Bill Speros is a partner at MacDonald Illig. He
represents his clients on contract formation and in related litigation in state and federal courts. He is also the solicitor and open records officer for Erie County.
Given today’s internet marketplace and the proliferation of virtual workspaces, Pennsylvania companies are increasingly engaged in business across state lines. Such expansion can prove lucrative, but may also lead to legal disputes with out-of-state parties. As we noted in the MBA Business Magazine’s May 2022 Legal Brief, every U.S. state has a so-called “long-arm” statute that permits its courts to exercise personal jurisdiction over out-of-state defendants. Pennsylvania was historically the only state in the United States with a “consent” long-arm statute that statutorily subjected a non-Pennsylvania company to any type of lawsuit in our courts simply because that company registered to conduct business here.
In December 2021, the Pennsylvania Supreme Court’s ruling in Mallory v. Norfolk Southern Railway Co. struck down the Commonwealth’s consent statute as unconstitutional. In Mallory, a former freight car mechanic brought a claim that he developed cancer from exposure to toxic chemicals while working for Norfolk Southern Railway, a business incorporated and based in Virginia. A central question in the case was whether the plaintiff properly filed his suit in Pennsylvania despite that the Commonwealth’s only connection to his case was that Norfolk Southern had registered to conduct business here.
The Mallory court held that Pennsylvania’s long-arm statute improperly saddled out-of-state companies with the dilemma of either consenting to personal jurisdiction in the Commonwealth or opting not do business here at all, a “Hobson’s Choice” that violated the right to due process guaranteed by the Fourteenth Amendment. As a result, out-of-state entities could no longer be subject to personal jurisdiction in our courts based solely on their Pennsylvania business registration. The decision rendered the Commonwealth an anti- consent state like the other 49.
It all changed again in June 2023 on appeal to the U.S. Supreme Court, which surprisingly vacated the 2021 ruling and remanded the case back to Pennsylvania. In a 5-to-4 decision the U.S. Supreme Court held that Pennsylvania could exercise jurisdiction over Norfolk Southern, which had registered to conduct business here and thus consented to being sued for any and all claims, regardless of whether the case has any other connection to the Commonwealth. Essentially, the Court’s reasoning was that any entity that avails itself of our business registration process waives its right to contest jurisdiction. Consequently, Pennsylvania is once again the lone consent state in the union.
In the short term, litigation “tourism” that had been suppressed by Pennsylvania’s 2021 ruling might now experience a renaissance. Plaintiffs can once again bring legal actions in our state courts against out-of-state entities registered to do business here — even if the case has no other connection whatsoever to the Commonwealth. Further, Pennsylvania may soon have company among the ranks of consent states, as other jurisdictions interested in opening their courts to litigation tourists might enact business registration laws that mimic Pennsylvania’s, given the recent endorsement by the highest court in the land.
There remains an open question as to whether the U.S. Supreme Court’s ruling will be a lasting victory for litigation tourism; the dissenting opinion in the case suggests that Pennsylvania’s long-arm statute could be vulnerable to other Constitutional challenges on remand. We will be sure to follow Mallory and keep you updated. In the interim, Pennsylvania companies with cross-border operations should be on the lookout for consent legislation in the states where they have registered to do business, and should continue to carefully craft the governing law provisions of their contractual relationships.
For more information, contact Bill Speros at 814/870-7764 or wsperos@mijb.com.
