Supreme Court of Pennsylvania To Address Whether Registration of Out-of-State Businesses Creates General Jurisdiction

By and on November 24, 2020

Pennsylvania’s unique corporate registration statute may be on the chopping block after a three-judge Superior Court panel in Mallory v. Norfolk Southern Railway agreed to transfer a jurisdictional dispute to the Commonwealth’s Supreme Court pursuant to a provision in the Pennsylvania Judiciary Code that gives the Supreme Court exclusive jurisdiction over any appeal from a trial court decision finding that a statute is “repugnant to the Constitution.” 42 Pa. C.S. § 722(7).

The key issue in Mallory v. Norfolk Southern Railway is whether Pennsylvania courts may constitutionally exercise general personal jurisdiction over out-of-state corporations simply because they register to conduct business in the Commonwealth of Pennsylvania. Pennsylvania law provides that a foreign corporation may not do business in the Commonwealth until it registers with the Pennsylvania Department of Business pursuant to 15 Pa.C.S.A. § 411. The Pennsylvania long-arm statute provides that general personal jurisdiction may be exercised over a foreign corporation in three circumstances: (1) incorporation under or qualification as a foreign corporation; (2) consent; and (3) the carrying on of a continuous and systematic part of its general business in Pennsylvania. 42 Pa. C.S. § 5301(a)(2). These statutes construed together appear to require foreign corporations to submit to the court’s general jurisdiction as a condition for doing business in Pennsylvania.

This is a hotly contested issue in Pennsylvania, and courts have struggled to reach a consensus as to whether the corporate registration and long-arm statutes comport with the U.S. Supreme Court’s holding in Daimler, which mandates that an out-of-state corporation is not subject to general jurisdiction unless it is registered to conduct business in or has its principal place of business in the forum.

In Mallory, the plaintiff (a resident of Virginia) filed suit in the Philadelphia Court of Common Pleas against his employer Norfolk Southern Railway (Virginia corporation with its principal place of business in Virginia) alleging violations of the Federal Employers’ Liability Act after allegedly being exposed to carcinogens while working at Norfolk’s locations in Ohio and Virginia. Norfolk filed Preliminary Objections seeking to dismiss the complaint for lack of personal jurisdiction. Plaintiff argued that Norfolk consented to general personal jurisdiction pursuant to 42 Pa.C.S.A § 5301 by registering to do business in Pennsylvania.

Judge Arnold New granted Norfolk’s Preliminary Objections for two reasons. First, he found that the Pennsylvania corporate registration statute does not comport with federal due process because it allows Pennsylvania to exert general jurisdiction over out-of-state entities that are not “at home” in the Commonwealth. This unique rule creates a federalism issue because it allows Pennsylvania courts to interfere with the right of other states to render verdicts against their own corporate citizens. Second, the corporate registration statute compels out-of-state entities to subject themselves to general jurisdiction as a condition of doing business in Pennsylvania. Judge New reasoned that this is contrary to U.S. Supreme Court law, which “made clear that a state cannot claim general jurisdiction over every corporation doing business within its borders… By wrapping general jurisdiction in the cloak of consent, Pennsylvania’s mandated corporate registration statute attempts to do exactly what the United States Supreme Court prohibited in Goodyear Dunlop Tires Operations, S.A. v. Brown, 131 S. Ct. 2846 (2011), BNSF Ry. Co. v. Tyrrell, 137 S. Ct. 1549 (U.S. 2017) and Daimler AG v. Bauman, 571 U.S. 117 (U.S. 2014).”

Judge New’s ruling is consistent with an overwhelming majority of courts throughout the country that have considered this same issue. See, e.g., Brown v. Lockheed Martin Corp., 814 F.3d 619, 636 (2d Cir. 2016) (“[T]he analysis that now governs general jurisdiction over foreign corporations…suggests that federal due process rights likely constrain an interpretation that transforms a run-of-the-mill registration and appointment statute into a corporate ‘consent’” to general jurisdiction); Lanham v. BNSF Ry. Co., 939 N.W.2d 363, 371 (Neb. 2020) (“[T]reating BNSF’s registration to do business in Nebraska as implied consent to personal jurisdiction would exceed the due process limits prescribed in [Goodyear and Daimler]”); Dutch Run-Mays Draft, LLC v. Wolf Block, LLP, 164 A.3d 435, 444 (N.J. Super. Ct. – App. Div. 2017) (“We now join the many courts that have circumscribed the view of general jurisdiction post-Daimler.”).

