Pennsylvania Supreme Court Rejects Requiring Consent to General Jurisdiction in the Commonwealth as a Condition of Registration to do Business
Under Pennsylvania law, a foreign corporation wishing to do business in the commonwealth must first register with the commonwealth. This is not an unusual requirement in itself—all states have registration statutes.
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However, Pennsylvania is the only state in which registration expressly amounts to consent to general jurisdiction in the courts of the commonwealth. Thus, to do business in Pennsylvania, a foreign corporation agrees to allow Pennsylvania courts to hear disputes against it regardless of where the actions giving rise to suit occurred and whether there is any connection between the litigation and Pennsylvania. Naturally, this led to forum shopping, wherein enterprising plaintiffs who believed Pennsylvania was a strategic forum sought to bring suit in the commonwealth.
In Mallory v. Norfolk Southern Railway Company, the Pennsylvania Supreme Court rejected this basis for jurisdiction, holding that “[o]ur statutory scheme of conditioning the privilege of doing business in the Commonwealth on the submission of the foreign corporation to general jurisdiction in Pennsylvania courts strips foreign corporations of the due process safeguards guaranteed” by the recent United States Supreme Court decisions in Goodyear Dunlop Tires Operations, S.A. v. Brown and Daimler AG v. Bauman.
The United States Supreme Court narrows general jurisdiction
The United States Supreme Court decisions in Goodyear and Daimler narrowed the permissible exercise of general jurisdiction over foreign corporations. Prior to those decisions, the key question in whether general jurisdiction existed was whether the defendant had such substantial continuous operations within the forum state as to justify suit against it on grounds unrelated to those operations. In Goodyear, the court held that placing a product in the stream of commerce alone was insufficient to support general jurisdiction, which only lies when the corporation’s contacts were “so continuous and systematic as to render them essentially at home in the forum state.” In Daimler, the Supreme Court rejected the idea that general jurisdiction could be predicated only on “substantial, continuous, and systematic” business within the state, holding that this analysis was germane instead to specific jurisdiction and that a corporation could not be “at home” in a jurisdiction simply because it conducted business there. Rather, “home” for a corporation is the place of incorporation or the principal place of business.
The Mallory decision
Against this backdrop, the Pennsylvania Supreme Court considered whether general jurisdiction could nonetheless lie when the only basis for jurisdiction was the defendant’s purported consent by way of its registration to do business in the state. Mallory involved a Virginia resident who sued a Virginia corporation—Norfolk Southern Railway Company—under the Federal Employers Liability Act for injuries alleged to have occurred in Virginia and Ohio. Plaintiff sued the railroad in Pennsylvania, even though Pennsylvania had no connection to the dispute at all. The only basis asserted for jurisdiction was Norfolk Southern’s registration to do business in Pennsylvania and corresponding consent to jurisdiction.
The trial court granted Norfolk Southern’s preliminary objections, dismissing the suit. The trial court held that forcing businesses to consent to general jurisdiction in order to do business within the commonwealth is unconstitutional under the Due Process Clause of the Fourteenth Amendment to the United States Constitution and the United States Supreme Court’s decisions in Daimler and Goodyear. The Pennsylvania Supreme Court agreed and held that “[l]egislatively coerced consent to general jurisdiction is not voluntary consent and cannot be constitutionally sanctioned.” Thus, foreign entities that register to do business in Pennsylvania no longer automatically consent to Pennsylvania’s general jurisdiction.
The Takeaway
What does this mean for you? While this decision provides relief to defendants in Pennsylvania, defendants should carefully consider whether a court has jurisdiction over them. If you are an entity that is sued in a state in which you are not incorporated and do not have your principal place of business and which has no connection to the litigation, you should consult with counsel at the beginning of litigation to explore the possibility of dismissal for lack of jurisdiction.
Co-authors Monica Clarke Platt, partner and Gregory Sellers, associate are members of the Litigation Department at Klehr Harrison.