A Philadelphia judge has dealt a blow to the increasingly popular argument that Pennsylvania’s unique corporate registration statute gives state courts jurisdiction over out-of-state defendants.
Philadelphia Court of Common Pleas Judge Arnold New recently ruled that Pennsylvania’s corporate registration law, which requires out-of-state companies to submit to general jurisdiction as a condition of doing business here, violates the due process clause of the constitution, and therefore cannot form the basis for jurisdiction.
The opinion, which New issued May 30 in Mallory v. Norfolk Southern Railway, tees up a likely first-impression issue for the state’s appellate courts, and promises to have significant implications for mass tort litigation in the Keystone State, according to several attorneys.
“This could affect any kind of litigation involving an out-of-state plaintiff and any corporation that’s registered to do business in Pennsylvania,” Reed Smith attorney Jim Beck said. Beck, a defense-focused products liability lawyer, is not involved in the case.
Mallory stems from plaintiff Robert Mallory’s claims that he developed colon cancer after allegedly being exposed to carcinogens while working for Norfolk Southern Railway Co. in Ohio and Virginia. According to New, Mallory is a resident of Virginia, and the defendant is a Virginia corporation with its principal place of business in Norfolk, Virginia. Mallory, however, brought his lawsuit in Philadelphia court, claiming that the company consented to be sued in Pennsylvania when it registered to do business in the state.
Norfolk Southern Railway contended at the preliminary objections stage that the court did not have jurisdiction, and that Pennsylvania’s business registration law violated the company’s due process rights.
New’s 14-page opinion relied heavily on recent Supreme Court decisions in Bristol-Myers Squibb v. Superior Court of California, BNSF Railway v. Tyrrell, Goodyear Dunlop Tires Operations v. Brown, and Daimler v. Bauman, which have largely held that courts only have jurisdiction over a company if it is essentially at home in the state, if it is incorporated there, or if the state is the company’s principal place of business. Ultimately, New rejected the plaintiff’s argument, and agreed that the state’s law went against the company’s due process rights.
“By wrapping general jurisdiction in the cloak of consent, Pennsylvania’s mandated corporate registration attempts to do exactly what the United States Supreme Court prohibited,” New, who supervises the court’s active mass tort dockets, said. “Therefore, plaintiff’s jurisdiction by consent argument infringes upon the doctrine of federalism as protected by the due process clause.”
Levin Sedran & Berman attorney Daniel Levin said the ruling not only addresses an issue that has gained in significance in the wake of recent Supreme Court precedent, but it also splits with some federal courts on the question of consent jurisdiction.
“We think this is an important issue. If a company registers to do business in Pennsylvania and consents to its jurisdiction, that should mean they consent to be sued in this state as well,” Levin said. “The Third Circuit and federal courts have uniformly ruled that when defendants registered to do business in Pennsylvania, they consented to be sued here. However, it hasn’t been decided by the Supreme Court of Pennsylvania.”
One case in particular that the ruling departs from is the 2016 decision in Bors v. Johnson & Johnson. U.S. District Judge Mark Kearney of the Eastern District of Pennsylvania’s decision in that case held that a company with no business ties to Pennsylvania—other than being registered as a corporation in the state—could be sued here.
Several attorneys noted that Pennsylvania’s corporate consent law is unique in that it specifically requires companies to submit to general jurisdiction if it wants to do business in the state.
According to attorney John Hare, who heads Marshall Dennehey Warner Coleman & Goggin’s appellate division, New’s ruling aligns Pennsylvania with the majority of states and federal courts, including the U.S. Court of Appeals for the Second Circuit, which in 2016 ruled that Connecticut’s corporate registration law did not create general jurisdiction.
“There had been some Pennsylvania precedence saying registration alone creates jurisdiction, but this is a strong statement that he doesn’t agree with that view,” Hare said. “The fact that so many states have weighed in consistent with his decision means the defendant will probably have the wind behind its sails in the Superior Court.”
Attorneys said arguments regarding jurisdiction by consent were once rare, but they have been on the uptick given the U.S. Supreme Court’s recent rulings that have narrowed both general and specific jurisdiction. Jurisdiction by consent, attorney said, is most often seen in cases with defendants who operate in several states at once, such as railroad and pharmaceutical companies.
Mass torts attorney Max Kennerly of Kennerly Loutey noted that the U.S. Supreme Court has yet to specifically address the question of jurisdiction by consent, and said New’s thought process regarding its interaction with federalism appeared to be a “novel” interpretation of the question.
Although he said he disagreed with how New came down on the issue, Kennerly said the ruling was very well-formulated and the case presents a great opportunity for the state’s appellate courts to cleanly rule on the issue.
“It might be very helpful for many, many litigants to have an answer on this,” he said.
Burns White attorney Jeffrey Jackson, who represented Norfolk Southern Railway Co., said the company does not comment on pending litigation.