Pennsylvania law is unique in that it permits courts to exert general jurisdiction over out-of-state defendants solely on the basis that those entities registered to conduct business in Pennsylvania. Product defendants in Pennsylvania have for several years urged the appellate courts to align Pennsylvania law with U.S. Supreme Court law by overturning the relevant business registration and long arm statutes because those laws improperly compel foreign companies to consent to general jurisdiction though they are not “at home” in Pennsylvania. The Superior Court’s decision to transfer Mallory to the Supreme Court is a big step that we hope signals a change in controlling Pennsylvania law.

From a practical standpoint, Philadelphia has long been viewed around the country as a plaintiff-oriented jurisdiction that is a favorable forum to prosecute product liability and mass tort litigation. The Supreme Court’s ruling in Mallory has the potential to end such blatant forum shopping.

Filed under Jurisdiction, Pennsylvania, Strict Liability

PA Appellate Court Declines Opportunity to Re-Evaluate State Registration Statute Under Daimler

By and on July 6, 2020

The PA Superior Court of Pennsylvania – the Commonwealth’s intermediate appellate court – recently issued its long-awaited en banc opinion in Murray v. Am. Lafrance. A copy of the decision is attached HERE.

They key issue in Murray was whether an out-of-state company that registers to do business in Pennsylvania consents to general personal jurisdiction. The Pennsylvania corporate registration statute purports to confer consent to general jurisdiction over an out-of-state entity in exchange for the ability to conduct business within the Commonwealth. This issue has been hotly contested in recent years within Pennsylvania, with several courts finding that the registration statute is unconstitutional under U.S. Supreme Court precedent in Daimler, which provides that an out-of-state defendant is only subject to general jurisdiction where it is incorporated or maintains a principal place of business.

Despite the holding in Daimler, the Superior Court recently found in another matter that registration to conduct business in Pennsylvania establishes consent to general jurisdiction in the Commonwealth in a manner than comports with due process. Many defense-oriented commentators hoped that Murray would provide an opportunity for the Superior Court to reverse its prior rulings in accordance with Daimler.

In Murray, the trial court originally dismissed an out-of-state defendant for lack of general personal jurisdiction under Daimler, and on rehearing en banc the Superior Court upheld the order, but refused to resolve the mandatory consent to general jurisdiction issue, finding instead that Plaintiffs waived the argument by failing to raise it at the trial level. Although the Superior Court affirmed the order dismissing the out-of-state defendant for lack of personal jurisdiction, it did not address the merits of plaintiff’s argument that the defendant consented to jurisdiction by registering to conduct business in Pennsylvania.

Unfortunately for out-of-state product defendants that are registered to conduct business in Pennsylvania, the state of the law is such that consent by registration is still a sufficient basis for plaintiffs to assert general jurisdiction over out-of-state defendants in Pennsylvania, even after the Daimler decision appeared to reject this approach.

As this blog has previously reported, other states have rejected registration by an out-of-state defendant as consent to jurisdiction.

Filed under Jurisdiction, Pennsylvania

Not Fair in Pennsylvania (Update) – The Pennsylvania Supreme Court Rules That Fair Share Act Does Not Allow Fault-Based Apportionment in Strict Liability Cases

By on March 27, 2020

In a decision that will reshape Pennsylvania products liability cases, the Pennsylvania Supreme Court has ruled that the Fair Share Act does not require pro rata percentage apportionment of damages among codefendants in proportion to fault. Instead, in asbestos and perhaps other strict liability cases, damages are to be split per capita, equally among defendants and a limited set of other responsible parties.

