The United States Supreme Court just issued a major opinion on where companies can be sued: Mallory v. Norfolk Southern Railway Co (June 27, 2023). Depending on which side of the debate you favor, Mallory is either a return to basic principles or a sea change in corporate law.
People are subject to “tag” jurisdiction, meaning you can sue a person anywhere you can serve them. If you can serve an Ohio resident in Maine, you can sue them in Maine.
Courts have operated for a long time as if corporations are subject to different rules. A corporation is subject to “specific” jurisdiction wherever its actions have consequences. If Company X’s widgets cause injuries throughout Massachusetts, Company X can be sued in Massachusetts.
“General” jurisdiction is the power to sue a company for anything at all, regardless where it happened. If Company X is headquartered in Virginia and an executive sexually harasses an employee while on a business trip in Iowa, can that employee sue Company X in the employee’s home state of Kentucky? For a long time, the answer has been “probably not,” unless Company X is connected enough with Kentucky that it is “at home” there.
Mallory provides a new answer. There, a plurality of justices returned to what they viewed as an old rule. Following a 1917 opinion, they held that, if a company registers to do business in a state, a company is subject to general jurisdiction in that state—whether or not the lawsuit relates to its business there. So if Company X is headquartered in Virginia and an incident occurred in Iowa, the plaintiff can sue Company X in Kentucky, as long as Company X is registered to do business there. The key is Company X’s consent to Kentucky’s jurisdiction as a condition of doing business there. Registering to do business basically waives jurisdictional arguments.
In effect, this rule creates “tag” jurisdiction over companies. Whether it is a new rule or a return to an old one, it will significantly expand courts’ jurisdiction over corporations and, most likely, reduce the cost of suing companies.
A minority of the Court viewed this rule as a drastic departure from current practice, where companies are subject to “specific” jurisdiction where they cause harm and “general” jurisdiction where they are “at home.” Justice Alito’s concurrence took another view, arguing that state expansion of jurisdiction over corporations might violate the “dormant” commerce clause of the Constitution—which is, effectively, Congress’s right to regulate interstate commerce without actually doing so.
For now, companies should look for lawsuits in new forums—and take a close look at the fine print when they register to do business in a state.