United States: Pennsylvania – Going Off The Jurisdictional Deep End?

Last Updated: July 26 2018
Article by James Beck

We've already unloaded on Hammons v. Ethicon, Inc., ___ A.3d ___, 2018 WL 3030754 (Pa. Super. June 19, 2018), where the court made a virtually unprecedented holding that a defendant challenging personal jurisdiction on Due Process grounds had the burden of proof in the course of allowing a litigation tourist from Indiana to stay in Pennsylvania, based on "contacts" that had no causal relationship to that plaintiff's injuries. Hammons involved high profile mass tort litigation, and we're sure the story there is far from over.

Now there's Webb-Benjamin, LLC v. International Rug Group, LLC, ___ A.3d ___, 2018 WL 3153602 (Pa. Super. June 28, 2018), a small commission dispute case involving a single event in Canada. Heck, the non-resident defendant was not even registered in Pennsylvania until after the events in question. Id. at *1. In Webb-Benjamin, another panel of the same court has ruled that a corporation's mere act of registering to do business in Pennsylvania subjected it to general personal jurisdiction, supposedly because registration equals "consent" and consent is a separate basis for personal jurisdiction not subject to the Due Process analysis.

Webb-Benjamin relied almost exclusively on Bors v. Johnson & Johnson, 208 F. Supp.3d 648 (E.D. Pa. 2016) (which we criticized here), and an asbestos case following Bors, Gorton v. Air & Liquid Systems Corp., 303 F. Supp.3d 278 (M.D. Pa. 2018). Webb-Benjamin, 2018 WL 3030754, at *4. Thus,

Guided by the reasoning in Bors and Gorton, we conclude that [Bauman] does not eliminate consent as a method of obtaining personal jurisdiction. Accordingly, pursuant to 42 Pa. C.S.A. §5301, Pennsylvania may exercise general personal jurisdiction over [plaintiff's] claims against [defendant].

Id. at *5.

The analysis in Webb-Benjamin and the two district court cases is fairly simple. First, the aforementioned §5301(a) "qualification as a foreign entity under the laws of this Commonwealth" is a "sufficient basis . . . to exercise general personal jurisdiction over such person." Second, registration is a form of "consent" to personal jurisdiction. Third, "consent" is distinct ground for general personal jurisdiction not subject to the ordinary general jurisdiction tests enunciated in Daimler AG v. Bauman, 571 U.S. 117 (2014). That's simple, but also simply wrong.

First, the statute says what it says. But a state statute cannot trump federal Due Process – that's what the Supremacy Clause is all about. Thus, Judge New recognized that to interpret the state's registration statute in this fashion renders it unconstitutional as applied to a non-resident corporation being sued by a non-resident plaintiff over activities outside the state of Pennsylvania:

Under the current state of Pennsylvania law, the only way foreign corporations such as Defendant can avoid Pennsylvania courts' assertion of general jurisdiction over them is for those corporations to avoid doing business in Pennsylvania. Faced with this Hobson's choice, a foreign corporation's consent to general jurisdiction in Pennsylvania can hardly be characterized as voluntary. In light of the Supreme Court's repeated admonishment that the Due Process Clause prohibits a state from claiming general jurisdiction over every corporation doing business within its borders, it logically follows the Due Process Clause also prohibits a state from forcing every corporation doing business within its borders to consent to general jurisdiction.

Mallory v. Norfolk Southern Railway Co., 2018 WL 3025283, at *5 (Pa. C.P. Phila. Co. May 30, 2018) (citations omitted). The United States Supreme Court has repeatedly stated that a corporate defendant must be "at home" in order to justify general jurisdiction – not merely that it conduct "continuous and substantial" business. E.g., BSNF Railway. v. Tyrrell, 137 S.Ct. 1549 (2017); Daimler AG v. Bauman, 571 U.S. 117 (2014); Goodyear Dunlop Tires Operations, S.A. v. Brown, 564 U.S. 915 (2011).

Personal jurisdiction, "represents a restriction on judicial power . . . as a matter of individual liberty." Insurance Corp. of Ireland v. Compagnie des Bauxites de Guinee, 456 U.S. 694, 702 (1982). A mere state statute cannot change federal constitutional law. "By wrapping general jurisdiction in the cloak of consent, Pennsylvania's mandated corporate registration attempts to do exactly what the United States Supreme court prohibited." Mallory, 2018 WL 3025283, at *6. Indeed, the same Pennsylvania statute expressly recognizes Due Process limitations. See 42 Pa. Cons. Stat. §5308 ("tribunals of this Commonwealth may exercise jurisdiction under this subchapter only where the contact with this Commonwealth is sufficient under the Constitution of the United States"); 42 Pa. C.S.A. §5307 (jurisdiction only extends "to the extent permitted by the Constitution of the United States").

