Pennsylvania’s unique corporate registration statute may be on the chopping block after a three-judge Superior Court panel in Mallory v. Norfolk Southern Railway agreed to transfer a jurisdictional dispute to the Commonwealth’s Supreme Court pursuant to a provision in the Pennsylvania Judiciary Code that gives the Supreme Court exclusive jurisdiction over any appeal from a trial court decision finding that a statute is “repugnant to the Constitution.” 42 Pa. C.S. § 722(7).
The key issue in Mallory v. Norfolk Southern Railway is whether Pennsylvania courts may constitutionally exercise general personal jurisdiction over out-of-state corporations simply because they register to conduct business in the Commonwealth of Pennsylvania. Pennsylvania law provides that a foreign corporation may not do business in the Commonwealth until it registers with the Pennsylvania Department of Business pursuant to 15 Pa.C.S.A. § 411. The Pennsylvania long-arm statute provides that general personal jurisdiction may be exercised over a foreign corporation in three circumstances: (1) incorporation under or qualification as a foreign corporation; (2) consent; and (3) the carrying on of a continuous and systematic part of its general business in Pennsylvania. 42 Pa. C.S. § 5301(a)(2). These statutes construed together appear to require foreign corporations to submit to the court’s general jurisdiction as a condition for doing business in Pennsylvania.
This is a hotly contested issue in Pennsylvania, and courts have struggled to reach a consensus as to whether the corporate registration and long-arm statutes comport with the U.S. Supreme Court’s holding in Daimler, which mandates that an out-of-state corporation is not subject to general jurisdiction unless it is registered to conduct business in or has its principal place of business in the forum.
In Mallory, the plaintiff (a resident of Virginia) filed suit in the Philadelphia Court of Common Pleas against his employer Norfolk Southern Railway (Virginia corporation with its principal place of business in Virginia) alleging violations of the Federal Employers’ Liability Act after allegedly being exposed to carcinogens while working at Norfolk’s locations in Ohio and Virginia. Norfolk filed Preliminary Objections seeking to dismiss the complaint for lack of personal jurisdiction. Plaintiff argued that Norfolk consented to general personal jurisdiction pursuant to 42 Pa.C.S.A § 5301 by registering to do business in Pennsylvania.
Judge Arnold New granted Norfolk’s Preliminary Objections for two reasons. First, he found that the Pennsylvania corporate registration statute does not comport with federal due process because it allows Pennsylvania to exert general jurisdiction over out-of-state entities that are not “at home” in the Commonwealth. This unique rule creates a federalism issue because it allows Pennsylvania courts to interfere with the right of other states to render verdicts against their own corporate citizens. Second, the corporate registration statute compels out-of-state entities to subject themselves to general jurisdiction as a condition of doing business in Pennsylvania. Judge New reasoned that this is contrary to U.S. Supreme Court law, which “made clear that a state cannot claim general jurisdiction over every corporation doing business within its borders… By wrapping general jurisdiction in the cloak of consent, Pennsylvania’s mandated corporate registration statute attempts to do exactly what the United States Supreme Court prohibited in Goodyear Dunlop Tires Operations, S.A. v. Brown, 131 S. Ct. 2846 (2011), BNSF Ry. Co. v. Tyrrell, 137 S. Ct. 1549 (U.S. 2017) and Daimler AG v. Bauman, 571 U.S. 117 (U.S. 2014).”
Judge New’s ruling is consistent with an overwhelming majority of courts throughout the country that have considered this same issue. See, e.g., Brown v. Lockheed Martin Corp., 814 F.3d 619, 636 (2d Cir. 2016) (“[T]he analysis that now governs general jurisdiction over foreign corporations…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’” to general jurisdiction); Lanham v. BNSF Ry. Co., 939 N.W.2d 363, 371 (Neb. 2020) (“[T]reating BNSF’s registration to do business in Nebraska as implied consent to personal jurisdiction would exceed the due process limits prescribed in [Goodyear and Daimler]”); Dutch Run-Mays Draft, LLC v. Wolf Block, LLP, 164 A.3d 435, 444 (N.J. Super. Ct. – App. Div. 2017) (“We now join the many courts that have circumscribed the view of general jurisdiction post-Daimler.”).
Pennsylvania law is unique in that it permits courts to exert general jurisdiction over out-of-state defendants solely on the basis that those entities registered to conduct business in Pennsylvania. Product defendants in Pennsylvania have for several years urged the appellate courts to align Pennsylvania law with U.S. Supreme Court law by overturning the relevant business registration and long arm statutes because those laws improperly compel foreign companies to consent to general jurisdiction though they are not “at home” in Pennsylvania. The Superior Court’s decision to transfer Mallory to the Supreme Court is a big step that we hope signals a change in controlling Pennsylvania law.
From a practical standpoint, Philadelphia has long been viewed around the country as a plaintiff-oriented jurisdiction that is a favorable forum to prosecute product liability and mass tort litigation. The Supreme Court’s ruling in Mallory has the potential to end such blatant forum shopping.