.

Defense Digest

Important New Developments in Jurisdiction and Venue in Pennsylvania

Defense Digest, Vol. 28, No. 3, October 2022

October 1, 2022

Key Points:

  • The Pennsylvania Superior Court has made it more difficult for businesses to challenge venue based on having minimal contact in the county where suit was filed.
  • The Pennsylvania Supreme Court has held that a business is not subject to jurisdiction in Pennsylvania solely on the basis that it has registered to do business here.

Two new appellate cases in Pennsylvania have, at least for now, significantly altered the landscape on jurisdiction and venue in Pennsylvania.

The change in jurisdiction comes as a result of a Pennsylvania Superior Court ruling in Mallory v. Southern Railway Co., 266 A.3d. 542 (Pa. Super. 2021), where the court decided that a corporation cannot be made subject to jurisdiction in Pennsylvania based solely on the fact that it has registered to do business in Pennsylvania, which has long been the standard. Mallory arose out of a claim by a former Norfolk Southern employee who brought suit in the Philadelphia Court of Common Pleas for cancer alleged to have been caused by asbestos exposure while he worked for the company in Ohio and Virginia. The plaintiff did not allege that any harmful exposure occurred in Pennsylvania, and the Virginia-based defendant did not have any direct connection to Pennsylvania.

However, Pennsylvania has a requirement, pursuant to Pa.C.S. § 5301(a)(2), that a corporation which desires to do business in Pennsylvania must register to do business and submit to general jurisdiction in Pennsylvania. Norfolk Southern argued that it had no connection to Pennsylvania and that it had not consented to jurisdiction by merely registering to do business. The trial court agreed and dismissed the plaintiff’s action.

On appeal by the plaintiff, the Superior Court upheld the ruling by the trial court, as did the Pennsylvania Supreme Court, which noted that the corporation, faced with the choice between registering or not being allowed to do business in the state, had not voluntarily consented to jurisdiction. Instead, “(f)aced with this Hobson’s Choice, a foreign corporation’s consent to general jurisdiction in Pennsylvania can hardly be considered voluntary.” As such, Pennsylvania’s general jurisdiction statute violated the defendant’s 14th Amendment right to due process under the law.

As a result of this holding, at least for now, there is no general jurisdiction over corporations in Pennsylvania based solely on registering to do business in the Commonwealth. However, the United States Supreme Court has taken up the case. That court’s decision could have important implications for corporations across the nation.

On the one hand, a ruling affirming the Pennsylvania Supreme Court’s holding would not have a great impact, as the majority of states do not have similar laws regarding consent to jurisdiction through registration to do business. On the other hand, if the United States Supreme Court rules in favor of the plaintiff, it could broaden the venues where corporations could be sued and might prompt forum shopping by plaintiffs seeking more plaintiff-friendly venues. Certainly, corporations and their insurers will be opposing venue based on registration for the time being and awaiting the decision of the United States Supreme Court.

The new, and unfortunate, change in Pennsylvania law on venue arises out of the ruling in Hangey v. Husqvarna, et al., 247 A.3d. 1136 (Pa. Super. 2021), which makes it much easier for plaintiffs to obtain venue over businesses and correspondingly more difficult for businesses to challenge venue in unfavorable venues, such as Philadelphia County, based on a lack of contact with the county. The plaintiff, a Bucks County resident, purchased a riding mower from a dealer in Bucks County and was injured in Bucks County when he fell off his mower and it ran over him. The plaintiff filed suit in Philadelphia County. The defendant challenged venue, arguing that it did not regularly conduct business in Philadelphia County. It established that it did $1.4 billion in sales in the United States in the year of the accident, of which a mere $75,310 came from sales in Philadelphia County, almost all of which came from a single dealer. This amounted to an infinitesimal fraction of its sales, only 0.005%. The Philadelphia trial court found that the defendant’s contact with Philadelphia was not sufficient to establish venue there and transferred the case out of Philadelphia to Bucks County. The plaintiff appealed the ruling to the Pennsylvania Superior Court.

