This dormant Supreme Court case could be a nightmare for businesses

Coal trains approach Norfolk Southern’s Williamson Yard in Williamson, West Virginia, bordering Pike County, Kentucky May 13, 2015. REUTERS/Valerie Volcovici

Join now for FREE unlimited access to Reuters.com

Register

(Reuters) – A low-profile U.S. Supreme Court case involving a Virginia railroad’s lawsuit against its former employer could dramatically expand plaintiffs’ ability to sue corporations in states where companies have no registered office or company.

If you needed proof that companies should pay close attention to the case, Mallory v Norfolk Southern Railway Co., you got it this week in amicus briefs supporting Virginia plaintiff Robert Mallory. The American Association for Justicethe Pennsylvania Association for Justicethe Railway Labor Lawyers Academy, The Center for Automotive Safety and US Citizens Pursuing Claims Under the Anti-Terrorism Act all urged the Supreme Court to embrace Mallory’s Arguments that corporations are liable to suit in states where they have consented to jurisdiction as a condition of registration to carry on business.

When plaintiffs’ attorneys throw that kind of combined force into Supreme Court litigation, you can be sure the case matters to corporations — otherwise known as defendants.

Join now for FREE unlimited access to Reuters.com

Register

The Norfolk Southern case, as Mallory attorney Ashley Keller of Keller Postman explained in his July 5 factum on the merits, raises the question of whether the Due Process Clause of the Fourteenth Amendment prohibits a state from require corporations to consent to personal jurisdiction as a condition of registering to do business in the state. The Supreme Court of Pennsylvania ruled last December that the state registration consent regime was coercive, non-voluntary, and therefore “patently” unconstitutional.

The state judges rooted their decision in the lineage of U.S. Supreme Court cases that began in the 1945s. International Shoe Co v Washington Statefinding that International Shoe and its progeny focused their jurisdictional analysis on a corporation’s contacts with the state.

But Mallory argues that consent via registration is a completely separate route to jurisdiction that does not depend on the company’s contacts with a state. Keller Postman’s Supreme Court brief argues that the Pennsylvania Supreme Court misinterpreted “a mountain of historical evidence” in its interpretation of the Due Process Clause of the Fourteenth Amendment.

When the amendment was ratified in 1868, according to the brief, each state had a law in place that required outside corporations to consent to jurisdiction, reflecting the increasingly interstate nature of the U.S. economy. It cannot therefore be, according to the brief, that “when the Fourteenth Amendment was ratified, it invalidated important statutes in every state.” In 1868, Keller Postman said that this interpretation “would have shocked the States and Congress, and would have produced a result widely regarded as ‘illogical and unjust'”.

The Supreme Court of the United States, as pointed out by Mallory and his amici, ruled in 1917 Pennsylvania Fire Insurance Company of Philadelphia v. Gold Issue Mining and Milling Company that the Fourteenth Amendment did not prevent Missouri from exercising jurisdiction against an Arizona corporation that had consented upon registration to carry on business in the state. Supreme Court decisions after International Shoe, Mallory and friends said, addressed an alternative theory of personal jurisdiction based on a society’s contacts with a state. But the court never explicitly overturned Pennsylvania Fire, they argued.

Norfolk Southern is represented in the Supreme Court by Carter Phillips of Sidley Austin. Phillips declined to comment on the new memoir of Mallory and her amici. But in the short review opposed by the Railroad Supreme Court, Norfolk Southern argued that Pennsylvania Fire, with its “territorial approach” to jurisdiction, was superseded by International Shoe and successive cases based on its principles. .

In particular, the railroad said, the judges’ decisions in 2011 Goodyear Dunlop Tires Operations, SA vs. Brown and 2014 Daimler AG versus Bauman “radically changed” jurisdictional analysis for corporations outside the state. These decisions made it clear, according to Norfolk Southern, that states cannot assert jurisdiction over all companies that operate within their borders, regardless of whether the state has a legitimate interest in the litigation.

In a telephone interview, Mallory’s attorney Keller told me that Goodyear and Daimler’s contact-focused analysis does not undermine Mallory’s alternative basis for consent-based Pennsylvania jurisdiction. of iron. “It’s completely separate,” Keller said. “We are very convinced that our position is firmly rooted in history and tradition.”

I asked Keller why Mallory, a Virginia man who claims he was exposed to asbestos while working in Virginia and Ohio, chose to sue Norfolk Southern, a Virginia, Pennsylvania company. Keller said Mallory’s trial attorneys are based in Pennsylvania. He politely brushed off my follow-up question about whether it made sense for Pennsylvania to hear Mallory’s case, arguing that his jurisdictional arguments are instead based on constitutional text and history.

Keller also said, in an argument echoed by some of Mallory’s amici, that companies routinely require customers and employees to consent to particular jurisdictions in circumstances no more coercive than Pennsylvania’s consent-by-registration requirement. Why, he said, should corporations be given special rights and treatment?

Moreover, Keller argued, corporations that consent to business registration jurisdiction may nevertheless argue that an out-of-state forum is impractical. And judges will still apply choice of law analysis in cases involving out-of-state plaintiffs and defendants. “It’s not, ‘come one, come all,'” Keller said. (Mallory’s motion does not address the dormant trade clause, which was cited in two Supreme Court briefs filed by law professors who said interstate commerce, rather than due process, is the correct analytical framework.)

But it’s also true that if Keller’s team wins in the Supreme Court, you can expect plaintiffs’ attorneys to push hard for state legislatures to pass or strengthen consent-by-registration laws, that many states abandoned or significantly weakened after Goodyear and Daimler. “The political process,” Keller acknowledged, “will likely come into play.”

We’ll see later this summer, when the Norfolk Southern amici surface, whether pro-business groups like the U.S. Chamber of Commerce are aware of the risk this case poses to multi-state corporations. Business cases haven’t exactly been at the top of the court’s agenda for the past two terms. But for litigants, this one could be important.

Join now for FREE unlimited access to Reuters.com

Register

Our standards: The Thomson Reuters Trust Principles.

The opinions expressed are those of the author. They do not reflect the views of Reuters News, which is committed to integrity, independence and freedom from bias by principles of trust.

Comments are closed.