State Interests for Jurisdiction by Registration

This is the final post by Charles "Rocky" Rhodes and Cassandra Burke Robertson (Case) on next Term's personal jurisdiction case. They will be back for the argument.

Our last post maintained that some state interest in the litigation is necessary for a corporation’s registration to support jurisdiction. This may appear counterintuitive. After all, if a corporation decides to register to do business when the state’s registration scheme specifies the jurisdictional consequences of registration, shouldn’t the registration operate as other forms of consent to jurisdiction, such as forum selection clauses, which do not typically necessitate a state interest?

But we think that the state-interest question is important enough that instead of joining an amicus brief supporting either party, we are working to draft a brief that charts a narrower course. Both the petitioner’s position (that the state may condition registration on consent to jurisdiction without exception) and the respondent’s position (that the state may not condition registration on consent to jurisdiction at all) raise serious federalism concerns.

First, the risk of state overreach is real, especially in areas where state policies are both diametrically opposed and politically salient. Imagine that Texas adopted a consent-by-registration statute as broad as the Pennsylvania one. National drugstores like CVS would have to register to do business and submit to personal jurisdiction as a condition of registration. Would the registration statute then allow someone to sue CVS in Texas for filling a mifepristone prescription outside the state of Texas? The threat of jurisdictional overreach reinforces the need for a sovereign interest, and it suggests that legislative jurisdiction and adjudicative jurisdiction can't be wholly separated.

At the same time, however, forbidding the state from extracting jurisdictional consent kneecaps state power so severely that it also undermines the federalist system. This is especially apparent in products liability cases, where it's common to have a seller, manufacturer, component-part manufacturer, buyer, and the injury in different states (as happened in the Cooper Tire lawsuit). In such cases, there may be no single state where all defendants could be subject to either general or specific jurisdiction. The state’s power to extract consent as a condition of registration allows the parties to be brought before the court in a single lawsuit. As Alexandra Lahav has recently noted, restricting states’ power to exercise personal jurisdiction in products liability cases undermines state tort law and risks granting effective “immunity from suit for manufacturers” that is at odds with state substantive law.

Our position is therefore different from either of the parties before the Court in Mallory: we think that the state’s authority to extract jurisdictional consent is a legitimate exercise of sovereign authority, but that its legitimacy extends only as far as the state’s sovereign interest.

This middle position fits with procedural principles, historical practice, and constitutional doctrine.

Differences exist between consent through registration and consent by contract or waiver by litigation conduct. As Tanya Monestier observed, contractual or litigation-conduct submissions to jurisdiction are limited to identifiable parties or specific lawsuits—a provision in a contract between private parties governs the forum for their dispute, or litigation conduct in an existing suit waives an otherwise available jurisdictional objection. In contrast, consent through registration represents the corporation’s acceptance of an obligation to defend those claims the state demands to acquire the benefits of engaging in intrastate business under the state’s sovereign authority.

Even though the Supreme Court has long viewed such statutory exchanges of obligations and benefits as manifesting a valid form of consent, the exercise of state sovereign authority in exacting such an agreement implicates constitutional concerns. These concerns, though, as Aaron Simowitz explained, do not doctrinally mirror the restraints for contacts jurisdiction. Courts should evaluate the constitutionally permissible scope of consent through registration under the limitations that have developed surrounding this type of jurisdictional assertion and other analogous statutory exchanges between sovereign states and citizens.

As discussed in our first post, the Supreme Court in the nineteenth century consistently expressed that the permissible bounds of jurisdiction against an appointed agent under a registration statute extended only to suits related to the business conducted in the forum. Although one reading of Justice Holmes’ opinion in Pennsylvania Fire in the early twentieth century is that a corporate registration statute may authorize jurisdiction for even unrelated claims without any connection to the sovereign authority of the State, the Supreme Court just three years after Pennsylvania Fire cautioned that it did “not wish to be understood that the validity of such service . . . would not be of federal cognizance.”  The original understanding thus presupposes some potential constitutional limits on the extent to which a corporation may be required to consent to jurisdiction to obtain the benefits of conducting intrastate business activities.

Due process ensures the government’s compliance with fundamental notions of fairness with respect to any of exercise of its power. As we have argued, in analogous statutory exchange situations, such as conditions on a land-use permit or implied consent to blood-alcohol testing as a condition for the privilege of driving on the state’s roads, the Court has required a congruence between the scope of the consent granted and the state benefits obtained as part of the exchange. Jeff Rensberger similarly relied on analogies to waivers of constitutional objections to state-court proceedings, exactions in takings cases, and the unconstitutional conditions doctrine to urge that a state sovereign interest is necessary to satisfy constitutional limitations.

Requiring the corporation to consent to all-purpose dispute-blind jurisdiction, for any claim filed by any person arising anywhere in the world, transcends this congruence when the state has no sovereign interest in the proceeding. Without a sovereign interest in the proceeding, the state is leveraging its permission to conduct intrastate corporate activities to regulate the corporation’s global activities, a disproportionate “deal” as the state has no generic interest in regulating a foreign corporation’s out-of-state conduct. On the other hand, if a sufficient state interest exists in the dispute, the arrangement is proportional. In exchange for the state’s forbearance in excluding, or attaching additional conditions on, the corporation’s in-state conduct, the corporation is agreeing to its amenability to suit for claims that have some connection to a state sovereign interest.

Jack Preis has argued convincingly that the Due Process Clause is not the only limit on personal jurisdiction—the Dormant Commerce Clause must also be considered, as a plaintiff’s forum choice over out-of-state corporations may burden interstate commerce. Under the Dormant Commerce Clause’s demand that state laws cannot discriminate against or impose an undue burden on interstate commerce in the absence of a sufficient local interest, Jack contends that registration statutes cannot authorize jurisdiction when the state does not have a strong enough interest in the proceeding, such as an in-state injury or a state citizen injured outside the state, a perspective we have mirrored in our own work.

Our view, then, of the correct answer to the question presented in Mallory—whether the Due Process Clause of the Fourteenth Amendment prohibits a state from requiring a corporation to consent to personal jurisdiction to do business in the state—is neither yes nor no, but sometimes, depending on the state’s sovereign interest in the case. Of course, both parties will see things differently, with Mallory arguing the answer is always no and Norfolk Southern Railway urging the answer is always yes. We’ll be back in the fall during the week of argument, thanks to Howard’s kind invitation, to discuss the parties’ positions in more detail as fleshed out by their merits briefing and the Court’s lines of inquiry.