In Sullivan v. A.W. Chesterton, Inc. (In re Asbestos Products Liability Litigation (No. VI)), 384 F. Supp. 3d 532, Judge Robreno broke from his colleagues in the Eastern District of Pennsylvania and ruled that Pennsylvania's statute requiring foreign corporations registering to do business in the Commonwealth consent to its courts' general jurisdiction is unconstitutional. The Court also ruled that the Supreme Court's 2014 decision in Daimler AG v. Bauman renders the Third Circuit's approval of that statute in Bane v. Netlink, Inc., 925 F.2d 637 (3d Cir. 1991), no longer binding on courts in the circuit.
The plaintiff in Sullivan brought claims against dozens of defendants, including the Virginia incorporated and -based Huntington Ingalls, Inc., alleging that her husband died because of exposure to asbestos. The alleged exposure to Huntington's asbestos occurred in Louisiana. Huntington did, however, register to do business in Pennsylvania as a foreign corporation.
Under 15 Pa. Cons. Stat. § 411, a foreign corporation "may not do business in this Commonwealth until it registers with the department." Pennsylvania's longarm statute, 42 Pa. Cons. Stat. § 5301 states that registration as a foreign corporation in Pennsylvania "shall constitute a sufficient basis of jurisdiction to enable the tribunals of this Commonwealth to exercise general personal jurisdiction over such [entities] . . ." Under the plain reading of these statutes, any foreign corporation that registers to do business in the Commonwealth has consented to general personal jurisdiction.
After Daimler, courts could exercise general jurisdiction over foreign corporations only when the corporation was "essentially at home in the foreign state." A corporation generally is "at home" where it is incorporated and where it has its principal place of business. It violates due process to subject a corporation to general jurisdiction wherever it engages in business.
In general, Pennsylvania state trial and appellate courts and federal district courts in Pennsylvania have held that Pennsylvania's compulsory consent statute is consistent with due process and Daimler. The Sullivan Court broke with these cases and held that "a mandatory regime purporting to confer consent to general jurisdiction in exchange for the ability to legally do business in a state is contrary to the rule in Daimler, and therefore, can no longer stand."
The Court stated that the "consensual" tone of Pennsylvania's statutory scheme did not save it. Rather, the statutes condition the benefit of doing business in Pennsylvania on the surrender of constitutional rights recognized by the Daimler Court. Applying the "unconstitutional conditions doctrine," the Court held Pennsylvania could not condition the "enjoyment of a government sponsored benefit" "upon a person's nonassertion of any constitutional right." The statutes left foreign corporations with two unsatisfactory choices: (1) register and consent to general personal jurisdiction; or (2) not register and be denied the opportunity to do business in the state. Because of the importance of being able to engage in interstate commerce, the court held that "the mandatory nature of the statutory consent" rendered the so-called consent "functionally involuntary."
Judge Robreno also broke from his colleagues by holding that Bane was no longer binding precedent in light of Daimler. In Bane, the Third Circuit held that a foreign corporation consents to general jurisdiction when it registers to do business in Pennsylvania. But, the Court in Sullivan held that Daimler essentially "disassembled the legal scaffolding upon which Bane was based." Judge Robreno reasoned that the standard articulated in Daimler contradicts Bane, effectively overruling it.
Until the Pennsylvania Supreme Court and, perhaps even the Supreme Court, weigh in on the issue of consent in Pennsylvania's long-arm statute, this question may continue to vex Pennsylvania's state and federal courts. Sullivan v. A.W. Chesterton, Inc. (In re Asbestos Products Liability Litigation (No. VI)), 384 F. Supp. 3d 532.
The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.