The Impact of Mallory v. Norfolk Southern R. Co. in Illinois, Missouri & Kansas
ABSTRACT: The Supreme Court of the United States recently reaffirmed one way that courts can gain personal jurisdiction over foreign corporate entities: consent. This decision has alarmed some in the corporate community. However, the decision is narrow enough that in most jurisdictions that alarm may not be justified.
The Issue Before the U.S. Supreme Court
The question before the Court was whether 14th Amendment due process is violated when a large out-of-state corporation with substantial operations in a State complies with a registration requirement that conditions the right to do business in that State on the registrant’s submission to personal jurisdiction in any lawsuits brought there. The United States Supreme Court vacated and remanded the decision of the Pennsylvania Supreme Court which had dismissed the lawsuit and held that Pennsylvania’s law did not violate the Due Process Clause.
Overview of the Supreme Court’s Decision
The focus of this post is to discuss Mallory’s impact on jurisdiction by consent under the corporate registration statutes in Illinois, Kansas and Missouri, where many of our clients are called upon to defend lawsuits.
In Mallory, a former employee of Norfolk Southern (NS), a company incorporated and headquartered in Virginia, resisted a suit from the former employee who contracted cancer while in employment in Ohio and filed suit in Pennsylvania. NS challenged personal jurisdiction, in part, by claiming that a Pennsylvania court’s exercise of personal jurisdiction over it would offend the Due Process Clause of the Fourteenth Amendment. The Pennsylvania Supreme Court ruled in favor of NS.
The Supreme Court reviewed the Pennsylvania Supreme Court’s decision under its century-old precedent in Pennsylvania Fire Ins. Co. v. Gold Issue Mining & Milling Co., 243 U.S. 93 (1917). The Court deemed the Pennsylvania Fire controlling, finding that the issue in Pennsylvania Fire was that “an out-of-state corporation may not do business in this Commonwealth until it registers with the Department of State.” The Court further found that the “explicit…qualification as a foreign corporation shall permit state courts to exercise general jurisdiction over a registered foreign corporation just as they can over domestic corporations.” The Virginia corporation at the time of this appeal had been a foreign corporation registered in Pennsylvania under this statute for 25 years. The Court emphasized that Pennsylvania Fire held that suits premised on such a statute do not deny a defendant due process of law. The Court did not opine as to whether any other set of facts would suffice to establish consent to suit.
The Court found that the Pennsylvania Supreme Court’s determination that Pennsylvania Fire was not to be followed due to tension with current other personal jurisdiction precedent set forth by the Supreme Court of the United States, was in error in this case. The Court emphasized that lower courts are to “follow the case which directly controls [here Pennsylvania Fire], leaving to this Court the prerogative of overruling its own decisions.”
Jurisdictional Impact of Supreme Court’s Decision
What impact will Mallory have in the jurisdictions of Illinois, Missouri, and Kansas? There are three lead cases: First from Illinois is, Aspen Am. Ins. Co. v. Interstate Warehousing, Inc., 2017 IL 121281, 90 N.E.3d 440 (2017). Second from Missouri is, State ex rel. Norfolk Southern Ry. v. Dolan, 512 S.W.3d 41 (Mo. banc 2017). Lastly from Kansas is, Merriman v. Crompton Corp., 282 Kan. 433, 146 P.3d 162 (2006).
In Aspen, the Illinois Supreme Court stated that the Illinois Business Corporation Act of 1983 and 805 of ILCS 5/1.01 “does not require foregoing corporations to consent to general jurisdiction as a condition of doing business at Illinois.” Aspen, 90 N.E.3d at 447. The corporate registration statute in Illinois as interpreted by its highest court is materially different than the sister statute in Pennsylvania. In Illinois, when a corporation registers to business within that state’s borders it is not an expression of consent to general personal jurisdiction and the due process analysis is required.
In State ex rel. Norfolk Southern Ry., the Missouri Supreme Court found that the Missouri statute controlling foreign corporate registration also does not require the consent to suit over activities not related to Missouri. In this case the Court reviewed Mo. Rev. Stat. 351.594.1 which states, “the registered agent of a foreign corporation authorized to transact business in this state is the corporation’s agent for service of process, notice, or demand required or permitted by law to be served on the foreign corporation.” The Court went on to explain the impact the statute has on foreign corporations jurisdictionally, by stating, “the plain language of Missouri’s registration statutes does not mention consent to personal jurisdiction for unrelated claims, nor does it purport to provide an independent basis for jurisdiction over foreign corporations.” Norfolk Southern, 512 S.W.3d at 52. Additionally, the Court was not compelled to determine the constitutionality of general jurisdiction under the registration statutes because “whether Missouri’s registration statutes constitutionally could condition doing business in Missouri on consent to general jurisdiction…is a question of interpretation of the instrument in which the consent is expressed and of the statute, if any, in pursuance of which the consent is given.” Id.
In Merriman, the Kansas Supreme Court analyzed K.S.A. 17-7301[now codified as 17-7931] and 17-7307 providing the interpretation of the statutes as they apply to foreign corporations registered to do business in the State of Kansas. First the Court noted that K.S.A. 17-7301 “requires foreign corporations wishing to do business in Kansas to file an application for authority including an irrevocable written consent of the foreign corporation that actions may be commenced against it in the proper court of any county where there is proper venue by service of process on the secretary of state.” Merriman, at 443. The Court then stated that “K.S.A. 17-7301(b)(7) requires, a consent to personal jurisdiction. Thus, a foreign corporation applying for authority to do business in Kansas under the statute expressly consents to personal jurisdiction and the statute provides a statutory basis for jurisdiction.” Merriman, 282 Kan. at 445.The corporate registration statutes in Illinois and Missouri comport with those in the majority of jurisdictions that do not act as consent to jurisdiction. As such, Mallory does not change jurisdiction law in those states. However, Mallory could have an impact should the legislature in those states decide to change the corporate registration statutes to provide for consent to general jurisdiction of their courts as a result of Mallory. In Kansas, whereby statute personal jurisdiction is premised upon registration, the Mallory decision would appear to foreclose future challenges to jurisdiction on due process grounds, where a business has registered and hence consented to personal jurisdiction in the state.
* Kaleb McKinnon, 2023 Summer Law Clerk, assisted in the research and drafting of this post. McKinnon is a rising 3L student at Drake University Law School.