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Litigation Tourism: Judicial Hellholes® Are Open for Business

Judges in Judicial Hellholes® have made a habit of swinging open their courtroom doors to out-of-state plaintiffs. This policy benefits plaintiffs but negatively impacts the states’ civil justice systems. It clogs courts, drains court resources, and drives businesses out of the states leading to job loss.

Plaintiffs’ lawyers flock to plaintiff-friendly courts seeking to take advantage of low barriers of entry and reputations for nuclear verdicts and expansive rulings.

Unfortunately, this year, the United States Supreme Court created significant ambiguity with respect to plaintiffs’ ability to drag out-of-state defendants into Judicial Hellholes® that have little or no connection to the case at hand.

Mallory v. Norfolk Southern Railway Co.

On June 27, 2023, a fragmented U.S. Supreme Court handed down its decision in Mallory v. Norfolk Southern Railway Co.– an opinion that may broaden plaintiffs’ opportunity to pursue lawsuits in problematic trial courts that have no connection with the events or involved parties. Specifically, the Court rejected a constitutional due process challenge to Pennsylvania’s statutory arrangement providing that a corporation’s registration to conduct business within the state constitutes consent to allow Pennsylvania courts to “exercise general personal jurisdiction” in any lawsuit brought against that corporate entity. In Mallory, a Virginia resident sued a Virginia-based railroad in Pennsylvania, relying purely on the railroad’s registration to do business in the state. A plurality of four justices concluded that constitutional due process concerns are not implicated “when an out-of-state defendant submits to suit in the forum State” as the Pennsylvania business registration statutes require.

Four justices dissented from this conclusion. These justices recognized that the absence of constitutional limitations on consent-by-corporate-registration statutes will open the door to a free-for-all with no practical limits on state courts’ exercise of jurisdiction. The dissenting justices would not allow state legislatures the ability to eliminate constitutional protections by following the Pennsylvania statutory model.

This decision will not only embolden the plaintiffs’ bar in Pennsylvania, but in other Judicial Hellholes® as well. The Georgia Supreme Court, the high court in this year’s No. 1 Judicial Hellhole®, reached a similar decision in 2021 and the New York legislature is considering enacting a statute similar to the one at issue in Pennsylvania.

Mallory in the Context of the Supreme Court’s Other Jurisdictional Decisions

The Mallory decision seems to continue the Supreme Court’s retreat from clear limitations on state courts’ ability to exercise personal jurisdiction over out-of-state corporate defendants. Prior rulings had signaled certain defined boundaries that state courts could not cross when attempting to exercise jurisdiction.

For example, in BNSF v. Tyrell (2017), the Court concluded that due process allows general jurisdiction over a corporate defendant only where the defendant is “essentially at home,” typically just its state of incorporation and where its principal place of business is located. The fact that the corporation does substantial business in the forum state, even employing thousands of people and operating extensive facilities, “does not suffice to permit the assertion of general jurisdiction over claims . . . that are unrelated to any activity occurring in [the forum state].” In contrast, Mallory found general jurisdiction less constrained, concluding that a corporation’s simple act of registering to do business in Pennsylvania is sufficient to enable the state to exercise general jurisdiction pursuant to the statute’s consent provision.

The less exacting requirements for establishing jurisdiction seen in Mallory also seem to comport with the softening of the specific jurisdiction analysis employed in Ford Motor Co. v. Montana Eighth Jud.Dist. Ct.,(2021). Prior to Ford, the Court had indicated in Bristol-Meyers Squibb v. Superior Court of California that due process considerations limited the exercise of specific jurisdiction to situations in which the lawsuit “arises out of or relates to the defendant’s contact with the forum,” meaning that the lawsuit stems from an “activity or an occurrence that takes place in the forum State and is therefore subject to the State’s regulation.” Even though the defendant in Bristol-Meyers Squibb sold its pharmaceutical product nationally, the fact that specific non-resident plaintiffs did not purchase, ingest or suffer injury from the product in California deprived the courts in that state of specific jurisdiction over the non-residents’ claims due to the lack of a “connection between the forum and the specific claims at issue[.]” But in Ford, the Court concluded that the state courts could exercise specific jurisdiction even though Ford did not sell the accident-involved vehicles in the forum state. The Court ruled that Ford’s forum state advertisement, sale and servicing of the same model as the vehicles at issue was sufficient to establish that lawsuits “relate to” the defendant’s contacts with the forum sufficient to allow specific jurisdiction.

Lower courts have struggled to find consistency in deciding what facts will establish adequate contacts by a corporation with the forum state that “relate to” the subject matter of a lawsuit. Courts in Judicial Hellholes® have ceased this opportunity to allow litigation tourism to flourish in their states. Without clear guidance from the U.S. Supreme Court, plaintiff-friendly courts across the country are likely to stretch the boundaries and further extend their jurisdiction over foreign defendants.

The Future of Mallory and Consent-by-Registration Statutes

Justice Samuel Alito’s concurring opinion determined the direction of the Mallory ruling, and his constitutional analysis contains competing elements. On the one hand, Justice Alito concluded that Pennsylvania’s statutory arrangement did not run afoul of due process limitations even though the statutes enable abusive litigation tactics to require corporate defendants to defend lawsuits in infamous trial courts having no connection to the parties or the events at issue.

On the other hand, Justice Alito observed that other constitutional protections, including state sovereignty, federalism, and the dormant commerce clause, are likely infringed by the consent-by-registration statutory arrangement. Justice Alito identified the potentially “devastating” consequences of consent-by-registration laws, which will be most severe for small businesses that cannot afford the risks of remote litigation and may therefore forgo out-of-state expansion altogether.

Accordingly, if constitutional arguments on the alternative grounds he identified had been properly raised, he seemingly would have struck down the statutes. His assessment therefore leaves the constitutionality of Pennsylvania’s consent-by-registration statutes unresolved and subject to further litigation on remand.

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