The United States Supreme Court’s Mallory Ruling: How State Business Registration May Result in Personal Jurisdiction

A divided Supreme Court recently announced its decision in Mallory v. Norfolk Southern Ry. Co., No. 21-1168 (June 27, 2023), which could subject companies to personal jurisdiction in states simply by registering to do business.

Mallory, an asbestos personal-injury case, involved questions of due process limitations on personal jurisdiction. Under Pennsylvania law, an out-of-state corporation may not do business in Pennsylvania until it registers with the Department of State.  15 Pa. Cons. Stat. § 411(a). In addition to the registration requirement, Pennsylvania law explicitly states that qualification as a foreign corporation in the state, shall permit Pennsylvania state courts to “exercise general personal jurisdiction” over the registered foreign corporation.  42 Pa. Cons. Stat. § 5301(a)(2).

Affirming its prior holding in Pa. Fire Ins. Co. v. Gold Issue Mining & Milling Co., 243 U.S. 93, 37 S. Ct. 344 (1917), the plurality in Mallory agreed that  a state may require, by statute, out-of-state corporations to consent to personal jurisdiction in the state before they may do business there. By registering to conduct business in Pennsylvania, the Defendant consented to jurisdiction in that state.

Mallory arguably represents a divergence from the more recent personal jurisdiction analysis, which focuses on the existence of either general or specific personal jurisdiction. For a state’s courts to exercise general personal jurisdiction over a defendant, the defendant must have contacts with that state that are sufficiently continuous and systematic to render it essentially “at home” there. See Daimler AG v. Bauman, 571 U.S. 117, 127 (2014). That standard is satisfied in the state where a company is incorporated or has its principal place of business. Alternatively, specific personal jurisdiction requires that the defendant’s contacts with the forum state “arise out of or relate to” the defendant’s in-state activities. Burger King Corp. v. Rudzewicz, 471 U.S. 462, 472 (1985).

A similar requirement to the Pennsylvania law regarding registration as a foreign corporation is found under Colorado law, “[a] foreign entity shall not transact business or conduct activities in this state except in compliance with this part 8 and not until its statement of foreign entity authority is filed in the records of the secretary of state.” Colo. Rev. Stat. § 7-90-801. Unlike Pennsylvania law, Colorado does not necessarily subject a company to jurisdiction merely be registering to do business in the state. See Colo. Rev. Stat. § 7-90-801(4).

Post-Mallory, businesses should examine the consequences of merely registering to do business in a particular jurisdiction. In addition, companies should evaluate the effects of their current registrations or other filings in particular states. Additional states may condition a foreign corporation’s registration upon consent to general personal jurisdiction. Alternatively, more pro-business states may decide that such a condition could stifle business. Companies with multistate operations should monitor the states in which they are registered to do business for any forthcoming legislation. Notwithstanding legislative action, Mallory also increases the importance of carefully analyzing whether to include choice-of-law and venue requirements in out-of-state contracts.

Justice Alito’s separate concurring opinion in Mallory highlights Dormant Commerce Clause concerns with the mandatory jurisdiction language in Pennsylvania’s statute. We anticipate further litigation on this issue as Mallory is remanded back to the Pennsylvania Supreme Court. Finally, Mallory may result in increased use of forum non conveniens arguments seeking to transfer cases to an alternative forum, even if personal jurisdiction exists. See, e.g., C.R.S. § 13-20-1004.

Attorneys at Wells, Anderson & Race, LLC frequently advise and represent corporations in Colorado state and federal courts. Please contact Adam O’Brien or Chelsie Smith for additional information.