In order to determine venue, courts have traditionally assessed whether a defendant’s contacts with the plaintiff’s chosen venue are of sufficient quantity and quality. The previous rule had been that the quantity test was satisfied if the defendant did about one percent or more of its business in a chosen venue. This percentage standard was equitable because it applied the same standard to large and small businesses.

Unfortunately, Hangey has thrown out this standard and completely changed the applicable venue analysis. The Hangey decision held that:

The percentage of a company’s overall business that it conducts in a given county, standing alone, is not meaningful and is not determinative of the ‘quantity’ prong. Each case turns on its own facts and we must evaluate evidence of the extent of a Defendant’s business against the nature of the business at issue. A small or local business may do all of its work in just a few counties or even a single one, while a large may span the entire nation. Indeed, the percentage of sales in a multi-billion-dollar company makes in a particular county will almost always be a tiny percentage of its total sales. Courts thus should not consider percentages in isolation. Rather, Courts must consider all of the evidence in context to determine whether the Defendant’s business activities in the county were regular, continuous and habitual.

Boiled down, the effect of this decision is that venue can now be established by either a tiny percentage of business done in a county or a very low dollar amount of revenue, especially for a large company. Large companies can now be subject to venue merely because they generate significant revenue in a county, even if the percentage of that revenue is miniscule. For example, venue over a company that produces expensive products could foreseeably be established by the sale of only a few units of that product within the county. In challenging venue, defendants can no longer rely on a low percentage of business in a county, but must go beyond that to address the volume of revenue. Unfortunately, that bar has been set very low at $75,000.

In May 2022, the Pennsylvania Supreme Court granted review of Hangey. Defendants should still consider asserting improper venue in case the Pennsylvania Supreme Court reverses Hangey. Nevertheless, if the issue is not raised, a reversal by the Pennsylvania Supreme Court would be a change in the law, which could also be a fair basis to raise the issue for the first time.


 

Defense Digest, Vol. 28, No. 3, October 2022 is prepared by Marshall Dennehey to provide information on recent legal developments of interest to our readers. This publication is not intended to provide legal advice for a specific situation or to create an attorney-client relationship. ATTORNEY ADVERTISING pursuant to New York RPC 7.1. © 2022 Marshall Dennehey. All Rights Reserved. This article may not be reprinted without the express written permission of our firm. For reprints, contact tamontemuro@mdwcg.com.

Firm Highlights

News

Christina Gonzales To Speak at the Women of Color Roundtable at DRI’s Diversity and Inclusion Seminar

Event

29th Annual FDLA Florida Liability Claims Conference

Jim and Erica will team up to present, "Supporting the Next Generation: Connecting with Associates." This panel-style presentation will explore communication best practices from the perspective of a senior shareholder and newer associate. The discussion will focus on the communication styles of different generations and effective strategies to avoid communication breakdowns. Topics to be discussed include the hiring process, perceptions of defense work among newer lawyers, work-life balance issues after hiring, and mentoring.

Thought Leadership

Marijuana Legalization and Workplace Risk: What New Jersey Employers Need to Know

While the legalization of recreational marijuana usage poses a risk of increased work-related accidents for younger workers, employers can work to curb this increase by investing in education, effective drug policies, and employee assistance programs.

News

Marshall Dennehey Again Earns Recognition in Distinguished Chambers USA

Thought Leadership

PA Middle District Dismisses Claims Against School District and its Superintendent, Principal, Special Education Director, and Classroom Teacher

