Supreme Court’s “Expansion” of Personal Jurisdiction Should Not Alarm Foreign Corporate Defendants in Illinois Just Yet

LAM

Among the flurry of decisions released by the U.S. Supreme Court in July 2023, Mallory v. Norfolk Southern Railway Co. caused particular concern for businesses when initial headlines announced the decision expanded state courts’ ability to exercise general personal jurisdiction over out-of-state corporate defendants, making it easier to sue businesses in plaintiff-friendly court venues. Now that a few months have gone by and the dust has settled, we are in a better position to assess what Mallory means for a foreign corporate defendant registered to do business in Illinois.

A foreign corporate defendant is subject to personal jurisdiction in Illinois only where authorized by state law and the due process requirements of the United States and Illinois Constitutions are satisfied. In 2017, the Illinois Supreme Court held in Aspen American Insurance Co. v. Interstate Warehousing, Inc. that the federal due process standard the U.S. Supreme Court outlined in Daimler AG v. Bauman applies under Illinois’ long-arm statute. Under that standard, and likewise in accordance with Illinois’ long-arm statute, an out-of-state corporate defendant is subject to general personal jurisdiction in Illinois only if the defendant is incorporated or has its headquarters in Illinois, or the defendant’s contacts with Illinois are so substantial as to render it an exceptional case.

In Mallory, however, the Supreme Court held that a foreign corporation’s sole act of registering to do business in a state is sufficient for general personal jurisdiction even if the business is not headquartered there, the plaintiff has no connection to the state, and the incident giving rise to the suit did not occur in the state. Specifically, the Supreme Court analyzed the constitutionality of a Pennsylvania statute that provided an out-of-state corporation cannot do business in the Commonwealth until it registers with the Department of State. The problem was Pennsylvania law explicitly states that “qualification as a foreign corporation” permits state courts to exercise general personal jurisdiction over a registered foreign corporation on “any cause of action.” Therefore, this statutory language in conjunction with existing state law posed the question of whether the Due Process Clause prohibits a state from requiring an out-of-state corporation to consent to personal jurisdiction to do business there. The Court ultimately found that by complying with the registration statute, an out-of-state corporation agrees to be “found” in Pennsylvania and, in so doing, understands it would be subject to being sued in Pennsylvania.

What does Mallory mean for out-of-state businesses registered to do business in Illinois? The Illinois Supreme Court addressed this very question in Aspen back in 2017. The court analyzed whether a foreign corporation registered to do business in Illinois under the Business Corporation Act of 1983 (the “Act”) with a registered agent in Illinois for purposes of service of process is subject to general personal jurisdiction in Illinois courts. Unlike the Pennsylvania statute in Mallory, there was no statute requiring defendants to consent to personal jurisdiction when registering to do business in Illinois. In fact, Illinois’ Business Corporation Act makes no mention of personal jurisdiction at all. Accordingly, the Illinois Supreme Court held that the fact that a foreign corporation registered to do business under the Act does not mean that the corporation consented to general personal jurisdiction over all potential claims against it, including those that are completely unrelated to the corporation’s activities in Illinois.

Mallory specifically states that the decision applies only where a foreign corporation consented to being sued in the state when registering to do business there. The good news is statutory registration language like Pennsylvania’s is uncommon. The corporate registration statute in Illinois is like those in most states and does not act as a consent to jurisdiction. Because out-of-state corporations do not consent to being sued in Illinois when registering to do business in the state, Mallory should not affect Illinois courts’ general personal jurisdiction over a foreign corporate defendant. For now, the analysis in Illinois should still be based on the Aspen and Daimler cases that hold a court has general personal jurisdiction over a foreign corporate defendant only if the defendant is incorporated in or has its headquarters in Illinois, or the defendant’s contacts with Illinois are so substantial as to render it an exceptional case.

In a post-Mallory world, out-of-state businesses should be aware of potential changes to avoid inadvertently consenting to being sued in a state for any claim by registering to do business there. State legislatures might amend their registration requirements to include consent-based language that mimics Pennsylvania’s statute, or courts might loosen their due process interpretations when it comes to deciding whether registering to do business in a state is sufficient to establish general personal jurisdiction even if there is no explicit statutory consent requirement.

The attorneys at Airdo Werwas, LLC are available to consult with you on any matter concerning your business. If you have questions about what Mallory might mean for your company, or if you require assistance with a civil litigation issue, please do not hesitate to contact Laura Michenfelder at lmichenfelder@airdowerwas.com or (312) 506-4467.

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