U.S. Supreme Court: Requiring Corporations to Consent to Jurisdiction As A Condition To Qualifying to Do Business In A State Does Not Violate Due Process Clause

June 28, 2023

By: William L. Hallam

The June 27, 2023 decision of the United States Supreme Court in Mallory v. Norfolk Southern Railway Co. demonstrates that the Justices of the Court, as currently constituted, have difficulty reaching consensus even on issues that are not politically-charged.

A Pennsylvania statute requires an out of state corporation that does business in the Commonwealth of Pennsylvania to qualify to do business in the Commonwealth. The statute provides that qualification to do business permits Pennsylvania courts to exercise jurisdiction over the corporation so qualifying to the same extent that they can exercise jurisdiction over Pennsylvania corporations.

Robert Mallory, a former employee of Norfolk Southern Railway Co., sought to take advantage of this statute. Mr. Mallory, who had lived briefly in Pennsylvania, but was a resident of Virginia at the time suit was filed, sued Norfolk Southern, a Virginia corporation with its headquarters in Virginia, in Pennsylvania, alleging that he had been exposed to carcinogens while working for Norfolk Southern in Ohio and Virginia. He alleged that the Pennsylvania court had jurisdiction over Norfolk Southern because it had qualified to do business in Pennsylvania.

Norfolk Southern moved to dismiss Mr. Mallory’s case. It asserted that having a Pennsylvania court exercise jurisdiction over it in a case filed by a Virginia resident for injuries not sustained in Pennsylvania simply because Norfolk Southern qualified to do business in Pennsylvania violated the Due Process Clause of the United States Constitution. The Pennsylvania Supreme Court agreed with Norfolk Southern and Mr. Mallory sought review of that decision by the U.S. Supreme Court.

In a fragmented opinion delivered by Justice Gorsuch, the U.S. Supreme Court reversed the decision of the Pennsylvania Supreme Court. Justices Thomas, Alito, Sotomayor, and Jackson joined with Justice Gorsuch with respect to Parts I and III-B of the opinion. Justices Thomas, Sotomayor, and Jackson joined with Justice Gorsuch with respect to Parts II, III-A, and IV.  Justice Jackson wrote a concurring opinion. Justice Alito wrote an opinion concurring in part and concurring in the judgment. Justice Barrett wrote a dissenting opinion in which Chief Justice Roberts and Justices Kagan and Kavanaugh joined.

Part I of the opinion is a description of the facts and procedural history of the case.  The Court’s analysis and holdings are in Parts II, III, and IV. Deducing why Justices Thomas, Alito, Sotomayor, and Jackson joined in some of the remaining Parts of the opinion, but not others, is a challenging endeavor at best.

Part II starts with the statement that the issue before the Court “is not a new one” because it was addressed by the Court previously in the 1917 case of Pennsylvania Fire Insurance Company of Philadelphia v. Gold Issue Mining & Milling Co. In that case, the U.S. Supreme Court affirmed a decision of the Missouri Supreme Court that a Pennsylvania-based insurance company that had insured a facility in Colorado owned by an Arizona-based company could be sued in Missouri for damages sustained by the Colorado facility because the insurance company had qualified to do business in Missouri and the applicable Missouri statute required a company qualifying to do business there to appoint an agent for service of process. Part II then describes the history of United States law regarding personal jurisdiction going back to the founding of the country on which the Missouri Supreme Court’s decision was based.

Part III-A of the opinion describes the facts and procedural history of the Pennsylvania Fire Insurance Company and the unanimous U.S. Supreme Court’s rationale for affirming the Missouri Supreme Court’s decision without extensive discussion. According to Part III-A of the opinion, the U.S. Supreme Court said in Pennsylvania Fire that there was “no doubt” that the insurance company could be sued in Missouri and that the case “hardly presented an open question” because of how thorough the Missouri Supreme Court’s analysis was.

Part III-B starts with the statement that “Pennsylvania Fire controls this case.” It then rejects the view of the Pennsylvania Supreme Court that subsequent decisions of the U.S. Supreme Court had “implicitly overruled” Pennsylvania Fire, stating that “If a precedent of this Court has direct application in a case…, [a lower court] should follow the case that directly controls, leaving to this Court the prerogative of overruling its own decisions.”

Part IV rejects the argument by Norfolk Southern that the U.S. Supreme Court should overrule Pennsylvania Fire because it conflicts with the U.S. Supreme Court’s 1945 decision in International Shoe Co. v Washington. In International Shoe, the Court held that the Due Process Clause requires a defendant to have at least minimum contact with a state for its courts to exercise jurisdiction over the defendant. According to Part IV of the opinion, Pennsylvania Fire and International Shoe do not conflict. International Shoe governs the extent to which a defendant who has not consented to jurisdiction must have contacts with a state before its courts may exercise jurisdiction over it. Pennsylvania Fire provides an additional basis for the exercise of jurisdiction consistent with the Due Process Clause when a defendant has consented to jurisdiction by qualifying to do business in the state.

Justice Barrett and the other dissenting Justices reject the distinction between Pennsylvania Fire and International Shoe in Part IV of the opinion. According to the dissenters, permitting courts to exercise jurisdiction “based on implied consent-not contacts” might as well “overrule our traditional contacts-based approach to jurisdiction.” Noting that every state could enact laws like Pennsylvania’s subjecting corporations to suits “with no connection whatsoever with the forum,” the dissenters object to permitting “state governments to circumvent constitutional limits so easily.”

If Justice Barrett’s prediction that every state may enact laws requiring consent to jurisdiction as a condition to qualifying to do business in that state comes true and more such statutes find their way to the Supreme Court for review, given the tenuous alignments of the Justices in Mallory, how such statutes will fare in future cases is far from certain.