Nor does Webb-Benjamin's step two accurately state the law. The Pennsylvania statute itself treats registration and consent as separate means of obtaining general jurisdiction.

(a) General rule. − The existence of any of the following relationships . . . shall constitute a sufficient basis . . . [for] general personal jurisdiction. . . .

  1. Formation under or qualification as a foreign entity under the laws of this Commonwealth.
  2. Consent, to the extent authorized by the consent.
  3. The carrying on of a continuous and systematic part of its general business within this Commonwealth.

42 Pa. C.S. §5301(a)(1-3) (emphasis added). On its face, the statute plainly distinguishes between registration and consent. They are different bases for jurisdiction. Webb-Benjamin improperly merges subsections (a)(i) and (a)(ii).

Nor does the United States Supreme Court currently (as opposed to 100 years ago) consider registration to do business as a form of consent. Generally, the Court has dispensed with "the fiction[] of implied consent to service on the part of a foreign corporation" in favor of "ascertain[ing] what dealings make it just to subject a foreign corporation to local suit." Shaffer v. Heitner, 433 U.S. 186, 202-03 (1977).

We initially upheld these [corporate registration] laws under the Due Process Clause on grounds that they complied with Pennoyer's rigid requirement of either "consent," or "presence." As many observed, however, the consent and presence were purely fictional.

Burnham v. Superior Court, 495 U.S. 604, 617-18 (1990) (citations omitted).

Further, in Insurance Corp. of Ireland, the Court listed the currently recognized ways by which a defendant could "consent" to personal jurisdiction in the forum: (1) "submi[ssion] to the jurisdiction of the court by appearance"; (2) "parties to a contract may agree in advance to submit to the jurisdiction of a given court"; (3) "a stipulation entered into by the defendant"; (4) "agreements to arbitrate"; (5) "a judgment in personam may be rendered in a cross-action against a plaintiff in its courts"; (6) "waive[r] if not timely raised"; and (7) "fail[ure] to comply with a pretrial discovery order." 456 U.S. at 705-06. Corporate registration to do business is conspicuously absent from this list. See also J. McIntyre Machinery, Ltd. v. Nicastro, 564 U.S. 873, 880-81 (2011) (more recent discussion of consent likewise omitting corporate registration). Registration is not consent. To the contrary, a state may not "requir[e] the corporation, as a condition precedent to obtaining a permit to do business within the State, to surrender a right and privilege secured to it by the Constitution." Koontz v. St. Johns River Water Management District, 570 U.S. 595, 607 (2013) (quoting Southern Pacific Co. v. Denton, 146 U.S. 202, 207 (1892)).

To conduct any business in Pennsylvania, however slight, a foreign corporation must register. 15 Pa. C.S. §412(a). All 50 states and the District of Columbia have similar laws. E.g., T. Monestier, "Registration Statutes, General Jurisdiction, & the Fallacy of Consent," 36 Cardozo L. Rev. 1343, 1363-64 n.109 (2015) (string cite of all 50 states' registration statutes). Thus, if an authorizing statute was sufficient to create general jurisdiction – whether called "consent" or anything else – a corporation could constitutionally be subjected to general jurisdiction in every state where they conducted business, whether or no not the business was "continuous and substantial" – indeed even if they actually did no business at all (recall that the defendant in Webb-Benjamin only registered after the events at suit). That result is incompatible with Bauman, which held that to "approve the exercise of general jurisdiction in every State in which a corporation engages in a substantial, continuous, and systematic course of business" would be "unacceptably grasping." 571 U.S. at 138 (quotation marks omitted). Since Webb-Benjamin's "consent" theory does not even require "continuous and substantial" corporate activity as a predicate to general jurisdiction, Due Process does not allow theories of jurisdiction that would expose a corporation to suit for anything in any state:

[T]he same global reach would presumably be available in every other State. . . . Such exorbitant exercises of all-purpose jurisdiction would scarcely permit out-of-state defendants to structure their primary conduct with some minimum assurance as to where that conduct will and will not render them liable to suit.

Id. at 139 (citation and quotation marks omitted). "A corporation that operates in many places can scarcely be deemed at home in all of them." Id. at 139 n.20. "[I]n-state business . . . does not suffice to permit the assertion of general jurisdiction." Tyrell, 137 S. Ct. at 1559.

