Power Manufacturing Co. v. Saunders

Background

An Ohio man was injured while working at an Arkansas warehouse owned by an Ohio manufacturing company. The company had followed Arkansas rules to do local business and named a resident agent in Stuttgart, Arkansas. The worker sued in Saline County and served the company’s Stuttgart agent. Arkansas law allowed foreign corporations to be sued in any county, but limited suits against local corporations and individuals to counties where they actually did business or lived. The company argued that this statewide venue rule was unfair and violated the Fourteenth Amendment; state courts rejected that argument and entered judgment against the company.

Reasoning

The Supreme Court considered whether the Arkansas venue rules unreasonably treated foreign corporations worse than local corporations and people. The Court said the law created a real and substantial discrimination: a foreign company doing business in one county could be hauled into any of the state’s counties even though a local company or person could not. The Court found no relevant difference that justified that statewide treatment. Procedural rules like venue must still follow the Constitution, and the Court held these venue provisions violated equal protection. It reversed the judgment against the company.

Real world impact

The ruling prevents states from forcing out-of-state companies doing local business to defend transitory lawsuits anywhere in the state when local companies and people face stricter, local limits. This reduces travel and expense burdens on such companies and may change where injured people choose to sue.

Dissents or concurrances

Justice Holmes (joined by Justice Brandeis) dissented, arguing the company had implicitly agreed to the state’s conditions by seeking permission to do business, so the venue rule should stand.