There’s No Place Like Home: Pa. Supreme Court Negates General Jurisdiction Over Foreign Corporations on Registration Alone

Most businesspersons operating in multiple states might logically think that if an accident involving one of its employees occurred in Virginia, where the employee resided and where the company was incorporated and had its principal place of business, the company could not then be sued in Pennsylvania.  And they would be correct, according to a recent decision by Pennsylvania’s highest court.

In Mallory v. Norfolk Southern Railway Company,[1] the Pennsylvania Supreme Court unanimously held that a state statute which would confer jurisdiction on a court in Pennsylvania to decide such a case violated the Due Process Clause of the U.S. Constitution.

The factual circumstances involved Robert Mallory, a resident of Virginia, who filed an action pursuant to the Federal Employers Liability Act (“FELA”), in the Philadelphia Court of Common Pleas against Norfolk Southern.  In his Complaint, Mr. Mallory alleged that Norfolk Southern was a Virginia railway corporation with its principal place of business in Norfolk, Virginia.  The Complaint asserted that while employed by Norfolk Southern in Ohio and Virginia from 1988 through 2005, he was exposed to various carcinogens.  The Complaint further alleged that Norfolk Southern’s negligence, carelessness and recklessness in failing to provide a safe workplace free from asbestos and other toxic chemicals caused him to develop colon cancer.  Mr. Mallory did not allege any harmful occupational exposures in Pennsylvania.

Norfolk Southern sought dismissal of the Complaint due to the lack of both specific and general personal jurisdiction.  Norfolk Southern contended that the alleged injuries did not arise in Pennsylvania, that it was neither incorporated nor did it have its principal place of business there and, central to the Court’s decision, it did not consent to jurisdiction by the mere act of registering to do business in Pennsylvania.

In response, Mr. Mallory argued that Norfolk Southern did consent to personal jurisdiction by registering to do business in Pennsylvania pursuant to 42 Pa.C.S. § 5301(a)(2).  That statute provides that registration as a foreign corporation doing business in Pennsylvania authorizes the courts of the Commonwealth to exercise general personal jurisdiction over the corporation.

The Court explained the difference between the two types of personal jurisdiction, one of which a court must have in order to exercise personal jurisdiction over nonresident defendants.  The first, specific jurisdiction, depends upon an affiliation between the state where suit is brought and the underlying cause of action, such as an injury or other occurrence that takes place in that state.  Here, there was no specific jurisdiction because Mr. Mallory’s action alleged a FELA violation arising from exposure to harmful carcinogens in Ohio and Virginia, and there was no allegation that Mr. Mallory was exposed to carcinogens in Pennsylvania.

General personal jurisdiction arises over a foreign corporation in instances in which a company’s business operations within a state are so substantial and of such a nature as to justify suit against it on causes of action arising from matters distinct from those general business operations.

Prior to 1945, personal jurisdiction was tied directly to a defendant’s presence within the state, and service of process on a defendant physically present in the state conferred personal jurisdiction over that defendant.  Thus, states enacted registration statutes that require foreign corporations to appoint in-state registered agents for purposes of service of process, thereby rendering them “present” in the state to subject those corporations to the jurisdiction of local courts.  All 50 states now have a registration requirement for corporations doing business in the state to register and appoint an agent for service of process within that state.  Pennsylvania, alone among those states, however, explicitly equates registration with general personal jurisdiction to bring suit against the registered company.

In 1945, the U.S. Supreme Court shifted its personal jurisdiction analysis away from the former territorial approach toward the modern-day contacts-focused analysis in International Shoe Company v. Washington.[2]  In that decision, the Court clarified that the 14th Amendment’s Due Process Clause protects a defendant from being subject to the binding judgments of a forum with which the defendant has no meaningful “contacts, ties, or relations.”  The Court explained that a court’s authority depends upon the defendant’s minimum contacts with a state such that a suit brought in that state “does not offend traditional notions of fair play and substantial justice.”  The International Shoe Court held that a state may exercise general jurisdiction where the “continuous corporate operations within a state [are] so substantial and of such nature as to justify suit against it on causes of action arising from dealings entirely distinct from those activities.”

