The Supreme Court recently delivered a significant ruling in Mallory v. Norfolk Southern Railway Co., reshaping the landscape of corporate jurisdiction in the United States. The case centered around the question of where firms can be sued, either under "specific" jurisdiction for activities related to their business or "general" jurisdiction regardless of location. The Court's decision potentially marks a return to fundamental corporate law principles or a major reform, depending on one's perspective.
Historically, courts have treated businesses differently when it comes to jurisdiction. "Specific" jurisdiction permits a company to be sued in a state where it has engaged in activities that have caused harm, such as a product injury in Massachusetts caused by Company X. "General" jurisdiction, on the other hand, allows a company to be sued for any claim, regardless of where the incident occurred, but only if the company is considered "at home" in the state, usually its place of incorporation or principal place of business.
In the Mallory case, the Court revisited an ancient regulation and, citing a 1917 judgment, concluded that a company is subject to "universal" jurisdiction in a state if it is registered to conduct business there. This means that if Company X is registered in Kentucky and an incident occurs in Iowa, the plaintiff can sue the company in Kentucky, irrespective of whether the claim is related to the company's activities in Kentucky. Business registration now acts as a "tag" that brings companies under the jurisdiction of a state, effectively expanding courts' jurisdiction over corporations.
The Mallory ruling carries significant implications for corporations and the legal landscape. By subjecting companies to jurisdiction based on business registration alone, it simplifies the process of filing lawsuits against firms operating across state lines. Plaintiffs can now seek remedies in states where the companies are registered, potentially leading to an increase in lawsuits filed in new venues. This might lower the cost and effort of pursuing legal action against corporations.
However, the decision has faced opposition from a minority of the Court, notably Justice Alito's concurrence. Some argue that this expansion of state jurisdiction over corporations could potentially violate the Constitution's "dormant" commerce clause, which pertains to Congress's ability to regulate interstate trade without actively doing so. Critics raise concerns about potential conflicts arising from varying state laws and the possibility of forum shopping.
In light of the Mallory ruling, corporations must carefully consider the implications of registering to conduct business in various states. Business registration now serves as a waiver of jurisdictional arguments, leaving companies more susceptible to being sued in those states. Corporations should seek expert legal advice to understand how this ruling affects their operations, potential litigation risks, and compliance with different state laws.
As this new rule takes effect, corporations must navigate the changing landscape carefully and seek expert advice to safeguard their interests and minimize potential liabilities.