DOJ, business groups urge SCOTUS to restrict venue for suits against corporations

The U.S. Department of Justice Building is pictured
The U.S. Department of Justice Building is pictured, in Washington, U.S., December 15, 2020. REUTERS/Al Drago

(Reuters) - In a flurry of friend-of-the court briefs filed late last week in a case that could dramatically expand jurisdiction for suits against corporations, the U.S. Department of Justice, eight state attorneys general and a bevy of business groups including the U.S. Chamber of Commerce warned the U.S. Supreme Court not to ditch modern precedent that limits where plaintiffs can sue businesses.

Otherwise, wrote DOJ Solicitor General Elizabeth Prelogar – who also requested to present oral argument when the justices hear the case in November – federalism and even international comity will be undermined by states that attempt to exercise general jurisdiction over corporations merely by dint of companies’ registration to conduct business in the state.

“Allowing states to require foreign corporations to submit to their general jurisdiction would improperly encroach upon the sovereignty of sister states, and allow larger states to impose their will on smaller states,” wrote Virginia Attorney General Jason Miyares in the AGs' brief. “Unrestrained general jurisdiction would also lead to widespread forum shopping and litigation tourism, undermining states’ abilities to implement their own policies.”

If nothing else, last week’s amicus briefs prove the potentially enormous consequences of the case, Mallory v. Norfolk Southern Railway Co. In July, I described the case as a bit of a Supreme Court sleeper. Clearly, the American business community has been awakened.

The key question in the case is whether the 14th Amendment’s Due Process Clause prohibits individual states from requiring a corporation to consent to personal jurisdiction as a condition of doing business within the state. Such consent-by-registration statutes were once common among the states, but almost all have been rescinded or interpreted to conflict with a line of Supreme Court cases, beginning with 1945’s International Shoe Co v. State of Washington, that focused jurisdictional analysis on a corporation’s contacts with the state.

In the Mallory case, longtime railway worker Robert Mallory, a Virginia resident, sued the Virginia-based corporation in state court in Pennsylvania, alleging that he was exposed to asbestos while working for the railroad in Ohio and Virginia. (Mallory's Supreme Court counsel, Ashley Keller of Keller Postman, told me his client's trial lawyers chose Pennsylvania because that's where they are based.)

Mallory asserted that the railroad had consented to Pennsylvania’s jurisdiction when it registered to conduct business in the state. But the Pennsylvania Supreme Court ruled last December that the state’s jurisdiction-by-registration statute is coercive, not voluntary, and therefore a violation of the railroad’s constitutional due process rights.

Mallory’s Supreme Court lawyers – guided by a concurrence in 2021’s Ford Motor Co v. Montana in which Justice Neil Gorsuch asked why U.S. corporations “continue to receive special jurisdictional protections in the name of the constitution” – told the Supreme Court in their opening brief that neither the 14th Amendment nor the high court’s precedent bars states from requiring corporations to submit to their jurisdiction as a condition of conducting business.

The long history and tradition of such state laws, according to Mallory, was reflected in a 1917 Supreme Court decision, Pennsylvania Fire Insurance Co of Philadelphia v. Gold Issue Mining and Milling Co, in which the justices endorsed Missouri's exercise of jurisdiction over an Arizona corporation that consented when it registered to conduct business in Missouri. Mallory argued that subsequent Supreme Court cases — including the two modern landmarks on corporate jurisdiction, 2011’s Goodyear Tires Operations SA v. Brown and 2014’s Daimler AG v. Bauman — emphasized the significance of a corporation’s residence and its contacts with the state purporting to exercise jurisdiction. But, according to Mallory, neither Goodyear nor Daimler explicitly overruled Pennsylvania Fire, which centered on the corporation’s consent to Missouri’s jurisdiction.

The railroad’s Supreme Court counsel, Carter Phillips of Sidley Austin, countered in Norfolk Southern’s Aug. 26 brief that the justices effectively nullified Pennsylvania Fire in their International Shoe decision and in subsequent cases.

“No aspect of Pennsylvania Fire’s reasoning survived International Shoe,” the railroad said in its brief. “That includes not only the fictions of implied consent and presence, but also the notion that a corporation’s compulsory compliance with state law is ‘voluntary.’ In other words, compulsory registration cannot produce consent.”

The railroad’s brief insisted that the process service problems that originally prompted states to enact statutes requiring corporations to consent to jurisdiction are now obsolete. The regime of jurisdiction-by-registration, “is thus a relic of a bygone era,” Phillips argued. “It is neither necessary nor doctrinally supportable today.”

If the Supreme Court were to side with Mallory, the railroad said, the effect would be dire: “If Pennsylvania can take jurisdiction over any suit against a corporation doing business there, so can any other state,” the brief said. “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.”

The Justice Department and the U.S. Chamber elaborated on the railroad’s insistence that the history of the old state registration statutes actually undermines Mallory’s arguments. In the Chamber brief, in particular, University of Georgia School of Law dean Peter (Bo) Rutledge offered a treatise on states' judicial authority over corporations, dating back to 1825, when states first began to assert jurisdiction in cases involving out-of-state corporations operating inside their borders.

Back in those day, the Chamber said, a handful of states enacted laws that can be read as broad grants of jurisdiction over corporations that registered to conduct business within the state. But the breadth of such laws, according to the brief, was hotly litigated in the decades before the 14th Amendment's adoption in 1868 – and state courts almost always interpreted the statutes narrowly.

Indeed, the Chamber brief said, Mallory failed to find a single case from that long-ago era in which a court backed its jurisdiction over an out-of-state corporation for claims unrelated to the company's actions within the state.

Keller, Mallory’s lead counsel, said by email that he’s raring to file a reply brief refuting these history-based arguments. “None of the amici refute the universal practice in and around 1868 of extracting consent to jurisdiction as a condition of authorizing a corporation to do business within a state’s territory,” Keller said. “Attempts to limit consent based on terms like ‘specific jurisdiction’ are anachronistic.”

Read more:

This sleeper Supreme Court case could be a nightmare for corporations

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Alison Frankel has covered high-stakes commercial litigation as a columnist for Reuters since 2011. A Dartmouth college graduate, she has worked as a journalist in New York covering the legal industry and the law for more than three decades. Before joining Reuters, she was a writer and editor at The American Lawyer. Frankel is the author of Double Eagle: The Epic Story of the World’s Most Valuable Coin.