Mallory, Consent, and Political Economy

Norfolk Southern 8807 by Emmett Tullos (CC BY 2.0)

The Mallory decision has been ably summarized here and elsewhere, so this post assumes familiarity and offers a few reflections.

To begin with, while it might not be a popular opinion, I don’t find the decision to be that interesting. The result roughly lined up with how I thought the case would turn out. Mallory presented a close question, hence the close decision. Ultimately, I expected the Court would not reject the Pennsylvania statute on Due Process grounds. Part of why I expected this result is that holding that the Due Process Clause constrained consent-based personal jurisdiction might put pressure on the Court’s favorable treatment of forum selection clauses and arbitration agreements—which might be susceptible to the same kind of fairness arguments as personal jurisdiction via consent-based registration statutes.

This emphasis on consent connects to an observation about how the decision relates to prior doctrine. My view is that Mallory is not a substantial departure from existing law. (That doesn’t mean it is right, of course!) Consent has long been an acceptable basis of jurisdiction. And it has persisted to the present day in various forms.

Importantly, though, I think it is wrong to say Mallory returns us to the pre-Goodyear era of general jurisdiction. Formally, these decisions address different bases of jurisdiction—Goodyear rejected general jurisdiction based on in-state conduct, while Mallory approved of general jurisdiction on the basis of consent. Practically, prior to Goodyear, state courts could assert general jurisdiction over out-of-state corporations on the basis of in-state contacts without any intervention by the state legislature. Some courts analogized doing business to in-state “presence” for which the common law provided jurisdiction without statutory authorization, thus they found doing business general jurisdiction regardless of the text of state long arms. Other courts read doing business into ambiguous provisions. Doing business general jurisdiction, in other words, was often judge-made. Mallory, to the contrary, approves of consent-based jurisdiction only when a state legislature so directs. That’s just different. It is different because many state legislatures won’t (see below), and it is different because it might matter normatively whether jurisdiction is the product of the legislative process. Consent-based jurisdiction also requires a conscious decision from the defendant, which matters for reasons of notice and fairness.

Turning back to state legislatures, my prediction is that we will not see a rush to enact consent-based statutes that apply to all corporations that register to do business in a state. Putting aside the possibility that the Supreme Court rejects these statutes on Dormant Commerce Clause grounds, I am dubious that we will see a rash of these statutes for reasons of political economy. Out-of-state corporations may oppose general jurisdiction registration statutes. In an age of large multinational corporations, there are enough large and powerful out-of-state corporations that we might expect them to wield significant political power in every state, for example through organizations such as the Chamber of Commerce or PhRMA. Meanwhile, broad consent-based statutes might benefit tort plaintiffs, but I just don’t think they represent a particularly strong lobbying interest. Consistent with this story, few states have statutes like Pennsylvania’s, and we have not seen a rush to adopt them since Goodyear.

That said, I would not be shocked if we saw a turn to more particularized consent-based statutes. Registration statutes potentially favor in-state business by dragging out-of-state competitors into court. So perhaps we might see statutes that favor, in a protectionist vein, specific local industries. What if Connecticut enacted a registration statute requiring consent to general jurisdiction for any out-of-state business seeking to provide insurance in the state? (This approach would parallel earlier attempts by states to assert act-based jurisdiction over limited types of foreign businesses, including insurance companies.) States also might be incentivized to adopt this approach to bring business to local lawyers. What if New York required consent to general jurisdiction for any bank doing business in New York? (This approach would parallel New York’s especially favorable treatment of inbound forum selection clauses in high-value disputes.) Or, more ominously in my view, what if state officials tried to use such statutes to score political points in the culture wars, for example by requiring abortion providers to consent to general jurisdiction?

Finally, I want to end with a reminder of Linda Silberman’s suggestion that we should not be preoccupied with where we will be hanged, rather than whether we will be hanged. Although the Supreme Court seemed worried about California courts in Bristol-Myers Squibb, it is often the choice of law, not the choice of court, that matters. Perhaps we should focus less on whether Pennsylvania asserts jurisdiction over an out-of-state dispute and more on whether the state’s courts will apply Pennsylvania law to this out-of-state dispute. Indeed, the same concerns that might animate a Dormant Commerce Clause challenge to a registration statute also might implicate states’ preference for applying their own law to extraterritorial disputes—though existing constitutional constraints on choice of law are notoriously weak.