On October 31, 2019, an en banc panel of the Pennsylvania Superior Court will hear reargument [1] in the case of Murray v. American LaFrance LLC to decide whether, following the United States Supreme Court’s landmark decision in Daimler AG v. Bauman, registration to do business in Pennsylvania can constitute consent to general personal jurisdiction. [2] The issue was previously addressed by separate three-judge panels of the Superior Court last year―first in Webb-Benjamin, LLC v. International Rug Group, LLC [3] and then in Murray―and both held that the language of Pennsylvania’s business registration [4] and long-arm statutes [5] provided sufficiently explicit notice of the jurisdictional impact of registering to do business, such that the act of registration conferred constitutionally valid “consent” to personal jurisdiction. Since that time, however, federal courts in Pennsylvania have split in deciding whether to follow existing precedent accepting consent by registration or to reject such an interpretation on constitutional grounds. This alert provides an overview of the current landscape in Pennsylvania, including recent federal decisions, on the eve of rehearing in Murray. [6]

I. Consenting to Personal Jurisdiction by Registering to do Business

In the wake of the United States Supreme Court’s landmark decisions in Goodyear v. Brown, Daimler AG v. Bauman, BNSF Railway Co. v. Tyrell, and Bristol-Myers Squibb Co. v. Superior Court (Anderson), [7] companies across the country (and particularly those companies facing potential exposure to mass tort, product liability, and other repetitive litigation claims) have been closely following ongoing developments related to personal jurisdiction. As litigants have continued to wrestle with the contours of the constitutional limitations defined by Daimler and its progeny, one question that has consistently risen to the forefront is when, if ever, registration to do business in a particular state can constitute valid consent to general personal jurisdiction in that state. This question became important following Daimler because the Supreme Court did away with the concept of general jurisdiction based solely on the business contacts of an out of state defendant. [8] Nationally, most courts addressing the issue have concluded that, even if an out of state company is reached by the forum’s long arm statute, simply registering to do business fails to satisfy constitutional due process requirements for personal jurisdiction; accordingly, these courts have rejected the argument that mere registration is sufficient to establish consent to jurisdiction. [9]

On the other hand, some recent Pennsylvania federal and state court decisions have found registration sufficient to establish general jurisdiction based on their interpretation of Pennsylvania’s particular statutory scheme. [10] The consequences of these decisions were immediate; all companies registered in Pennsylvania (irrespective of their presence in the state) were potentially subjected to lawsuits brought by plaintiffs (including plaintiffs from outside of Pennsylvania) seeking to recover for injuries suffered entirely in other states. [11]

II. Recent Federal Decisions Have Reached Divergent Conclusions About the Validity of “Jurisdiction by Registration”

While Murray awaits its en banc rehearing, federal district courts have continued to address questions regarding general personal jurisdiction and Pennsylvania’s statutory scheme. For example, on January 16, 2019, in Youse v. Johnson & Johnson, a mass-tort lawsuit alleging exposure to asbestos from the use of cosmetic talcum powder products, Judge Michael Baylson of the Eastern District of Pennsylvania sided with other recent Pennsylvania federal district court decisions holding that business registration constitutes consent to jurisdiction. [12] Judge Baylson explained that in Bane v. Netlink, Inc.—decided prior to Daimler—the Third Circuit had interpreted registration under the statute to confer consent to jurisdiction. [13] Accordingly, Judge Baylson held that “[w]ithout the Third Circuit overruling Bane or distinguishing Daimler,” the court was bound to “follow these decisions [i.e. Bane and its progeny].” [14]

On June 6, 2019, however, in another asbestos case, Judge Eduardo Robreno of the Eastern District of Pennsylvania reached a contrary conclusion on constitutional grounds in Sullivan v. A.W. Chesterton, Inc. [15] In Sullivan, defendant Huntington Ingalls Incorporated (“HIC”) moved to dismiss because HIC had no forum contacts sufficient to establish specific jurisdiction and HIC was not “at home” in Pennsylvania for general jurisdiction under Daimler—in fact, HIC was incorporated and maintained its headquarters in Virginia. [16] Of course, however, HIC had registered to do business in Pennsylvania. [17]

