In some states, the mere act of registering to do business there may subject your business entity to a lawsuit, via a legal term called “personal jurisdiction.” One of those states is Pennsylvania, which prohibits corporations from doing business there until they register with the Pennsylvania Department of State.1 By statute, the Commonwealth further outlines that a corporation’s Pennsylvania business registration enables a plaintiff to sue that company in Pennsylvania, even if the lawsuit otherwise has nothing to do with Pennsylvania.2 Recently, in Mallory v. Norfolk Southern Railway Co., No. 21-1168, a plaintiff disputed the constitutionality of this requirement and challenged it in state court, after which it made its way to the United States Supreme Court. There, the High Court will attempt to answer the question of whether the Due Process Clause of the 14th Amendment precludes a state from requiring a corporation to consent to personal jurisdiction to do business in the state.
In Mallory, Virginia-based railroad Norfolk-Southern Railway Co. was sued in Pennsylvania, where it was registered to do business, for claims arising under the Federal Employer’s Liability Act. According to plaintiff Robert Mallory’s complaint, he was exposed to harmful carcinogens while employed by Norfolk-Southern in Ohio and Virginia. He did not allege that he suffered any harm in Pennsylvania but sued in a Pennsylvania court on a theory that the court could exercise jurisdiction over the Virginia company because it had registered to do business in Pennsylvania.
Norfolk-Southern objected to the exercise of personal jurisdiction, arguing that the exercise violated the Due Process Clause of the Fourteenth Amendment. The trial court agreed and held Pennsylvania’s statutory scheme unconstitutional. The Pennsylvania Supreme Court affirmed. SCOTUS now has the chance to have the final word when it hears argument on the matter on November 8, 2022, with a decision to follow months later.
As a practical matter, business entities should pay close attention to the Supreme Court’s decision in Mallory, as it could affect a state’s ability to mandate consent to personal jurisdiction by registering to do business there. In the meantime, companies that seek to expand to a new state should carefully consider that state’s laws regarding business registration and personal jurisdiction. Should a dispute arise, such registration in that state could result in the company being sued there – even if the dispute itself has little to do with the state – instead of in a state that is more convenient, from a legal, cost, and/or geographical perspective.
If you have questions on initiating or defending against a lawsuit on behalf of yourself or your business, please contact Matt Korenoski at mkorenoski@utbf.com.
1 See 15 Pa. Cons. Stat. § 411(a).
2 See 42 Pa. Cons. Stat. §§ 5301(a)(2)(i) and (b).
