The Supreme Court Lays New Track for Litigation Tourism

If someone were to claim that he developed cancer due to a company’s negligence, where would you expect him to sue? What if we told you that he lived in Virginia, the company has its headquarters in Virginia and it allegedly exposed the man to carcinogens in Virginia and Ohio?

You might think the answer is, “Virginia. Naturally.” But you’d be wrong. In this case, Pennsylvania has a greater reputation for massive verdicts in favor of plaintiffs, and due to a provision in the Commonwealth’s registration for out-of-state businesses, the plaintiff could sue there. If you don’t think that’s right? Well, that’s what legal insiders refer to as “litigation tourism,” and the Supreme Court recently said something to the effect of, “It’s tourism season!”

Mallory v. Norfolk Southern Railway Co.

The Supreme Court did not technically review the issue of litigation tourism. However, that was the big issue on attorneys’ minds as the Supreme Court decided whether a Pennsylvania state court could exercise jurisdiction over Robert Mallory’s suit against Norfolk Southern Railway.

As noted above, Norfolk Southern is based in Virginia. Mallory resided in Virginia at the time he filed suit. He claimed that Norfolk exposed him to asbestos and other carcinogens during his work in Virginia and Ohio. Yet, he filed suit in Pennsylvania.

He could do this because Norfolk Southern had registered to do business in Pennsylvania. Pennsylvania statute holds that out-of-state businesses that register in Pennsylvania must agree to appear in Pennsylvania courts against “any cause of action” against them.

Norfolk Southern argued that Pennsylvania courts didn’t have jurisdiction. The plaintiff, defendant and alleged cause of Mallory’s injuries were all based outside of Pennsylvania. Norfolk Southern argued that the suit represented a violation of the Fourteenth Amendment’s Due Process Clause. The Pennsylvania Supreme Court agreed with Norfolk Southern. But the U.S. Supreme Court reversed that ruling and sent the case back to Pennsylvania state court for further review.

Settling a Point of Confusion

The Supreme Court’s opinion made a special point of correcting the Pennsylvania high court over one particular line of thought. It noted that the Pennsylvania Supreme Court believed the U.S. Supreme Court had “implicitly overruled” the key precedent set by Pennsylvania Fire Insurance Co. of Philadelphia v. Gold Issue Mining & Milling Co. This was due to the Pennsylvania Supreme Court’s interpretation of recent opinions on other, seemingly related cases.

“That was error,” wrote the Supreme Court. It noted that lower courts should follow direct, controlling precedent. They should leave any business of overruling Supreme Court opinions to the Supreme Court, itself.

Indeed, Justice Gorsuch, who authored the opinion, noted that the precedential case Norfolk Southern held against Pennsylvania Fire didn’t conflict with it at all. Rather, the two precedents “sit comfortably side by side.”

The case Norfolk Southern used to support its Due Process argument was International Shoe Co. v. Washington. Norfolk Argued that the Supreme Court had said, in that case, that the Due Process Clause “tolerates two (and only two) types of personal jurisdiction over a corporate defendant.”

Specific jurisdiction arising from, or related to, a company’s activities in a state.

General jurisdiction, which could apply to all kinds of suits, but only in states where the company has its headquarters or primary place of business.

Norfolk Southern claimed neither of these applied in Mallory’s case. The activities Mallory claimed to be negligent had taken place in Virginia and Ohio. Norfolk Southern had its headquarters in Virginia.

But the Supreme Court noted that the circumstances of International Shoe were quite different from those of Mallory’s case. In International Shoe, the company had not incorporated in Washington or agreed to face suits there. Therefore, the opinion from International Shoe did not limit Mallory’s action but, instead, provided another novel way for courts to establish jurisdiction over out-of-state businesses.

Accordingly, the Supreme Court’s ruling proved the opposite of an end to litigation tourism. Instead, it clarified that state statutes such as Pennsylvania’s clearly allowed plaintiffs to haul businesses across state lines into favorable courts, and it clarified that International Shoe illustrated additional means of dragging foreign companies into state courts.

What Does This Mean for Businesses?

Most likely, the Supreme Court’s decision will lay the track for future litigation tourism. At least, it removes the plaintiff’s concern that it cannot drag a company across state lines into a jurisdiction with minimal contact with that company. The Supreme Court was unequivocally clear in that regard.

As Justice Ketanji Jackson noted in her concurrence, “The due process ‘requirement of personal jurisdiction’ is an individual, waivable right.” Businesses can choose to waive that right when they register in states that demand those businesses accept suits in their courts.

This means businesses, especially transportation companies like Norfolk Southern, may need to answer suits in courts that tend to favor the plaintiffs. However, the question of Due Process may not be the only question worth asking in this case. As Justice Alito noted, the Supreme Court neither explored, nor addressed, whether Pennsylvania and other states were acting within their Constitutional rights to force businesses to submit to their jurisdiction as part of their business registration.

Businesses confronted by future litigation tourists may consider pursuing Justice Alito’s line of thought. He suggests that state statutes that force businesses to answer lawsuits against any cause of action may “violate fundamental principles that are protected by one or more constitutional provisions[.]” As an example, Alito offers the “so-called dormant Commerce Clause.” Indeed, Alito suggests that Norfolk Southern could pursue that argument when it takes its case back to Pennsylvania state court.

For Now, It’s Time to Form New Strategies

Ultimately, the result is that businesses are more likely to find themselves hauled into out-of-state courts. When they do, they will want attorneys ready to offer alternate strategies. This might mean looking at the Commerce Clause. Or it might mean preparing to stand strong in negotiations or trial. But it won’t mean leaning on the Due Process Clause to argue against the very idea of litigation tourism.