the state that constitutes its principal place of business. That’s because the courts of those states have “general” jurisdiction over the company. But the ability to sue a company in other states is more limited. Typically, a lawsuit in some other state is allowed only in two circumstances: first, if the company voluntarily consented to be sued in that state, and second, if the company engaged in activities there that are connected to the plaintiff’s lawsuit.

Mallory is about a Pennsylvania law that seeks to impose general jurisdiction on any company doing business in the state. Pennsylvania requires out-of-state corporations to register with the state if they want to do business there, and under state law, that registration gives Pennsylvania courts general jurisdiction over those corporations. Various business groups – as well as the Biden administration – warn that if the Pennsylvania scheme is allowed to stand, other states will follow suit, an outcome that would dramatically expand states’ ability to exercise jurisdiction over corporations. But supporters of the Pennsylvania law say it is consistent with the original understanding of the Constitution and must be upheld under the current court’s history-based approach to many constitutional questions.

The plaintiff in the case is Robert Mallory, who worked for Norfolk Southern Railway Co. for 17 years. During that time, Mallory says, he was exposed to asbestos and other cancer-causing chemicals and, as a result, was diagnosed with colon cancer. Mallory went to court in 2017, seeking to hold the railroad liable. Even though the facts underlying the lawsuit did not occur in Pennsylvania, Mallory contended that the Pennsylvania courts had jurisdiction over Norfolk Southern because the railroad had registered to do business there.

A state trial court dismissed Mallory’s case, agreeing with Norfolk Southern that it did not have jurisdiction over the railroad. Pennsylvania’s registration scheme, the trial court concluded, violates the 14th Amendment’s due process clause – which, among other things, guarantees fair treatment by the government – by giving state courts jurisdiction over out-of-state corporations in all circumstances. The Pennsylvania Supreme Court upheld that ruling, prompting Mallory to come to the Supreme Court earlier this year.

Mallory’s arguments

In his brief in the Supreme Court, Mallory contends that the Pennsylvania Supreme Court’s holding that the registration scheme violates the Constitution is inconsistent with the “original public meaning” of the 14th Amendment – that is, how the amendment would have been commonly understood when it was ratified in 1868. Efforts to discern the “original public meaning” have in recent years become increasingly important in constitutional interpretation. In 1868, Mallory asserts, all states required out-of-state corporations that wanted to do business in the state to agree to personal jurisdiction, even if the corporations could not have otherwise been brought into court there. At roughly the same time, Mallory adds, Congress adopted a similar requirement for the District of Columbia.

Mallory also points to the Supreme Court’s 1917 decision in Pennsylvania Fire Insurance Co. of Philadelphia v. Gold Issue Mining & Milling Co., holding that an out-of-state corporation agreed to jurisdiction in Missouri when, as required by state law, it appointed an agent to accept “service of process” – the legal papers that initiate a lawsuit. The Supreme Court has never overruled its decision in Pennsylvania Fire, Mallory writes, and there is no good reason to do so now.

Mallory rejects any suggestion that the court’s later rulings on personal jurisdiction somehow undermine the jurisdiction established by Pennsylvania Fire. The court’s 1945 decision in International Shoe Co. v. Washington, holding that a state can have jurisdiction over an out-of-state defendant when the defendant has sufficient contacts with the state such that it would not be unfair for the defendant to face a lawsuit there, simply “established an additional basis for jurisdiction over out-of-state defendants.” The justices in International Shoe did not, Mallory stresses, weigh in on whether jurisdiction over out-of-state defendants is constitutional when the defendant has consented to jurisdiction. According to Mallory, Norfolk consented to jurisdiction in Pennsylvania under the state’s registration scheme.

The Supreme Court’s 1990 decision in Burnham v. Superior Court also makes clear, Mallory adds, that Pennsylvania’s registration scheme is constitutional. In Burnham, the Supreme Court upheld “tag jurisdiction” – the concept of exercising jurisdiction over an out-of-state defendant who was served with the lawsuit while visiting the state. If the defendant in Burnham – a father from New Jersey – can be sued based on a visit to California to visit his children, Mallory insists, there is nothing unfair about also allowing Norfolk Southern, which has registered to do business in Pennsylvania and has “thousands of miles of track and a dozen facilities” there, to be sued in Pennsylvania.

Norfolk Southern’s arguments

Norfolk Southern counters that the Pennsylvania scheme is “an anachronism — developed in a different era to solve a problem that no longer exists, based on a doctrinal foundation that disappeared decades ago.” Indeed, it notes, Pennsylvania is the only state that uses such a scheme, and even Pennsylvania has not weighed in to defend it in this case. Norfolk Southern explains that until the 20th century, unless states had laws requiring out-of-state corporations to appoint agents to accept service of a lawsuit, corporations could avoid being sued for their activities in states where they did business. But after International Shoe, the railroad continues, such laws were no longer necessary, because a state’s courts could have “specific” jurisdiction – the limited power to hear claims arising from a corporation’s in-state activities – over out-of-state corporations.

But even if International Shoe did not undermine Pennsylvania Fire, Norfolk Southern tells the justices, the decision in Pennsylvania Fire would still not save the Pennsylvania scheme. Norfolk Southern and other out-of-state corporations did not consent to jurisdiction in Pennsylvania simply by registering to do business there, the railroad reasons, because the registration process does not say anything about consent.

The Supreme Court’s more recent decisions in Goodyear Dunlop Tires Operations v. Brown and Daimler AG v. Bauman, Norfolk Southern argues, also made clear that a state has general jurisdiction only over corporations that are “at home” in the state.

Norfolk Southern contests Mallory’s originalist view of the 14th Amendment, writing that “Mallory badly misstates the ratification-era law and practice.” Unlike the Pennsylvania scheme, Norfolk asserts, the laws that Mallory cites “overwhelmingly governed claims arising from” business in the forum states. Mallory cannot point to any “decisions that applied all-purpose registration-jurisdiction before ratification, and just one decision that did so over the next 28 years,” Norfolk Southern concludes.

The Biden administration filed a brief supporting Norfolk Southern. It warns the justices that if Mallory prevails, state courts could also hear lawsuits against foreign defendants that arise from their conduct overseas – which, the government contends, could harm the federal government’s relationships with other countries.

This article was originally published at Howe on the Court.

Originalist arguments and business interests clash in a dispute over where companies can be sued