Personal Jurisdiction Over Out-of-State Corporations

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).

Thurgood Marshall

 Thurgood Marshall (1908 – 1993)

Dale G. Larrimore, Esquire

           This month we celebrate the 50th Anniversary of Thurgood Marshall becoming the first African American on the United States Supreme Court. Often lauded for his insightful legal opinions as a Supreme Court Justice, Thurgood Marshall’s career as a trial attorney before he took the bench is even more significant.
            The great-grandson of slaves, Marshall was born in Baltimore in 1908. As a child his parents instilled in him an appreciation for the Constitution, a feeling reinforced by teachers who forced him to read the document as punishment for acting up in school. He observed segregation at an early age as his mother taught kindergarten in all-black schools, where she earned far less, by law, than white teachers.
            After graduating from Lincoln University in 1930, Marshall sought admission to the University of Maryland School of Law, but was turned away because the school’s segregation policy effectively prevented blacks from studying with whites. Marshall attended Howard University Law School, from which he graduated magna cum laude in 1933. He opened his own law practice in Baltimore, and began to volunteer with the NAACP, where he successfully sued Maryland School of Law for its discriminatory admissions policy.
            Marshall joined the legal division of the NAACP in 1936 and two years later he succeeded his mentor, Charles Houston, in the organization’s top legal post. Over the next two decades, Marshall distinguished himself as one of the country’s leading advocates for individual rights, successfully arguing before the Supreme Court in cases such as Boynton v. Trailways. Marshall won 29 of the 32 cases he argued in front of the Supreme Court, most of which challenged in some way the ‘separate but equal’ doctrine that had been established in 1896 by the landmark case of Plessy v. Ferguson. The high-water mark of Marshall’s career as a litigator came in 1954 with his groundbreaking victory in Brown v. Board of Education of Topeka, a case that was consolidated with similar cases from South Carolina, Virginia, Delaware and the District of Columbia.
            In Brown, Marshall argued that the ‘separate but equal’ principle was unconstitutional, and designed to keep blacks “as near [slavery] as possible” and, as we all now know, the Court agreed, holding that school segregation was illegal as it violated the 14th Amendment to the Constitution. On May 17, 1954, Chief Justice Earl Warren, delivered the unanimous ruling: “We conclude that, in the field of public education, the doctrine of ‘separate but equal’ has no place. Separate educational facilities are inherently unequal.” This decision served as a great impetus for the African American civil rights movement of the 1950s and 1960s and ultimately led to the abolishment of de jure segregation in all public facilities and accommodations.
            In 1961, President John F. Kennedy appointed Marshall to the U.S. Court of Appeals, but his nomination was opposed by many Southern senators, delaying his confirmation until the next year. In 1965, President Lyndon B. Johnson named him as the United States Solicitor General, where Marshall successfully argued on behalf of the United States in Miranda v. Arizona and U.S. v. Price. Following the retirement of Justice Tom C. Clark, President Johnson appointed Marshall to the Supreme Court on June 13, 1967. After a vigorous and often heated debate, his appointment was confirmed by the Senate on August 30, 1967 with a 69-11 vote.
            As an Associate Justice on the highest court in America, Marshall continued his lifelong fight against discrimination, writing numerous opinions protecting the constitutional rights of the most vulnerable Americans. Over the next 24 years, Justice Marshall consistently opposed the death penalty and any discrimination based on race or sex, while supporting the rights of criminal defendants. He also defended affirmative action and women’s right to abortion; and continued his tireless commitment to ensuring equitable treatment of individuals–particularly minorities–by state and federal governments. As appointments changed the politics of the Court, Marshall found his liberal opinions increasingly in the minority.
            After a very distinguished career on the Supreme Court, Justice Marshall retired in 1991, in poor health, and two years later passed away. He left us with a legacy of upholding the rights of the individual as guaranteed by the U.S. Constitution. Current Supreme Court Justice Elena Kagan recently posited that “Thurgood Marshall was the greatest lawyer of the 20th century. No one did more to advance justice.” In a recent celebration of Thurgood Marshall’s life in Philadelphia, Villanova Law School Professor Catherine Lanctot was even more persuasive in suggesting that if we measure greatness by the impact that a person has had and the number of people influenced by those efforts, then Thurgood Marshall should be recognized as the greatest lawyer in American history.
    As we look back on his incredible life, we might reflect on his own words. In a commencement address given in May of 1978 at the University of Virginia, Thurgood Marshall had this to say to the graduates:

The democratizing aspect of the Constitution cannot be overstated. For me, its cardinal principle is that all persons stand in a position of equality before the law. The Constitution gives each and every one of you an equal right to your own opinions and to participate in the process of your own governance. These are precious rights that we must continually strive to preserve, and whose promise we must seek to attain. There are still far too many persons in this country who cannot participate as equals in the processes of Government—persons too poor, too ignorant, persons discriminated against by other people for no good reason. But our ideal, the ideal of our Constitution, is to eliminate these barriers to the aspirations of all Americans to participate fully in our government and society. We have realized it far better than most countries, but we still have a long way to travel and we must continue to strive in that direction.…

Governments derive their power from many sources—the military or police are instruments of power and many in the short run enforce the government’s directives against an unwilling people. But authority is a different question—and no government can govern long, or well, without the authority that comes from a shared consensus among the governed. They must believe that theirs is a rightful, and lawful, and just government.