The Fair Share Act

The proper method by which shares of liability are allocated to asbestos defendants (and strict liability defendants more generally) was unclear for some time in the Commonwealth of Pennsylvania. The Fair Share Act, passed in 2011, apparently clarified the issue by eliminating joint and several liability apportionment in most tort cases.

[E]ach defendant shall be liable for that proportion of the total dollar amount awarded as damages in the ratio of the amount of that defendant’s liability to the amount of liability attributed to all defendants and other persons to whom liability is apportioned.

42 Pa. C.S. §7102(a.1). This provision appears to make “pro rata” or “apportioned” allocation of fault the default mechanism for allocating liability in Pennsylvania.

The statute further provides that “a defendant’s liability shall be several and not joint, and the court shall enter a separate and several judgment in favor of the plaintiff and against each defendant for the apportioned amount of that defendant’s liability.” This provision makes all tortfeasors severally liable to the injured party except in a few defined circumstances, such as where a defendant is found more than 60% liable.

The Fair Share Act specifically applies to “actions for strict liability,” but trial courts have inconsistently applied pro rata allocation in asbestos strict liability cases, often relying upon the language from a prior version of the Fair Share Act which apportioned fault amongst strictly liable defendants on a per capita basis, such that each defendant is equally responsible for a portion of the verdict (e.g. five defendants would each be 20% liable) without regard to degrees of fault.

Roverano Lower Court Decisions

A Philadelphia jury awarded $6.4 million to a former utility worker and his wife following an asbestos (lung cancer) trial. The trial court ruled that the Fair Share Act did not apply and apportioned the judgment equally (per capita) among the eight tortfeasors. The two remaining defendants at trial appealed, arguing that pro rata allocation was required under the Fair Share Act. The Superior Court, Pennsylvania’s intermediate appellate court, sided with the defendants and reversed.

Roverano Supreme Court Decision

On February 19, 2020, a majority of the Supreme Court of Pennsylvania held that the Fair Share Act requires trial courts to apportion liability equally (per capita) among strictly liable joint tortfeasors in asbestos litigation. [The majority opinion can be found here.] The court also ruled that the Fair Share Act allows defendants to include bankrupt entities on the verdict sheet and apportion liability against them, subject to (1) appropriate proof against the bankrupt entity and (2) provided that the bankrupt entity was joined as a defendant. Per capita allocation against a bankrupt entity is also permitted if that entity entered into a release with the plaintiff. Under the Supreme Court’s logic, the same rule should apply to settling codefendants, provided non-settling parties make the appropriate proofs against each settling entity.

Justice Wecht’s concurring opinion [found here] explained that the Fair Share Act was never intended to repeal a common law strict liability rule that compelled trial courts to apportion strict liability verdicts on a per capita basis. The use of the term “strict liability” was only “intended to eliminate joint and several liability for strict liability cases as well as for negligence actions.” Justice Wecht reasoned that “in providing that strict liability would apply to defendants severally rather than jointly, the General Assembly neither said nor clearly implied that it intended to displace per capita apportionment in strict liability cases.” Like the majority, Justice Wecht believes that it is too scientifically difficult to apportion fault in asbestos cases on a pro rata basis – that juries and trial courts cannot fairly apportion relative fault in asbestos and other toxic tort cases.

Impact on Products Liability Litigation in Pennsylvania

The Supreme Court did not explicitly state whether its holding is limited to asbestos and toxic tort cases, where scientific and exposure issues arguably make it difficult to fairly assign fault-based liability (though juries seem perfectly capable of the task in most other jurisdictions), or whether per capita allocation applies across the board to all strict liability defendants in Pennsylvania.

Three major effects of Roverano are likely: (1) to increase settlement pressure on nominal defendants facing per capita liability allocation at trial; (2) to incentivize defendants to join additional parties to spread liability amongst as many defendants as possible; (3) to change the way cases are tried, for example “pointing the finger” at more culpable parties.

