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Monday, May 02, 2022

Why Mallory?

This is the second post on next Term's SCOTUS case on general personal jurisdiction by Rocky Rhodes (South Texas) and Cassandra Burke Robertson (Case).

As we mentioned in our last blog post, scholars and practitioners have been waiting a very long time for the Supreme Court to take up the question of the states’ power to require consent to personal jurisdiction as a condition of registration to do business. Another case, Cooper Tire & Rubber Company v. McCall, appeared to be a strong candidate for a cert grant. It attracted substantial cert-stage amicus support, and we predicted that the Court would be interested in it.

Instead, however, the Court granted certiorari in Mallory v. Norfolk Southern Railway Co. and appears to be holding Cooper Tire for the decision in Mallory.

Both the petitioner and respondent in Mallory argued that Mallory presents a cleaner legal issue. In some ways, the parties are right—but Mallory does have some quirks of its own.

What is cleaner in Mallory is the legal background. Pennsylvania’s long-arm statute is unique in that it explicitly provides that by registering to do business companies consent to general personal jurisdiction in the state. This transparency is important to the case in two ways.

First, in a case challenging the state’s power, it is helpful to have a clear statement of the state’s law. The Georgia law at issue in Cooper Tire was less clear; although the Georgia Supreme Court followed state precedent concluding that registration impliedly demonstrated all-purpose consent to personal jurisdiction, the court expressed some uncertainty as to whether that precedent reflected the legislature’s intent and recommended that the legislature clarify the long-arm statute.

Second, Pennsylvania’s clear statement is helpful in determining the scope of consent. That is, as Tanya Monestier has convincingly argued, implied consent is not consent at all—it is, instead, a trap for the unwary corporation that would have no reason to expect that business registration would give the courts of a state the authority to hear any and all claims against that business, including claims that have no connection at all to the forum.

Pennsylvania’s explicit statute, on the other hand, gives fair warning to corporations about the effect of their decision to register. In that sense, it makes registration-based consent mirror an arbitration clause in a contract of adhesion—not a term that the signing party necessarily wants, but one that the party is willing to accept to obtain the benefits of the contract. The Supreme Court, of course, has been highly deferential to contracts including arbitration and forum selection clauses, even in contracts of adhesion.

A clear long-arm statute and fair notice are helpful to enforcement. But are they enough? We have argued elsewhere that there is one more essential piece of the puzzle that makes state-required consent different from private agreements: a sovereign interest in the case. That is, the state can explicitly condition benefits on consent to jurisdiction—but only insofar as the state has a sovereign interest in the underlying case. Jack Preis and Jeff Rensberger have similarly separately argued that some state benefit or a state sovereign interest is required to satisfy constitutional limits on exacting consent through a registration statute.

On that point, Cooper Tire appears stronger than Mallory. The plaintiff in Cooper Tire was a passenger in a car that was involved in an accident in Florida. But the driver of the car, who was also a defendant in the suit, was a Georgia resident, as was the used-car dealer who sold the car and inspected the tire. Because the plaintiff wanted to sue the driver, the car dealer, and the tire manufacturer, it made sense to sue in Georgia. And Georgia has a clear sovereign interest in ensuring the safety of the cars sold in the forum as well as adjudicating the liability of state residents. Furthermore, it is not clear that any other forum would have had personal jurisdiction over all three parties—the used-car dealer, for example, seems to have no Florida contacts.

With Mallory, it is not evident that there is a sufficient state interest. The respondent has argued that there is no tie to Pennsylvania, but that is not entirely true—the plaintiff’s complaint notes that Mallory worked for Norfolk Southern in Pennsylvania for the last part of his career before retirement, although there was no allegation that any asbestos exposure took place in Pennsylvania. And by the time suit was filed, Mallory was living in Virginia, not Pennsylvania. Still, the employment connection may provide some basis for the state to have an interest in the outcome of the suit—the state would, after all, have at least some interest in the employment relationship within the state. But if the Supreme Court were to adopt our view of the importance of the underlying sovereign interest, it may need to remand the case for further fact-finding. Neither the plaintiff nor the defendant has fleshed out the state connection.

Posted by Howard Wasserman on May 2, 2022 at 09:47 AM in Civil Procedure, Howard Wasserman, Judicial Process | Permalink

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