Personal Jurisdiction Over Foreign Corporations
After Daimler - What Now?[i]
Dale G. Larrimore, Esq.
First-year law students quickly learn that procedure matters, and the enormous impact of procedural rules is never more important than in attempting to exercise personal jurisdiction over out-of-state corporations without violating the Due Process Clause of the Fourteenth Amendment. In the seminal case of Daimler AG v. Bauman,[ii] the US Supreme Court drastically changed the rules with regard to when a court in Pennsylvania can exercise general in personam jurisdiction over a corporation. No longer do we just look for systematic and continuous contacts in our state. Under Daimler, the paradigm forum for the exercise of general personal jurisdiction over a corporation is its state of incorporation or its principal place of business – the single state where the corporate offices are located and the business decisions are made. So when can a foreign corporation (either a sister-state or a foreign-country corporation) be sued in Pennsylvania and not violate the Fourteenth Amendment?
Where litigation arises out of or relates to the defendant’s contacts with Pennsylvania then this forum may have specific jurisdiction over the defendant. The “primary concern” in assessing personal jurisdiction is “the burden on the defendant”[iii] and specific jurisdiction is confined to adjudication of issues that derive from, or are connected with, the very controversy that establishes jurisdiction. For a court to exercise specific jurisdiction over a claim there must be an “affiliation between the forum and the underlying controversy, principally, [an] activity or an occurrence that takes place in the forum State.”[iv] On June 19, 2017, the US Supreme Court decided Bristol-Myers Squibb Co. v. Superior Court of California, holding that when no such connection exists, specific jurisdiction is lacking regardless of the extent of a defendant’s unconnected activities in the State.[v]
If an injury did not occur in Pennsylvania and an attorney is attempting to exercise personal jurisdiction over an out-of-state corporate defendant, there is one remaining avenue to consider. Personal jurisdiction may always be established through a party’s expressed or implied consent.[vi] One way a foreign corporation can be sued in a state is through state procedures that find constructive consent through the voluntary registration that may have the effect of granting consent to personal jurisdiction in the state.[vii] Jurisdiction is always proper if a defendant consents to the exercise of jurisdiction over it in the forum state.
Pennsylvania law imposes such a basis for consent jurisdiction if a business qualifies as a foreign corporation for doing business in this Commonwealth.[viii] In Bane v. Netlink, Inc., the Third Circuit Court of Appeals held that when a foreign corporation registers to do business in Pennsylvania, a court may constitutionally exercise jurisdiction over that defendant.[ix] If the defendant has registered to do business in Pennsylvania, the court should recognize this as giving its consent to general personal jurisdiction here. Subsequent decisions have followed Bane, indicating, e.g., that “Our court of appeals has flatly held that when a foreign corporation registers to do business in Pennsylvania, a court may constitutionally exercise jurisdiction over that defendant pursuant to 42 Pa. C.S.A. § 5301(a)(2)(i).”[x]
Defendants have attempted to argue that courts should ignore the Court of Appeals’ precedent in Bane based on Daimler, where the Supreme Court restricted general personal jurisdiction over a foreign corporation to where the corporation was “essentially at home.” But the ruling in Daimler does not eliminate consent to general personal jurisdiction over a corporation registered to do business in Pennsylvania. In Bors v. Johnson & Johnson, Judge Kearney noted that the Supreme Court did not eliminate consent jurisdiction and that a court’s exercise of general jurisdiction based on a corporation’s consent differs from general jurisdiction established when a corporation is “essentially at home” in the forum state. Since Pennsylvania’s statute specifically advises the registrant of the jurisdictional effect of registering to do business, Judge Kearney held that “consent remains a valid form of establishing personal jurisdiction under the Pennsylvania registration statute after Daimler. . . . Parties can agree to waive challenges to personal jurisdiction by agreements in forum selection clauses or, as here, by registering to do business under a statute which specifically advises the registrant of its consent by registration. We do not see a distinction between enforcing a forum selection clause waiving challenges to personal jurisdiction and enforcing a corporation's choice to do business in the Commonwealth.”[xi] After Daimler multiple lower courts have held that the Daimler decision does not eliminate consent to general personal jurisdiction over a foreign corporation registered to do business in the forum state.[xii]
As is true in many states, Pennsylvania requires foreign corporations to register with the Department of State of the Commonwealth in order to do business in the Commonwealth.[xiii] Under the Pennsylvania long-arm statute, at Section 5301 of the Judicial Code, “qualification as a foreign corporation under the laws of this Commonwealth” or “consent, to the extent authorized by the consent” “shall constitute a sufficient basis of jurisdiction to enable the tribunals of this Commonwealth to exercise general personal jurisdiction” over a foreign corporation.[xiv] This very specific language has been held to provide foreign corporations with notice of the effect of qualifying to do business in this Commonwealth. In fact, in Display Works, LLC v. Bartley, the court distinguished New Jersey’s statute from Pennsylvania’s because the New Jersey statute does not contain language stating that registering as a foreign corporation constitutes submission to the general jurisdiction of New Jersey courts, nor even mention consent or stating that a foreign corporation will be subject to suit in the state for conduct outside the state.[xv] The Pennsylvania statute very clearly provides that a foreign corporation consents to general jurisdiction in this forum by registering to do business here.
