Yesterday, the Supreme Court of Pennsylvania held that Pennsylvania’s statutory scheme was unconstitutional insofar as it subjected foreign corporations to general personal jurisdiction based solely on their registration to conduct business in Pennsylvania. This is a landmark decision that will dramatically alter the landscape of civil litigation in Pennsylvania moving forward.
The Fourteenth Amendment to the United States Constitution prohibits states from depriving any person of “life, liberty, or property, without due process of law.” This provision, often referred to as the Due Process Clause, has been interpreted by the Supreme Court of the United States to place certain limitations on where people and businesses can be sued in connection with a particular claim. Every state is free to enact its own jurisdictional laws, known as “long-arm statutes,” setting forth the circumstances under which a court within that state may exercise jurisdiction over a person or business. This freedom is curtailed, however, by the protections of the Due Process Clause: a state’s long-arm statute cannot be enforced if doing so would violate a person’s due process rights under the Constitution.
Pennsylvania’s long-arm statute, 42 Pa.C.S. § 5301(a)(2)(i),was unique. It permitted Pennsylvania’s courts to exercise general personal jurisdiction over any corporation that is registered to do business in Pennsylvania. Practically speaking, this presented out-of-state corporations with a Hobson’s choice: if they wanted to conduct business in Pennsylvania, they had to subject themselves to suit in Pennsylvania in connection with any type of claim regardless of whether the claim or corporation has any substantial factual connection to Pennsylvania.
There had been a significant debate among trial and intermediate appellate courts, at both the state and federal levels, regarding the constitutionality of this Hobson’s choice. Some judges believed that the long-arm statute violated the protections of the Due Process Clause, while others considered a company’s registration to conduct business in Pennsylvania to be a valid waiver of its due process rights. While the latter theory of waiver, also known as “consent-by-registration,” had been rejected by most other states that have considered the issue, none of those states had long-arm statutes that specifically and directly stated that registration to conduct business amounted to consent to general jurisdiction.
The consent-by-registration debate, as applied to Pennsylvania law, was brought to the forefront in the recent case Mallory v. Norfolk Southern Railway Company, 3 EAP 2021 (Pa. Dec. 22, 2021). A railroad company was sued in Pennsylvania by a resident of Virginia who developed colon cancer allegedly as a result of occupational exposure to carcinogens while working in Virginia and Ohio. Since the railroad company — which was headquartered in Virginia and organized under the laws of Virginia — had registered to conduct business in Pennsylvania, Pennsylvania’s long-arm statute authorized the case to proceed in Pennsylvania despite the lack of any other connection with the Commonwealth. In a significant divergence from a recent decision by Pennsylvania’s intermediate appellate court, the Honorable Arnold New of Philadelphia County held that the long-arm statute was unconstitutional because it conferred personal jurisdiction over foreign corporations to an extent that violates the Due Process Clause. The plaintiff appealed, and the intermediate appellate court transferred the appeal directly to the Supreme Court of Pennsylvania for consideration.
On December 22, 2021, in a landmark unanimous decision, the Court affirmed Judge New’s decision and ruled that Pennsylvania’s “statutory scheme violates due process to the extent that it allows for general jurisdiction over foreign corporations, absent affiliations within the state that are so continuous and systematic as to render the foreign corporation essentially at home in Pennsylvania.” While it remains true that any person or company can waive its due process rights, the Court found that a company’s registration to conduct business did not constitute a voluntary waiver, but rather a “compelled submission to general jurisdiction by legislative command.” The Court explained that if Pennsylvania’s long-arm statute were deemed constitutional, every state in the Union could theoretically enact a similar law; and such an outcome would result in every single national corporation being subject to the general jurisdiction of every state. The Court emphasized that such an outcome “flies in the face” of the U.S. Supreme Court’s precedent and “cannot be condoned.”
The Mallory decision will have a significant impact on future cases. Pennsylvania, and in particular Philadelphia, has long been viewed as a prime destination for personal injury plaintiffs due to its reputation as a plaintiff-friendly jurisdiction. Until now, there were very few limitations on the types of circumstances that would warrant filing suit in Pennsylvania. While Mallory may not deter litigants from filing cases in Pennsylvania that have no factual connection to the Commonwealth, the decision will likely result in many of those cases being dismissed at the pleadings or summary judgment stage. Pennsylvania’s jurisprudence remains idiosyncratic in many respects, but it has advanced towards a lockstep with other state and federal courts on the important issue of personal jurisdiction.
If you have questions concerning this topic or would like to discuss in further detail, please contact the author Benjamin Hartwell.
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