Key Points:
Supreme Court of Pennsylvania issued a decision in Mallory v. Norfolk Southern Railway. Co. that will have a significant impact on asbestos and other mass tort litigation in Pennsylvania and where such cases may be filed.
In Mallory, the Pennsylvania Supreme Court unanimously declared Pennsylvania’s “consent by registration” statutory scheme unconstitutional.
On December 22, 2021, the Supreme Court of Pennsylvania issued a decision in Mallory v. Norfolk Southern Railway. Co., 263 A.3d 542 (Pa. 2021), which will have a significant impact on asbestos and other mass tort litigation in Pennsylvania. Until now, Pennsylvania has been one of a minority of states that allows a foreign defendant to be hauled into court under principles of general jurisdiction based solely on registration to do business in the state. Given the fact that Philadelphia and Allegheny County courts trend pro-plaintiff, with relatively high verdicts in toxic tort matters, plaintiffs take advantage of Pennsylvania’s liberal jurisdiction rules to forum shop and file mass tort actions that have little or no connection to these jurisdictions. That landscape is changing. In Mallory, the Pennsylvania Supreme Court unanimously declared Pennsylvania’s “consent by registration” statutory scheme unconstitutional.
Background
The plaintiff in Mallory, a Virginia resident, filed a FELA action in the Philadelphia Court of Common Pleas against a Virginia corporation, Norfolk Southern Railway (Norfolk Southern), alleging he was exposed to asbestos and other hazardous substances while working for Norfolk Southern in Ohio and Virginia, which caused him to develop colon cancer. None of the plaintiff’s alleged exposure occurred in Pennsylvania.
Norfolk Southern filed preliminary objections, seeking dismissal of the complaint for lack of both general and specific jurisdiction. The plaintiff, however, argued that Norfolk Southern had consented to jurisdiction by registering to do business in the Commonwealth pursuant to 42 Pa.C.S. § 5301(a)(2), which provides in pertinent part:
(a) General Rule. – The existence of any of the following relationships between a person and this Commonwealth shall constitute a sufficient basis of jurisdiction to enable the tribunals of this Commonwealth to exercise general personal jurisdiction over such person, or his personal representative in the case of an individual, and to enable such tribunals to render personal orders against such person or represented:
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(2) Corporations.--
(i) Incorporation under or qualification as a foreign corporation under the laws of this Commonwealth;
(ii) Consent, to the extent authorized by the consent;
(iii) The carrying on of a continuous and systematic part of its general business within this Commonwealth.
Norfolk Southern’s preliminary objections were sustained by the trial court, which opined that it would violate the due process of the Fourteenth Amendment to construe a foreign corporation’s compliance with Pennsylvania’s mandatory business registration statute as voluntary consent to the exercise of general personal jurisdiction. The court noted that, because Pennsylvania requires foreign corporations to register with the Commonwealth before conducting business operations, foreign corporations are faced with a Hobson’s choice—to either register to do business, and thereby consent to general jurisdiction, or not do business in the Commonwealth. The court found that this “Hobson’s choice violate[d] Defendant’s right to due process.” Requiring a foreign corporation to submit to general jurisdiction as a condition precedent to doing business within the Commonwealth also unconstitutionally “infringes upon our sister states’ ability to try cases against their corporate citizens” and “runs counter to the concept of federalism and should not be tolerated.” The plaintiff appealed directly to the Pennsylvania Supreme Court pursuant to 42 Pa.C.S. § 722(7).
Supreme Court Decision
On appeal, the plaintiff-appellant continued to argue that registration to do business in the Commonwealth establishes consent to general personal jurisdiction under Pennsylvania’s long-arm statute, 42 Pa.C.S. § 5301(a)(2)(i), which expressly states that Pennsylvania courts may exercise general personal jurisdiction over corporations that qualify as foreign corporations under the law, and that qualification requires registration to do business within the state. According to the plaintiff, the statute does not coerce involuntary consent to jurisdiction but, instead, gives notice to foreign corporations registering to do business in the Commonwealth that, by doing so, they are consenting to jurisdiction. The plaintiff further noted that there is no precedent holding that a foreign corporation cannot validly consent to jurisdiction by registration.
Norfolk Southern, by contrast, argued that, since the statute requires all foreign corporations to register, it compels them to surrender their right to due process in order to do business within the Commonwealth. This violates the doctrine of “unconstitutional conditions,” prohibiting the government from denying a benefit to someone because they are exercising a constitutional right. “Compliance with mandatory registration cannot serve as a voluntary relinquishment of due process rights.”
