‘Really Big’: US Supreme Court Ruling Against Norfolk Southern Seen as Rebuke to Corporate Impunity

Yves here. Once in a while, even our Supreme Court decides in favor of the little guy. But I’m surprised that the objection to the Pennsylvania “consent by registration” requirement went this far, and that the Supreme Court decision was as close as 5-4.

By Kenny Stancil, a staff writer at Common Dreams. Originally published at Common Dreams

The U.S. Supreme Court rejected Norfolk Southern’s attempt to limit where companies can be sued.

In a 5-4 opinion written by Justice Neil Gorsuch and joined by Justices Clarence Thomas, Samuel Alito, Sonja Sotomayor, and Ketanji Brown Jackson, the high court ruled that Pennsylvania’s “consent-by-registration” law “requiring an out-of-state firm to answer in the commonwealth any suits against it in exchange for status as a registered foreign corporation and the benefits that entails” does not violate the due process clause of the 14th Amendment.

The decision vacates an earlier judgment by the Pennsylvania Supreme Court and remands the case.

“This is really big,” Slate‘s Mark Joseph Stern tweeted. Big business lawyers are “going to be furious with this decision.”

“This is big—and, in my view, good—because it allows states to exercise personal jurisdiction over corporations that do business within the state but are incorporated elsewhere, often in a jurisdiction that they deem more favorable to their interests,” Stern continued.

“Pennsylvania requires out-of-state corporations to file paperwork consenting to appear in Pennsylvania courts as a condition of doing business within the state,” Stern added. “Gorsuch says: Nothing about that scheme violates due process.”

Matt Stoller, director of research at the American Economic Liberties Project, also applauded the decision.

In 2017, months after being diagnosed with colon cancer, former Norfolk Southern worker Robert Mallory filed a lawsuit alleging that his illness stemmed from workplace exposure to asbestos and other hazardous materials and that the rail carrier failed to provide safety equipment and other resources to ensure he was sufficiently protected on the job.

Although he had never worked in Pennsylvania, Mallory filed his lawsuit in the Philadelphia County Court of Common Pleas because his attorneys were from the state and “he thought he would get the fairest access to justice there,” Ashley Keller, the lawyer representing him before the U.S. Supreme Court, toldThe Lever in February.

As Rebecca Burns and Julia Rock, two of the investigative outlet’s reporters, explained at the time:

Norfolk Southern asserts that being forced to defend the case in Pennsylvania would pose an undue burden, thereby violating its constitutional right to due process.

Even though Norfolk Southern owns thousands of miles of track in the Keystone State, the Philadelphia county court sided with the railroad and dismissed the case. Mallory appealed, and the case wound its way through state and federal courts before landing at the U.S. Supreme Court last year.

Norfolk Southern asked the U.S. Supreme Court “to uphold the lower court ruling, overturn Pennsylvania’s law, and restrict where corporations can be sued, upending centuries of precedent,” the journalists noted.

The American Association of Railroads (AAR), the rail industry’s largest lobby, filed a brief last September on behalf of Norfolk Southern. AAR and other powerful corporate lobbying groups such as the U.S. Chamber of Commerce, the National Association of Manufacturers, and the American Trucking Association sought to undermine the ability of workers and consumers to file lawsuits in the venue of their choosing.

President Joe Biden’s administration, meanwhile, came under fire earlier this year when The Lever revealed that the U.S. Department of Justice had also filed a brief siding with the railroad giant behind the toxic derailment in East Palestine, Ohio.

If Norfolk Southern had prevailed, it could have been easier for the profitable rail carrier to thwart pending and future lawsuits “on the grounds that they’re filed in the wrong venue,” The Lever reported, citing Scott Nelson, an attorney with the Public Citizen Litigation Group, which filed a brief backing Mallory. At particular risk would have been “lawsuits filed by residents exposed to hazardous chemicals as the result of accidents in other states,” including victims of air or water pollution stemming from the disaster in East Palestine, five miles west of the Pennsylvania state border.

“[Norfolk Southern] might say, ‘You can only sue us in Ohio or Virginia [where Norfolk Southern is headquartered],’ even if you were injured at your home in Pennsylvania from an accident that took place five miles away in Ohio,” Nelson warned.

A ruling in the rail giant’s favor could have also established “a national precedent limiting where workers and consumers can bring cases against corporations,” Burns and Rock pointed out.

However, workers and consumers are not out of the woods yet. AsBloomberg Lawreported Tuesday, “Alito seemed to invite a future challenge against the [Pennsylvania] law in his concurrence,” where he suggested that “Norfolk Southern could win when the case goes back to the lower court.”

“In my view, there is a good prospect that Pennsylvania’s assertion of jurisdiction here—over an out-of-state company in a suit brought by an out-of-state plaintiff on claims wholly unrelated to Pennsylvania—violates the commerce clause,” Alito argued.

Sean Marotta, a partner at Hogan Lovells, which filed a brief on behalf of a law professor in support of Norfolk Southern, “is telling his clients not to panic but to ‘stay on guard,'” according to Bloomberg Law. “Under this ruling, he said state legislatures could amend their registration statutes to impose consent-by-registration. They could basically copy and paste the Pennsylvania law because the court is saying it’s okay under the Constitution’s due process clause, he said.”