Many commentators believe that the Supreme Court intended Roverano as a special rule in cases where damages and liability cannot reasonably be divided between multiple defendants. If true, the Fair Share Act would still apply to other types of strict liability cases, such as those involving industrial equipment, hard consumer goods, etc. On the other hand, if Roverano has broad applicability to all forms of strict liability cases, it will lead to a drastic change in the way that product defendants negotiate settlements. This interpretation of Roverano could lead to an explosion of third-party litigation, especially in complex products cases implicating numerous product distributors, component part manufacturers, etc.

Filed under Apportionment, Asbestos, Pennsylvania, Per Capita, Pro Rata, Strict Liability

Not Fair in Pennsylvania: Application of The Pennsylvania Fair Share Act to Strict Liability Cases Reviewed by State Supreme Court

By and on March 11, 2019


In Pennsylvania, the proper method by which shares of liability are allocated to asbestos defendants (and strict liability defendants more generally) has been unclear for some time. The Supreme Court of Pennsylvania heard argument on March 6, 2019 in a case that should clarify matters and provide some certainty regarding the Pennsylvania Fair Share Act.

Background

The Pennsylvania legislature passed the Fair Share Act in 2011, eliminating joint and several liability from most tort cases. See 42 Pa. C.S. §7102. Under the Fair Share Act, each defendant is only liable for its apportioned amount of lability:

Where recovery is allowed against more than one person, including actions for strict liability, and where liability is attributed to more than one defendant, each defendant shall be liable for that proportion of the total dollar amount awarded as damages in the ratio of the amount of that defendant’s liability to the amount of liability attributed to all defendants and other persons to whom liability is apportioned under subsection (a.2).

42 Pa. C.S. §7102(a.1). From a practical standpoint, this provision of the Fair Share Act makes “pro rata” or “apportioned” allocation the default mechanism for allocating liability amongst tortfeasors in Pennsylvania.

Subsection (a.2) provides that “a defendant’s liability shall be several and not joint, and the court shall enter a separate and several judgment in favor of the plaintiff and against each defendant for the apportioned amount of that defendant’s liability.” 42 Pa. C.S. §7102(a.2). This provision eliminates joint and several liability and makes all tortfeasors severally liable to the injured party except in a few defined circumstances. For instance, where a defendant is found more than 60% liable to plaintiff, that defendant is jointly and severally liable. See 42 Pa. C.S. §7102(a.1)(3).

Although the Fair Share Act specifically applies to “actions for strict liability,” trial courts have inconsistently applied pro rata allocation in asbestos strict liability litigation. Many courts have relied upon a prior version of the Fair Share Act which apportioned fault amongst strictly liable defendants on a per capita basis whereby each defendant is equally responsible for a portion of the verdict (e.g. five defendants would each be 20% liable).

Roverano

The Superior Court held in December 2017 that the Fair Share Act applies to both negligence and strict liability actions. See Roverano v. John Crane, Inc., 177 A.3d 892 (Pa. Super. 2017). In Roverano, a Philadelphia jury awarded $6.4 million to a former utility worker and his wife in an asbestos (lung cancer) lawsuit. The trial court ruled that the Fair Share Act did not apply and apportioned the judgment equally among the eight defendants determined to be tortfeasors. The two defendants left at trial appealed, arguing (1) that the Fair Share Act applies to strict liability matters and (2) that the jury may consider evidence of settlements with bankrupt entities in connection with apportionment of liability.

The Superior Court agreed, finding that “liability in strict liability cases must be allocated in the same way as in other tort cases, and not on a per capita basis” and that “settlements with bankrupt entities [may be] included in the calculation of allocated liability” under the Fair Share Act provided that defendants at trial “submit evidence to establish that the non-parties were joint tortfeasors.” Roverano, 177 A.3d at 909.

The Pennsylvania Supreme Court granted a petition for appeal in Roverano to settle these issues of “first impression” to determine the proper method of allocation in strict liability cases. The Roverano case was argued before the Supreme Court on March 6, 2018.