In June of 2017, in Hegna v. Smitty’s Supply, Inc., Judge Padova in the Eastern District of Pennsylvania, held that since Section 5301 specifically advises a foreign corporation of the jurisdictional effect of registering to do business in Pennsylvania, then a defendant would be deemed to have consented to general personal jurisdiction in Pennsylvania by registering to do business here.[xvi] There have been similar rulings in Plumbers' Local Union No. 690 Health Plan v. Apotex Corp.,[xvii]George v. AW Chesterton,[xviii] Louis Dreyfus Commodities Suisse v. Fin. Software,[xix] and Synthes Inc. v. Emerge Med.[xx]Procedure matters. These rules for obtaining personal jurisdiction over an out-of-state corporation are the same whether you file in the Court of Common Pleas or in a federal district court. When filing suit in Pennsylvania, the state or federal court must still have personal jurisdiction over all defendants and the same rules on general and specific jurisdiction apply equally. Attorneys must protect clients from the ultimate dismissal of the action for lack of personal jurisdiction over the defendant by grasping the import of personal jurisdiction and understanding that consent jurisdiction is proper in Pennsylvania over foreign corporations that have registered to do business in this state.
[i] Derived from an article published in The Verdict, Vol. 2016-2017, Issue 8, September 2017. Philadelphia Trial Lawyers Assn., 123 South Broad St., Suite 200, Philadelphia, PA.
[ii] See, e.g., Daimler AG v. Bauman, 571 U.S. __, 134 S.Ct. 746, 761, 187 L.Ed.2d 624 (2014).
[iii] World-Wide Volkswagen Corp. v. Wood-son, 444 U. S. 286, 292 (1980).
[iv] Goodyear Dunlop Tires Operations, S. A. v. Brown, 564 U. S. 915, 919 (2011).
[v] Bristol-Myers Squibb Co. v. Superior Court of California, 582 U.S. __, 137 S. Ct. 1773, 198 L. Ed. 2d 395, (U.S. June 19, 2017).
[vi] Ins. Corp. of Ireland v. Compagnie des Bauxites de Guinee, 456 U.S. 694, 703-04, 102 S.Ct. 2099, 72 L.Ed. 492 (1982).
[vii] Id., at 704.
[viii] Bors v. Johnson & Johnson, 208 F.Supp. 3d 648 (E.D. Pa. 2016).
[ix] Bane v. Netlink, Inc., 925 F.2d 637, 640-41 (3d Cir. 1991).
[x] RX Returns v. PDI Enters., 1997 U.S. Dist. LEXIS 8198, *6, 1997 WL 330360 (E.D. Pa. 1997)
[xi] Bors v. Johnson & Johnson, 208 F. Supp. 3d 648, 653-655 (E.D. Pa. Sept. 20, 2016).
[xii] Otsuka Pharm. Ltd. v. Mylan, Inc. , 106 F.Supp.3d 456, 468 (D. NJ 2016), Forest Labs v. Amneal Pharm., LLC, 2015 U.S. Dist. LEXIS 23215, 2015 WL 880599, at *13-14 (D. Del. Feb. 26, 2015), report adopted by Forest Labs., Inc. v. Amneal Pharm. LLC, 2015 U.S. Dist. LEXIS 39846, 2015 WL 1467321 (D. Del. Mar. 30, 2015); Acorda Therapeutics, Inc. v. Mylan Pharm., Inc., 78 F. Supp. 3d 572, (D. Del. 2015); affirmed 817 F.3d 755 (Fed. Cir. 2016); Bors v. Johnson & Johnson, supra.
[xiii] 15 Pa.C.S. §411(a). This section applies to all foreign associations, defined in §102 to be any corporation or business entity in which the internal affairs are not governed by the laws of this Commonwealth.
[xiv] 42 Pa.C.S. §5301(a)(2).
[xv] Display Works, LLC v. Bartley, 2016 U.S. Dist. LEXIS 55136, 2016 WL 1644451 (holding that New Jersey’s registration statutes do not establish jurisdiction by consent).
[xvi] Hegna v. Smitty’s Supply, Inc., 2017 U.S. Dist. LEXIS 90367 (E.D. Pa. June 13, 2017)(Judge Padova also discusses the defendant’s argument that the Pennsylvania long-arm statute violates the Dormant Commerce Clause).
[xvii] Plumbers' Local Union No. 690 Health Plan v. Apotex Corp., 2017 U.S. Dist. LEXIS 114733, 2017 WL 3129147 (E.D. Pa. July 24, 2017).
[xviii] George v. AW Chesterton, 2016 US Dist LEXIS 126176 (WD PA 2016).
[xix] Louis Dreyfus Commodities Suisse v. Fin. Software, 2015 US Dist LEXIS 137996 (ED PA 2015). See also, Bradley v. Powell, 2015 US Dist LEXIS 124806 (ED PA 2015), where the Court indicated in a footnote that registration is enough to convey jurisdiction.
[xx] Synthes Inc. v. Emerge Med, 887 F. Supp. 2d 598 (ED PA 2012).