Local companies could be impacted by Supreme Court ruling
Law could effect businesses that register to conduct business in multiple states
– Local businesses that register to conduct business in multiple states could be affected by a recent Supreme Court ruling, according to San Luis Obispo County Law Firm Carmel & Naccasha.
In its ruling, the court ruled that a business registered in a state can be sued even if the case didn’t occur in that state nor do any of the parties need to reside in that state, as a condition for doing business in that state.
In Mallory v. Norfolk Southern Railway Co., 1 (“Mallory”), the United States Supreme Court ruled that a Pennsylvania law requiring out-of-state companies registering to do business in Pennsylvania to consent to jurisdiction in Pennsylvania courts on “any cause of action” against them is constitutional. The court’s narrow 5-4 decision held that regardless of the location of, or accrual of the facts in a cause of action, a company registered to do business in a state with a law specifying that the company consents to jurisdiction by registering to do business there, has waived its jurisdictional defense.
“Registration to do business in certain states, like Pennsylvania, means that a company is subject to personal jurisdiction there for any lawsuit, regardless of whether it is related to the business of the company, regardless of where the Plaintiff is located, and regardless of where the cause of action occurred,” said Andrew Russell, an attorney at Carmel & Naccasha, LLP, in San Luis Obispo. “For large businesses with in-house counsel, this raises the prospect of being forced to retain outside counsel should registration in a “new” state led to a lawsuit there.”
Russell gives a hypothetical situation: A company registers to do business in a state with a law like Pennsylvania’s, with registration constituting consent to jurisdiction on any cause of action. Then say an employee of that company is involved in an on-the-job auto accident in a completely different state with an out-of-state plaintiff. Although that accident and that plaintiff have no ties to the state, the person involved in the accident could still sue in that state, regardless of the company’s other contacts there.
In the landmark case, Plaintiff Robert Mallory worked for Norfolk Southern for 20 years in Ohio and Virginia, where he was responsible for spraying boxcar pipes with asbestos, handling chemicals in the paint shop, and demolishing car interiors allegedly exposing him to carcinogens. After leaving Norfolk Southern, he moved to Pennsylvania and then returned to Virginia. He later developed cancer and filed a suit in Pennsylvania against Norfolk Southern. Mallory lived in Virginia and claimed chemical exposures in Virginia and Ohio, but had no claim for exposure in Pennsylvania, as he never performed his job there, and alleged no connection to Pennsylvania.
The court rejected Norfolk Southern’s defense that its principal place of business was in Virginia. Norfolk Southern did have extensive operations in Pennsylvania, but those contacts with the State of Pennsylvania were not the basis of the court’s decision.
Because the railroad company was registered to do business in Pennsylvania and since Pennsylvania requires registering out-of-state companies to agree to appear in courts on “any cause of action” against such companies, by registering the business under the statute, Norfolk Southern had consented to general jurisdiction in Pennsylvania.
“State laws on the interplay between registration and jurisdiction vary immensely,” said Jess Raynor, a partner at Carmel & Naccasha. “The critical takeaway for companies from this decision is to review the laws of each state where they are registered to do business and, if contemplating registering to do business in a particular state, to consider the risk of potentially being sued in that state for claims that have no ties at all to the business conducted by the company there or to the state.”
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