A five-year-old special education student was enrolled in the Wyoming Valley West School District and attended the State Street Elementary School during the 2024-2025 school year. The student refused to clean up classroom toys at dismissal. When his teacher allegedly grabbed him by the wrist to walk him back to his seat, the student dropped to the floor and began crying. The teacher then allegedly grabbed the student by the ankle and dragged him across the floor. Following an investigation, criminal charges were not advanced by the county DA, and the school permitted the teacher to return to the classroom. The student’s parents sued, lodging thirteen legal counts under both state and federal law, which sought monetary damages from the teacher, the school district, the superintendent, the principal, and the director of special education. The plaintiff’s 42 USC 1983 claims were dismissed as to the school district for failure to allege a policy or custom violation, and the failure to alleged deliberate indifference in the failure-to-train context. As to the superintendent, building principal, and special education director, the Section 1983 claims were also dismissed for failure to allege personal involvement on the part of the individuals. Regarding an equal protection claim asserted against all defendants, the motion to dismiss was also granted for a failure to advance a plausible equal protection claim, holding that “plaintiffs' single-act allegations do not include a factual basis to even infer that the act was motivated by discriminatory animus rather than some other non-discriminatory impulse.” The court further dismissed the plaintiff’s negligence-based claims including negligence against the teacher and district administrators, NIED, and vicarious liability under the Political Subdivision Tort Claims Act (PSTCA). The federal claims under the IDEA, Section 504, and the ADA were also dismissed in various respects. The IDEA claim was dismissed against all defendants with prejudice for failure to exhaust administrative remedies. The Section 504 claims against the individual defendants were also dismissed with prejudice, as districts, not individuals, are the recipients of federal funds under Section 504. However, the Section 504 and ADA claims were dismissed without prejudice as to defendant Wyoming Valley West, and the plaintiff was permitted leave to amend.

Thought Leadership

U.S. Supreme Court Decides Key Issue Regarding Interstate Freight Broker Liability

Freight brokers are intermediaries.  They connect shippers of goods with trucking companies that transport those goods.  Freight brokers match a load of freight with a trucking company and oversee the logistics of the transportation. For a number of years there has been a division among the Federal Circuits regarding the potential liability of freight brokers when the trucking companies that they retain for interstate loads are involved in accidents.  At the center of this division was the Federal Aviation Administration Authorization Act of 1994 (FAAAA).  Some Federal Circuit Courts have held that state law negligent hiring claims against freight brokers were preempted by the FAAAA .  Other Federal Circuits Courts have held that even if preemption applied, the “safety exception” in the FAAAA saved state law negligent hiring claims from federal preemption.  On May 14, 2026, the U.S. Supreme Court addressed the conflict in Montgomery v. Caribe Transport II, LLC, et al, No24-1238. In that case freight broker C.H. Robinson selected Caribe Transport to haul an interstate load. The commercial truck driver employed by Caribe Transport allegedly caused an accident and the plaintiff, Montgomery, was seriously injured. Montgomery brought an action against the driver, Caribe Transport and C.H. Robinson. The allegation against C.H. Robinson was that it negligently retained Caribe Transport when it knew, or should have known, that it was an unsafe company. The Seventh Circuit Court of Appeals held that Montgomery’s claims against C.H. Robinson were preempted by the FAAAA. The plaintiff appealed to the U.S. Supreme Court.  The U.S. Supreme Court’s decision focused primarily on the safety exception in the FAAAA.  That provision provides that the FAAAA preemption “…shall not restrict the safety regulatory authority of a State with respect to motor vehicles.” C.H. Robinson argued, as freight brokers historically have, that their function was not “with respect to motor vehicles” because they do not own trucks or employ drivers. They are merely intermediaries, connecting entities who need freight moved with entities who can do that job. Therefore, C.H. Robinson argued that preemption applied, not the safety exception. The U.S. Supreme Court did not accept that argument. The Court focused on the meaning of the phrase “with respect to” in the safety exception. The Court held that it means “referring to”, “concerning” or “regarding”. Therefore, writing for a unanimous Court, Justice Barrett concluded that “[r]equiring C.H. Robinson to exercise ordinary care in selecting a carrier therefore “concerns” motor vehicles—most obviously, the trucks that will transport the goods. So, Montgomery’s negligent-hiring claim falls within the FAAAA’s safety exception, which saves it from preemption.” Justice Kavanaugh, in his concurring opinion, noted the effect this ruling may have on freight brokers and their insurers throughout the country: Importantly, the Court's decision today should not be read to mean that brokers will routinely be subject to state tort liability in the wake of truck accidents. As even plaintiff's counsel stressed, brokers should be able to successfully defend against state tort suits if the brokers have acted reasonably and arranged transportation with reputable trucking companies. Tr. of Oral Arg. 27-29. In plaintiff's counsel's words, the brokers "just have to hire carriers that actually have a reasonable policy," and "the broker is not going to have a problem if it's asking the hard questions of the carrier." Id., at 42, 45. In addition, the proximate-cause requirement in typical state tort law should help protect brokers from excessive liability. Id., at 25. That said, the brokers rightly caution against naivete. In the real world, as the brokers forcefully respond, state tort law can be unpredictable, and the costs to brokers of litigation and insurance may be significant even when brokers prevail in lawsuits. Moreover, the costs of litigation and insurance, as well as the costs of brokers' conducting more substantial inquiries into trucking companies, will cascade through the economy and be paid in part by American consumers in the form of higher prices. The concerns expressed by the brokers are legitimate and weighty. The key point here is that freight brokers can no longer claim they are protected from negligent retention claims by the FAAAA (in cases involving interstate transportation). The challenge will be to determine what is considered ”reasonable efforts” used by brokers when retaining transportation companies. 

