The Major Ramifications of a Little-Noticed Case from 2023

A little-noticed case from last year has had significant ramifications for the states and companies doing business in them. Last year, the Court ruled that a unique Pennsylvania law allows any company doing business there to be sued in Pennsylvania court, regardless of whether the particular case has any connections to the commonwealth. The ruling could encourage other states to enact similar statutes, opening up a venue-shopping bonanza against any companies doing business in the United States. 

First, some background. In order to bring suit against a company in a particular jurisdiction, the plaintiff must show that the defendant company has a direct connection to that state. For example, if the company is incorporated in that state or its principal place of business is there. Otherwise, the specific action being litigated must have specific connections to that state in order to file the suit there. In this case, Mallory v. Norfolk Southern Railway, the plaintiff was an employee of the railway in Virginia and filed a lawsuit against his employer for alleged workplace injuries that occurred in Ohio and Virginia. But Mallory sued the railway in Pennsylvania, arguing that a law in that state, which requires the railway to register with the state as a condition of doing business there, gives Pennsylvania courts jurisdiction over the company and every other business registered to do business in Pennsylvania. As noted above, this gives Pennsylvania dramatically more power to hear cases that occurred in other states than is typically understood under jurisdictional procedure. 

Norfolk Southern argued that a law giving state courts jurisdiction over out-of-state corporations in all circumstances violates the railway’s constitutional rights under the 14th Amendment’s due process clause, which guarantees fair treatment by the government. The trial court and state supreme court agreed that the statute violated the railway’s 14th Amendment rights, and ruled that the state law was invalid. But the plaintiff appealed to the U.S. Supreme Court, which, in a narrow 5-4 ruling, reversed the lower courts’ 14th Amendment rulings, leaving the state law in place — at least for now. 

The Court’s decision is complicated, but Justice Alito, in a concurring opinion, while agreeing with the court’s decision that the 14th Amendment was not violated in this case, argued that the state law may still run afoul of other provisions of the U.S. Constitution, including the dormant commerce clause. So while the Pennsylvania law survives, the justices sent the case back to the lower courts, which may still invalidate the statute under a different constitutional provision. 

Ultimately, whether this statute survives will be a major question for anyone doing business in the U.S. The Biden Administration joined business groups in warning the Court that if allowed to stand, additional states would enact similar statutes to “reach beyond their borders and seize cases that concern only other states,” threatening to “upset the federal balance, which posits that each state has a sovereignty that is not subject to unlawful intrusion by other states.” 

The Supreme Court’s ruling was a surprising one, and the case itself will be important to watch for those of us keeping track of state power. Lawmakers may be hesitant to enact laws similar to that of Pennsylvania’s until the legal dispute is fully resolved, but trial attorneys are already encouraging additional states to do so. In fact, New York Gov. Hochul (D) vetoed a bill late last year that would have given New York courts jurisdiction over any company doing business in the state. 

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This article appeared in our Morning MultiState newsletter on February 13, 2024. For more timely insights like this, be sure to sign up for our Morning MultiState weekly morning tipsheet. We created Morning MultiState with state government affairs professionals in mind — sign up to receive the latest from our experts in your inbox every Tuesday morning. Click here to sign up.