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December 23, 2021

Registering to Do Business in Pennsylvania Does Not Confer General Jurisdiction Over Foreign Corporations

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Key Takeaways

  • General personal jurisdiction allows a court to adjudicate a dispute arising entirely from conduct that occurred outside of the state in which the court sits. In Goodyear Dunlop Tires Operations, S.A. v. Brown, 564 U.S. 915 (2011) and Daimler AG v. Bauman, 571 U.S. 117 (2014), the U.S. Supreme Court held that the exercise of general personal jurisdiction comports with due process only where a foreign corporation has affiliations with the state that are so “continuous and systematic” as to render the corporation essentially at home there. A corporation’s state of incorporation and location of its principal place of business are the paradigm examples of such affiliations.

On December 22, 2021, the Supreme Court of Pennsylvania handed down a landmark ruling on personal jurisdiction in Mallory v. Norfolk Southern Railway Company. Before this decision, the controlling rule had been that foreign corporations subject themselves to general personal jurisdiction by registering to do business in Pennsylvania. In Mallory, the Pennsylvania Supreme Court changed that rule and held that a foreign corporation's registration to do business does not confer general personal jurisdiction over the corporation.

General personal jurisdiction allows a court to adjudicate a dispute arising entirely from conduct that occurred outside of the state in which the court sits. In Goodyear Dunlop Tires Operations, S.A. v. Brown, 564 U.S. 915 (2011) and Daimler AG v. Bauman, 571 U.S. 117 (2014), the U.S. Supreme Court held that the exercise of general personal jurisdiction comports with due process only where a foreign corporation has affiliations with the state that are so "continuous and systematic" as to render the corporation essentially at home there. A corporation's state of incorporation and location of its principal place of business are the paradigm examples of such affiliations.

Pennsylvania's general jurisdiction statute, 42 Pa.C.S. § 5301, provides two other avenues to assert general jurisdiction over foreign corporations. First, section 5301 states that "qualification as a foreign corporation under the laws of this Commonwealth" is a basis for general jurisdiction. In Mallory, the Pennsylvania Supreme Court held that "[t]he Legislature's grant of such broad jurisdictional authority is incompatible with the Fourteenth Amendment." By giving "Pennsylvania courts general personal jurisdiction over foreign corporations, regardless of whether the foreign corporation has incorporated in the Commonwealth, established its principal place of business here, or is otherwise ‘at home' in Pennsylvania," this statutory provision "eviscerates the Supreme Court's general jurisdiction framework set forth in Goodyear and Daimler."

Section 5301 also provides general jurisdiction when a foreign corporation consents to it. Before Mallory, Superior Court precedent held that a foreign corporation consented to general jurisdiction by registering to do business in Pennsylvania. The Pennsylvania Supreme Court rejected that rule in Mallory. Pennsylvania law mandates that foreign corporations register to do business within the state, and foreign corporations that fail to do so relinquish their right to sue in Pennsylvania courts. As a result, the court held 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." That compelled "surrender of [a] constitutional right to due process" violated "the protections delineated in Goodyear and Daimler."

After Mallory, foreign corporations will not be subject to general personal jurisdiction in Pennsylvania, based on their registration to do business in the state. Pennsylvania courts may exercise general personal jurisdiction over companies incorporated or with a principal place of business in Pennsylvania and may exercise specific personal jurisdiction over foreign corporations for claims arising from conduct within the state. But Mallory is a significant restriction on the power of Pennsylvania courts to regulate the conduct of foreign corporations beyond Pennsylvania's borders.

Disclaimer: This Alert has been prepared and published for informational purposes only and is not offered, nor should be construed, as legal advice. For more information, please see the firm's full disclaimer.

ALM expressly disclaims any express or implied warranty regarding the OnPractice Content, including any implied warranty that the OnPractice Content is accurate, has been corrected or is otherwise free from errors.

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