Pennsylvania Supreme Court News
October 12, 2021

The Pennsylvania Supreme Court recently held its first live arguments since before the COVID-19 pandemic, and two of the arguments presented to the Court involved significant personal jurisdiction and venue issues that could affect civil actions in this Commonwealth.

Consent Registration for Personal Jurisdiction Analysis

First, in Mallory v. Norfolk Southern, the Pennsylvania Supreme Court wastasked with examining the constitutionality of the Pennsylvania corporate registration statute. This statute requires out-of-state corporations to register in Pennsylvania as a condition of conducting business in Pennsylvania.  Plaintiffs have argued for years, particularly in mass tort litigation, that by registering to conduct business in Pennsylvania, corporations have effectively consented to general personal jurisdiction in Pennsylvania, making them susceptible to suits brought in Pennsylvania involving lawsuits completely unrelated to Pennsylvania.  However, since Daimler AG v. Bauman was decided by the U.S. Supreme Court in 2014 limiting general personal jurisdiction to a defendant-corporation’s state of incorporation and principal place of business, defendants have been challenging plaintiff’s consent to jurisdiction through registration theory of general personal jurisdiction  as being inconsistent with Daimler. Trial courts and intermediate appellate courts in Pennsylvania – both state and federal – have for the most part ruled in favor of plaintiffs on this issue, but this position has increasingly become an outlier position throughout the country since Daimler was decided.  

In Mallory,  Norfolk Southern argues that Pennsylvania’s registration statute violates the due process clause of the 14th Amendment of the U.S. Constitution.  Philadelphia Court of Common Pleas Judge Arnold New agreed and granted Norfolk Southern’ s preliminary objections based on lack of personal jurisdiction: “By wrapping general jurisdiction in the cloak of consent, Pennsylvania’s mandated corporate registration attempts to do exactly what the United States Supreme Court prohibited.”   Given the constitutional nature of Norfolk Southern’ s argument, the Pennsylvania Superior Court asked the Pennsylvania Supreme Court to immediately review the issue and the Commonwealth’s highest court agreed.

During the argument before the Pennsylvania Supreme Court, Mallory’s counsel argued that Norfolk Southern’ s registration to conduct business in Pennsylvania was purely voluntary because  it did not need to do so in order to simply operate trains through Pennsylvania, but that by voluntarily registering, it was nevertheless bound by the language of the registration statute.   Counsel for Norfolk Southern argued that a corporation conducting any type of business involving Pennsylvania is required to register making it mandatory, and that requiring a company to waive its constitutional personal jurisdiction protection violates the due process clause of the 14th Amendment.  Mallory’s Counsel also argued that Norfolk Southern does, in fact, conduct business in Pennsylvania through its operation of trains through Pennsylvania.  

The Pennsylvania Supreme Court focused, in large part, on whether Pennsylvania’s registration statute is mandatory.    Questioning by the Court  swung in both directions on this issue.. Their appeared to be disagreement between some justices as to whether registration is truly voluntary if it is a perquisite to conduct any type of business in Pennsylvania.  Justices also raised concerns that it was unreasonable for the plaintiff to argue that Norfolk Southern did not conduct business in Pennsylvania by operating its trains throughout Pennsylvania, especially given the fact that, for example, it must make stops in Pennsylvania and likely purchased land or easements of land in Pennsylvania over which to operate its trains.  Other justices focused on the voluntariness of a corporation’s choice to, in fact, conduct business in Pennsylvania in the first place, commenting that corporations can choose not to conduct business in Pennsylvania.  

The Court’s decision in Mallory will have a significant impact on litigation in Pennsylvania.  If the Court affirms the trial court’s decision, registration under Pennsylvania’s registration statute would no longer be a recognized basis of general personal jurisdiction in Pennsylvania.  If, however, the Court reverses the trial court’s decision, plaintiffs will continue to be permitted to  file lawsuits in Pennsylvania despite the absence of any meaningful connection to Pennsylvania so long as the defendant registered to conduct business in the Commonwealth.

