Pennsylvania Personal Jurisdiction Update
The past three years have seen the scope of personal jurisdiction challenges expand on a national level, and Pennsylvania is no exception. Two areas in particular in Pennsylvania, jurisdiction by consent and jurisdiction by registration, have been tackled by both the state and federal courts in the Commonwealth. There have been inconsistent rulings in the courts, and there is potential for a continued sea change in this particular area of jurisprudence based on the outcome of a currently pending appeal in the Pennsylvania Superior Court.
Two cases in the Pennsylvania Superior Court, Webb-Benjamin, LLC v. International Rug Group, LLC and Kenneth Murray, et al. v. American LaFrance, LLC, et al., came down on one side of the fence. In Webb-Benjamin, the trial court sustained IRG’s preliminary objections, finding that 42. Pa.C.S.A. Section 5301 does not provide jurisdiction over claims that are based on events that occurred prior to a foreign association’s registration in Pennsylvania. The superior court analyzed Daimler AG v. Baumann in light of IRG’s argument that even if 42 Pa.C.S.A. Section 5301 provides a basis for jurisdiction, the court may not exercise it because IRG’s registration as a foreign association in Pennsylvania does not satisfy the updated interpretation of the due process clause. The superior court held that Daimler makes a clear distinction between jurisdiction by consent and the method of establishing personal jurisdiction that forms the basis of its analysis and holding. “While Pennsylvania courts have not discussed this distinction following the Daimler decision, federal courts in Pennsylvania have analyzed 42 Pa.C.S.A. Section 5301 in light of Daimler, and determined it has no effect in jurisdiction by consent.” The court reversed and remanded.
In Murray, appellee filed preliminary objections, arguing that the court lacked personal jurisdiction over it for the following reasons: its principal place of business is in Illinois; it does not have corporate offices in Pennsylvania; it is not a Pennsylvania domestic company; it does not own or lease real property in Pennsylvania; it does not have bank accounts in Pennsylvania; it does not design or manufacture any products in Pennsylvania; and its contacts with Pennsylvania are minimal. The trial court agreed, concluding that the appellee was not at home in Pennsylvania, sustained its preliminary objections, and dismissed all claims. Appellants argued that the appellee’s registration as a foreign corporation in Pennsylvania under 42 Pa.C.S.A. Section 5301(a)(2) constitutes consent to personal jurisdiction and the superior court agreed, reversing and remanding the case.
Conversely, one case from the Court of Common Pleas of Philadelphia County and one from the Eastern District of Pennsylvania, decided differently under two similar sets of facts. In Mallory, the plaintiff cited Simmers v. American Cyanamid Corp. which states that “when jurisdiction is based on a foreign corporation’s general activity or consent, i.e., … has voluntarily registered itself to do business here, the courts of this Commonwealth may exercise jurisdiction over the foreign corporation regardless of whether the cause of action being prosecuted is related to the corporation’s activities in Pennsylvania.” The plaintiff further cited precedent from Pennsylvania’s federal courts and four other state courts for the proposition a corporation may voluntarily consent to jurisdiction by choosing to register as a foreign business organization in a given state. The court was not persuaded, and stated that “[C]ontrary to plaintiff’s argument, foreign corporations do not submit to general jurisdiction by choosing to register as a foreign business corporation in this Commonwealth. Instead, Section 5301 of the Judiciary Act and Section 411 of the Association Code, when read together, mandate foreign corporations to submit to general jurisdiction as a condition of being permitted to conduct business within the Commonwealth. Stated differently, a foreign corporation has two choices: doing business in Pennsylvania while concomitantly consenting to personal jurisdiction, or not doing business in Pennsylvania.” The court continued, holding that “[I]n light of the Supreme Court’s repeated admonishment that the due process clause prohibits a state from claiming general jurisdiction over every corporation doing business within its borders (Goodyear, Daimler, or BNSF) it logically follows that the due process clause also prohibits a state from forcing every corporation doing business within its borders to consent to general jurisdiction.”
Judge Robreno, in Sullivan, stated that “Daimler brought about a sea change in the jurisprudence of exercising general personal jurisdiction over a foreign corporation. Daimler 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.” Ultimately, Judge Robreno agreed with Judge New, who authored the Mallory decision, holding that “(1) the Pennsylvania 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; and (2) the Third Circuit’s pre-Daimler decision in Bane v. Netlink, Inc., finding that, by registering to do business in Pennsylvania, a foreign corporation consents to general personal jurisdiction, is irretrievably irreconcilable with the teachings of Daimler, and can no longer stand.”
In an unusual move, the superior court agreed to rehear, en banc, the Murray case, and we are currently waiting on their decision. All of these above-referenced decisions potentially hinge on the holding in Murray, and if the court determines that registration to do business in the state does not in and of itself confer personal jurisdiction, we can expect personal jurisdiction challenges to skyrocket in the Commonwealth. In many asbestos cases, particularly in Pennsylvania, the only ostensible grounds for personal jurisdiction over many companies stems from registering to do business in the Commonwealth.