United States: Foreign Corp's Registration To Do Business In Pennsylvania Does Not Confer General Jurisdiction

A recent Pennsylvania Supreme Court decision falls in alignment with several other jurisdictions that do not confer general jurisdiction over a foreign corporation based on its registration to do business in the state. In Mallory v. Norfolk S. Ry. Co.,¹ the Court affirmed that the state's corporate registration statute² is unconstitutional to the extent that it confers general jurisdiction over foreign corporations that are not "at home"³ in Pennsylvania. The Court further held that the registration statute does not constitute voluntary consent by a foreign corporation to general jurisdiction. 

Relying on Daimler AG v. Bauman and its predecessor, Goodyear Dunlop Tires Operations, S.A. v. Brown,⁴ the Court held that the state's "statutory scheme of conditioning the privilege of doing business in the Commonwealth on the submission of the foreign corporation to general jurisdiction in Pennsylvania courts strips foreign corporations of the due process safeguards guaranteed in Goodyear and Daimler."⁵ In Mallory, the Virginia plaintiff filed a Federal Employers Liability Act (FELA) lawsuit against a Virginia railway company that has its principal place of business in Virginia for injuries sustained in Ohio and Virginia. The case had no connection to the forum state, other than general jurisdiction based on Pennsylvania's registration statute. The Court found "such broad jurisdictional authority is incompatible with the Fourteenth Amendment. Simply stated, a statute may not require what the Constitution prohibits."⁶

The Court recognized that a constitutional analysis was necessary because Pennsylvania's registration statute is peculiar in that it expressly provides that the act of registering to do business constitutes a basis upon which a court may assert all-purpose general jurisdiction over claims against a foreign corporation.⁷

The Court further recognized the "Hobson's choice" that foreign corporations face to either lawfully register to do business in the state or not do business in Pennsylvania at all. Clearly, no voluntary consent exists; it is coerced. Moreover, if the registration statute was upheld, then "every national corporation [would be] subject to the general jurisdiction of every state. This reality flies in the face of Goodyear and Daimler and cannot be condoned."⁸  

Pennsylvania is in accord with other states on this issue.⁹ A few months ago, the New York Court of Appeals addressed this question and, in a 5-2 opinion, similarly held that a foreign corporation's registration to do business and designation of an agent for service in New York does not constitute consent to general jurisdiction.¹⁰ Rather, the required registration with New York's secretary of state and designation of an in-state agent for service of process constitute consent to accept service of process, not general jurisdiction. That decision resolved a split among federal and state courts in New York on the issue. New York Gov. Kathy Hochul also recently vetoed legislation¹¹ that would make a foreign corporation's registration to do business in the state constitute consent to the jurisdiction of the New York courts.

The constitutionality of a consent-by-registration statute, such as the one proposed in New York, is a debated issue among state courts¹² and one that may eventually see U.S. Supreme Court review.  

Footnotes

1. __ A.3d __ , 2021 WL 6067172 (Pa. Dec. 22, 2021).

2. See 42 Pa. C.S. § 5301(a)(2)(i) (qualifying as a foreign corporation under the laws of the state constitutes a sufficient basis for Pennsylvania courts to exercise general jurisdiction over the foreign corporation); 15 Pa. C.S. § 411(a) (requiring foreign corporation to register with the Department of the State of the Commonwealth to do business in Pennsylvania).

3. See Daimler AG v. Bauman, 571 U.S. 117, 127, 138, 139 n.19 (2014) (holding corporation is subject to general jurisdiction only in states where it is "at home," with "paradigm" forums being corporation's place of incorporation and its principal place of business and, in an "exceptional case," where its activities are "so substantial and of such a nature as to render the corporation at home in that State").

4. 564 U.S. 915 (2011).

5. Mallory, 2021 WL 6067172 at *21.

6. Id. at *17.

7. Id.at *15 (noting that until the U.S. Supreme Court "speaks on the interplay between consent to jurisdiction by registration and the due process limits on general jurisdiction, it is our role to interpret that Court's governing case law on the topic and apply it to the facts presented").

8. Id. at *20. The Court also observed that "a contrary result would render application of specific jurisdiction superfluous as applied to foreign corporations registered to do business in Pennsylvania, as there would be no need to examine the affiliations between the forum State and the underlying case to establish specific jurisdiction over a particular controversy because general jurisdiction would always lie based merely upon the foreign corporation's registration." Id. at n.19.

9. States that similarly hold that corporate registration does not confer general jurisdiction include Colorado, Delaware, Illinois, Missouri, Montana, New Mexico, New York, Oregon, and Wisconsin.

10. See Aybar v. Aybar, 37 N.Y.3d 274, 280-83 (Oct. 7, 2021). New York courts had previously interpreted Bagdon v. Phila. & Reading Coal & Iron Co., 217 N.Y. 432 (N.Y. 1916) as long-standing precedent that registration under Bus. Corp. Law § 1301(a) constituted consent to general jurisdiction in New York. Aybar held that the lower courts had "misread" Bagdon, which decided only the narrow question whether a foreign corporation's designation of an in-state agent for service of process "extended to causes of action unrelated to the business transacted in New York." General jurisdiction was not disputed and had existed in Bagdon because the foreign corporation was concededly "doing business" in New York, which, at the time, was sufficient for due process.

11. In June 2021, the New York legislature had passed A.B. 7769/S.B. 7253, which would create an express statutory consent-by-registration rule.

12. See, e.g., Mallory, 2021 WL 6067172 at *12 n.13 (recognizing disagreement with Georgia Supreme Court decision holding its courts may exercise general jurisdiction over foreign corporations authorized to do business in Georgia).

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