'Consent by Fiction'? Superior Court Eyes Jurisdiction Under Pa.'s Corporate Registration Law
Nine Superior Court judges presiding over the Harrisburg argument session took nearly an hour probing both sides about the fundamental fairness and constitutionality of the law.
October 31, 2019 at 01:48 PM
5 minute read
The Pennsylvania Superior Court en banc on Thursday examined whether Pennsylvania jurisdiction should extend to all entities that register to do business in the state, an argument that has been closely watched because it could impact litigation ranging from a lawsuit over the fatal 2017 Grenfell Tower blaze in London and cases over liability for talc products.
Chicago attorney David Duffy of Thompson Coburn argued that consent to jurisdiction under the registration statute is a legal "fiction" that would allow any state to create jurisdiction simply by adding "magic words" to standard documents.
Supporting implied consent to jurisdiction was Philadelphia attorney Charles "Chip" Becker of Kline & Specter, who appeared on behalf of the Pennsylvania Association for Justice. Becker argued that the courts under a proper standard of review must presume the registration statute is constitutional and that, in the absence of a specific U.S. Supreme Court pronouncement, it means Pennsylvania has broad jurisdiction over companies that do business in the state.
The case, captioned Murray v. American LaFrance, focuses on whether registering as a "foreign" corporation in Pennsylvania constitutes consent to be sued in the state. Nine Superior Court judges presiding over the Harrisburg argument session took nearly an hour probing both sides about the fundamental fairness and constitutionality of the law.
Central to the constitutional analysis was the U.S. Supreme Court's 2014 decision in Daimler AG v. Bauman, which held that a domestic company may not be sued for its conduct abroad in a U.S. court.
"As a practical matter, Daimler is completely [gone] if you're going to engage in this legal fiction that registration is consent," Duffy said. "This is consent by fiction."
But Becker said that Daimler did not specifically address consent via registration.
"There could be a case like this that comes to the U.S. Supreme Court. But for you, you live in a legal jurisprudential environment where … you can't declare a statute unconstitutional unless [it is clearly unconstitutional]," he said. "Given the diversity of the cases, the diversity of the argument, you should not declare this unconstitutional."
Over the past few years, courts in Pennsylvania have gone back and forth on the issue, with a Superior Court panel, on a 2-1 vote, ruling that consenting to do business in the state was sufficient to establish jurisdiction, and a federal judge ruling months later that the statutory scheme violates due process in the wake of the Daimler.
A final decision on the question could impact a broad swath of cases, from contract suits and asbestos dockets, to products liability cases, including one stemming from the Grenfell Tower fire and another case that could be the first in the state to go to trial over claims that talcum powder caused a woman's ovarian cancer.
Much of the questioning from the judges focused on questions of fairness, and how the Supreme Court's decision in Daimler changed the considerations for determining jurisdiction. In Daimler, the high court ruled that jurisdiction could not be exercised over a corporation in a state where that corporation was not "at home," which the justices defined as having "continuous and systematic" "affiliations" with the state where the litigation was filed.
According to Judge Mary Jane Bowes, who dissented in the three-judge panel's prior decision in the case, Daimler was a "real shift" that "constrained" and "reined in" the considerations so that jurisdiction could only be applied where companies are at home.
"How is this not an unconstitutional taking?" Bowes asked. "You're requiring [defendants] to give up their due process rights as defined by the U.S. Supreme Court in Daimler."
Becker countered that there is no real punishment for foreign corporations that do not register. He said they can still conduct business here, and the only major distinction is that they can't bring certain types of lawsuits.
"The fundamental fairness lies in the registration. There is a quid pro quo," Becker said.
Duffy, however, argued that the law was fundamentally unfair, and that the company he represents, Federal Signal Corp., had no way to foresee that, simply by registering to do business in Pennsylvania, it would be sued by a group of firefighters from New York for injuries they allegedly sustained in the Empire State.
"That's not a knowing and voluntary choice," Duffy said.
Judge Anne Lazarus, however, said Duffy's argument used circular logic, since he was saying that the law was unconstitutional because there was no consent, yet the law specifically mentions consent.
"So if you have consent, how is it unconstitutional as applied?" Lazarus asked.
Duffy said the constitution requires a more in-depth and case-specific analysis.
"If you just say there's consent by jurisdiction, you haven't done the full analysis," Duffy said.
Both Bowes and Judge Judith Olson also questioned whether, if, once Pennsylvania upheld consent by registration, all 50 states would adopt similar laws, and how that scenario could impact the constitutional considerations.
"If they passed that, it undercuts everything the U.S. Supreme Court has said," Olson said.
Becker said that could be possible, but, so far, Pennsylvania is the only state with this type of statute.
"We're not there yet," he said.
Joining Bowes, Lazarus and Olson on the panel were Judges Carolyn Nichols, Alice Dubow, Jacqueline Shogan, Victor Stabile, Deborah Kunselman and Mary Murray.
Judge William Platt, who wrote the three-judge panel opinion that Lazarus joined, was not on the en banc group hearing the arguments.
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