Unlike Webb-Benjamin, almost every other appellate court in the country has read the Supreme Court's decisions in BSNF, Bauman, and Goodyear to mean what they say, and has recognized the handwriting on the wall against expansive jurisdiction by consent theories. We'll start with Genuine Parts Co. v. Cepec, 137 A.3d 123 (Del. 2016), since: (1) Delaware knows something about corporate law, and (2) until Bauman, Delaware law had recognized precisely the same consent theory of jurisdiction as Webb-Benjamin. No longer. Cepec understood that general jurisdiction by consent merely by means of registration to do business is incompatible with Bauman:

An incentive scheme where every state can claim general jurisdiction over every business that does any business within its borders for any claim would reduce the certainty of the law and subject businesses to capricious litigation treatment as a cost of operating on a national scale or entering any state's market. [Bauman] makes plain that it is inconsistent with principles of due process to exercise general jurisdiction over a foreign corporation that is not "essentially at home" in a state for claims having no rational connection to the state. The foreign corporation in this case does not have its principal place of business in Delaware; nor is there any other plausible basis on which Delaware is essentially its home. Hence, Delaware cannot exercise general jurisdiction over it consistent with principles of due process.

137 A.3d at 127-28 (footnote omitted)

General jurisdiction by consent was likewise rejected in State ex. rel. Norfolk Southern Railway Co. v. Dolan, 512 S.W.3d 41, 51-53 (Mo. 2017). The court first observed, citing Cepec, that "a broad inference of consent based on registration would allow national corporations to be sued in every state, rendering [Bauman] pointless." Id. at 51. It therefore refused to interpret its statute to raise such constitutional questions. "The plain language of Missouri's registration statutes does not mention consent to personal jurisdiction for unrelated claims." Id. at 52. Accord State ex rel. Bayer Corp. v. Moriarty, 536 S.W.3d 227, 232-33 (Mo. 2017) (following Dolan in prescription medical product case).

Similarly, the Illinois Supreme Court, in Aspen American Insurance Co. v. Interstate Warehousing, Inc., 90 N.E.3d 440 (Ill. 2017), rejected the proposition that corporate registration creates general jurisdiction:

[T]hat a foreign corporation registered to do business in Illinois is subject to the same duties as a domestic one in no way suggests that the foreign corporation has consented to general jurisdiction. . . . [T]hat a foreign corporation has registered to do business under the Act does not mean that the corporation has thereby consented to general jurisdiction over all causes of action, including those that are completely unrelated to the corporation's activities in Illinois.

Id. at 447-48. Accord Campbell v. Acme Insulations, Inc., ___ N.E.3d ___, 2018 WL 2305692, at *4 (Ill. App. May 18, 2018) ("Nor does the fact that [defendant] has a registered agent for service of process in Illinois show that it consented to jurisdiction in this State") (following Aspen).

In the otherwise unfortunate Bristol-Myers Squibb Co. v. Superior Court, 377 P.3d 874 (Cal. 2016), reversed, 137 S. Ct. 1773 (2017), the California Supreme Court likewise held that "a corporation's appointment of an agent for service of process, when required by state law, cannot compel its surrender to general jurisdiction for disputes unrelated to its California transactions." Id. at 798. See also Am Trust v. UBS AG, 681 F. Appx. 587, 589 (9th Cir. 2017) (consent to jurisdiction not required of corporations registering to do business) (applying California law). The same conclusion governs Wisconsin law. In Segregated Account of Ambac Assurance Corp. v. Countrywide Home Loans, 898 N.W.2d 70 (Wis. 2017), the court overturned lower court precedent, cautioning that it "generally avoids interpreting statutes in a way that places their constitutionality in question," which was precisely basing general jurisdiction on corporate registration would do:

The shade of constitutional doubt that Goodyear and [Bauman] cast on broad approaches to general jurisdiction informs our assessment of this court's older cases. . . . Significantly, the [Bauman] Court cautioned that "cases decided in the era dominated by Pennoyer's territorial thinking should not attract heavy reliance today." 134 S.Ct. at 761 n.18 (citation omitted). . . . [W]e instead give preference to prevailing due process standards when interpreting a contemporary statute for the first time. . . . [S]ubjecting foreign corporations to general jurisdiction wherever they register an agent for service of process would reflect the "sprawling view of general jurisdiction" rejected by the Supreme Court.

