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Pennsylvania Business Registration Rejected as ‘Consent’ to Suit

Dec. 23, 2021, 10:21 PM

Pennsylvania’s statutory scheme conditioning an out-of-state corporation’s ability to do business in the state on its “consent” to jurisdiction there is unconstitutional, the state’s high court said in affirming Norfolk Southern Railway Co.'s exit from a toxic exposure lawsuit.

The consent requirement violates due process for two reasons, the unanimous Pennsylvania Supreme Court said Wednesday. First, it conflicts with recent U.S. Supreme Court opinions limiting the application of general jurisdiction. Second, registration to do business doesn’t constitute voluntary consent.

The nation’s top court, in Goodyear Dunlop Tires Operations, S.A. v. Brown and Daimler AG v. Bauman, “has afforded substantial protection to foreign corporations’ Fourteenth Amendment due process rights, guaranteeing that they will not be subject to judgments on any and all claims filed against them in a forum state in which they are not at home,” Chief Justice Max Baer said.

Foreign corporations may waive their rights by voluntarily consenting to jurisdiction when they appear in the state’s courts, or when they contractually agree or stipulate to jurisdiction, Baer said.

But that’s not the case with the registration and long-arm jurisdiction laws at issue, he said. “Legislatively coerced consent to general jurisdiction is not voluntary consent and cannot be constitutionally sanctioned,” he said.

Here, Virginia resident Robert Mallory sued his employer, Norfolk Southern, which is incorporated in Virginia and has its principal place of business there, under the Federal Employer’s Liability Act. He alleged exposure to asbestos and toxic chemicals in Virginia and Ohio in his complaint, which was filed in the Philadelphia County Court of Common Pleas.

The trial court granted Norfolk Southern’s request for dismissal on jurisdiction grounds.

The New Mexico Supreme Court said in November that that state’s law for registering to do business is silent about requiring consent and doesn’t impose jurisdiction. But the Georgia Supreme Court reaffirmed in September that out-of-state corporations automatically consent to being sued when they register to do business there. A federal court in Kansas has also allowed suits to proceed on the basis of consent by registration in recent years.

The Georgia court acknowledged that its reading was “in tension” with recent U.S. Supreme Court decisions on jurisdiction.

The case is Mallory v. Norfolk S. Ry. Co., 2021 BL 488225, Pa., No. 3 EAP 2021, 12/22/21.

To contact the reporter on this story: Martina Barash in Washington at mbarash@bloomberglaw.com

To contact the editors responsible for this story: Rob Tricchinelli at rtricchinelli@bloomberglaw.com; Steven Patrick at spatrick@bloomberglaw.com