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Supreme Court Issues Its Decision, Reversing the Pennsylvania Supreme Court and Finding that the Pennsylvania Law that Requires Out Out-Of-State Corporations to Register to Conduct Business There

Posted on June 28, 2023 at 9:00 AM by Jennifer Johnson

As reported last fall, the United States Supreme Court granted certiorari to hear Mallory v. Norfolk Southern Railway Co., On June 27, 2023, the Supreme Court issued its decision, reversing the Pennsylvania Supreme Court and finding that the Pennsylvania law that requires out-of-state corporations to register to conduct business there, and which registration permits the state Court to exercise general jurisdiction, comports with due process.

The Court relied on a 1917 case that considered a similar Missouri statute, Pennsylvania Fire Ins. Co. of Philadelphia v. Gold Issue Mining & Milling Co., 243 U.S. 93 (1917). Pennsylvania Fire found that suits premised on a state business registration requirement do not deprive a corporation of due process. The Mallory Court rejected Norfolk Southern's argument that Pennsylvania Fire had implicitly been overruled by subsequent Supreme Court jurisprudence like International Shoe. Instead, the Mallory Court explained that International Shoe allows suits against out-of-state companies who have not consented to jurisdiction if they have sufficient in-state contacts. Pennsylvania Fire allows suits against out-of-state companies that have consented to jurisdiction by virtue of registering to do business there.

The Mallory dissent finds the majority decision flies in the face of precedent and overlooks the holding in BNSF v. Tyrrell, which rejected the idea that in-state business alone suffices to permit general jurisdiction over unrelated claims, even where state statute permitted jurisdictional reach.

Justice Alito authored a concurrence in the decision, but raising the question of whether the Pennsylvania statute violates the dormant Commerce Clause doctrine. Because the Supreme Court vacated the judgment of the Supreme Court of Pennsylvania and remanded the matter, the Pennsylvania courts will need to address the dormant Commerce Clause issue on remand.

There is potential that the Mallory opinion will encourage other states to adopt laws similar to the Pennsylvania registration statute, which could, in essence, create consent jurisdiction in any state where a company conducts business. We will report further developments of the Mallory matter on remand.

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