In a much-anticipated decision, the Pennsylvania Supreme Court closed 2021 by striking down Pennsylvania’s statutory consent-by-registration scheme that held that an out-of-state business consented to general personal jurisdiction in Pennsylvania simply by registering. to do business in the state. .1 The question of the constitutionality of the consent-by-record system has swirled through lower courts since the 2014 U.S. Supreme Court ruling Daimler AG versus Bauman ruling, with those rulings making Pennsylvania an exception in allowing the practice within its unique statutory framework.2
In brief, this framework is as follows: foreign companies cannot do business in Pennsylvania until they are registered with the Commonwealth.3 Under Pennsylvania’s long arm law, personal jurisdiction is extended to the fullest extent permitted by the U.S. Constitution, and Pennsylvania courts may exercise general personal jurisdiction over corporations registered as foreign corporations in the Commonwealth.4 As we discussed earlier,5 2018 Pennsylvania Superior Court Webb-Benjamin, LLC v International Rug Group, LLC The ruling, in which the statutory scheme was upheld on the grounds that registration amounted to consent to personal jurisdiction, remained Pennsylvania’s newest appellate authority on the matter.6
The facts of Mallory are well suited to solving this problem. In Mallory, the plaintiff, a resident of Virginia, sued his Virginia-based employer for violation of the Federal Employers Liability Act, alleging that his occupational exposure to harmful carcinogens caused his colon cancer. The plaintiff worked in Virginia and Ohio, and he alleges no exposure to carcinogens in Pennsylvania. In short, there was no connection between the case and Pennsylvania. The trial court ruled that the Consent by Record Act was unconstitutional under the Due Process Clause of the Fourteenth Amendment. On appeal, the Superior Court transferred the case to the Pennsylvania Supreme Court under the Supreme Court’s exclusive jurisdiction over trial court orders declaring a Pennsylvania law invalid or unconstitutional.
In the long-awaited opinion written by Chief Justice Baer,seven the court conclusively concluded that the consent-by-record system “clearly, demonstrably and plainly violates the [United States] Constitution.”8 The court began with an in-depth analysis of the history of United States Supreme Court jurisprudence on personal jurisdiction. He observed that in International shoe,9 the United States Supreme Court has moved away from the “territorial approach” emphasized in Pennoyer v. Nefften to one requiring “minimal contact” with a forum state, so that continuing a prosecution “does not offend traditional notions of fair play and substantial justice”.11 The Pennsylvania court recognized that the decisions of the Supreme Court of the United States in Goodyear Dunlop Tires Operations, SA vs. Brown12 and Daimler further circumscribed this approach, limiting general personal jurisdiction to situations where the company’s affiliations with the forum state were so “continuous and systematic” that the company was essentially at home there.13 The court emphasized that the “paradigm” forums in which a defendant company is primarily at home are the company’s place of incorporation and principal place of business, although a defendant company’s operations in another forum may also confer jurisdiction general in an “exceptional case”.14
Given this context, the court expressly annulled Webbconcluding that Pennsylvania’s statutory scheme was unconstitutional “in so far as it confers general jurisdiction on the courts of Pennsylvania over foreign corporations not ‘at home’ in Pennsylvania pursuant to Good year and Daimler.”15 The court then proceeded to analyze the constitutional validity of consent to jurisdiction by waiving due process rights by registration. Observing that the waiver of a right to freedom of due process requires that the waiver be given “voluntarily, knowingly and intelligently”, the court held that the fact that the statute provided for a notice that registration confers jurisdiction general personal information did not amount to the party recording it voluntarily providing consent.16
Instead, the Pennsylvania court ruled that, in accordance with the “unconstitutional terms doctrine,” under which the government cannot withhold a benefit because a constitutional right is exercised, registration of a corporation foreigner to do business in the Commonwealth was “compulsory submission to general jurisdiction by legislative decree. »17 The court explained that Pennsylvania’s legislative framework was “Hobson’s choice,” requiring a corporation seeking to do business in Pennsylvania to register and submit to general personal jurisdiction “or not to business at all in Pennsylvania”.18 Chief Justice Baer wrote that this “broad exercise of general jurisdiction” was prohibited by Daimler, and, with “no remedy to respond to challenges to the exercise of court jurisdiction”, consent by registration contrasted with “constitutionally sanctioned” methods of consenting to general personal jurisdiction by appearance, contract or stipulation .19
In sum, the Pennsylvania Supreme Court finally solved a long-simmering problem and brought Pennsylvania in line with the other jurisdictions. Absent a change in the precedent of the personal jurisdiction of the United States Supreme Court, out-of-state corporations can no longer be dragged into Pennsylvania courts solely on the basis of their registration in the Commonwealth.
1 See Mallory v. Norfolk S.Ry. Co., — A.3d —, No. 3 EAP 2021, 2021 WL 6067172 (Pa. 22 Dec. 2021).
2 Daimler AG v Bauman, 571 US 117 (2014).
3 See 15 Pa. SC § 411(a).
4 See 42 Pa. CS §§ 5322, 5301(a)(2)(i).
5 See David R. Fine, David A. Fusco and Hudson M. Stoner, Supreme Court of Pennsylvania to consider whether business registration subjects an out-of-state corporation to general personal jurisdiction, K&L GATES HUB (January 14, 2021 ), David R. Fine, David A. Fusco & Hugh T. McKeegan, Pennsylvania Superior Court Defers Resolution of Jurisdiction-By-Registration Debate, K&L GATES HUB (June 30, 2020), David A. Fusco & Hugh T. McKeegan, En Bench Panel of the Pennsylvania Superior Court Prepares for New Argument Regarding Business Registration as Consent to General Personal Jurisdiction, K&L GATES HUB (October 25, 2019), David R. Fine Registration to Do Business in Pennsylvania as Implied Consent to General Personal Jurisdiction: An Unsettled Question in Pennsylvania, K&L GATES HUB (February 28, 2019), David A. Fusco, Sarah M. Czypinski, and Jake Morrison, Pennsylvania Superior Court Says Registration to Do Business in pen nsylvania constitutes consent to personal jurisdiction after Daimler, K&L GATES HUB (August 13, 2018).
6 Webb-Benjamin LLC v. Int’l Rug Grp., LLC, 192 A.3d 1133 (Pa. Super. Ct. 2018).
seven Judges Saylor, Todd, Donohue, Dougherty, Wecht, and Mundy joined in the opinion, with Judge Mundy’s brief agreement regarding specifically the “single jurisdictional scope” of the federal employers’ liability law. Mallory, 2021 WL 6067172 at *21–22.
8 Identifier. to *13.
9 Int’l Shoe Co. v. Washington, 326 US 310, 66 S. Ct. 154, 90 L. Ed. 95 (1945).
ten Pennoyer c. Neff, 95 US 714, 722, 24 L. Ed. 565 (1877).
11 Malory, 2021 WL 6067172 at *1–2.
12 Goodyear Dunlop Tires Operations, SA v. Brown, 564 US 915, 131 S. Ct. 2846, 180 L. Ed. 2d 796 (2011).
13 Malory, 2021 WL 6067172 to *4.
15 Identifier. to *18.
16 Identifier. to *19. Specifically, the Act provides that “qualification as a foreign company under the laws of this Commonwealth . . . constitute[s] a basis of jurisdiction sufficient to enable the courts of this Commonwealth to exercise general personal jurisdiction. 42 Pa. CS § 5301(a)(2)(i).
17 Malory, 2021 WL 6067172 at *20.
19 Identifier. to *21.