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July 5, 2023

Supreme Court Broadens Grounds for Personal Jurisdiction Over Corporate Entities

By Mark F. Raymond, Andrew Fuller

The Supreme Court’s recent opinion in Mallory v. Norfolk Southern R. Co. is the most significant decision on the exercise of personal jurisdiction over corporations since Daimler AG v. Bauman, 571 U.S. 117 (2014). In Mallory, the Court held that the Fourteenth Amendment’s Due Process clause allows states to require corporations to consent to the exercise of general jurisdiction as a condition of registering to do business in the state. The plaintiff, a Virginia resident, filed his complaint in Pennsylvania against Norfolk Southern. The plaintiff alleged that Norfolk Southern exposed him to carcinogens in Ohio and Virginia.

Under the Court’s minimum contacts test, jurisdiction would almost certainly have been improper. Specific jurisdiction would not have been available because the claims did not arise from Norfolk Southern’s contacts with the forum, but from the company’s activity in Ohio and Virginia. General jurisdiction would likewise have been improper because Norfolk Southern is headquartered and incorporated in Virginia, not Pennsylvania.

Mallory, however, involved a twist: a Pennsylvania statute requires foreign companies that register to do business in Pennsylvania to agree, as a condition of their registration, to permit Pennsylvania state courts to exercise general jurisdiction over them. Norfolk Southern had registered to do business in Pennsylvania.

A majority of the Justices agreed that Pennsylvania’s registration-consent regime complied with the Fourteenth Amendment’s Due Process Clause. Five justices agreed that the Court had upheld a similar scheme in Pennsylvania Fire Ins. Co. of Philadelphia v. Gold Issue Mining & Milling Co., 243 U.S. 93 (1917). In addition, a majority concluded that because personal jurisdiction is an individual right that defendants are free to waive, there is no due process impediment to a corporation consenting to a state’s jurisdiction in exchange for the benefits that come from being able to do business there.

Personal Jurisdiction Over Corporations Prior to Mallory

The Justices’ opinions in Mallory revealed a Court sharply divided over how its personal jurisdiction precedents apply to corporations. The Court has long held that the Fourteenth Amendment’s Due Process Clause constrains a court’s power to exercise authority over a defendant. For much of the republic’s history, geography was the primary constraint. In general, state courts could exercise personal jurisdiction as long as the defendant either consented or was served with process within the state’s borders.[1]

In International Shoe Co. v. Washington, 326 U.S. 310 (1945), the Court inaugurated the modern era of personal jurisdiction by using a minimum contacts analysis in lieu of the traditional test. Under International Shoe and the minimum contacts doctrine, a court’s power over a defendant depends not on whether a defendant was served with process within state lines, but on whether a defendant’s connection to the forum was extensive enough for the exercise of jurisdiction to be “reasonable and just according to our traditional conception of fair play and substantial justice.”[2]

In later jurisprudence, the Court adopted a nomenclature for the types of minimum contacts discussed in International Shoe. If a defendant’s ties with the forum gave rise to the plaintiff’s claims, then a court may exercise authority over the defendant, but only with respect to those claims. In Helicopteros Nacionales de Colombia, S.A. v. Hall, the Court labeled this “specific jurisdiction.”[3] If a defendant’s ties are deep enough—if a defendant is “essentially at home in the forum State”—then a court may exercise personal jurisdiction against a defendant on any claims, including those that do not relate to the defendant’s in-forum contacts.[4] This is known as general jurisdiction or all-purpose jurisdiction.[5]

International Shoe and its progeny, however, never clarified whether the minimum contacts analysis supplemented or replaced the traditional analysis. The Court eventually offered some clarification in Burnham v. Superior Court of Cal., County of Marin, 495 U.S. 604 (1990), holding that service of process within the forum still creates personal jurisdiction over a nonresident defendant on any claim. While Burnham involved the oldest form of jurisdiction in the United States, the type of jurisdiction it described gained a new moniker—tag jurisdiction.

Burnham, however, left a very important question unanswered. Because the defendant in Burnham was a human being, and not a corporation, it was at least arguably unclear whether serving a corporation with process within the forum authorized a court to exercise personal jurisdiction over any claim. In other words, Burnham left uncertain whether tag jurisdiction applied to corporations.

In Daimler AG v. Bauman, 571 U.S. 117 (2014), the Court deepened the uncertainty by answering a slightly different question than the one left open. Daimler discussed when a court may exercise general jurisdiction over a corporation under the Court’s minimum contacts test.[6] Specifically, the Court held that a corporation’s principal place of business and place of incorporation are the “paradigm” forums in which corporations are “essentially at home” under the Court’s minimum contacts standard.[7] Daimler, however, never addressed whether tag jurisdiction applies to corporations.

