New York Legislature Seeks to Broadly Expand Personal Jurisdiction: A Sign of Things to Come in the Wake of Mallory v. Norfolk Southern Railway Co.?August 9, 2023 – Article
New York legislators have put forth two bills in the State Assembly and State Senate (A7351 and S7476 respectively) which would dramatically expand personal jurisdiction over foreign defendants in the State. The proposed legislation provides that out-of-state entities who register to be authorized to do business within the State will now automatically consent to be subject to personal jurisdiction within the State as a consequence of registration. The proposed legislation also provides that out-of-state entities revoke this consent upon the surrender of their registration, but that is of course of way less consequence – currently foreign entities are not subject to general jurisdiction merely by registering to do business here. See Aybar v. Aybar, 37 N.Y.3d 274 (2021).
The pathway for the proposed legislation was provided by the Supreme Court’s June 2023, decision in Mallory v. Norfolk S. Ry. Co., 600 U.S. (2023), No. 21-1168 (6/27/2023) which analyzed an existing statute in Pennsylvania, similar to the one currently under consideration in New York. In Mallory, the plaintiff, a Virginia resident, worked for Norfolk Southern as a freight mechanic for twenty years. After leaving the company, Plaintiff moved to Pennsylvania before settling in Virginia. He was eventually diagnosed with cancer which he attributed to exposure to chemicals while working for the railroad. Norfolk Southern moved to dismiss for lack of personal jurisdiction, arguing that it was a foreign entity, incorporated and headquartered outside Pennsylvania, and that Plaintiff’s cause of action did not arise out of any contacts or relationship between Norfolk Southern and the State of Pennsylvania. However, Norfolk Southern had registered to do business in Pennsylvania, and Pennsylvania’s business registration statute provided that by registering to do business a foreign entity expressly consented to be subject to personal jurisdiction on any claim. The Supreme Court, reversing the Pennsylvania Supreme Court, held that the Pennsylvania statute did not violate due process and that by registering with the State and consenting to be amenable to claims in Pennsylvania, Norfolk Southern was indeed subject to the State’s jurisdiction.
A lot could be said about Mallory. However, for our purposes, what’s relevant is that the Supreme Court has ruled that these types of business registration statutes, which require consent to jurisdiction on any claim, do not violate due process. Now, New York legislators have put forth legislation which will change New York’s business registration requirements to provide that businesses consent to jurisdiction in New York on all claims. In other words, foreign entities would be subject to personal jurisdiction in New York courts merely because they are registered to do business here, even if the underlying claims against these entities have no connection to the State. Should the proposed legislation become law, we expect a huge influx of cases against foreign entities to be filed here in New York, even for claims having nothing to do with the State. This will undoubtably add an immense burden on an already overburdened New York court system, and the justification for the proposed legislation is not clear. Out-of-state defendants still have a potential route of escape – forum non conveniens. However, forum non conveniens motions are less black and white than personal jurisdiction motions; and there is definitely room for skepticism about the New York court system’s willingness to grant such motions, especially in the face of a legislature which seems bent on offering the State’s courts as a safe haven for lawsuits which otherwise have no business here.
We anticipate that the proposed bills will eventually become law and advise that foreign businesses consider whether registration in New York is still right for them, and if so, that they are properly insured for a potential increase in New York based claims.