But in order to preserve this power in the people—the power of defining and limiting the authority of their government—it is first and foremost essential that the people be well informed.… [T]he duty to keep up,… to be knowledgeable in some area of human endeavor, is an essential one, not only for the continued survival of our government but in the long run for our civilization. It is hard work being well-informed; but it is essential work for the citizens of a democracy.…

Those of you here today about to use your degrees, it is for you now to undertake the projects of this age.… It is not for me to tell you what these are—each generation must find its own calling. But you have the energies of youth—and while you have them, use them, that you may look back on your lives with as much a sense of accomplishment as Jefferson no doubt did.…

Each of you as an individual must pick your own goals. Listen to others but do not become a blind follower. Do not wait for others to move out—move out yourself—where you see wrong or inequality or injustice speak out, because this is your country. This is your democracy—make it—protect it—pass it on. You are ready. Go to it.

His words speak volumes to all of us even today, almost 40 years later.

Seat Belts Save Lives!

Seat Belts Save Lives!

Dale G. Larrimore, Esquire

It is well known that motor vehicle crashes are a leading cause of death in the U.S.[i] But what is perhaps less well known is that the death rate for drivers and passengers in America’s most rural counties is up to 10 times higher than those in the most urban counties.[ii] The Center for Disease Control recently completed an analysis of the rural death rate from vehicle crashes and concluded that vehicle occupants in rural areas of the United States were less likely to use seat belts and more likely to die in vehicle crashes.[iii] 

“Although we know motor vehicle crash-related deaths have been historically higher in rural areas, this study shows that the more rural the area, the higher the risk,” said Laurie Beck, an epidemiologist in CDC’s Division of Unintentional Injury Prevention. “It also helps us confirm what works to prevent these crash deaths, such as primary enforcement seat belt laws and seat belt use.”

The CDC’s analysis of nationwide statistics revealed that 61.3 percent of drivers and passengers in rural counties were not wearing seat belts at the time of a fatal crash. In urban counties, 44.4 percent of the vehicle occupants were not wearing seat belts in fatal vehicle accidents.  

In a recent article in The Philadelphia Inquirer,[iv] Jason Nark noted that PennDOT’s statistics from 2014 to 2016 indicated that 69 percent of the drivers and passengers in fatal crashes in Pennsylvania’s four most rural counties were not wearing seat belts, whereas only 29 percent of the occupants of vehicles in fatal crashes in Pennsylvania’s four most urban counties were not protected by a seat belt. 

In his story, Mr. Nark also quoted Nichole Morris, director of the HumanFIRST Laboratory at the University of Minnesota, who indicated that there may also be a cultural component to the lack of seat belt use in rural areas.  “Pickup truck drivers are less likely to use seat belts than drivers of other motor vehicles,” she said.  Morris also noted that rural drivers have less access to Uber and Lyft. “The cities make it so easy to not drive drunk.”

In an interesting anomaly, the most urban county in Pennsylvania is the county with the lowest percentage of seat belt usage. From 2011 to 2014, only 40% of Philadelphia motorists were using seat belts when involved in a vehicle crashes. There was only one other county (Beaver County) with less than 75% rate of seat belt usage.  On the other hand, in 53 of Pennsylvania’s 67 counties over 80 per cent of the vehicle occupants in automobile accidents were using seat belts.[v] 

Not surprisingly, the county in Pennsylvania with the highest percentage of traffic-related deaths is Philadelphia, the county with the lowest rate of seat belt usage.

According to Ashley Schoch,  a PennDot spokeswoman, Gov. Wolf’s administration has dedicated $3 million to seat belt enforcement this year.

"We know seat belts save lives," said CDC Director Brenda Fitzgerald, M.D. "These findings remind us that no matter what kind of road you are traveling on, it is important to everyone to buckle up every time on every trip. "

---

[i] CDC. WISQARS (Web-based Injury Statistics Query and Reporting System). Atlanta, GA: US Department of Health and Human Services, CDC; 2010. Available at https://www.cdc.gov/injury/wisqars.

[ii] CDC, Press Release September 17, 2017, “Rural Americans less likely to wear seat belts, more likely to die in crashes”

 

[iii] Id., citing data from the National Highway Traffic Safety Administration’s Fatality Analysis Reporting System (FARS) to identify passenger vehicle occupant deaths among adults and data from CDC’s Behavioral Risk Factor Surveillance System (BRFSS) to estimate how often drivers and passengers used seat belts.

[iv] “Rural motorists wear belts less, die more,” Jason Nark, Philadelphia Inquirer, September 28, 2017.

[v] 2014 Pennsylvania Crash Facts and Statistics, PennDOT publication, a statistical five year review of traffic crash reports compiled by the Bureau of Maintenance and Operations of the Department of Transportation.