Corporations Registering To Do Business In Pennsylvania Consent To Being Sued In Pennsylvania

FLB Law      Oct. 10, 2018

On September 25, 2018, the Pennsylvania Superior Court in Murray v. American LaFrance, — A.3d —, 2018 Pa. Super. 267 held that foreign corporations registered to conduct business in the state automatically consent to being sued in Pennsylvania’s courts.  This decision, along with the Court’s decision in Webb-Benjamin, LLC v. International Rug Group, LLC, — A.3d — Pa. Super. June 28, 2018) represents a major shift in the landscape of general personal jurisdiction.

The notion of personal jurisdiction is that a court may not exercise its power over non-residents unless there is a basis to do so, which means that a court’s power over a non-resident is limited by the concept of due process.  With respect to foreign corporations (i.e., those organized under the law of another state), the U.S. Supreme Court in Daimler AG v. Bauman, 571 U.S. 117 (2014) held that due process only permits a court to possess general or all-purpose jurisdiction over a foreign corporation where the corporation is 1) incorporated in the state; 2) has its principal place of business there; or 3) has such “continuous and systematic” affiliations within the state so as to render the corporation “essentially at home.”

Pennsylvania law requires that foreign corporations must register with the Department of State in order to conduct business within the Commonwealth, even if that corporation’s “home” (i.e., its state of incorporation or principal place of business) is elsewhere. Despite the “essentially at home” test set forth in Daimler, the Pennsylvania Superior Court in Murray and Webb-Benjamin, LLC held that Pennsylvania’s general personal jurisdiction statute provides that foreign corporations consent to general personal jurisdiction in the state simply by registering to do business there.  In Murray, the Court ruled that the defendant corporation, which had a principal place of business in Illinois and had minimal contacts with Pennsylvania (i.e. it did not have a corporate office in Pennsylvania; it was not a Pennsylvania domestic company; it did not own or lease real property in Pennsylvania; it did not have any bank accounts in Pennsylvania; it did not design or manufacture any products in Pennsylvania) had nevertheless consented to the jurisdiction of Pennsylvania’s courts by registering to do business within the state.

While the result seems straightforward, the dissenting opinion pointed out that, in the case before it, the plaintiffs are individuals from Massachusetts,  New  York,  and  Florida,  who sued  a  Delaware  company  with  its  principal  place  of  business  in Illinois, for injuries that allegedly occurred in New York.  Although there were other defendants in the case when it was filed, the claims against those defendants were either dismissed or withdrawn. The dissent acknowledged that that jurisdiction-via-registration became part of Pennsylvania’s jurisprudence following the Superior Court’s recent holding in Webb-Benjamin, which had adopted the consent analysis first proffered by the Third Circuit Court of Appeals in Bane v. Netlink, Inc., 925 F.2d 637 (3d Cir. 1991), which was later reiterated by a Pennsylvania district court in Bors  v.  Johnson &  Johnson,  208  F.Supp.3d  648  (E.D.  Pa.  2016). However, the dissent contended that the “core principle,” that registration is tantamount to consent to personal jurisdiction, is incongruous with  the  fundamental  aspect  of  due  process  that  the United States  Supreme  Court  first highlighted in International Shoe Co. v. Washington, 326 U.S. 310, 319 (1945); that is, protecting an individual’s liberty interest against being subjected to binding judgments in a foreign forum with which the defendant has no meaningful relationship.

In sum, the Superior Court’s decision in Murray will create issues for out-of-state corporations that desire to conduct business in Pennsylvania but are wary of being haled into court in a jurisdiction with which they have minimal business or other contacts.  Moreover, the decision may result in anomalous situations where Pennsylvania courts find themselves in the position of addressing cases which do not involve Pennsylvania residents, a Pennsylvania incident, or the application of Pennsylvania law.  However, unless and until a higher court addresses the issue, or the legislature intervenes to modify either the state’s registration requirement or its personal jurisdiction statute, Pennsylvania attorneys will have to advise their out-of-state clients that meeting the legal requirement of registering to do business in Pennsylvania will be deemed consent to general personal jurisdiction within the state.

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