HARRISBURG – In a significant decision sure to have tremendous import, the Supreme Court of Pennsylvania held in a recent decision that the state’s consent-by-registration rules are unconstitutional, and could not be used to establish personal jurisdiction.
The Dec. 22 unanimous ruling, authored by state Supreme Court Chief Justice Max Baer and joined by all of his colleagues, found that the practice of out-of-state companies consenting to general jurisdiction in order to conduct business in Pennsylvania, stripped such companies of due process protections.
In the 2014 case Daimler AG v. Bauman, the U.S. Supreme Court decided, barring extraordinary circumstances, conferral of general jurisdiction over an out-of-state defendant would only apply if the corporation in question was “at home,” meaning where it was incorporated or maintained its principal place of business.
But in Pennsylvania, corporations wanting to do in the business in the state are required to register with the Pennsylvania Department of State, as per state law – and that such registration “constitutes a sufficient basis for the exercise of general personal jurisdiction over the foreign corporation.”
In Daimler and other cases, it was argued that Pennsylvania’s business registration leading to general jurisdiction-arrangement violated the Fourteenth Amendment’s Due Process Clause. Pennsylvania is the only state whose law explicitly states that registering to do business allows Pennsylvania courts to exercise personal jurisdiction over a company headquartered elsewhere.
Robert Mallory, a Virginia man, initially brought suit against Norfolk Southern Railway Company, a Virginia corporation, in the Philadelphia County Court of Common Pleas, alleging a claim pursuant to the Federal Employers Liability Act.
Mallory argued he was exposed to carcinogenic substances during the time he worked for Norfolk Southern in Ohio and Virginia – while Norfolk Southern filed preliminary objections wanting the case dismissed, due to a lack of personal jurisdiction.
Mallory cited the statute which explains Pennsylvania courts can confer general personal jurisdiction over companies classified as foreign corporations under the law, as such a designation required registration to do business within the state.
In contrast, Norfolk Southern, countered that because “all foreign corporations doing business in Pennsylvania are required to register...the ability to do business in the Commonwealth hinges upon compliance with mandatory registration provisions and cannot serve as a voluntary relinquishment of due process rights.”
Ultimately, the Philadelphia County Court of Common Pleas dismissed the complaint with prejudice and sided with Norfolk Southern, believing that since its registration to do business in Pennsylvania led to its consent not being voluntarily obtained.
According to the trial court’s ruling, “Pennsylvania’s statutory scheme creates an impermissible Hobson’s choice between relinquishing its right to due process by registering to do business in the Commonwealth and thereby submitting to the general jurisdiction of Pennsylvania courts, or foregoing the privilege of doing business in Pennsylvania” – and also leads to unconstitutional infringement on the court systems of other states to oversee cases involving businesses from those other jurisdictions.
As the trial court’s ruling found the Pennsylvania general personal jurisdiction statute was unconstitutional, the state Supreme Court received Mallory’s appeal.
The Supreme Court unanimously upheld the trial court’s decision that Pennsylvania’s general jurisdiction statute was unconstitutional, since it conferred jurisdiction on foreign corporations only because they registered to do business in Pennsylvania.
“Upon a close examination of the High Court’s most recent directives, we are persuaded that our statutory scheme fails to comport with the guarantees of the Fourteenth Amendment; thus, it clearly, palpably, and plainly violates the Constitution,” Baer said.
“The exercise of jurisdiction over defendant in this case does not satisfy due process as required by Goodyear and Daimler. Here, a Virginia plaintiff filed the FELA action against defendant, a foreign railway company, which is incorporated in Virginia and has its principal place of business there, alleging injuries in Virginia and Ohio. It is obvious that no specific jurisdiction lies in Pennsylvania, as there is no connection whatsoever between the case and the forum state. It is equally clear that defendant did not incorporate in Pennsylvania and does not have its principal place of business here. Further, there is no indication that this is an otherwise ‘exceptional case,’ where the circumstances demonstrated that defendant is essentially ‘at home’ in Pennsylvania so as to afford our courts general jurisdiction.”
Baer and the rest of the state Supreme Court found that Pennsylvania’s “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 in Goodyear and Daimler.”
“Legislatively coerced consent to general jurisdiction is not voluntary consent and cannot be constitutionally sanctioned. Accordingly, our statutory scheme is unconstitutional to the extent that it affords Pennsylvania courts general jurisdiction over foreign corporations that are not at home in the Commonwealth. Accordingly, we affirm the order of the trial court, which sustained defendant’s preliminary objections and dismissed the action with prejudice for lack of personal jurisdiction,” Baer concluded.
Supreme Court of Pennsylvania case 3 EAP 2021
Philadelphia County Court of Common Pleas case 170901961
From the Pennsylvania Record: Reach Courts Reporter Nicholas Malfitano at nick.malfitano@therecordinc.com