Casualty

Key Points:

• Pennsylvania Supreme Court has made it easier for plaintiffs to bring suit in their preferred venues by diluting the common defense argument that a corporate defendant does only a de minimis amount of business in a plaintiff’s chosen forum.
• The court found that Pennsylvania Rule of Civil Procedure 2179(a)(2) vests venue wherever an entity “regularly conducts business.”
• Now, the percentage of revenue is simply one data point to be considered in determining “regularity,” with consistency of business and a physical presence in the county also relevant.

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On November 22, 2023, the Pennsylvania Supreme Court issued its much-anticipated opinion in Hangey v. Husqvarna Professional Products, Inc., 2023 WL 8102730 (Pa. Super. Nov. 22, 2023), that affirmed the Superior Court’s polarizing decision. Hangey makes it easier for plaintiffs to bring suit in their preferred venues by diluting the common defense argument that a corporate defendant does only a de minimis amount of business in a plaintiff’s chosen forum.

At issue in Hangey was the standard for venue over business entities under Pennsylvania Rule of Civil Procedure 2179(a)(2), which vests venue wherever an entity “regularly conducts business.” Prior decisional law explained that this standard required the business activities of a corporate defendant to be evaluated for both their quality and their quantity. Focusing on the “quantity” prong of the analysis, for many years, defendants have argued that venue is improper in counties where they conduct only a tiny proportion of their business. Results varied from case to case, but a general rule of thumb was that business activity below 1%—the proverbial “drop in the bucket”—was not enough to justify venue in a particular forum.
 
The Hangey case is noteworthy because venue hinged on one of several defendants selling $75,000 worth of goods to Philadelphia customers, or just 0.005% of its total sales for that year. However, because the defendant had an authorized dealer in Philadelphia through which many of its sales were made, the Superior Court found that those contacts were sufficiently continuous so as to satisfy the quantity prong of the venue test.
 
On appeal, the Supreme Court affirmed the Superior Court’s decision, emphasizing that, for purposes of the venue standard, “it is the word ‘regularly’ which we are construing and not ‘principally.’” A company could, therefore, perform acts “regularly” “even though these acts make up a small part of its total activities.” It was thus an abuse of the trial court’s discretion to find venue improper based solely on the 0.005% statistic.
 
Instead, percentage of revenue is simply one data point to be considered in determining “regularity.” Also to be considered is consistency of business and a physical presence in the county. Because the defendant in Hangey had ongoing contractual relationships with two authorized dealers in Philadelphia, because its products were on display in Philadelphia stores day after day, and because its sales were generally consistent from year to year, the defendant’s business in Philadelphia was therefore “regular,” even if that business was a tiny fraction of the defendant’s overall sales. The Supreme Court noted, too, that “business” may be quantified in metrics other than units sold, such as hours billed by employees or days open to the public. The court gave the example of a company with a brick-and-mortar building in the forum county that opens its doors to prospective customers on a daily basis—that company may be said to be regularly conducting business, even if it fails to make a sale or otherwise generate income. 
 
Even before the Hangey decision, Pennsylvania’s venue rules were fairly lax. Venue only needs to be proper as to one defendant for it to be proper for the entire case. Thus, an array of far-flung defendants may be subject to venue in Philadelphia because of the connections of just one defendant. The Supreme Court’s decision in Hangey loosens those venue rules further by lowering the bar for what constitutes “regular business.” A mere handful of sales from year to year may be sufficient to justify venue and anchor a case for all parties in a forum where the accident did not occur, and where no defendant is located. 

Hangey has raised the hurdle for defendants seeking to object to a plaintiff’s chosen venue. While statistics of the proportion of sales made in the forum county should still be considered, courts will demand that venue objections go further to present evidence of a lack of “regularity.” Evidence like sporadic sales to the forum county, locations of dealers or distributors, and the defendant’s lack of a physical presence in a county may also be necessary to support a change of venue. 

Questions about this important Pennsylvania Supreme Court venue decision may be directed to Michael A. Salvati, shareholder in Marshall Dennehey’s Philadelphia office, at masalvati@mdwcg.com. 
 

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_{Defense Digest, Vol. 29, No. 4, December 2023, 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. © 2023 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.}