“There’s still a dormant commerce clause fight to have,” Marotta told the outlet.

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  1. bayoustjohndavid

    Did anybody else notice that three Republican appointed judges voted yes in a 5-4 decision? I thought it was a 6-3 court, with three good liberal justices that we could count on (I’m being sarcastic).
    (Obama appointee) Kagan voted no. Is anyone going to even ask her to explain herself?

    1. Alan F.

      Maybe this isn’t a purely partisan issue, and the justices don’t automatically vote along party lines?

      I’m a lawyer whose practice includes the edges of the area of the law at issue. In my best attempt to look at this question objectively, I don’t see one obviously correct answer. There are some legal questions that should never make it to SCOTUS, but others, possibly including this one, that are difficult questions without immediately clear answers.

      1. Mark Gisleson

        Not all corporations love how our railroads are run. This was a battle between corporate camps. Really don’t see anything about this that is partisanly political, no D or R issues per se.

    2. Susan the other

      But Gorsuch has been kinda good. One to watch. These issues are where some measure of conservatism can be good medicine.

  2. TimmyB

    This is a case of corporate overreach. Norfolk Southern most likely could have the case dismissed on inconvenient forum grounds. This would be based on neither the plaintiff nor defendant residing in Pennsylvania and the alleged injury not occurring there. Don’t practice in Pennsylvania, but in California an inconvenient forum motion dismissing the case on the grounds it should be filed in another state would most likely be granted.

    Instead, they went for the whole enchilada and tried to limit jurisdiction. That was too much, even for the pro big business Supreme Court.

  3. upstater

    I am not sure how this decision relates to railroad operation safety… Railroad workers, seamen and offshore oil workers are not covered by Workman’s Comp. To receive compensation for a work injury, a worker MUST sue the employer. This seems to be a work-related injury claim and may have more to do with allowing the selection of venue to hear an injury claim. I know railroads for years have been successful in directing work-related injury or death claims to court jurisdictions which are favorable to the industry. It will be interesting to see how this particular ruling relates to the Norfolk Southern East Palestine wreck. There may be less here than meets the eye, but I’m not a lawyer…

    Reuters had a lengthy article on the use of corporate preemption, where a federal regulation supersedes any state legal remedy. The Supreme Court established this in 1992 shielding Big Tobacco from state liability laws. In the below article Big Pharma Merck was successful hiding behind FDA regulations approving Singlulair, an asthma drug that was documented to cause mental health problems and suicide (a “black box” warning was added in 2020, 2 decades after approval).

    It also details in the middle how railroads use this to escape liability. Worth reading in full:

    Corporate preemption defenses are now common across a host of federally regulated industries.

    After a February train derailment in East Palestine, Ohio, released toxic chemicals, train operator Norfolk Southern invoked preemption to counter pending lawsuits.

    Asked about the legal strategy, the company told Reuters it was “following the legal process” and that it was committed to paying for the environmental clean-up and any damage to residents’ health, water supply or property values.

    It would seem if the Rail Safety Act of 2023 becomes law, the industry will use the ensuing federal regulations to run around any more stringent state laws requiring manning levels, inspections, train length, etc. Note that the Biden administration already sided with the railroads in this particular decision and the RSA is already been considerably watered down in the Senate Committee from the original proposal. Maybe it will become the Rail Industry Corporate Protection Act of 2023

  4. GramSci

    I find Justice Barrett’s dissent is interesting:

    «But if a defendant contests the court’s authority, the court must determine whether it can nevertheless assert coercive power over the defendant. That calculus turns first on the statute or rule defining the persons within the court’s reach. See World-Wide Volkswagen Corp. v. Woodson, 444 U. S. 286, 290 (1980). It depends next on the Due Process Clause,
    which guards a defendant’s right to resist the judicial authority of a sovereign to which it has an insufficient tie. International Shoe, 326 U. S., at 316. The Clause has the companion role of ensuring that state courts “do not reach out beyond the limits imposed on them by their status ascoequal sovereigns in a federal system.”»

    The Pennsylvania Supreme Court held that it could not compel Norfolk Southern to submit to its rulings. Imagine if Federal Courts similarly allowed foreign states to reject their rulings. Would the Court then renounce Paul Singer’s suit against Argentina? How will the Federal Judiciary exert control over, oh, say Germany, if such a precedent were allowed to stand?

    Laws are like standards, and as Andy Grove quipped, they’re good because there are so many to choose from.

  5. TomW

    The derailment occurred in Pennsylvania, and that alone should be enough to establish Pennsylvania as a likely jurisdiction, .

    Meanwhile, a personal injury suit filed in a state unrelated to the accident, the plaintiff or the defendant smacks of jurisdiction shopping by the plaintiff.

    I haven’t examined this at any depth, but assume that the legal issues are much more complex for any number of reasons.

    FWIW…Paul Singer’s suit against Argentina is hardly siding with the little guy…being that Singer was seeing on behalf of his vulture hedge fund seeking a judgment against a sovereign in financial turmoil. Of course, it was a complex securities default issue. But the optics were awful if nothing else.

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