To determine whether it had personal jurisdiction, the court first discussed Daimler within the evolution of the Supreme Court’s general personal jurisdiction precedents. The court explained that the Supreme Court had gradually rejected the contacts-based analysis of general jurisdiction it announced in International Shoe and ultimately concluded, in Goodyear, that “a foreign corporation is subject to general personal jurisdiction only where it ‘is fairly regarded as at home.’” [18] Daimler, in turn, “completed the turn away from International Shoe’s factual analysis in favor of a fairly straightforward bright line test” such that “a corporation is typically ‘at home’ in only two places: its state of incorporation and that state in which it has its principal place of business.” [19] The court further explained, however, that although Daimler did not prevent a party from consenting to jurisdiction under certain circumstances, it is axiomatic that consent is only valid if it is given both knowingly and voluntarily. [20] Accordingly, the court framed the question in Sullivan as whether “a foreign corporation knowingly and voluntarily consent[s] to general jurisdiction in a state by registering to do business under a statutory regime that conditions the right to do business on the waiver of general jurisdiction?” [21]

In addressing the question of knowing and voluntary consent, the court found that the “knowingly” prong was arguably satisfied because Pennsylvania’s statutory scheme explicitly ties registration to jurisdictional consent. [22] The problem, however, was whether that consent was voluntary. [23] Noting that use of Pennsylvania’s statutory scheme to establish consent would allow states to circumvent Daimler without giving corporations any real alternative to registration, [24] the court explained that the Pennsylvania statute failed the “voluntary” prong because it “allows Pennsylvania to impermissibly extract consent at a cost of a constitutional right.” This, the court found, violates the unconstitutional conditions doctrine, which prohibits a state from “condition[ing] a benefit generally available to others in the state [i.e. engaging in commerce in the state] on the surrender of a constitutional right [i.e. the due process protections afforded by Daimler].” [25] Therefore, the statute “violates the Due Process Clause and is unconstitutional.” [26]

As it relates to Bane, Youse, and other decisions holding that the statutory scheme was sufficient to confer general personal jurisdiction, the court explained that “[w]hen a constitutional standard is replaced by newer Supreme Court law contrary to the law of the circuit, ‘the old standard [is] not binding’ on lower courts.” [27] Consequently, the court held that, because “the rule that emerges from Daimler changed the standard for determining when a state may exercise general personal jurisdiction over a foreign corporation . . . the result obtained under Bane . . . cannot stand under the new constitutional standard adopted in Daimler.” [28]

III. The Superior Court Prepares for En Banc Rehearing of Murray v. American LaFrance LLC

It is against this backdrop that the Pennsylvania Superior Court will rehear argument in Murray, in which the court will reconsider its earlier 2-1 panel decision holding that registration to do business in Pennsylvania provides constitutionally valid “consent” to general personal jurisdiction, even in the absence of other “contacts” between the defendant and Pennsylvania. [29] Indeed, the forthcoming en banc decision is poised to provide the most definitive resolution to date of this important statutory and constitutional question with significant jurisdictional implications for every company registered to do business in the state.

It is also worth emphasizing that the Superior Court en banc panel will not be bound by that court’s earlier panel decisions or by the federal district court decisions addressing the issue. As such, the en banc panel will have a number of options before it and, although the panel is expected to revisit the central issue of registration by consent, it is possible the court could sidestep the issue and reach a decision on case-specific grounds. For example, the court could conclude the defendant in Murray did not “consent” to jurisdiction because it registered to do business in Pennsylvania nine years before the “explicit general-jurisdiction language in Section 5301” was actually adopted in 1978. The court could also elect to decide the case on the grounds of waiver, although that appears unlikely given the posture of the case. Both of these case-specific concerns were flagged in Judge Mary Jane Bowes 27-page dissent in Murray, and a narrow decision on either ground by the en banc panel [30] could leave Webb-Benjamin undisturbed as the prevailing law in Pennsylvania.

For now, then, the situation remains very much in flux. A company that registers to do business in Pennsylvania today may find itself subject to general personal jurisdiction in Pennsylvania’s courts. That analysis may change in the near future, however, with the Pennsylvania Superior Court set in Murray to provide what will become the most definitive interpretation of the relevant statutory scheme by a Pennsylvania appellate court to date. Moreover, further consideration by the Pennsylvania Supreme Court or the Third Circuit could set the issue up to be heard by the United States Supreme Court, since neither is bound by decisions of the other on issues of federal law. Whatever the Superior Court ultimately decides, one thing is clear: all companies registered (or considering registering) to do business in Pennsylvania should be closely monitoring the en banc proceedings in Murray over the coming months and preparing to evaluate the impact of the decision on their exposure to potential liability in Pennsylvania.