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Does Registering to Do Business in Pa. Mean Consent to General Personal Jurisdiction?

Jacob Lehman and Mike Dolan of German, Gallagher & Murtagh.

Think back (fondly) to your civil procedure course. In order for a dispute to be litigated in a court, the court must have jurisdiction over the parties. There are two types of jurisdiction, subject matter and personal. Regarding the latter, a court can have personal jurisdiction over a defendant two ways. One, specific jurisdiction, has to do with the relationship between the conduct or occurrence from which the suit arises and the forum.  he other, the one this writing is concerned with, is general personal jurisdiction.

General personal jurisdiction allows a plaintiff to bring suit against a defendant in a jurisdiction unrelated to the conduct or occurrence from which the suit arises. In an injury suit, it means suing a defendant in a place that has nothing whatsoever to do with the alleged tortious conduct. For mass tort and products liability cases this has historically permitted forum shopping by plaintiffs who seek out the courts they feel most favorable to their claims.

In the past, whether general personal jurisdiction could exist revolved around the high court’s pronouncement in International Shoe v. Washington, 326 U.S. 310,  66 S. Ct. 154, (1945), that the defendant must have engaged  in a “substantial, continuous and systematic course of business” in the forum state. This language was interpreted broadly by different courts over the years to the point that many large corporate defendants felt they were becoming subject to jurisdiction everywhere.

The trend toward an expansive reading of International Shoe, and broad general personal jurisdiction was upended five years ago. In Daimler AG v. Bauman, 571 U.S. 117; 134 S. Ct. 746 (2014), the U.S. Supreme Court drastically limited the scope of general personal jurisdiction holding that the due process clause of the 14th Amendment to the U.S. Constitution requires not just that a defendant’s contacts with the forum be substantial and continuous but that they be so continuous and systematic as to render it essentially “at home” in the forum state. Justice Ruth Bader Ginsburg, writing for the majority in Daimler, noted the two places where a defendant is at home are where the defendant is incorporated and where it has its principal place of business. Post-Daimler, the states where a large manufacturer defendant could be sued under a general personal jurisdiction theory seemingly shrank from 50 to 2.

Naturally, a good lawyer doesn’t give up without a fight. Enter the battle over jurisdiction by consent. While Daimler concerned itself principally with when a nonresident defendant has significant enough contacts with a forum state to impose general personal jurisdiction it also recognized consent as a long-standing third possibility for general personal jurisdiction. Clearly, a nonresident defendant can consent to suit in a jurisdiction once they have been sued, or by means of a forum selection clause regardless of whether they are “at home.” Beyond this though there is the idea of consent by registration. Proponents of this theory posit that when a foreign corporation registers to do business in a state (as almost every state requires) it consents to general personal jurisdiction in that forum. Pre-Daimler, courts in our commonwealth upheld this concept. See Simmers v. American Cyanamid, 394 Pa. Super 464;, 576 A.2d 376, 382 (1990). Post-Daimler critics argue such clauses violate the due process clause of the 14th Amendment to the U.S. Constitution. Outside of Pennsylvania, many jurisdictions have rejected the consent by registration theory as inconsistent with Daimler. See e.g., Genuine Parts v. Cepec, 137 A.3d 123, 126 (Del. 2016); Display Works v. Bartley, 182 F. Supp 3d 166, 179 (D. N.J. 2016).

Here in the Keystone state, a series of decisions over the past two years have made consent by registration a hot-button issue. Two Superior Court panel decisions, Webb-Benjamin v. International Rug Group, 2018 Pa. Super 187; 192 A.2d 1133 (2018) and Murray v. American LaFrance, 2018 Pa. Super 267 (2018) (en banc review granted Dec. 7, 2018) suggested registration equals consent. The fight is not over. Recently, the Superior Court granted en banc reconsideration of Murray, voiding the panel decision and setting up a potentially significant ruling on the issue. At the core of the dispute are two things. One is whether Pennsylvania addresses the issue of consent by registration in a way that puts corporate defendants that register to do business here on notice of the consequences of doing so. The second is the question of whether post-Daimler any consent by registration statue, no matter how specific is permissible.