Choice of Venue in Internet Defamation cases

The Pennsylvania Supreme Court heard arguments on the issue of choice of venue in internet defamation cases as well this week..  In Fox v. Smith, the plaintiff, a Delaware County resident who had been a candidate for mayor of Chester Heights, Pennsylvania sued her opponent, individuals involved in her opponent’s campaign, and two political committees, all residing and/or based in Delaware County, Pennsylvania, for defamation after she lost the election.  The plaintiff claimed that the defendants had defamed her by maliciously posting inaccurate information on the internet (through the creation of a website and various posts on Facebook) claiming that the plaintiff had committed a crime, resulting in pecuniary losses and reputational harm.  All of the parties were located in Delaware County,and there was no dispute that all of the defendants’ activities occurred in Delaware County. The plaintiff, nonetheless, filed her lawsuit in Philadelphia County, not Delaware County. Plaintiff contends that venue is proper in Philadelphia County based on the argument that because one of her close friends, who resided in Philadelphia County, read the defamatory statements on the internet from her home and understood them to be defamatory of the plaintiff.  

The trial court overruled  the preliminary objections based on the precedent handed down in the 1967 decision of the Pennsylvania Supreme Court in Gaetano v. Sharon Herald Corp. The Court held in that case that “defamatory statements in a newspaper printed in Mercer County but sent to Allegheny County were ’published’ when they were read by third parties in Allegheny County and understood to be defamatory of the plaintiff. .  While acknowledging that Gaetano bound him, the trial court judge questioned whether Gaetano should be applicable in internet-based defamation actions. He invited the Pennsylvania appellate court to provide guidance on the issue.  The Pennsylvania Superior Court affirmed the trial court’s decision based on the precedential effect of Gaetano, but in a concurring opinion, one of the judges invited the Pennsylvania Supreme Court to weigh in. 

At thearguments before the Pennsylvania Supreme Court, as well as in  their brief, defendants argue that the trial court and Superior Court read Gaetano is too narrowly. They contend  Gaetano is specifically guided by the facts of that case. There plaintiffs resided and worked in Allegheny County where their neighbors and associates had read the defamatory statements and that the defendants had mailed the newspapers to subscribers in Allegheny County.  The defendants argue that the “neighbors and associates” language used by the Court, is adopted from the Restatement of Torts. In the Restatement of Torts where a plaintiff lives and works is the place where the reputational harm caused by the defamation is felt and, therefore, venue is proper only when the third party is located in a county where a plaintiff resides or works.  Counsel pointed out that the Court’s reference to a plaintiff’s “own bailiwick,” confirms this interpretation of Gaetano, and that one or two sentences in the Courts holding in Gaetano cannot be reviewed in a vacuum without reference to the facts of the case.  Counsel argues that the manner in which the lower courts had interpreted Gaetano could arguably make venue proper in all 67 counties in the Commonwealth, which is not only inconsistent with the limitations intended by the venue rules, but could increasingly result in forum-shopping in defamation cases.

Counsel for the plaintiff argued that venue was proper in Philadelphia County since a close friend of the plaintiff had read it in Philadelphia County and understood it to apply to the plaintiff.   Counsel argued that Gaetano has been around for over 50 years and despite the fact that it involved defamation in a newspaper, the Court’s holding continues to work in the internet-based defamation context.  Counsel further argued that a defendant can file a forum non-conveniens motion if the plaintiff’s choice of forum, although proper, is nevertheless inconvenient.

 

Angela M. Heim of Rawle & Henderson, LLP, argued on behalf of the defendants/appellants.

 

Attorney Advertising. This Web site may be considered advertising under the rules of some states. Prior results described on this site cannot and do not guarantee or predict a similar outcome with respect to any future matter that we or any lawyer may be retained to handle.


© Copyright 2021 Rawle & Henderson, LLP. All rights reserved.