U.S. Supreme Court Upholds State's Ability to Obtain General Personal Jurisdiction Over Out-Of-State Corporations Using "Consent to Registration" Statutes.
A corporation looking to conduct business in a state other than its state of incorporation is required to register and appoint a registered agent in the state. And while every state requires out-of-state, or "foreign," corporations to register to do business in its borders, some states have recently enacted, or expressed the intention of enacting, "consent to registration" laws. Consent to registration means that when the foreign corporation registers to business in that state, it also consents to general personal jurisdiction in the state and can be sued in that state for any reason.
Use of Consent to Registration Statutes is Not Currently Common.
Currently, only Georgia and Pennsylvania have "consent to registration" laws. A recent U.S. Supreme Court decision may, however, provide support for those states looking to enact similar laws to expand general personal jurisdiction over foreign corporations. On June 27, 2023, the U.S. Supreme Court rendered its decision Mallory v. Norfolk Southern Railway Co., overruling the Pennsylvania Supreme Court and upholding the Pennsylvania “consent by registration” statute against a Due Process challenge. The Supreme Court's ruling confirmed that states have the ability to enact "consent by registration" laws, which allows courts to exercise jurisdiction over out-of-state corporations for any reason, because those laws do not violate a corporation's due process rights.
Pennsylvania's consent by registration approach to jurisdiction is premised on the idea that the corporation's registration to business in the state is an affirmative decision to avail itself to all of the benefits of the state just as any domestic corporation – a corporation that is incorporated and/or "at home" within the state. Thus, Pennsylvania law posits, it is only just and fair that the corporation is also availing itself of what else comes with its decision, such as the possibility of being hauled into that state's courts, for any reason. Because the corporation is effectively being treated as a domestic corporation, the "consent by registration" approach allows for that out-of-state corporation to be sued within the state for any reason.
The Mallory Holding Could Result in More States Adopting "Consent By Registration" Laws.
Consent to registration may seem new. It's not. In the last two years, the high courts of no less than four states issued rulings on whether corporations consent to general jurisdiction by registering to do business in their respective states. And while Georgia held that registration in its state did result in consent to general personal jurisdiction, New York, New Mexico, and Pennsylvania all held that it did not. It was the split with Pennsylvania and Georgia that supported the Supreme Court's review of Pennsylvania's long-arm statute in Mallory. Using Pennsylvania and Georgia's long-arm statutes, combined with the Mallory holding, those states that want to enact consent by registration have the tools a guidance on how to modify their current long-arm statutes.
For those corporations looking to expand into states outside of where they have incorporated, Mallory demonstrates the wisdom of adding "consent by registration" to your due diligence and risk analysis. Texas' long-arm statute does not include a "consent to jurisdiction" provision that would expand general personal jurisdiction to those foreign corporations solely for registering to do business and having an agent of service here. Under Texas law, business registration and the maintenance of a registered agent for service of process in Texas is not sufficient grounds, by itself, to support being hauled into a Texas court for any reason. So, for those out-of-state businesses considering an expansion into Texas, Mallory has not changed anything. However, Mallory does give Texas the power to decide if it wants to extend its courts' exercise of jurisdiction over out-of-state corporations through a "consent by registration" approach. Thus, barring some act by the Texas legislature, a foreign corporation registering to do business in Texas does not mean the corporation has, via that act alone, consented to general personal jurisdiction.
