United States: New Philly Opinion Rejects Personal Jurisdiction Via Corporate Registration Consent

Not so long ago the Philadelphia Court of Common Pleas emitted a malodorous opinion exercising personal jurisdiction over a foreign corporation because one of its materials suppliers was in Pennsylvania, even though the quality of that supplied material seemed to have nothing much to do with the injury, which occurred outside Pennsylvania. That opinion seems to have mislearned the teaching of the SCOTUS BMS opinion. Beyond that, the less said about it, the better. But it was interesting to us how that rotten opinion did not address the plaintiff's alternative argument that the corporate defendant's registration to do business in Pennsylvania constituted consent to general personal jurisdiction. Perhaps the court realized it had done enough damage by stretching specific personal jurisdiction beyond the bounds of reason.

Or perhaps the Philly court did not buy the consent argument. And now we know that is the case because the same court and same judge issued an opinion rejecting the consent via corporate registration argument. Mallory v. Norfolk So. Ry. Co., No. 1961 8-2 EDA, slip op. (Phila. C.C.P May 30, 2018), is actually a very good personal jurisdiction opinion. Let's pause, rub our eyes, take that in, and celebrate.

The plaintiff in Mallory was a railway carman in Virginia. He sued his railway employer, which was incorporated and had its principal place of business in Virginia, alleging that exposure to carcinogen caused him to suffer colon cancer. The defendant was definitely not "at home" in Pennsylvania. The exposure and injury did not occur in Pennsylvania. So why was the case in Philadelphia? Could it be the reputation Philadelphia juries enjoy for flipping million dollar verdicts around like nickels? Yes, Virginia plaintiffs, there is a Santa Claus, and he sits on a jury in Philadelphia's City Hall. Virginia courts and juries, of course, have a very different reputation.

But even putting aside mere predilection, what could possibly be the basis for a Virginia plaintiff to sue a Virginia defendant in Philadelphia for injuries having nothing to do with Philadelphia? The plaintiff hung jurisdiction on the defendant's registration to do business in Pennsylvania. The plaintiff was not merely engaged in wish fulfillment. Section 5301 of the Pennsylvania Judiciary Act does, unfortunately, provide that qualification as a foreign corporation in Pennsylvania constitutes a sufficient basis for general personal jurisdiction.

The question, then, is whether exercising personal jurisdiction over a corporation that registered to do business in Pennsylvania, without more, comports with due process. Put another way, whatever the statute says, does foreign corporate registration equal true consent – the kind of consent that can waive constitutional rights?

The Mallory court's answer seems altogether obvious but, at the same time, remarkable given the court that is doing the answering. It is actually a rather brave, as well as wise, decision. The court reviews the Pennsylvania statutory scheme and concludes that the "Defendant's consent to jurisdiction was not voluntary." If a foreign corporation does not register with the Commonwealth, it cannot do business in Pennsylvania. Moreover, it would be prohibited from seeking any redress with the Commonwealth's courts (you know – in cases where Pennsylvania jurisdiction actually made sense). As the Mallory court reasons, "the Legislature imposed a punitive sanction upon those foreign corporations; it matters not if such a sanction is characterized as a carrot rather than a stick, the punitive result is the same." Put simply, foreign corporations have no choice but to register in Pennsylvania. Having no choice is the antithesis of giving consent. The Mallory court held that a state's securing of general personal jurisdiction over a foreign corporation via what is essentially mandatory registration is an exercise of coercive power at odds with the SCOTUS BMS decision and due process.

To be sure, there are some old legal chestnuts out there that permitted "state courts to obtain personal jurisdiction over foreign corporations via mandatory registration statutes" (e.g., Pennsylvania Fire Ins. Co. (1917)), but those cases "are relics of the Pennoyer era, in which a bright-line rule prohibited courts from exercising personal jurisdiction over persons or corporations outside the geographic boundary of the court." They have been effectively overruled. And good thing, too.

By contrast to the Philadelphia court's crabbed reading of the recent SCOTUS BMS case when it came to specific personal jurisdiction, the Mallory court's reading of recent SCOTUS precedents on general jurisdiction is insightful and on the mark. The Mallory court interprets recent SCOTUS cases as teaching that "federalism prevents this Court from exercising general jurisdiction over Defendant simply because Defendant does business in Pennsylvania." Thus, "[b]y requiring foreign corporations to submit to general jurisdiction as a condition of doing business here, Pennsylvania's statutory scheme infringes upon our sister states' ability to try cases against their corporate citizens." Yes, hurray for those sister states, with damages caps and parsimonious jurors.

The reasoning of Mallory in rejecting the consent argument is sound, it should apply to all Pennsylvania cases and, for that matter, cases anywhere. Indeed, Mallory's reasoning on the issue far exceeds that of several federal district courts in Pennsylvania, which have fallen for arguments that the Pennsylvania statute could somehow overcome constitutional restraints on general personal jurisdiction.

Now if only the courts here could screw their heads on right about specific jurisdiction.

This article is presented for informational purposes only and is not intended to constitute legal advice.

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