January 6, 2022
On December 22, 2021, the Supreme Court of Pennsylvania issued a significant decision in the matter of Mallory v. Norfolk Southern Railway Company, holding that Pennsylvania’s general jurisdiction statute, 42 Pa.C.S. § 5301(a)(2), which conveys general jurisdiction over foreign corporations who register to do business in Pennsylvania, is unconstitutional.
In Mallory, the plaintiff, a Virginia resident, filed a Federal Employers’ Liability Act (FELA) action against defendant Norfolk Southern Railway in the Philadelphia Court of Common Pleas, alleging colon cancer from exposure to various carcinogens, including asbestos, while employed by Norfolk in Ohio and Virginia from 1988 to 2005. None of the alleged exposure took place in Pennsylvania.
Norfolk sought dismissal of the complaint via preliminary objections for lack of both general and specific jurisdiction. Norfolk argued that the case did not “arise” in Pennsylvania (i.e. no specific jurisdiction), and that since Norfolk was neither “at home” in Pennsylvania nor did it “consent” to jurisdiction by registering to do business in Pennsylvania, there was also no general personal jurisdiction. In opposition, the plaintiff argued that Norfolk consented to jurisdiction by virtue of its registration to do business in Pennsylvania, under the general personal jurisdiction statute:
(a) General Rule. – The existence of any of the following relationships between a person and this Commonwealth shall constitute a sufficient basis of jurisdiction to enable the tribunals of this Commonwealth to exercise general personal jurisdiction over such person, or his personal representative in the case of an individual, and to enable such tribunals to render personal orders against such person or represented:
(b) Corporations.
(i) Incorporation under or qualification as a foreign corporation under the laws of this Commonwealth;
(ii) Consent, to the extent authorized by the consent;
(iii) The carrying on of a continuous and systematic part of its general business within this Commonwealth.
The trial court sustained Norfolk’s preliminary objections, finding that, “the Due Process Clause of the Fourteenth Amendment of the Constitution limits the authority of a state court to exercise personal jurisdiction over a non-resident defendant.” The court noted that specific jurisdiction depends upon an affiliation between the forum state and the underlying case. Here, because the alleged exposure took place outside of Pennsylvania—in Ohio and Virginia—there was no specific jurisdiction.
The court noted that Norfolk was not a Pennsylvania corporation nor did it maintain its principal place of business in Pennsylvania. Hence, the only way to obtain general jurisdiction would be consent. Finding no voluntary consent, the court analyzed registration-based consent under Section 5301(a)(2).
The court found that Norfolk’s “consent to jurisdiction by registering to do business” in Pennsylvania was involuntary, and therefore invalid. Because the Associations Code requires foreign corporations to register with Pennsylvania before conducting business operations in Pennsylvania, foreign corporations have just two choices: either do business in Pennsylvania while consenting to general personal jurisdiction, or do not do business in Pennsylvania at all. The court found that this ultimatum violated Norfolk’s right to due process. The court concluded that “[b]y requiring foreign corporations to submit to general jurisdiction as a condition of doing business here, Pennsylvania’s statutory scheme infringes upon our sister states’ ability to try cases against their corporate citizens.”
On appeal to the Supreme Court of Pennsylvania, the plaintiff maintained his position that the trial court erred in holding that Pennsylvania’s consent-by-registration statute violated due process. The plaintiff argued that the statute did not coerce involuntary consent to jurisdiction, but rather gave notice to a foreign corporation registering to do business in Pennsylvania that they have consented to jurisdiction.
Norfolk argued that Pennsylvania’s statute requires all foreign corporations to register, and “compliance with mandatory registration cannot serve as a voluntary relinquishment of due process rights.” Norfolk further argued that the statute compelled a defendant to relinquish its right to due process by registering to do business in Pennsylvania or forego the privilege of doing business in Pennsylvania.
On review de novo, the court noted that the Supreme Court of the United States “has not addressed the question of whether it violates due process when a state conditions the privilege of doing business in the forum State upon the foreign corporation’s submission to general jurisdiction,” resulting in courts across the nation reaching differing results. The court noted that “[w]hile all states require foreign corporations to register to do business within their boundaries, most states do not provide expressly that the act of registering to do business constitutes a specific basis upon which a court may assert general jurisdiction ….”
The court agreed with Norfolk that the exercise of jurisdiction in this case did not satisfy the minimum due process requirements for general jurisdiction under Daimler AG v. Bauman, 571 U.S. 117 (2014) and Goodyear Dunlop Tires Operations, S.A. v. Brown, 564 U.S. 915 (2011). Here, the plaintiff alleged jurisdiction solely based on Norfolk’s compliance with a mandatory registration statute, and the legislature’s grant of such broad jurisdictional authority in that statute was incompatible with the Fourteenth Amendment.
The court held that “to conclude that registering as a foreign corporation invokes all-purpose general jurisdiction eviscerates the Supreme Court’s general jurisdiction framework set forth in Goodyear and Daimler and violates federal due process by failing to comport with International Shoe’s ‘traditional conception of fair play and substantial justice.’” The court further held that the Pennsylvania statute was contrary to the concept of federalism, recognized by the U.S. Supreme Court in Bristol-Myers Squibb Co. v. Superior Court, 137 S. Ct. 1773 (2017): “when determining whether personal jurisdiction is present, courts should consider the effect of the defendant’s ‘submission to the coercive power of a State that may have little legitimate interest in the claims in question,’ as the ‘sovereignty of each state implies a limitation of the sovereignty of all its sister states.’”
The court concluded that the statute coerced consent to jurisdiction, which is not voluntary consent and cannot be constitutionally sanctioned. As such, the statute is unconstitutional to the extent that it affords Pennsylvania courts general jurisdiction over foreign corporations that are not at home in Pennsylvania.
The court’s decision will have a significant impact on future asbestos litigation in Pennsylvania. Prior to this holding, Pennsylvania had one of the country’s broadest jurisdictional frameworks. Presumably, there will now be less out-of-state plaintiffs filing lawsuits in Philadelphia and Allegheny counties after this holding, reducing potential forum shopping. Out-of-state defendants named in lawsuits in Pennsylvania will have to consider filing preliminary objections and motions to dismiss based on lack of personal jurisdiction.
For more information, contact David W. Snyder in our Philadelphia office at dsnyder@mcgivneyandkluger.com