Asbestos Multidistrict Litigation Judge Rejects Pre-Daimler Third Circuit Authority Finding Personal Jurisdiction Based on Registration as a Foreign Corporation U.S. District Court E.D. of Pennsylvania, June 6, 2019

PENNSYLVANIA – In Re Asbestos Products Liability Litigation, Jackie Sullivan, Executrix of the Estate of John L. Sullivan v. A.W. Chesterton, Inc., et al., the Asbestos multidistrict litigation court recently ruled on a motion to dismiss filed by a defendant. The court granted the motion as it concluded that the court lacked personal jurisdiction over the defendant.

The court analyzed the 2014 Daimler AG v. Bauman, decision, which brought about a sea change in the jurisprudence of exercising general personal jurisdiction over a foreign corporation. The court reviewed the Daimler decision, which held that under the due process clause, subjecting a foreign corporation to general jurisdiction in every state in which it “engages in a substantial, continuous, and systematic course of business” was “unacceptably grasping.” Furthermore, under Daimler, the exercise of general jurisdiction over a foreign defendant (except in extraordinary circumstances) was limited to instances where the corporation was “at home,” namely, the forums in which the foreign corporation is incorporated and where it maintains its principal place of business. As in all states, under Pennsylvania law, foreign corporations wishing to do business in Pennsylvania are required to register with the state. Under pre-Diamler Third Circuit authority, such a business registration constituted a sufficient basis for the exercise of general personal jurisdiction over the foreign corporation. The court stated that federal and state courts in Pennsylvania have struggled to divine the applicability of Daimler to this registration statute. Therefore, the court held that:

  1. The Pennsylvania statutory scheme that requires foreign corporations to register to do business and, therefore, to consent to general personal jurisdiction in Pennsylvania, offends the due process clause and is unconstitutional
  2. The Third Circuit’s pre-Daimler decision in Bane v. Netlink, Inc., found that, by registering to do business in Pennsylvania, a foreign corporation consents to general personal jurisdiction, is irreconcilable with the teachings of Daimler, and can no longer stand.

In this case, the plaintiff, Jackie Sullivan, brought this action against 48 defendants in the Philadelphia Court of Common Pleas in July 2018, alleging that the decedent, John Sullivan, was exposed to asbestos during his Naval service from October 1967 through January 1980. The plaintiff alleged that this asbestos exposure caused the decedent to develop lung cancer, which ultimately led to his death. The defendant removed the action in August 2018 pursuant to the Federal Officer Removal Statute. Regarding the defendant, the plaintiff alleged that in 1973, the decedent was assigned to the U.S.S. Blakely while serving in the Navy as a machinist mate. The plaintiff further contended that an alleged predecessor of the defendant built the U.S.S. Blakey, and designed its ship to contain asbestos and failed to warn regarding the hazards of asbestos. It was undisputed that the decedent’s alleged exposure aboard the U.S.S. Blakely did not occur in Pennsylvania. The defendant is incorporated and has its principal place of business in Virginia, and the plaintiff is also a citizen of Virginia.

The court analyzed the plaintiff’s argument that the court had general personal jurisdiction over the defendant because the defendant and its alleged predecessors registered to do business in Pennsylvania at various points in time. The court analyzed two Pennsylvania statutes regarding business registration, which when read together, provide that the state will only permit a foreign corporation to “do business” in Pennsylvania if it registers and, thus, subjects itself to general personal jurisdiction. The court held that this scheme has serious due process implications and raised two questions for the court to address:

  1. Is the Pennsylvania statutory scheme constitutional after Daimler
  2. Must this court follow the Third Circuit’s holding in Bane that a foreign corporation consents to jurisdiction by registering under the Pennsylvania statutory scheme?

In its analysis, the court assessed whether Pennsylvania’s long-arm statute provided for the exercise of long-arm jurisdiction, and if so, whether the exercise of such jurisdiction satisfied the requirements of the due process clause of the United States Constitution. The court addressed the applicability of the long-arm statute, and held that it only needed to analyze whether jurisdiction was proper under the Federal Fourteenth Amendment jurisprudence. The court considered the jurisprudential history of general personal jurisdiction, with the development of the law from International Shoe, Pennoyer, and Helicopteros Nacionales, landmark cases in federal law holding that a foreign corporation’s continuous and systematic general business contacts in a state could allow its courts to exercise general personal jurisdiction over the corporation. In 2011, the Supreme Court retracted from this business contacts based general jurisdictional analysis. The court held that a foreign corporation is subject to general personal jurisdiction only where it is fairly regarded as being at home. Three years later, in Daimler, the Supreme Court held that a corporation is typically at home in its state of incorporation and state in which it has its principal place of business.

In its review of the Pennsylvania statutory scheme, the court addressed the plaintiff’s arguments that the defendant consented to general jurisdiction when they registered to do business in Pennsylvania. The court held that such consent is only valid if it is given both knowingly and voluntarily. In its analysis, the court held that the original force behind business registration statutes is now archaic and moot, and was initially intended to create only specific jurisdiction over foreign corporations, not general jurisdiction. The court further held that most courts confronted with the issue had also concluded that these statutes do not imply consent to general jurisdiction. In a Second Circuit decision, the court distinguished Pennsylvania’s statutory scheme on the grounds that the statute included clear language regarding consent based jurisdiction. However, the court concluded that even with the express statutory language conferring jurisdiction upon registration “[t]he reach of [a state’s] coercive power, even when exercised pursuant to a corporation’s purported ‘consent,’ may be limited by the Due Process clause.” The court further reviewed a Delaware Supreme Court decision interpreting a state registration statute as conferring general personal jurisdiction over registrants. The court held that:

“If all of our sister states were to exercise general jurisdiction over our many corporate citizens, who often as a practical matter must operate in all fifty states and worldwide to compete, that would be inefficient and reduce legal certainty for businesses. Human experience shows that “grasping” behavior by one, can lead to grasping behavior by everyone, to the collective detriment of the common good. It is one thing for every state to be able to exercise personal jurisdiction in situations when corporations face causes of action arising out of specific contacts in those states; it is another for every major corporation to be subject to the general jurisdiction of all fifty states.”

In its own analysis, the court agreed with previous holdings in the cases that a mandatory statutory regime purporting to confer consent to general jurisdiction in exchange for the ability to legally do business in a state is contrary to the rule in Daimler, and therefore, can no longer stand.

Read the case decision here.

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