The more recent case of Goodyear Dunlop Tires Operations, S.A. v. Brown,[3] narrowed the circumstances in which general jurisdiction could be asserted.  In Goodyear, the Court held that for an individual, general jurisdiction is appropriate in the state where the individual resides; for a corporation, general jurisdiction attaches in an equivalent place where the corporation is regarded as “at home,” such as the place of incorporation or the principal place of business.  In that case, Goodyear’s sale of tires in North Carolina did not render North Carolina courts proper for general jurisdiction regarding an accident that occurred outside North Carolina allegedly due to malfunctioning tires that were manufactured outside of North Carolina.  Otherwise, any substantial manufacturer or seller of goods would be open to suit on any claim wherever its products are distributed.

A few years later, the U.S. Supreme Court again addressed general jurisdiction in Daimler AG v. Bauman.[4]  In that case, the lower court determined that California courts could exercise general “all purpose” jurisdiction over Daimler, a German corporation, for claims filed in California by Argentina residents based on alleged human rights violations committed abroad by one of Daimler’s subsidiaries.  The lower court determined that the subsidiary acted as Daimler’s agent for jurisdictional purposes.  The U.S. Supreme Court reversed, finding that the lower court’s agency theory would subject foreign corporations to general jurisdiction wherever they have an in-state subsidiary or affiliate.  This outcome, the court stated, would “sweep beyond even the sprawling view of general jurisdiction rejected by the Court in Goodyear.”

As an example of how rare it would be for a defendant to be subject to general jurisdiction outside of the state of its incorporation or principal place of business, the Daimler court cited Perkins v. Benguet Consolidated Mining Co.[5]  Perkins held that where World War II forced the foreign corporation’s owner to relocate the company temporarily from the Philippines to Ohio, Ohio then became the center of the corporation’s activities, which was sufficient to confer Ohio courts with general jurisdiction over the foreign corporation.

In looking to these U.S. Supreme Court cases for guidance, the Pennsylvania Supreme Court noted that the requirement of personal jurisdiction could be waived, like other individual rights, in a variety of ways, including contractually agreeing to personal jurisdiction or stipulating to it.  Mr. Mallory argued that Norfolk Southern had consented to personal jurisdiction by registering to do business in Pennsylvania.  In order to find that Norfolk Southern consented to the general jurisdiction of Pennsylvania courts when it registered to do business here, the Pennsylvania Supreme Court stated it must find that Norfolk Southern “voluntarily, knowingly, and intelligently waived its due process liberty interests in not being subject to the binding judgments of a forum with which it has no meaningful ‘ties or relations,’” citing International Shoe.

The Pennsylvania Supreme Court concluded that a foreign corporation’s registration to do business in the Commonwealth does not constitute voluntary consent to general jurisdiction “but, rather, compelled submission to general jurisdiction by legislative command.”  A foreign corporation desiring to do business in Pennsylvania can either lawfully register to do business and submit to the general jurisdiction of Pennsylvania courts or not do business in Pennsylvania at all.  The Mallory court agreed with the trial court that “[f]aced with this Hobson’s choice, a foreign corporation’s consent to general jurisdiction in Pennsylvania can hardly be characterized as voluntary.”

As noted, this decision has no effect on specific jurisdiction.  Thus, if plaintiff’s alleged injuries had occurred in Pennsylvania, jurisdiction by the courts of this state against Norfolk Southern would have been proper.  The Mallory decision supports basic fairness, in that a corporation, or any business entity, should not be subject to suit in a state in which it does some level of business simply because that state may afford a more favorable venue for a greater potential recovery by a plaintiff.

[1] 2021 WL 6067172, decided on December 22, 2021.

[2]  326 U.S. 310, 66 S. Ct. 154 (1945).

[3]  564 U.S. 915, 131 S. Ct. 2846 (2011).

[4]   571 U.S. 117, 134 S. Ct. 746 (2014).

[5]   342 U.S. 437, 72 S. Ct. 413 (1952).

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