September 11, 2019
Pennsylvania has long been known for its liberal general jurisdiction standards as provided by Pennsylvania statutes 15 Pa.C.S. § 411 and 42 Pa.C.S. § 5301, which collectively grant local courts general jurisdiction over foreign corporations registered to conduct business in the Commonwealth. But the days of liberally granted general jurisdiction over foreign corporations may not come so easily in Pennsylvania going forward. In fact, based on a recent decision by the Eastern District of Pennsylvania, courts in Pennsylvania should be considering whether or not such sweeping general jurisdiction over foreign corporations is constitutional.
In the matter of Sullivan v. A. W. Chesterton, Inc.(In re Asbestos Prods. Liab. Litig. No. VI)2019 U.S. Dist. LEXIS 95861 (E.D. Pa. June 6, 2019), the Eastern District of Pennsylvania recently issued a decision holding that Pennsylvania business registration statutes, which have generally provided for “consent jurisdiction” over entities that register to do business in this Commonwealth, are unconstitutional. In so holding, the Eastern District has rejected the theory of “consent jurisdiction” based on a corporation’s registration to do business in Pennsylvania, having found such imposed jurisdiction contrary to the Supreme Court’s decision in Daimler AG v. Bauman,571 U.S. 117, 134 S. Ct. 746, 187 L.Ed.2d 624 (2014).
On June 6th, 2019, Judge Eduardo C. Robreno concluded in the Sullivan matter that the Court lacked personal jurisdiction over Huntington Ingalls Incorporated(“HIC” or “Defendant”) and therefore granted its motion to dismiss. In doing so, the Court deemed Pennsylvania statutes 15 Pa.C.S. § 411 and 42 Pa.C.S. § 5301, which for years have collectively provided general jurisdiction over registered foreign corporations, unconstitutional.
Plaintiff Jackie Sullivan (“Plaintiff”) brought an asbestos personal injury action against 48 defendants in the Philadelphia Court of Common Pleas. Plaintiff alleged that her husband, decedent John Sullivan, was exposed to asbestos during his time in the Navy as a machinist mate on the U.S.S. Blakely, and that he developed lung cancer as a result, eventually leading to his death. Plaintiff claimed that an alleged predecessor of HIC, Avondale Shipyard, had built the U.S.S. Blakely and designed it to contain asbestos.
Importantly, and as noted by the court, it was undisputed that Plaintiff’s husband’s alleged asbestos exposure aboard the U.S.S. Blakely did not occur in Pennsylvania; that HIC is incorporated and has its principal place of business in Virginia (not in Pennsylvania); and that Plaintiff is a citizen of Virginia (not of Pennsylvania). Accordingly, HIC removed the case to federal court under the Federal Officer Removal Statute, 28 U.S.C. § 1442. By removing the matter to federal court, HIC was able to assert, under Fed. R. Civ. P. 12(b)(2), that the court lacked personal jurisdiction over it, placing the burden on Plaintiff to establish that jurisdiction is otherwise proper. Plaintiff in turn argued that the court had personal jurisdiction over HIC pursuant to 15 Pa.C.S. § 411 and 42 Pa.C.S. § 5301.
Section 411 provides that a foreign corporation may not do business in Pennsylvania until it registers itself with the State Department (and maintain, within the Commonwealth, a registered office), and Section 5301 provides that registration of a foreign corporation in Pennsylvania constitutes a sufficient basis of jurisdiction, thus enabling Pennsylvania courts to exercise general personal jurisdiction over such foreign corporations. As noted by the Court, in what Judge Robreno cleverly dubs the “Pa. Statutory Scheme”, when the two sections are read together, it is clear that a foreign corporation can only do business in Pennsylvania if it subjects itself to general personal jurisdiction. Echoing what defense counsel has argued for many years in Pennsylvania, Judge Robreno discussed the serious due process implications of the continued implementation of the “Pa. Statutory Scheme.”
