Written By: Seth M. Owens
Two years ago this fall, I learned of the nightmares associated with the words “International Shoe and its progeny.” For those who do not understand the terror associated with this phrase, it refers to a line of cases all first-year law students learn in a Civil Procedure course. Specifically, International Shoe Co. v. Washington begins a line of cases all dealing with personal jurisdiction and whether a person or an entity has enough “contact” with a state in order to be sued there. While this line of cases has continued to develop for the last seventy-eight years, the Supreme Court’s recent decision in Mallory v. Norfolk Southern Railway Co. may have proverbially “untied” this body of established law and opened the door for many states to expand their jurisdiction and authority over an out of state person or entity.
What is personal jurisdiction and why does it matter?
Personal jurisdiction “refers to the power that a court has to make a decision regarding the party being sued” in any given case. It can be “specific” and based on a certain amount of “minimum contacts” with the state, or it can be a “general” authority where a defendant is domiciled. In “non-legal English,” it is the authority to make the defendant in a case subject to that court’s final ruling, and it depends on how the defendant is connected to that court. In practical terms, it is probably best illustrated with a hypothetical.
As a father, my child is subject to my “general” authority in our home. I can demand that they take particular actions and enforce reasonable punishments when they do not. These are the conditions for living in our home. Likewise, when my child visits a friend’s house, the other parents have “specific” authority to enforce their rules while my child is in their presence. However, their specific authority over my child only relates to actions taken while at their house. It is not a general authority to enforce rules against my child for other actions taken outside their home. Further, my general authority as a father extends to any action my child might take, regardless of whether we are at our home.
Even non-legally trained readers would likely agree with the foregoing hypothetical and understand its general use of “authority” as synonymous with the legal concept of personal jurisdiction. However, suppose a parent took their child to the only grocery store in town, Big Box, and posted out front is a large sign that reads, “By proceeding past this sign in order to do business with Big Box, any parent who brings their child into this store grants Big Box the general authority to enforce any punishment against your child, for any reason.” Maybe that parent thinks, “They can’t really enforce that,” and proceeds inside with the child to buy groceries. If they do not shop here, they will have to drive to the next town in order to do business. Surely, that parent would be outraged if a Big Box employee approached them and attempted to invoke Big Box’s general authority to punish their child for breaking a piece of furniture at the friend’s home a week earlier. Is there a legal basis for this assertion of general authority for something that happened outside the store?
Mallory v. Norfolk Southern Railway Co.
While the previous hypothetical may seem farfetched, the Court in Mallory ruled that based on the facts of that case, the hypothetical Big Box did have general authority to punish the hypothetical child because the general authority was consented to as a condition of doing business with the store. In Mallory, the plaintiff worked for Norfolk Southern Railroad for nearly twenty years in the states of Ohio and Virginia. Mr. Mallory alleged that he developed cancer from exposure to asbestos and other toxic chemicals that he was exposed to while working for Norfolk Southern and subsequently brought a lawsuit. What makes the Mallory case unique is that the lawsuit he brought against Norfolk Southern was filed in Pennsylvania state court for a particular reason.
To greatly simplify the traditional application of personal jurisdiction, as understood from “International Shoe and its progeny,” Mallory could have potentially brought his lawsuit in Ohio or Virginia, as this is where the alleged exposure occurred. Relating this to our previous hypothetical, while the child was at the friend’s home, the child is subject to the authority of the friend’s parents. Additionally, Mr. Mallory could have brought his lawsuit where Norfolk Southern was “at home.” For a business entity, this is the state in which they are incorporated and the state in which their principal place of business resides; for Norfolk Southern, that state was Virginia (Note: A business entity can be “at home” in more than one state. For example, Walmart has its principal place of business in Arkansas and is incorporated in the state of Delaware). Traditionally, this analysis would exclude states where a company was simply “doing business.” Norfolk Southern had a significant business presence in Pennsylvania but was not “at home” there. To return to the hypothetical once again, Norfolk Southern shopped at Big Box, a lot, but it did not call the store home.
Additionally, if a defendant directly submits to the authority of a court, the court automatically acquires personal jurisdiction over the defendant. In Mallory, the debate centered around a Pennsylvania statute that required Norfolk Southern to register with the state, in order to conduct business within the state. This same statute conferred like benefits on the registrant as any company “at home” in Pennsylvania, effectively authorizing general personal jurisdiction. The 5-4 majority in Mallory relied on the precedent established in Pennsylvania Fire Ins. Co. of Philadelphia v. Gold Issue Mining & Milling Co. (a 1917 case that predates International Shoe) to hold that the Pennsylvania statute was valid and Norfolk Southern had consented to general personal jurisdiction by registering to do business with the state. They went on to distinguish “International Shoe and its progeny” because the defendants had not consented to the states’ jurisdiction in those cases.
The four dissenting Justices fiercely defended the traditional standards developed over the last seventy-eight years. Ultimately, they cited precedent that Pennsylvania Fire had been directly overruled by “International Shoe and its progeny,” and even if the case still stood, it was based on express consent, not consent implied by doing business. Going back to the Big Box hypothetical, express consent would be akin to a parent signing a waiver that the store could discipline the child, while implied consent is akin to the parent simply walking past the posted sign.
What might the Mallory ruling mean for the future?
You might ask, how does a ruling about a technical matter of Civil Procedure impact me? The Dissenters in Mallory feared that the ruling might pave the way for other states to enact similar statutes as Pennsylvania’s (Currently, only Georgia also treats corporate registration as support for general jurisdiction, this by judicial ruling versus a statute.). If that were to happen, a business may be haled into court in any state it does business, for any reason, if that state requires consent to general jurisdiction as a condition of doing business there. While the impacts of the Mallory decision on the business landscape are yet to be known, one thing is for certain. This fall, thousands of incoming law students will be receiving an addendum to their Civil Procedure textbooks that adds another wrinkle to “International Shoe and its progeny.”
Sources:
Daimler AG v. Bauman, 571 U.S. 117 (2014).
https://www.law.cornell.edu/wex/personal_jurisdiction
https://www.sec.gov/Archives/edgar/data/104169/000119312511335193/d262056dex41.htm
https://www.supremecourt.gov/opinions/slipopinion/22
Insurance Corp. of Ireland v. Compagnie des Bauxites de Guinee, 456 U.S. 694 (1982).
International Shoe Co. v. Washington, 326 U.S. 310 (1945).
Mallory v. Norfolk Southern Railway Co., 600 U.S. ___ (2023).
Pennsylvania Fire Ins. Co. of Philadelphia v. Gold Issue Mining & Miling Co., 243 U.S. 93 (1917).
Shaffer v. Heitner, 433 U.S. 186 (1977).