Laying the Tracks for Litigation Tourism: Mallory v. Norfolk Southern Railway Co.
On June 27, 2023, the U.S. Supreme Court issued a 5 to 4 decision, Mallory v. Norfolk Southern Railway Co., that may have substantial legal implications for businesses and organizations that do business in multiple states. After this ruling, a large number of organizations will likely be subject to legal jurisdiction in states in which they have very little connections, let alone legal counsel. Organizations should consider the potential consequences of the Mallory decision, analyze legal risks, and take steps to mitigate those risks.
Understanding Personal Jurisdiction
To appreciate the importance of the Mallory decision, it is important to understand the concept of “personal jurisdiction,” which refers to the power of a court to exercise jurisdiction over a given individual or entity. The U.S. Constitution places limits on the scope of courts’ personal jurisdiction. Generally, a state court (or a federal court sitting in a state) may not exercise jurisdiction over a person or entity unless that person or entity has sufficient minimum contacts or connections with the state or area where the lawsuit is taking place. In order to be subject to personal jurisdiction in a state, a person or entity must have reached out to benefit from that state.
For example, if a California resident gets sued in New York, but has no meaningful connections with New York, no court in New York (state or federal) may exercise jurisdiction over that defendant. The plaintiff will need to sue that resident in California or in another state in which the defendant has sufficient contacts to create personal jurisdiction.
There are two general categories of personal jurisdiction: special personal jurisdiction and general personal jurisdiction. A court will have special personal jurisdiction over a defendant when the defendant has sufficient minimum connections with the state and the subject matter of the litigation arises out of those connections. For example, if a Texas driver collides with another motorist in Tennessee, the injured plaintiff may sue the Texan in a Tennessee court for negligence. The Texan had contacts with Tennessee (i.e., driving on Tennessee roads) and the subject matter of the negligence lawsuit arose from those connections. However, with no other connections to Tennessee than merely driving through, the Texan generally may not be dragged into a Tennessee court for matters that did not arise from the Texan’s transient trip through the state, for example, a contract entered into outside of Tennessee.
However, when a person or individual has systematic and continuous connections with a state, such as having a residence there, being incorporated there, or being headquartered there, then the courts of that state may exercise general personal jurisdiction, also known as “at-home” and “all-purpose” jurisdiction. This means that the defendant may be sued for anything in that state. For example, if ACME Corporation is incorporated in Montana, headquartered in Maine, and has its largest factory and distribution center in Minnesota, ACME may be sued for anything in the courts of any of those three states This is because ACME has systematic and continuous contacts with each of those states.
Litigation Tourism: The Problem of Forum Shopping
Plaintiffs who want to sue organizations will often have strategic reasons to want to file their lawsuits in one state rather than another. This is known as forum shopping. For example, an automobile collision might occur in State A, but defendant driver resides in State B, which is known for having more pro-plaintiff jury pools. If given the option to sue in either state, the plaintiff will likely sue in State B because it helps the chances of obtaining a successful outcome in the lawsuit.
As another example, if an organization operates a children’s camp in State A, but State B enacts a law abolishing the statute of limitations for child sexual abuse claims (as several states have done), a plaintiff alleging to have been abused while attending camp 20 years ago is incentivized to find some kind of jurisdictional nexus that the camp has to State B so the lawsuit can be brought in that state.
The diversity of laws, limitations periods, and jury trends between states, and the reality that organizations may be subject to jurisdiction in multiple states, creates this “litigation tourism” scenario in which plaintiffs search for ways to bring their lawsuits in the jurisdiction that is most favorable to their chances of obtaining the best outcome. Personal jurisdiction is generally the main factor that controls to what extent a plaintiff may shop around to find the most favorable forum in which to file a lawsuit. And plaintiffs’ motivations are never to make it easy or convenient for the defendant(s) they are suing.
The Mallory Decision
The Mallory case involved a former employee of Norfolk Southern who sued his former employer under a federal railroad worker compensation statute after he was diagnosed with cancer that he alleges was caused by his work environment. The plaintiff was a Virginia resident, Norfolk Southern is both incorporated and headquartered in Virginia, and most of the work the plaintiff did for Norfolk Southern occurred in Virginia. Nevertheless, the plaintiff filed his lawsuit in Pennsylvania state court, possibly for jury pool or other strategic litigation reasons.
Norfolk Southern argued that there was no personal jurisdiction in Pennsylvania because Norfolk Southern was not “at-home” in Pennsylvania in the sense of having systematic and continuous contacts with Pennsylvania. However, the plaintiff pointed to the fact that Norfolk Southern had registered with the Pennsylvania Secretary of State to do business there as a foreign entity. Pennsylvania law requires such out-of-state companies to agree to appear in Pennsylvania courts on “any cause of action” against them. This law essentially required out-of-state companies to consent to general personal jurisdiction as a condition of being able to do business in Pennsylvania, regardless of whether they had sufficient contacts there.
The central legal issue in the Mallory case was whether this “consent-by-registration” statute and Norfolk Southern’s registration with the Pennsylvania Secretary of State, was a constitutionally valid basis to create general personal jurisdiction in Pennsylvania. The U.S. Supreme Court ruled that it was. This means that a state may require an out-of-state company to consent to general personal jurisdiction as a condition of being able to do business there, even if the company otherwise did not have contacts with that state to make it “at-home” there.
Managing Legal Risk in Light of Mallory
Because many states have laws requiring out-of-state registrant entities to consent to general jurisdiction, or at least appoint an in-state agent for service of process, in order to do business there, the implications of the Mallory case could be huge. Certain organizations and industries may be more affected than others. For example, multi-state organizations that work with children could be affected by being subject to jurisdiction in states that have passed laws creating new causes of action for abuse allegations and suspending the statute of limitations for such claims. Because of the forum-shopping phenomenon discussed above, such organizations could now easily find themselves defending a lawsuit for decades-old abuse allegations in a state in which they do not have substantial connections, let alone legal counsel. Defendant organizations could find themselves having to defend lawsuits in random states for a host of other issues as well. This, of course, could be very burdensome and expensive for organizations and put them at a disadvantage in litigation.
In light of the Mallory decision and its major shift of the jurisdictional landscape, organizations should work with legal professionals to determine all the states in which they might be subject to personal jurisdiction, what laws and claims such jurisdiction might expose them to, and how they can mitigate legal risks. These steps might include, but are not limited to, ceasing or minimizing operations in risky states, creating special LLCs or other entities in risky states to isolate potential liability, and implementing written agreements with forum selection and choice of law provisions (or alternative dispute resolution) to help ensure any litigation that might arise is not on hostile turf. Organizations should work with experienced legal counsel to figure out what steps can be taken to avoid liability.
Featured Image by Rebecca Sidebotham.
Because of the generality of the information on this site, it may not apply to a given place, time, or set of facts. It is not intended to be legal advice, and should not be acted upon without specific legal advice based on particular situations