CSG Law Alert: Out-of-State Corporations May Be Sued In States Where They Have Registered To Do Business
On Tuesday, June 27, 2023, the United States Supreme Court effectively decided in Mallory v. Norfolk S. Ry. Co.1 that an out-of-state corporation may be sued in each state in which it is registered to do business.
In general, a corporation (or other business entity) is considered “domestic” in the state in which it was legally formed. However, this same corporation is considered “foreign” (or out-of-state) in the eyes of all other states. Accordingly, these states may require foreign qualification of an out-of-state corporation before such corporation may do business in each of those respective foreign states.
In Mallory, among other things, the United States Supreme Court addressed a Pennsylvania law that prohibits a foreign corporation from doing business in Pennsylvania until it registers with the Pennsylvania Department of State.2 Many other states have similar laws and each have their own standards with respect to what it means to “do business in” that particular state.
Of importance, Pennsylvania law provides that “qualification as a foreign corporation” shall permit Pennsylvania state courts to “exercise general personal jurisdiction” over a registered foreign corporation, just as they can over domestic Pennsylvania corporations.3 In other words, “qualification as a foreign corporation” is a “sufficient basis” for Pennsylvania courts “to exercise general personal jurisdiction” over an out-of-state company.4
Thus, in exchange for the ability to conduct business, a registered foreign corporation must answer and defend itself against any lawsuits brought in the Commonwealth of Pennsylvania.5
In Mallory, the defendant was registered to do business in Pennsylvania as a foreign corporation for more than two decades. Accordingly, the Supreme Court held that the plaintiff’s case could proceed in Pennsylvania. While the Supreme Court’s ruling was with respect to Pennsylvania law, the Court’s decision effectively applies to any similar state foreign corporation laws that permit the state court to exercise personal jurisdiction over a foreign corporation registered to do business with the state.
For more information or further updates, please contact your CSG attorney or one of the authors of this alert.
1 Mallory v.Norfolk S. Ry. Co., No. 21-1168, 2023 WL 4187749, at *1 (U.S. June 27, 2023). Only the Westlaw citation is currently available.
2 15 Pa. Cons. Stat. §411(a).
3 42 Pa. Cons. Stat. §5301(a)(2).
4 See id.
5 15 Pa. Cons. Stat. §411(a).