Norfolk Southern Ruling Dulls Liability Shield for Companies

On June 27, the US Supreme Court upheld an unusual Pennsylvania law that allows plaintiffs to sue corporations in state court over disputes that have no direct connection to the state. The court split on nonpartisan lines in Mallory v. Norfolk Southern Railway Co.—on an issue that seems dry and technical to non-lawyers (also to many lawyers), so it’s unlikely to garner much attention.

But the decision is worth paying attention to, because it signals that the court might be less inclined to shield corporations from suit than it has been in the past.

In this case, Robert Mallory sued his former employer, Norfolk Southern Railway, over alleged exposure to carcinogens while at work. Mallory sued in Pennsylvania, even though he and Norfolk Southern are Virginia citizens, and he worked for the company in Virginia and Ohio. The lack of connection between Mallory’s claims and Pennsylvania would usually mean that, under the Due Process Clause of the Fourteenth Amendment, the state courts can’t assert “personal jurisdiction” over Norfolk Southern.

Typically, corporations can be sued in the states where they are incorporated or have their principal place of business ( “general personal jurisdiction”), or they can be sued in states that have a strong connection to the suit, especially through the defendant’s conduct (“specific personal jurisdiction”).

In this case, Pennsylvania’s jurisdiction over Norfolk Southern was based on something else: A state law that requires corporations that want to do business in the state to agree to submit to the state courts’ jurisdiction for any lawsuit, even those with no connection to the state.

In a fractured 5-4 decision, the court ruled that the Pennsylvania law doesn’t offend the Due Process Clause. In the majority’s view, defendants have always been suable in a court that would otherwise not have jurisdiction as long as they have consented (for example, by contractually agreeing to litigate claims in a particular state, or by failing to object to the court’s jurisdiction at the start of the lawsuit).

Beyond its specific holding, the decision offers evidence that the court is increasingly interested in leveling the playing field between individual plaintiffs and corporate defendants. Corporations prefer stricter limits on personal jurisdiction—the fewer places they can be sued, the harder it is for plaintiffs to bring suit.

Corporations especially want to avoid plaintiff-friendly states that the American Tort Reform Association uncharitably describes as “judicial hell-holes” (Pennsylvania was #2 in the most recent rankings). But, as Mallory’s attorney put it at oral argument, “one person’s hell hole is another’s nirvana,” and permissive jurisdictional rules are a boon for plaintiffs (and their lawyers).

For about a decade, the Roberts Court seemed to sympathize with corporations. Starting in 2011, it repeatedly enforced constitutional limits on state assertions of personal jurisdiction over corporate defendants.

But, in 2021, it bucked that trend, unanimously ruling that plaintiffs injured while driving Ford vehicles could sue the company in the states where they lived (and where the accidents happened)—even though Ford did not manufacture or sell the vehicles in those states. And now a bare majority has upheld a law that allows jurisdiction over corporations in suits that have no connection to the state whatsoever.

It is telling that Justice Neil Gorsuch opened his majority opinion by noting how a ruling for Norfolk Southern would subject corporations and individuals to different legal regimes. It has long been the rule that an individual can be sued anywhere they can be found and served with papers (lawyers call this “tag” jurisdiction). So if Norfolk Southern wanted to sue Mallory, and served him while he was on vacation to Disneyworld, the Florida courts could hear the case.

Why, Gorusch asked, is Norfolk Southern “entitle[d] … to a more favorable rule” that says they can’t be sued wherever they are found? At the same time, he expressed little sympathy for the argument that it was unfair to let Pennsylvania extract consent to jurisdiction as a cost of doing business there. Citing Norfolk Southern’s 5,000 employees and 2,400 miles of railroad track in Pennsylvania, Gorsuch concluded that its fairness arguments “meet a dead end.”

That said, Justice Amy Coney Barrett’s prediction that this ruling shoves prior (corporate-friendly) limits on personal jurisdiction “halfway out the door” may be overstated. For starters, Pennsylvania is currently the only state that has such a broad jurisdictional statute, and just because the Due Process Clause allows other states to adopt their own doesn’t mean they are obliged to. Corporations are pretty good at lobbying state legislatures, and many states might worry that spooked companies could take their business elsewhere.

Defendants like Norfolk Southern also have another constitutional arrow in their quiver. Justice Samuel Alito joined the majority on the Due Process question, but wrote separately to argue that the Pennsylvania law violates the Constitution’s prohibition on states discriminating against out-of-state companies (the “Dormant Commerce Clause”). Because the state courts did not consider that argument, the Supreme Court remanded the case to allow them to do so.

Even if the Pennsylvania law survives further challenges, it’s too early to predict how far the court’s apparent course-correction will go. Gorsuch was barely able to cobble together a majority, and no fair-minded observer would describe the conservative-dominated Supreme Court as “plaintiff-friendly”—witness its recent addition to a series of decisions forcing people suing corporations to go to arbitration, rather than to court.

At minimum, however, the ruling suggests that corporations seeking constitutional protection from lawsuits in state courts may no longer get the friendly reception at One First Street that they are used to.

The case is Mallory v. Norfolk S. Railway Co., U.S., No. 21-1168, opinion.

This article does not necessarily reflect the opinion of Bloomberg Industry Group, Inc., the publisher of Bloomberg Law and Bloomberg Tax, or its owners.

Author Information

Kevin Arlyck teaches civil procedure and federal courts at Georgetown Law and is an expert on the federal government’s early history. He previously clerked on the Supreme Court for Associate Justice Sonia Sotomayor.

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