PA Supreme Court Rules Jurisdiction-by-Registration Statute Unconstitutional

December 29, 2021

Registering to do business in Pennsylvania no longer establishes general personal jurisdiction according to the Pennsylvania Supreme Court’s landmark decision in Mallory v. Norfolk Southern Railway Co., 3 EAP 2021, 2021 WL 6067172, —A.3d — (Pa. Dec. 22, 2021). Prior to this decision, foreign corporations were subject to general personal jurisdiction in Pennsylvania by registering to do business, which is mandatory under Pennsylvania law. With this ruling, a company can no longer be sued in Pennsylvania for out-of-state conduct simply because it registered to do business in Pennsylvania.

In Mallory, a Virginia resident filed an action in the Philadelphia County Court of Common Pleas against a Virginia railway corporation that has a principal place of business in Virginia. The plaintiff alleged exposure to carcinogens while working for the railway in Ohio and Virginia; he did not allege exposure in Pennsylvania. The railway filed a preliminary objection, asking the trial court to dismiss the case for lack of personal jurisdiction. The plaintiff argued that the railway consented to general jurisdiction by registering to do business in Pennsylvania. The trial court sustained the objection, finding Pennsylvania’s long-arm jurisdiction statute unconstitutional and insufficient ties to establish specific personal jurisdiction over the railway.

Pennsylvania’s long-arm jurisdiction statute provides that general personal jurisdiction can be established by “incorporation under or qualification as a foreign corporation under” Pennsylvania state law. 42 Pa.C.S. § 5301(a)(2)(i). Additionally, Pennsylvania’s Associations Code requires foreign corporations to register before doing business in the state. 15 Pa.C.S. § 411(a). Construing § 5301 and § 411 together, the trial court reasoned, would mean that foreign corporations are required to submit to general jurisdiction as a condition of doing business in Pennsylvania. Recognizing the federal limits placed on a state’s ability to regulate a foreign corporation’s actions, the trial court found that this “Hobson’s choice violates Defendant’s right to due process.” Also, the trial court found that registration was an involuntary act; therefore, foreign corporations did not voluntarily consent to jurisdiction when registering with the state.

The Pennsylvania Supreme Court affirmed the order of the trial court. General jurisdiction under the Due Process Clause of the Fourteenth Amendment is only permissible over a corporation where it is regarded as at home, such as its place of incorporation or principal place of business. Goodyear Dunlop Tires Operations, S.A. v. Brown, 564 U.S. 915 (2011) General jurisdiction is also proper where a corporation’s affiliations with a forum state, when compared to a corporation’s activities in their entirety, are so continuous and systemic it is essentially “at home” in the forum state. Daimler AG v. Bauman, 571 U.S. 117 (2014). Importantly, a corporation is not “at home” merely because it does business in a state. Id. at 139 n.20.

Applying Goodyear and Daimler, the Pennsylvania Supreme Court found, “to conclude that registering as a foreign corporation invokes all-purpose general jurisdiction” violates federal Due Process. Registration is a prerequisite to a foreign corporation merely conducting business in Pennsylvania and operation within Pennsylvania cannot be the basis of general jurisdiction alone. Also, the Court found that Pennsylvania’s statutory scheme of submission to general jurisdiction as a condition of doing business in states violates the principles of federalism. Pennsylvania has no legitimate interest in adjudicating a controversy with no connection to the state filed by a non-resident against a foreign corporation.

Finally, the Pennsylvania Supreme Court found that, because registration in Pennsylvania is mandatory, it cannot constitute voluntary consent. Additionally, the government may not grant a privilege predicated upon the surrender of a constitutional right. See, Koontz v. St. Johns River Water Mgmt. Dist., 570 U.S. 595, 604 (2013). For these reasons, Pennsylvania’s statutory scheme cannot support a constitutional waiver of general jurisdiction of consent by registration. As a result, the Court overturned the decision in Webb-Benjamin, LLC v. Int’l Rug Grp., LLC, 192 A.3d 1133 (Pa. Super. 2018) (holding that registration was insufficient to establish general jurisdiction but consent by registration remained possible in Pennsylvania).

Pennsylvania courts may still exercise general personal jurisdiction over companies deemed “at home” in Pennsylvania, or specific personal jurisdiction over foreign companies based on conduct within the state. However, foreign companies no longer surrender the constitutional right to due process merely by registering to do business in Pennsylvania.

The Pennsylvania Supreme Court’s opinion can be found here.