graphic with Maria Granaudo photo text announces she has joined the firm as a shareholder in the Health Care Dept.

News

Maria R. Granaudo Joins Marshall Dennehey’s Wilmington Office As a Shareholder in the Health Care Department

Result

Summary Judgment Secured, Preserving $750,000 in Coverage for Insured in Major Trucking Liability Dispute

Ray Freudiger and Michael A. Roberts (both of Cincinnati) successfully obtained summary judgment on behalf of their client in a coverage dispute arising from a May 19, 2022, motor vehicle accident. A permissive driver operated a box truck for an interstate trucking company and caused severe injuries to two tort victims. Prior to the accident, the insured had procured a commercial auto policy for the trucking company with stated limits of $1,000,000. Following the accident, the insurer initiated a declaratory judgment action asserting that only reduced bodily injury limits of $25,000/$50,000 applied and later counterclaimed, alleging it would not have insured the driver had he been properly submitted for approval under the policy. After extensive discovery, briefing, and oral argument, the court rejected the insurer’s attempt to shift responsibility for the $750,000 in coverage it was legally required to provide for permissive drivers under Ohio law, granting summary judgment in favor of the insured and preserving $750,000 in liability exposure.

Result

No-Cause Jury Verdict Secured in Wrongful Death Trial

We successfully obtained a no-cause jury verdict in a 13-day wrongful death trial. The decedent, a 59-year-old man, was admitted to the emergency room on February 15, 2019, with complaints of abdominal pain, decreased appetite, and constipation, despite the use of laxatives. The patient did not complain of any nausea, vomiting, or diarrhea. He had a significant medical history including diabetes, hypertension, prior coronary artery stenting, morbid obesity (with past gastric bypass surgery), longstanding ventral hernia, and back pain. A CT scan revealed multiple hernias and a potential closed-loop bowel obstruction, leading to a surgery consultation. Our client, an emergency general surgeon, interpreted that the patient did not have a closed loop or any significant obstruction and recommended non-surgical management. The patient was approved to have clear liquids, and had a vomiting incident shortly after, but our client was not notified. The patient was returned to NPO status, and after improving overnight, he was returned to “clears” and additional medical and renal consults were ordered. Our client did not receive any communications from the residents/nurses of any changes in the patient’s condition. On February 18, 2019, two rapid responses were called due to increased heart rate and vomiting. It is believed that the vomiting resulted in aspiration, causing sepsis, ultimately leading to the patient’s death. During the trial, the plaintiff’s sole medical expert highlighted imaging on the wrong hernia, which called into question all of his opinions in the case. We made key objections related to the expert testimony, limiting what the allegations were, and preventing new allegations from being made. After approximately two and a half hours of deliberating, the jury returned a no-cause verdict. 

blue facade of a hospital sign against blue sky

Result

Defense Verdict in Complex Medical Malpractice Trial