?The U.S. Supreme Court has ruled that an employee can continue his civil case against a transportation company in Pennsylvania courts, even though the events of his case didn’t take place in the state.
In a 5-4 ruling on June 27, the court upheld a Pennsylvania law that requires companies to face lawsuits in the state when they register to do business there.
The ruling in Mallory v. Norfolk Southern Railway Co. may impact the locations where employers could face future trials, perhaps giving plaintiffs more opportunity to choose a jurisdiction that would likely be the friendliest to them. Having a lot of employees working remotely in different locations could open an employer up to a bigger number of jurisdictions where it could potentially be sued.
“Before today’s ruling, it was understood that general personal jurisdiction over a corporation could be found in only two very distinct places: the state of the company’s headquarters and the state of the company’s incorporation. However, the holding of Mallory now allows a corporation to be hauled into court in any state in which it has consented to jurisdiction,” said Saxon Guerriere, an attorney with Gordon Rees Scully Mansukhani in Dallas.
However, the application of the ruling may not be very broad, as the Pennsylvania law is unusual.
“This is not a very significant case for employers because it applies in very limited circumstances,” said Douglas Brayley, an attorney with Ropes & Gray in Boston. The Supreme Court’s ruling “is interpreting a Pennsylvania statute that is atypical. Other states could pass a law like that, but it’s not a typical law.”
Zach Busey, an attorney with Baker Donelson in Memphis, Tenn., agreed.
“I don’t think it has a day-to-day, significant impact in the employment context,” he said. “Courts aren’t in any hurry to allow day-to-day employment claims to be litigated in states that have no relationship” with the facts of the case.
“I don’t think we’re going to have a rash of cases of Pennsylvania courts holding on to cases” where the facts occurred in other states, Busey added.
Background
In the Mallory case, the high court concluded a state can require a corporation to consent to personal jurisdiction as a condition of doing business within the state, even if the corporation is not headquartered there. Such consent-by-registration statutes previously were common, but almost all have been revoked or interpreted to clash with Supreme Court decisions.
Virginia resident Robert Mallory sued Virginia-based Norfolk Southern Railway Co. in the Philadelphia County Court of Common Pleas for claims under the Federal Employers’ Liability Act, which created a workers’ compensation program permitting railroad employees to recover damages for their employers’ negligence.
Mallory said he was exposed to carcinogens that caused his colon cancer while he was employed by the railway in Ohio and Virginia between 1988 and 2005. He sued in a Pennsylvania court on the theory that it could exercise jurisdiction over the Virginia employer because the company had registered to do business in Pennsylvania. Mallory did not allege any harmful exposures in Pennsylvania.
“It’s a pretty unusual fact pattern where someone is trying to sue in a state that is not connected to the facts of the case. That would be especially unusual in an employment case,” Brayley said.
And such cases aren’t just unusual.
“It can be incredibly burdensome for a company to be dragged into a jurisdiction that has nothing to do with the underlying dispute and be forced to defend there,” said Andrew Pincus, an attorney with Mayer Brown in Washington, D.C.
Norfolk Southern claimed the Pennsylvania law violates the U.S. Constitution’s due process clause, which guarantees fair treatment by the government, by giving state courts jurisdiction over out-of-state companies in all circumstances.
A Pennsylvania trial court dismissed Mallory’s lawsuit for lack of jurisdiction, and the Pennsylvania Supreme Court agreed.
The U.S. Supreme Court reversed that decision and remanded the case to lower courts. It relied on precedent set in Pennsylvania Fire Ins. Co. of Philadelphia, which held that a state does not violate due process under the U.S. Constitution if it requires out-of-state companies to agree to personal jurisdiction in order to register to do business in the state.
Norfolk Southern argued that “the due process clause separately prohibits one state from infringing on the sovereignty of another state through exorbitant claims of personal jurisdiction,” Justice Neal Gorsuch wrote in the opinion. “In candor, the company is half right.” However, the court’s personal jurisdiction cases have never found a due process clause problem grounded in federalism when an out-of-state defendant has agreed to be subject to lawsuits in the state, Gorsuch added.[GC4]
In a concurring opinion, Justice Ketanji Brown Jackson agreed: “In my view, there is no question that Norfolk Southern waived its personal-jurisdiction rights here.”
Employers Should Rely on Arbitration Agreements
Employers do have one way to protect themselves: If an employee has signed an arbitration agreement, that would prevent them from taking a claim to a court in a different state.
Busey said the Mallory case “reiterates the importance for employers to consider implementing arbitration agreements, as we see further and further efforts to expand jurisdictions in which lawsuits can be filed, and we see more aggressive forum shopping by the attorneys in plaintiff’s bar that files those lawsuits.”
Pincus concurred. “A fair arbitration agreement that uses a reputable arbitration forum is the quickest way to reconcile these disputes,” he said.