The Supreme Court noted that Pennsylvania’s statutory scheme that confers general jurisdiction over foreign corporations, regardless of whether they incorporated, established their principal place of business or are otherwise “at home” in the Commonwealth, would eviscerate the general jurisdiction framework and minimum due process requirements established by the U.S. Supreme Court in Goodyear Dunlop Tires Operations, S.A. v. Brown, 564 U.S. 915 (2011) and Daimler AG v. Bauman, 571 U.S. 117 (2014), and thereby violate Constitutional notions of fair play and substantial justice. “Upon a close examination of the High Court’s most recent directives, we are persuaded that our statutory scheme fails to comport with the guarantees of the Fourteenth Amendment; thus, it clearly, palpably, and plainly violates the Constitution.” Citing to International Shoe Co. v. Washington, 326 U.S. 310 (1945), the court explained that “to find that Defendant consented to the general jurisdiction of Pennsylvania courts when it registered to do business here, we must conclude that it voluntarily, knowingly, and intelligently waived its due process liberty interest in not being subject to the binding judgments of a forum with which it has no meaningful ‘contacts, ties, or relations.’” While Norfolk Southern may have had notice that registering to do business within the Commonwealth would subject it to personal jurisdiction, “notice [] does not render the consent voluntary.” Because a foreign corporation’s only choice is to consent to personal jurisdiction or not do business in the Commonwealth, the court found that “consent” to personal jurisdiction was thereby coerced and not voluntary.
The court further noted that Pennsylvania’s statute was contrary to the concept of federalism, recognized by the U.S. Supreme Court in Bristol-Myers Squibb Co. v. Superior Court, 137 S. Ct. 1773 (2017), stating, “[w]hen determining whether personal jurisdiction is present, courts should consider the effect of the defendant’s ‘[submission] to the coercive power of a State that may have little legitimate interest in the claims in question,’ as the ‘sovereignty of each state implies a limitation of the sovereignty of all its sister states.’” On this point, the court held that “[t]he factual predicate underlying the instant appeal illustrates the textbook example of infringement upon the sovereignty of sister states, as Pennsylvania has no legitimate interest in a controversy with no connection to the Commonwealth that was filed by a non-resident against a foreign corporation that is not at home here.”
In conclusion, the Supreme Court affirmed the trial court order sustaining Norfolk Southern’s preliminary objections and dismissed the action for lack of personal jurisdiction, holding:
Our statutory scheme of conditioning the privilege of doing business in the Commonwealth on the submission of the foreign corporation to general jurisdiction in Pennsylvania courts strips foreign corporations of the due process safeguards guaranteed in Goodyear and Daimler. Legislatively coerced consent to jurisdiction is not voluntary consent and cannot be constitutionally sanctioned. Accordingly, our statutory scheme is unconstitutional to the extent that it affords Pennsylvania courts general jurisdiction over foreign corporations that are not at home in the Commonwealth.
Commentary
The Mallory opinion brings Pennsylvania’s jurisprudence in line with recent U.S. Supreme Court’s decisions regarding due process, as well as those in neighboring jurisdictions. It continues the national trend of rulings narrowing the scope of general personal jurisdiction. After Mallory, Pennsylvania courts can still exercise general personal jurisdiction over companies incorporated or having a principal place of business in Pennsylvania; however, foreign corporations will no longer be subject to general personal jurisdiction based solely on their registration to do business in the Commonwealth. This decision does not impact the ability of Pennsylvania courts to exercise specific jurisdiction over foreign corporations.
To avoid waiver, defendants need to be vigilant and to preserve their jurisdictional arguments through timely objection as soon as there is sufficient information to establish the lack of any basis for the court’s exercise of jurisdiction over them. Defendants who previously had preliminary objections overruled or summary judgment motions denied based on “jurisdiction by consent” should consider whether they now have a basis to seek reconsideration based on Mallory. Since counties like Philadelphia and Allegheny have a reputation as being more plaintiff-friendly jurisdictions, the Mallory decision is a significant development since it both provides a basis for foreign defendants to object to jurisdiction and to avoid litigating in these less favorable forums. Hopefully, it serves as a disincentive for plaintiffs to file against them in these and other Pennsylvania courts.
*Christine is a shareholder in our Philadelphia, Pennsylvania, office. She can be reached at 215.575.2778 or CPBusch@mdwcg.com.
Defense Digest, Vol. 28, No. 1, April 2022 is prepared by Marshall Dennehey Warner Coleman & Goggin 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 Warner Coleman & Goggin. All Rights Reserved. This article may not be reprinted without the express written permission of our firm. For reprints, contact tamontemuro@mdwcg.com.
