The Eastern District of Pennsylvania in Sullivan v. A. W. Chesterton, Inc., et al., No. 18-3622 (E.D. Pa. June 6, 2019), grappled with the constitutionality of the Pennsylvania statutes, 15 Pa.C.S. § 411 and 42 Pa.C.S. § 5301, (the “PA Statutory Scheme”) requiring out-of-state businesses to register in the state, which in turn functions as consent to general jurisdiction. This issue became salient only in light of the Supreme Court’s ruling in Daimler AG v. Bauman, 571 U.S. 117 (2014) (holding corporation is “at home” only where it is incorporated or maintains its principal place of business). The Eastern District held that the PA Statutory Scheme requiring out-of-state corporations to register before they conduct business in the state and thereby consent to general jurisdiction in Pennsylvania offends the Due Process Clause and is unconstitutional.
The Sullivan case was an asbestos personal injury action brought against 48 defendants, alleging that the decedent John Sullivan was exposed to asbestos during his service as a machinist mate in the U.S. Navy from 1967 to 1980, which caused him to develop fatal lung cancer. Defendant Huntington Ingalls Incorporated (“HIC”) was allegedly negligent in the design and building of the naval vessel upon which the Decedent served and failed to warn of the hazards of asbestos. HIC was incorporated and had its principal place of business outside of Pennsylvania. Because the plaintiff did not allege any grounds for specific jurisdiction, nor that HIC was incorporated or maintained its principal place of business in Pennsylvania, the only possible grounds for jurisdiction was HIC’s consent under the PA Statutory Scheme. HIC moved to dismiss for lack of personal jurisdiction.
The court first held that registration statutes that “extract consent” to general jurisdiction in exchange for the ability to do business are unconstitutional. This is because a mandatory statutory regime “purporting to confer consent to general jurisdiction in exchange for the ability to legally do business in a state” is irreconcilable with the rule in Daimler. The court observed that, if the PA Statutory Scheme were upheld, states could merely add language that is explicit as to the consequences of registering to do business in the state (consent), while leaving no real alternative to registration. Such laws by states would render the general jurisdiction analysis laid out in Daimler to be useless.
The court next held that the PA Statutory Scheme is not saved by the explicit nature of the consent, because it conditions the benefit of doing business in the state on the surrender of constitutional due process protections. Moreover, the court explained, foreign corporations seeking to do business in Pennsylvania are left with only two choices: (1) consent or (2) be disallowed from conducting business in the state. Thus, the PA Statutory Scheme is “functionally involuntary” and such “extorted actual consent” is not true consent at all.
In sum, the court explained that the PA Statutory Scheme allows the state to “impermissibly extract consent at a cost of the surrender of a constitutional right,” which re-opens the door to the type of nation-wide general jurisdiction that was firmly closed by Daimler. This issue is not exclusive to Pennsylvania, though, as all states have business registration statutes. It remains to be seen if other jurisdictions will analyze such statutes as the Sullivan court did here.
For more information, please contact Jen Dlugosz. This article was published as part of the Toxic Tort Monitor. You can read the full edition here.