The Court’s application in Daimler of the International Shoe framework to corporations and failure to clarify whether tag jurisdiction applied to corporations troubled certain Justices and created doctrinal confusion. For example, in her concurrence in Daimler, Justice Sotomayor argued that it was “incongruous”

that an individual defendant whose only contact with a forum State is a one-time visit will be subject to general jurisdiction if served with process during that visit, Burnham v. Superior Court of Cal., County of Marin, 495 U.S. 604, 631 (1990), but a large corporation that owns property, employs workers, and does billions of dollars’ worth of business in the State will not be, simply because the corporation has similar contacts elsewhere (though the visiting individual surely does as well).[8]

Justices Gorsuch and Thomas have issued similar criticism. In Ford Motor Co. v. Montana Eighth Judicial District Court, Justice Gorsuch, joined by Justice Thomas, criticized the disparate treatment of corporations and individuals and the doctrinal confusion between tag jurisdiction and the minimum contacts standard:

Even today, this Court usually considers corporations ‘at home’ and thus subject to general jurisdiction in only one or two States. All in a world where global conglomerates boast of their many ‘headquarters.’ The Court has issued these restrictive rulings, too, even though individual defendants remain subject to the old ‘tag’ rule, allowing them to be sued on any claim anywhere they can be found. Burnham, 495 U.S., at 610–611. Nearly 80 years removed from International Shoe, it seems corporations continue to receive special jurisdictional protections in the name of the Constitution. Less clear is why.[9]

The Court Weakens Corporate Jurisdictional Protections, at Least for the Moment

Although the Court did not hold in Mallory that corporations are subject to general jurisdiction if they are served with process in the forum, the practical outcome may be very similar to a decision in which it had. Under Mallory, a corporation would be subject to general jurisdiction in any state with a registration-consent statute like Pennsylvania’s law. Such statutes may become more common now that the Court has held that the Fourteenth Amendment permits them. States also have strong incentives to pass such laws because they make it easier for a state’s residents to sue where they live.

There is also the possibility, however, that this matter returns to the Court and Pennsylvania’s registration-consent statute is later overturned on other grounds. Although five Justices agreed that the Fourteenth Amendment permitted Pennsylvania’s registration-consent statute, Justice Alito, one member of the majority, argued in his concurrence that the law violated the Dormant Commerce Clause. The case was remanded for further proceedings consistent with the Court’s opinion. Should the matter return, it is possible that some combination of five Justices would overturn the law as violating a constitutional provision or principle other than the Fourteenth Amendment. This is by no means assured, however. Notably, Justice Barrett, who wrote the dissent, took a narrower view of the Dormant Commerce Clause than Justice Alito in National Pork Producers Council v. Ross, another decision issued this term.

Ultimately, Mallory represents a victory, at least for the moment, for the Justices critical of disparate corporate treatment under the minimum contacts standard. The majority eroded those distinctions by upholding registration-consent statutes under the Fourteenth Amendment. Justice Barrett, in her dissent, recognized this dynamic, characterizing Justices Alito, Gorsuch, Thomas, and Sotomayor—who, along with Justice Jackson, were in the majority—as “[c]ritics of Daimler and Goodyear” who “may be happy to see them go.”

Whether the minimum contacts standard fades in importance for corporations depends on how states will react and whether this matter returns to the Court. Attorneys accustomed to relying on Daimler and minimum contacts should become familiar with this new jurisdictional regime. In-house counsel should also pay close to attention to whether these registration-consent statutes proliferate. For the moment, corporations should expect to be subject to general jurisdiction in forums with such laws, even if the company’s headquarters or place of incorporation is elsewhere.

 

[1] Pennoyer v. Neff, 95 U.S. 714, 733 (1878).

[2] International Shoe Co. v. Washington, 326 U.S. at 320.

[3] Helicopteros Nacionales de Colombia, S.A. v. Hall, 466 U.S. 408, 414 n.8 (1984).

[4] Daimler AG v. Bauman, 571 U.S. 117, 128 (2014).

[5] Helicopteros Nacionales de Colombia, S.A., 466 U.S. at 414–15.

[6] Daimler AG, 571 U.S. at 128–39.

[7] Id. at 137–39.

[8] Id. at 158 (Sotomayor, J, concurring in the judgment).

[9] Ford Motor Co. v. Mt. Eighth Jud. Dist. Ct., 141 S. Ct. 1017, 1038 (2021) (Gorsuch, J. concurring in the judgment).