In Mallory v. Norfolk Southern Railway Co., the United States Supreme Court handed down a decision on June 27, 2023, that will significantly increase forum shopping by plaintiffs and negatively impact corporate defendants. Companies registered to do business in certain states could now be forced to defend themselves in that forum even though the cause of action did not accrue there. Specifically, the Court held that the U. S. Constitution’s Due Process Clause does not prohibit a state from imposing general jurisdiction over a corporate defendant where 1) state law preconditions business registration in that state with the requirement that the corporation consent to general personal jurisdiction in that state and 2) the defendant registers to do business in that state.
The Supreme Court agreed to hear Mallory to “decide whether the Due Process Clause of the Fourteenth Amendment prohibits a State from requiring an out-of-state corporation to consent to personal jurisdiction to do business there.” The Court said that this exact question was answered in Pennsylvania Fire Ins. Co. of Philadelphia v. Gold Issue Mining & Milling Co., 243 U.S. 93 (1917). In Pennsylvania Fire, the United States Supreme Court unanimously found there was “no doubt” that an insurance company could be sued in Missouri by an out-of-state plaintiff on an out-of-state contract because the company had agreed, as a condition of doing business in the state, to accept service of process in Missouri on any suit. The Court found it no more important that Mr. Mallory does not live in Pennsylvania and that the suit did not accrue there than it did that the corporation in Pennsylvania Fire was not from Missouri and its claim did not arise there. The Court maintained “the state law and facts before us fall squarely within Pennsylvania Fire’s rule.” Because the Court resolved this more than a century ago, Norfolk Southern is subject to jurisdiction in Pennsylvania and precedent stands, allowing state laws imposing general personal jurisdiction on out-of-state businesses as a condition of registering to business within that state.
Practical Guidance for Alabama Businesses
Alabama does not have a statutory provision asserting general jurisdiction over foreign corporations registered to do business in the state. Therefore, corporations and other businesses who do not have their place of incorporation or principal place of business in Alabama, and thus would not otherwise be subject to general jurisdiction in the state, need not worry about being subject to general personal jurisdiction as a result of this decision. However, Alabama corporations registered to do business in other states should be mindful that those states may have, or create, legislation imposing general jurisdiction upon corporations registered to do business there.
This decision will significantly increase forum shopping, so stay tuned – next week we will explore what states already have such statutes and what corporate defendants might expect because of this ruling.
https://www.supremecourt.gov/opinions/22pdf/21-1168_kifl.pdf
Sharon D. Stuart is a founding partner of Christian & Small and has been with the firm since 1993. She devotes her practice to civil trial work and arbitration. She focuses on complex commercial and insurance litigation, and she handles a variety of pharmaceutical and medical device products liability litigation as national, regional or local counsel. Sharon’s trial experience includes a wide range of business tort claims, contract disputes, commercial and insurance fraud and bad faith suits, and wrongful death cases. She has defended dozens of class action lawsuits in areas as diverse as product liability/toxic tort, financial products, insurance, and employment law.
Isabella “Bella” Prince is a summer clerk at Christian & Small and is a 2L at the University of Alabama School of Law where she also obtained her undergraduate degree. In the fall, Bella will be a junior editor of the Journal of the Legal Profession and a member of the Trial Advocacy Competition Team.
About Christian & Small
Christian & Small LLP represents a diverse clientele throughout Alabama, the Southeast, and the nation with clients ranging from individuals and closely-held businesses to Fortune 500 corporations. By matching highly experienced lawyers with specific client needs, Christian & Small develops innovative, effective, and efficient solutions for clients. With offices in Birmingham, metro-Jackson, Mississippi, and the Alabama Gulf Coast, Christian & Small focuses on the areas of litigation and business, is a member of the International Society of Primerus Law Firms, and is the only Alabama-based member firm in the Leadership Council on Legal Diversity. Our corporate social responsibility program is focused on education, and diversity is one of Christian & Small’s core values.
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