Pennsylvania’s long-arm jurisdictional statute makes clear that qualification as a foreign corporation under the laws of this commonwealth i.e., registration to do business in Pennsylvania, subjects the registrant to general personal  jurisdiction. 42 Pa. C.S.A. 5301(a)(2). In this way, Pennsylvania stands alone in clearly codifying the jurisdictional consequences associated with registration, see "Registration Statues, General Jurisdiction and the Fallacy of Consent," Monestier, 36 Cardozo L. Rev. 1343 (2015). Pre-Daimler both federal and state courts held that in Pennsylvania that registration equaled consent which equaled general personal jurisdiction, see Simmers v. American Cyanamid  and Bane v. Netlink, 925 F.2d 637 (3rd 1991). The specific language of the Pennsylvania long-arm statute was at the core of these rulings.

Post-Daimler, a number of decisions have suggested that the analysis is the same. In Bors v. Johnson & Johnson, 208 F.Supp.3d 648, 651 (E.D. Pa. 2016) and Gorton v. Air & Liquid Systems, 303 F.Supp.3d 278 (M.D. Pa. 2018) two district courts held that Pennsylvania’s established consent by registration case law was not disturbed by Daimler. Again, both focused on the express language of Section 5301, reasoning that corporations were on notice of the effect of registration to do business.

Webb-Benjamin, and Murray, the two Superior Court panel decisions of 2018, are similar. In Webb-Benjamin, the panel, citing Bors and Gorton, held that Daimler, does not eliminate consent as a method of obtaining personal jurisdiction. Murray, decided later in the year, reached the same conclusion noting that “Daimler, did not discuss consent to general jurisdiction based on business registration laws.” Webb-Benjamin, too held that the act of registration creates general personal jurisdiction regardless of whether the alleged tortious act took place before the registration occurred.

Despite these four rulings, the fight is not over. Murray, also produced a dissent by Judge Mary Jane Bowes outlining  the countervailing view. In part this focused on the question of whether the plaintiff/appellants waived their jurisdictional objections by failing to preserve them in the trial court. It also though, addressed the substantive issue. As Bowes put it “the federal jurisprudence underpinning the Webb-Benjamin, decision is flawed” and the “core principle therein, that registration is tantamount to consent to personal jurisdiction, is incongruous with the fundamental aspect of due process … In International Shoe.” In her reasoning, a “foreign company … cannot be subjected to the personal jurisdiction of a forum state unless it has fair warning that a particular activity will expose it to jurisdiction” and that here, that does not occur. Rejecting the framework of Bors, Bowes first noted that the statute that actually requires registration, 15 Pa. C.S. 411(a), makes no explicit mention of general jurisdiction. The long-arm statute, which does contain this requirement, is not referenced in the former. That a corporate defendant ought to be on-notice of the effect of registration because somewhere in the Pennsylvania consolidated statutes it says as much does not pass the smell test. Second, she assails what she sees as the fallacy that a corporation has a choice when it “consents” to register to do business in Pennsylvania, arguing that the administrative act of registering, is not the volitional act of consent necessary to satisfy due process.

Where is this all going? On Dec. 7, 2018, the Superior Court granted re-argument of Murray to the court en banc voiding the prior decision and setting the stage for a decisive ruling on whether registration equals consent. Any ruling on this issue by the en banc Superior Court stands a good chance of receiving Supreme Court review. While neither of the above-cited federal cases were appealed because of the nature of the controversy, a future challenge of Bors and Bane at the U.S. Court of Appeals for the Third Circuit remains possible. Last, the Supreme Court too, could weigh in on this issue either because of a Pennsylvania case, with its unique statutory language, or generally. In this era of uncertainty, counsel that has the opportunity is advised to consider whether to file suit  in the commonwealth on the basis of general personal jurisdiction alone. On the other side, objections to jurisdiction must be preserved.

 

Jacob Lehman and Mike Dolan are partners at the Philadelphia firm German, Gallagher & Murtagh. Lehman is a trial lawyer who focuses his practice on the defense of products liability, professional liability and complex casualty claims. Dolan regularly litigates and tries all manner of personal injury claims while also maintaining an active mass tort practice. They can be reached at lehmanj@ggmfirm.com and dolanm@ggmfirm.com.