The Court first looked to Pennsylvania’s long-arm statute (42 Pa.C.S. §5322) to determine if it satisfies the requirements of the Due Process Clause of the Constitution. The Court found that the Pennsylvania’s long-arm statute is coextensive with the Due Process Clause, and therefore, consistent with Daimler, needed only to analyze the jurisprudence of the Fourteenth Amendment. Indeed, in light of the United States Supreme Court decision in Daimler AG v. Bauman, which maintains that a foreign corporation is only subject to general personal jurisdiction where it is incorporated or maintains its principal place of business, the Court found the “Pa. Statutory Scheme” unconstitutional for multiple reasons.
First, the Court looked to the original intent of registration statutes, which it noted is “archaic and moot” – that is, corporations were only considered to exist where incorporated, so registration statutes required corporations to appoint an in-state agent specifically for service of process (and to consent to jurisdiction) in order to protect its citizens from corporate injury that occurred in its jurisdiction. Thus, registration statutes were always intended to be implemented for specific jurisdiction purposes, not general jurisdiction.
The Court then looked to whether the purported statutory consent of a foreign corporation to personal jurisdiction (by registering to do business in the Commonwealth), even if given knowingly, is actually voluntary, and thus comports with due process. Ultimately the Court found that the “Pa. Statutory Scheme” extracts consent from foreign corporations “impermissibly” at the cost of the surrender of a constitutional right: consent to general personal jurisdiction or, do not do business in Pennsylvania. The Court correctly noted that the “Pa. Statutory Scheme” essentially allows an argument for nationwide general jurisdiction, subjecting corporations to general jurisdiction in every state, which Daimler firmly held unconstitutional; therefore, the “Pa. Statutory Scheme” violates the Due Process Clause.
To close the loop on prior Third Circuit precedent holding that foreign corporations consent to general jurisdiction when registering to do business in Pennsylvania (and thus blessing the “Pa. Statutory Scheme” as valid), the Court noted that those Third Circuit decisions, such as the Court’s decision in Bane v. Netlink, Inc.,925 F.2d 637 (3d Cir. 1991),were issued long before Daimler, and have been superseded by a newer standard in Daimler, which clarified that general personal jurisdiction only exists where the foreign corporation is at home. The Court therefore held that pre-Daimler precedent upholding the “Pa. Statutory Scheme” can no longer stand as it is irretrievably irreconcilable with Daimler, and the Court granted HIC’s motion for dismissal accordingly.
As a result of this Court’s conclusions, the “Pa. Statutory Scheme,” which conditions the benefit of doing business in this Commonwealth on a corporation’s surrender of its constitutional right to be subjected to general jurisdiction only where its principle place of business is located or within its state of incorporation, is a clear violation of the Due Process Clause. Though it is too early to predict the full ramifications of this opinion on plaintiffs’ filings of complaints in the Commonwealth, an opinion issued just days after Sullivan by the Eastern District of Pennsylvania declined to fully follow the Sullivan Court’s lead, granting in part and denying in part the defendants’ motion to dismiss, but affirms the holding in Sullivan that the “Pa. Statutory Scheme” offends the Due Process Clause. See, Williams v. Takeda Pharm. Am., Inc., No. 18-4774, 2019 U.S. Dist. LEXIS 107093 (E.D. Pa. June 26, 2019).
Based on the sound reasoning of the Sullivan opinion, going forward, counsel should not resist or forgo filing preliminary objections in a case based on a lack of personal jurisdiction just because a corporation is registered to do business in Pennsylvania as required by the state Rules. And until the tide completely changes across the board, counsel should confidently file motions consistent with the reasoning in Sullivan and allow the Court to once and for all follow the lead of what many other states have done, and end the unconstitutionality of the statutory scheme that still exists on the books in Pennsylvania.
For more information on this topic, please contact MKC&I’s Christina M. Philipp at cphilipp@mcgivneyandkluger.com or at (215) 557-1990.