Id. at 82. Accord Figueroa v. BNSF Railway Co., 390 P.3d 1019, 1021-22 (Or. 2017) ("we conclude that appointing a registered agent to receive service of process merely designates a person upon whom process may be served. It does not constitute implied consent to the jurisdiction of the Oregon courts."); Magill v. Ford Motor Co., 379 P.3d 1033, 1038 (Colo. 2016) (corporate registration cannot support general jurisdiction where defendant's in-state contacts "pale in comparison to the significant contacts that were deemed 'slim' in" Bauman).

So that's seven state high courts rejecting general jurisdiction based on considering registration to do business as "consent" since Bauman – to zero in favor.

Appellate authority in other jurisdictions is in accord with the above decisions. The Second Circuit in Brown v. Lockheed-Martin Corp., 814 F.3d 619 (2d Cir. 2016) (applying Connecticut law), refused to "err[] in casually dismissing related federal due process concerns" and became the first post-Bauman appellate decision to reject "consent" based on mere registration to do business as a basis for general personal jurisdiction. Id. at 636. "[T]he history of such statutes suggests that assent only to specific jurisdiction is what the statute required." Id. at 637. So-called "consent" jurisdiction, if generally conferred by registration to do business raises the same constitutional concerns that drove the result in Bauman:

In any event, we can say that the analysis that now governs general jurisdiction over foreign corporations − the Supreme Court's analysis having moved . . . to the more demanding "essentially at home" test . . . − suggests that federal due process rights likely constrain an interpretation that transforms a run‐of‐the‐mill registration and appointment statute into a corporate "consent" − perhaps unwitting − to the exercise of general jurisdiction by state courts.

Id. "If mere registration and the accompanying appointment of an in state agent – without an express consent to general jurisdiction – nonetheless sufficed to confer general jurisdiction by implicit consent, every corporation would be subject to general jurisdiction in every state in which it registered, and [Bauman's] ruling would be robbed of meaning by a back‐door thief." Id. at 640. See also Wal-Mart Stores, Inc. v. Lemaire, 395 P.3d 1116, 1120 (Ariz. App. 2017) ("there is no need to base personal jurisdiction solely upon a murky implication of consent to suit − for all purposes and in all cases − from the bare appointment of an agent for service. We therefore agree with those decisions holding that registration statutes do not imply consent to general jurisdiction."); Magwitch, LLC v. Pusser's West Indies, Ltd., 200 So.3d 216, 218 (Fla. App. 2016) (registration cannot create general jurisdiction; old law "has yielded to the two-prong analysis for long-arm jurisdiction set forth in recent decades by the Supreme Court"); Dutch Run Mays Draft, LLC v. Wolf Block LLP, 164 A.3d 435, 444-45 (N.J. App. Div. 2017) (court could not "agree business registration rises to consent to submit to the general jurisdiction in the forum," given Bauman's "clear narrow application of general jurisdiction"); Stisser v. SP Bancorp, Inc., 174 A.3d 405 (Md. App. 2017); Salgado v. OmniSource Corp., 2017 WL 4508085, at *5 (Tex. App. Oct. 10, 2017) (having a "registered agent in Texas . . . [alone] is not enough to subject a nonresident defendant to general jurisdiction") (unpublished); Northern Frac Proppants, II, LLC v. 2011 NF Holdings, LLC, 2017 WL 3275896, at *16 (Tex. App. July 27, 2017) ("general jurisdiction contacts are not established by showing that foreign business entities . . . were registered to do business in Texas, and had registered agents for service of process in Texas") (unpublished); Gulf Coast Bank & Trust Co. v. Designed Conveyor Systems, LLC, 717 F. Appx. 394, 398 (5th Cir. 2017) (rejecting "other outdated view[s] of general jurisdiction"; no general jurisdiction by reason of corporate registration) (applying Louisiana law).

There are literally dozens of trial court level decisions in numerous other states that also reject corporate registration as a basis for general jurisdiction when a corporate defendant is not "at home" under Tyrell/Bauman. For prior decisions, see our 50-state survey on jurisdiction by consent. For future decisions (not divided by state) see our post-BMS jurisdictional cheat sheet.

With WebbBenjamin, those of us who defend cases in Pennsylvania now have to cope with loopy Superior Court decisions on both general and specific jurisdiction. Pennsylvania's prior reputation as a hotbed of litigation tourism remains well and fairly earned. Expect multiple appeals to the Pennsylvania Supreme Court, and perhaps even higher, to the United States Supreme Court.

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

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