The justices were generally skeptical of proportional allocation of fault in asbestos litigation, finding that such an approach would lend itself to “junk science” over how fault should be apportioned between defendants. Further, the justices questioned how it would be possible for a jury to determine proportional fault in a “non-arbitrary way” in asbestos cases. Counsel for the defense argued that the Fair Share Act is specifically focused on apportionment of damages, not liability, such that the cause of action is not altered. Plaintiffs’ counsel asserted that it would be impossible for the jury to apportion fault in this manner where the medical community has not been able to do so in the asbestos context. Plaintiffs also argued that bankrupt entities should not be allowed on the verdict sheet because it would violate federal law that bars bankrupt entities from defending lawsuits.

Roverano presents an opportunity for the Supreme Court to set the record straight once and for all as to whether the Fair Share Act applies to strict liability litigation. It appears based on oral argument, however, that the Supreme Court is focused more narrowly on whether the Fair Share Act should apply in asbestos cases, entertaining argument as to whether it is medically and scientifically possible to do so at all. Some commentators were anticipating that the Supreme Court might – in the interest of predictability in products litigation – take a broader approach and establish a framework as to how liability should be apportioned generally in strict liability cases. A decision is expected in a few months.

Filed under Apportionment, Asbestos, Damages, Pennsylvania

Pennsylvania Supreme Court to Address Whether Jury or Court Determines “Unreasonably Dangerous”

By on March 2, 2016

3-2The Pennsylvania Supreme Court recently allowed an appeal in two consolidated asbestos personal injury lawsuits on the limited issue of whether “a defendant in a strict-liability claim based on a failure-to-warn theory has the right to have a jury determine whether its product was ‘unreasonably dangerous.’” Amato v. Bell & Gossett, 448 EAL 2015 (Feb. 1, 2016); Vinciguerra v. Bayer Cropscience, Inc., 447 EAL 2015 (Pa. Feb. 1, 2016).

This case is particularly significant because it will be the first occasion that the Pennsylvania Supreme Court builds on its landmark decision in Tincher v. Omega Flex, Inc., 104 A.3d 328 (Pa. 2014).

Prior to Tincher, there was a firm separation between strict liability and negligence claims, and negligence concepts such as the inherent risks of a product versus its utility were not presented to a jury. Rather, the trial court would examine those considerations and determine whether a product was “unreasonably dangerous” as a matter of law. The jury was simply asked to decide whether the product was “defective,” i.e. “whether the product lacks any element necessary to make it safe for its intended use.” Tincher held that “whether a product is defective depends upon whether that product is ‘unreasonably dangerous’” and that determination is a question of fact for the jury.

The Amato/Vinciguerra case was tried before the Tincher decision came down. However, Crane had anticipated a change in the law and submitted a proposed failure-to-warn jury instruction incorporating considerations of foreseeability and reasonableness. The trial court declined to issue the proposed jury instruction, and the jury returned multimillion-dollar verdicts in favor of the plaintiffs.

Amato/Vinciguerra presents an opportunity for the court to address several issues raised by Tincher. First, Tincher, which involved a design defect claim, did not address how its decision applies to other strict products liability claims, i.e. manufacturing defect or failure-to-warn claims. The Amato/Vinciguerra case is a failure-to-warn case and the court should clarify whether one of its holdings – that a jury should determine whether a product is “unreasonably dangerous” – applies to failure-to-warn cases.

Second, Tincher held that design defect claims may proceed under either the risk-utility test or the consumer expectations test, so Amato/Vinciguerra presents a chance for the court to address whether these two tests will apply to failure-to-warn cases.

Third, the court might consider whether under Tincher, juries are permitted to consider “state-of-the-art” evidence in determining the reasonableness of a manufacturer’s failure to warn. Such “state-of-the-art evidence,” or evidence of the relevant industry standards and the science known during the time period in question, is significant in asbestos cases where manufacturers are often found liable for failing to warn about the dangers of asbestos during a time period when the dangers of asbestos were not known. This type of evidence would certainly be probative of the reasonableness of a manufacturer’s failure to warn and relevant to the jury’s determination of whether the lack of warning made the product “unreasonably dangerous.”

Filed under Asbestos, Consumer Expectations, failure to warn claim, Pennsylvania, risk/benefit, state of the art