In law as in real estate, “location, location, location.” Where a case is filed is often outcome-determinative. Jury pools and jurisprudence vary from one jurisdiction to the next. In some states, any complaint written on paper is sufficient; in others, a plaintiff must actually plead facts to avoid dismissal. Similarly, juries in some places routinely award plaintiffs massive judgments while juries elsewhere do not. Because being sued in a favorable jurisdiction increases the odds of winning a quick dismissal while being sued in an unfavorable jurisdiction increases the odds of having to pay a large verdict, the value of a case depends on where it is filed, even though the same substantive law would be applied to the same underlying facts regardless of jurisdiction.
Plaintiffs know this and so do we. That is why questions of personal jurisdiction are so important.
And that is why we were pleased to receive the recent decision in Mallory v. Norfolk Southern Ry., ___ A.3d ____, 2021 WL 6067172 (Pa. 2021), which held that—as a matter of constitutional law—corporations are not subject to suit in Pennsylvania merely because they are registered to do business there.
For a corporation to be subject to suit in a particular state, that state’s courts must have personal jurisdiction over it. The U.S. Supreme Court recognizes two types of personal jurisdiction: general jurisdiction and specific jurisdiction. If a corporation is subject to specific jurisdiction in a state, then it may be sued in that state only on claims that arise from or relate to the corporation’s in-state activities. If, by contrast, a corporation is subject to general jurisdiction in a state, then it may be sued there on all claims, even those that do not arise from or relate to activity in that state.
The more states in which a corporation is subject to general jurisdiction, the greater plaintiffs’ ability to sue the corporation in a plaintiff-friendly jurisdiction. If a corporation were subject to general jurisdiction in every state, it could be sued anywhere on any claim. Plaintiffs would file suit in only the most plaintiff-friendly jurisdictions and settlement values would reflect that.
Luckily, however, the Due Process Clause limits where corporations are subject to general jurisdiction. Specifically, the U.S. Supreme Court held in Goodyear Dunlop Tires Operations, S.A. v. Brown, 564 U.S. 915 (2011), and Daimler AG v. Bauman, 571 U.S. 117 (2014), that a corporation is subject to general jurisdiction only in states where it is “essentially at home,” and that (absent exceptional circumstances) a corporation is at home only in the states where it is incorporated or has its principal place of business. Thus, corporations are usually subject to general jurisdiction in only one or, at most, two states.
Hoping to file every suit in a plaintiff-friendly forum, plaintiffs bristle at the limits on general jurisdiction and have tried to erode them.
One theory that plaintiffs have advanced since Daimler is jurisdiction-by-consent. Recognizing that a defendant may voluntarily submit to personal jurisdiction because Due Process is an individual and thus waivable right, plaintiffs have argued that a corporation consents to general jurisdiction in a state if it registers to do business in the state. Given that most nationally active corporations, including drug and device manufacturers, are registered to do business in every state, they would be subject to general jurisdiction in every state on plaintiffs’ theory.
Most states have rejected the jurisdiction-by-registration theory. Thanks to the Mallory decision, Pennsylvania is the latest state to conclude that registering to do business in a state is not by itself subject a corporation to general jurisdiction in that state. Mallory is especially noteworthy because the Pennsylvania business-registration statute, unlike similar statutes in other states, expressly states that registering to do business in Pennsylvania constitutes consent to general jurisdiction there. See 42 Pa. C.S. § 5301(a)(2)(i).
Mallory found the consent-through-registration provision unconstitutional, holding that “a foreign corporation’s registration to do business in the Commonwealth does not constitute voluntary consent to general jurisdiction but, rather, compelled submission to general jurisdiction by legislative command.” 2021 WL 6067172, at *20. That is so, said the court, because it put every “foreign corporation desiring to do business in Pennsylvania” to the “Hobson’s choice” of “lawfully register[ing] to do business and submit[ting] to the general jurisdiction of Pennsylvania courts or not do[ing] business in Pennsylvania at all.” Id. Under those circumstances, “a foreign corporation’s consent to general jurisdiction in Pennsylvania can hardly be characterized as voluntary, and instead is coerced.” Id. (quotation marks omitted).
The Mallory court was aware of the issue’s significance:
It cannot be ignored that if Pennsylvania’s legislative mandate of consent by registration satisfied due process by constituting voluntary consent to general jurisdiction, all states could enact it, rendering every national corporation subject to the general jurisdiction of every state. This reality flies in the face of Goodyear and Daimler and cannot be condoned.