Justices Weigh Limits of State Jurisdiction in Business Disputes – Bloomberg Law

A majority of US Supreme Court justices seemed skeptical that companies can be forced to face litigants in states where they aren’t based simply as a condition of doing business there.

Pennsylvania law gives its state courts this kind of general jurisdiction over disputes that have no connection to the state when companies headquartered elsewhere register to operate in the commonwealth. The justices at argument on Tuesday weighed whether that regime is constitutional in a case against Norfolk Southern Railway Co. that could make it much easier to sue corporations for alleged wrongdoing.

Justice 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 law requirement that everyone who does business in the state has to make their identities known and say ‘Here I am. I’m doing business in the state,’” she said. “Where’s the consent to jurisdiction in that?”

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

A Pennsylvania trial court dismissed the lawsuit for lack of jurisdiction, a decision that was later affirmed by the state supreme court.

Coercion in Question

Mallory argued Norfolk Southern consented to general jurisdiction when it voluntarily registered to do business in Pennsylvania. Norfolk Southern says it never gave consent and that it was coerced by Pennsylvania into giving consent by registering to do business there.

Not all members of the court’s liberal wing seemed sympathetic to the company’s argument. Justice Sonia Sotomayor said Norfolk Southern does more business in Pennsylvania than anywhere else.

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

Justice Ketanji Brown Jackson reiterated Mallory’s argument that Norfolk Southern has a choice: Do business in the state and agree to general jurisdiction or don’t.

“Surely, a business who doesn’t want to be held to that standard could go to the legislature and ask for an exemption,” she said. “I mean you have options to try to get around it if you’d like to, but you don’t have to do business in the state, so why is it coercive?”

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

Justice Samuel Alito conceded that Norfolk Southern is a big corporation that can litigate anywhere in the US, so the practical consequences for having to fight a case in Pennsylvania may not be so serious. But he asked about smaller entities that merely want to ship products to consumers in the state.

What consequences are there if all states can condition shipment of a few products in the state on that little corporation consenting to general jurisdiction, he asked.

Unique Regime

Pennsylvania is the only state with this kind of registration-jurisdiction regime but opponents say a ruling upholding it could pave the way for other states to pass similar laws. That seemed to be a concern for Justice Brett Kavanaugh.

“If you win every state could have a statute like this, which assumes every business would be at home throughout the country,” he told Mallory’s attorney.

Opponents have argued that a ruling for Mallory would lead to forum shopping where litigants could seek out the courts most likely to rule in their favor.

“States have no legitimate interest in seizing jurisdiction over claims with no forum connection, and allowing them to do so invites gamesmanship, forum-shopping, and unfairness,” Norfolk Southern argued in a brief to the court.

The Justice Department participated in Tuesday’s argument to support Norfolk Southern. A ruling that upholds Pennsylvania’s law would also give states general jurisdiction over foreign defendants and foreign lawsuits, which could significantly affect diplomatic relations and foreign trade, the solicitor general argued in a brief to the court.

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