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).