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A recent U.S. Supreme Court decision potentially changes the way we approach precedents.  Mallory v. Norfolk Southern Railway Co. was recently decided on June 27, 2023.  The Plaintiff, Robert Mallory, was working for the railway for many years before he retired.  His work was limited to Ohio and Virginia.  After retirement, Mr. Mallory moved to Pennsylvania for a short period of time before moving back to Virginia.  It was in Virginia that Mr. Mallory was diagnosed with cancer.  Mr. Mallory believes his cancer was because of the work he did for Norfolk Southern Railway and sued the railway in the Eastern District of Pennsylvania.

Norfolk Southern Railway is incorporated and headquartered in Virginia.  It does have a presence in Pennsylvania by operating 2,000 miles of track, 11 rail yards, and 3 locomotive repair shops.  As per Pennsylvania statute, Norfolk Southern Railway was registered to do business in Pennsylvania as required of out-of-state companies.  Upon registration, Pennsylvania requires that companies agree to appear in its courts on any causes of action against them.  If an out-of-state company does not register to do business, it cannot operate in Pennsylvania.

In the Eastern District of Pennsylvania, the Pennsylvania court decided that there was no personal jurisdiction over Norfolk Southern Railway and Mr. Mallory appealed to the Supreme Court.  Norfolk Southern Railway argues that Pennsylvania does not have jurisdiction over this matter based on the 14th Amendment Due Process Clause.  The Supreme Court then looked at the case to determine if the Due Process Clause prohibits states from requiring out-of-state corporations to consent to personal jurisdiction to do business in that state.

This case relies on the overturned precedent Pennsylvania Fire Ins. Co. of Philadelphia v. Gold Issue Mining & Milling Co., 243 U.S. 93.  Pennsylvania Fire states personal jurisdiction exists wherever Defendant can be found.  The Supreme Court believed the current case had a direct application to Pennsylvania Fire, and stated, “If a precedent of this Court has direct application in a case a lower court should follow the case which directly controls, leaving to this Court the prerogative of overruling its own decisions.”

Pennsylvania Fire was a 1917 case where the defendant consented to service in the state of Missouri which acted as a contract that the court upheld.  The Dissent and Norfolk Southern Railway argue that Pennsylvania Fire was overturned in International Shoe Co. v. Washington et al, 326 US 310.  International Shoe has the distinction that a company must have minimum contacts with the state in order to exercise personal jurisdiction there.  The majority argues International Shoe does not apply to this case because the Defendant was not registered to do business and therefore did not consent to the jurisdiction.  The sole distinction between these precedents in whether the Defendant “consented” to jurisdiction.

Many cases have relied on International Shoe as precedent for deciding personal jurisdiction.  While there is no case that directly states that Pennsylvania Fire is overturned, Shaffer v. Heitner, 433 US 186, uses International Shoe as a precedent and further states that prior decisions that are inconsistent with this standard are overrules.  Additionally, Daimler AG v. Bauman, 571 US 117, reinforces this idea by states that pre-International Shoe decisions “should not attract heavy reliance today.”  Daimler argues that Pennsylvania Fire makes the mistake of equating “doing business” with “consent,” which is no longer good law.  With all of these precedents indirectly or directly stating Pennsylvania Fire, it is a wonder that the Supreme Court decided it would be good law again.

The Supreme Court in this decision believes that Norfolk Southern Railway’s activities in Pennsylvania were of a nature that it would be reasonable and just for them to be sued in Pennsylvania.  There is no risk that Norfolk Southern Railway would suffer from “local prejudice” because the Court believed they were sufficiently local themselves.  The Court decided that International Shoe did not apply because there was no discussion of consent, while there is in Pennsylvania Fire.  By registering to do business in Pennsylvania, Norfolk Southern Railway waived their rights to personal jurisdiction rights, and it was therefore not a violation of their Due Process rights.

Interestingly, Justice Alito’s concurring opinion agrees that this was not a violation of Due Process but does believe that it is a violation of the Commerce Clause.  The Commerce Clause prohibits state laws that unduly restrict interstate commerce.  Justice Alito stated he was not convinced that the Constitution would permit a state to impose jurisdiction requirements over lawsuits where there was no real connection to the state.  He argued no one benefits from breaching this registration agreement.  If a corporation chooses to not register in that state, they must manage the risks of working as an unregistered corporation.  The Plaintiffs in the case would also face the challenge of serving unregistered corporations after they are injured in that state.

The Dissent argues there are two kinds of jurisdiction: personal jurisdiction and general jurisdiction.  Personal jurisdiction applies only to specific claims while general jurisdiction applies to any and all claims.  Justice Barrett states because of this case, states can now manufacture their “consent” to assert personal jurisdiction.  General jurisdiction is only available in the “at-home” state where a corporation is incorporated or their principal place of business.  As the “contract” was for any and all claims, the Court should have looked to general jurisdiction instead of personal jurisdiction.  A Defendant’s ability to waive its objection to personal jurisdiction  reflects that the Due Process Clause protects individual rights.  Compliance to the registration laws should not have subjected the corporations to any case in the state, but limited to those related to the forum.

He argues that the very point of International Shoe was to cast aside legal fictions built on the old approach to personal jurisdiction and replace them with contact-based tests.  Justice Barrett states consent was one of those particular “legal fictions.”

Justice Barrett also points out that BNSF Ry. V. Tyrrell, 581 US 402, from 2021 is a similar case that upholds International Shoe and was completely ignored by the majority.  BNSF looked at whether Montana’s courts could exercise general jurisdiction over the BNSF railroad.  No one resided in Montana or suffered an injury there and one of the Plaintiffs also alleged they were exposed to toxic substances from the railroad that caused cancer.  BNSF had railroad tracks in Montana but it was not incorporated or headquartered there.  The decision in BNSF stated in-state business does not suffice to permit the assertion of general jurisdiction over claims that are unrelated to any activity occurring in the state.  This has continued to be the rule in many state courts—including Missouri, that compliance with registration or doing business in that state does not equal consent to general jurisdiction.  The state of Pennsylvania itself also does not consider this registration as consent.

The greatest concern in this decision is not just the extension of personal jurisdiction where the parties do not reside and the injury did not occur, but that the Supreme Court has decided that they can back on overturned decisions.  Because of Shaffer does this mean that International Shoe is overturned?  Is Shaffer overturned and judges can pick and choose precedents—overturned or valid?  Choosing cases that “directly control” and stating the Court has the prerogative to change precedent is a change in how the Court operates.  Such a precedent in the Courts only threatens the rules and regulations that we live under today.

Article written by Associate Attorney Elisa Leighton | Gausnell, O’Keefe & Thomas, LLC

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