It Just Got a Lot Easier to Sue Out-of-State Companies in Pa.

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It Just Got a Lot Easier to Sue Out-of-State Companies in Pa.

In the span of three months, the Pennsylvania Superior Court issued two very similar precedential rulings that both plaintiffs and defense attorneys agree are likely to put to rest an issue that has been debated across the state over the past four years: whether registering to do business as a foreign corporation in Pennsylvania still means consenting to be sued in Pennsylvania.

The Superior Court ruled in late June and again in late September that it does, despite a relatively recent U.S. Supreme Court decision that raised the bar for establishing general personal jurisdiction.

Trial judges around the state have split on the issue of consent by registration in various cases since 2014. That’s the year the U.S. Supreme Court ruled in Daimler AG v. Bauman that jurisdiction could not be exercised over a corporation in a state where that corporation was not “at home,” which the justices defined as having “continuous and systematic” “affiliations” with the state where the litigation was filed.

In the ensuing years, defendants have, sometimes successfully, made the argument to trial courts that the Daimler ruling invalidated the provision found at 42 Pa.C.S.A. Section 5301(a)(2), which says out-of-state businesses consent to general personal jurisdiction in Pennsylvania simply by registering to do business in the state.

But in a pair of precedential decisions—Webb-Benjamin v. International Rug Group from June 28 and Murray v. American LaFrance from Sept. 25—two different three-judge panels of the Superior Court ruled that Daimler had no impact on the consent provision in Pennsylvania’s long-arm statute and that registering to do business in the state still means agreeing to the possibility of being sued in the state.

Now, Pennsylvania litigators on both sides of the courtroom aisle said the oft-employed defense argument that Daimler thwarts consent by registration has lost considerable heft.

“Now that you have two Superior Court decisions [saying the opposite], you’d be hard-pressed to make that argument at the trial court,” said David Fusco, a partner in the litigation and dispute resolution group at K&L Gates in Pittsburgh.

Brian McCormick Jr. of Ross Feller Casey in Philadelphia represented the plaintiff in Bors v. Johnson & Johnson in the U.S. District Court for the Eastern District of Pennsylvania case. The court’s ruling in Bors, which upheld consent by registration post-Daimler, was heavily relied upon by both the Webb-Benjamin and Murray panels.

McCormick said the practical effect of the recent Superior Court rulings will be to “assist plaintiffs in keeping corporations in either Pennsylvania state court or federal court.”

Andrew DuPont, a partner at Philadelphia plaintiffs firm Locks Law Firm, has argued extensively in favor of consent by registration post-Daimler and said trial judges across Pennsylvania have come down on both sides of the issue.

Indeed, both the Webb-Benjamin and Murray Superior Court decisions were reversals of trial court rulings sustaining defendants’ preliminary objections.

In addition, almost exactly a month before the Webb-Benjamin decision came down, Philadelphia Court of Common Pleas Judge Arnold New issued an opinion in Mallory v. Norfolk Southern Railway saying consent by registration violates defendants’ due process rights.

“By wrapping general jurisdiction in the cloak of consent, Pennsylvania’s mandated corporate registration attempts to do exactly what the United States Supreme Court prohibited,” New said. “Therefore, plaintiff’s jurisdiction by consent argument infringes upon the doctrine of federalism as protected by the due process clause.”

At the time, litigators said New’s ruling was in line with decisions by the majority of state and federal courts, including the U.S. Court of Appeals for the Second Circuit.

But the Superior Court’s recent rulings seem likely to sway Pennsylvania courts back toward outlier status—perhaps fitting given how unique Pennsylvania’s corporate consent law is.

DuPont noted that, between Webb-Benjamin and Murray, five Superior Court judges have now endorsed consent by registration.

“If I were a trial judge I would feel very confident now that consent to jurisdiction remains valid,” he said.

In fact, DuPont said, a judge in one of his cases has already reversed his own prior ruling granting preliminary objections to the defense in light of the Webb-Benjamin decision.

In Webb-Benjamin, a three-judge panel, noting that no other Pennsylvania appellate court had yet addressed the issue, unanimously ruled that “Daimler does not eliminate consent as a method of obtaining personal jurisdiction.” The opinion was written by Judge John Musmanno and joined by Judges Victor Stabile and Kate Ford Elliott.

Three months later, in Murray, another panel, this time voting 2-1, reached the same conclusion.

Curiously, the majority in Murray also said it was addressing an issue of first impression in Pennsylvania state court and made no mention of the Webb-Benjamin decision, though the dissenting opinion did, acknowledging that ”jurisdiction via registration was affixed to our jurisprudence” by the June decision.

Attorneys familiar with both decisions were largely stumped as to why the Murray majority, but not the dissent, appeared to be unaware of the Webb-Benjamin ruling. They all agreed, however, that Webb-Benjamin and Murray arrived at nearly identical conclusions.

Fusco did note that the Webb-Benjamin ruling addressed one key issue that was not touched on in Murray: whether consent by registration could still apply in situations where the alleged conduct occurred before the defendant actually registered to do business in Pennsylvania.

The court found that it did apply because Section 5301 “does not expressly limit jurisdiction to only those events that occur during a foreign association’s registration in Pennsylvania.”

Going Forward

In addition to the guidance Webb-Benjamin and Murray give to state courts, several attorneys also said the Superior Court rulings could have significant impact on federal jurisprudence.

While the U.S. Court of Appeals for the Third Circuit upheld consent by registration in its 1991 ruling in Bane v. Netlink and several federal district courts have continued to follow that ruling in the wake of Daimler, the federal appeals court itself has not yet had occasion to address the issue in a post-Daimler context.

But if and when that opportunity arrives, several attorneys said, the Third Circuit is likely to seek guidance from the state courts because consent by registration is a state law issue. And as the case law in Pennsylvania stands currently, that guidance would likely come directly from Webb-Benjamin and Murray, attorneys said.

Still, Kenneth Argentieri, managing partner of Duane Morris’ Pittsburgh office and a commercial litigator, said the Third Circuit could instead choose to look at consent by registration through a constitutional due process lens, as New did in the Mallory case and as Judge Mary Jane Bowes did in her dissent in Murray.

It is also remains to be seen whether the Pennsylvania Supreme Court will get an opportunity to weigh in on the issue.

On Aug. 28, the Superior Court denied a petition for reargument en banc in Webb-Benjamin and there has been no additional activity recorded on the docket since then.

As of press time, there also had not been any docket activity in Murray since the Superior Court’s Sept. 25 ruling.

Curt Schroder, executive director of Pennsylvania Coalition for Civil Justice Reform, said in an email that he believes the Supreme Court will be compelled to take the Murray case if it is appealed, precisely because of the constitutional issues Bowes raised in her dissent.

“This application of [Pennsylvania]‘s long-arm-statute being read in conjunction with the registration requirement in the associations code, virtually eliminates the requirements of due process which require a corporation’s affiliations with the state be so continuous and systematic as to render it essentially at home in the forum state, according to the United States Supreme Court in Daimler,” Schroder said. ”Clearly those elements are not present here where the only affiliation with Pennsylvania is registration as a foreign corporation.”

 

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