Jackie L. Sullivan v. A. W. Chesterton, Inc. (In re Asbestos Products Liability Litigation (No. VI))
Jackie L. Sullivan v. A. W. Chesterton, Inc. (In re Asbestos Products Liability Litigation (No. VI))
Opinion of the Court
Before the Court is the motion to dismiss filed by Defendant Huntington Ingalls Incorporated ("HIC"). The Court will grant the motion as it concludes that it lacks personal jurisdiction over HIC.
In 2014, the Supreme Court decided the case of Daimler AG v. Bauman
Pennsylvania has long had a statute which requires a foreign corporation wishing to do business in Pennsylvania to register in Pennsylvania. Correspondingly, Pennsylvania law provides that such registration constitutes a sufficient basis for the exercise of general personal jurisdiction over the foreign corporation.
Federal and state courts in Pennsylvania have struggled to divine the applicability of Daimler to the Pennsylvania registration scheme with mixed results. Building on that jurisprudence, this Court concludes that: (1) the Pennsylvania statutory scheme that requires foreign corporations to register to do business and, therefore, to consent to general personal jurisdiction in Pennsylvania, offends the Due Process Clause and is unconstitutional; and (2) the Third Circuit's pre- Daimler decision in Bane v. Netlink, Inc.,
I. FACTS AND PROCEDURAL HISTORY
Plaintiff Jackie Sullivan brought this asbestos personal injury action against 48 Defendants in the Philadelphia Court of Common Pleas on July 25, 2018. She alleges that decedent John Sullivan was exposed *535to asbestos during his Naval service from October 1967 through January 1980. Plaintiff further alleges that this asbestos exposure caused Sullivan to develop lung cancer which ultimately led to his death. HIC removed the action on August 22, 2018 pursuant to the Federal Officer Removal Statute, 28 U.S.C § 1442.
Regarding the allegations against HIC, Plaintiff alleges that in 1973, Sullivan was assigned to the U.S.S. Blakely while serving in the Navy as a machinist mate. Plaintiff further contends that an alleged predecessor of HIC, Avondale Shipyard, built the Blakely in Westwego, Louisiana and "designed its ship to contain asbestos and despite the ability to know of and warn of the hazards of asbestos failed to do so." Am. Compl. 8-9 (ECF No. 100). It is undisputed that Sullivan's alleged asbestos exposure aboard the Blakely did not occur in Pennsylvania.
II. LEGAL STANDARD
Under Fed. R. Civ. P. 12(b)(2), in response to a complaint, a defendant may assert as a defense that the court lacks personal jurisdiction over it. When a defendant raises this defense, "the burden falls upon the plaintiff to come forward with sufficient facts to establish that jurisdiction is proper." Mellon Bank (E.) PSFS, Nat'l Ass'n v. Farino,
III. DISCUSSION
A. The Pennsylvania Business Registration Statutory Scheme and Federal Due Process Guarantees
Plaintiff contends that this Court has general personal jurisdiction over HIC pursuant to 15 Pa.C.S. § 411 and 42 Pa.C.S. § 5301 because HIC and its alleged predecessors registered to do business in Pennsylvania at various points of time.
*536Section 411 provides in relevant part that a foreign corporation "may not do business in this Commonwealth until it registers with the department." 15 Pa.C.S. § 411(a). If a foreign corporation does business in the state without registering, as a penalty, it "may not maintain an action or proceeding in" the state. 15 Pa.C.S. § 411(b). Section 5301 provides in relevant part that registration as a foreign corporation in Pennsylvania "shall constitute a sufficient basis of jurisdiction to enable the tribunals of this Commonwealth to exercise general personal jurisdiction over such" entities. 42 Pa.C.S. § 5301(a)(2)(i). Read together, these two statutes provide that, the state will only permit a foreign corporation to "do business" in Pennsylvania if it registers and, thus, subjects itself to general personal jurisdiction. The Court will refer to the interplay of these two statutes as the "Pa. Statutory Scheme."
The concept of due process is deeply rooted in our judicial system, having been imported from England as an essential bulwark against arbitrary deprivations by the crown. See, e.g., Davidson v. City of New Orleans,
The Pa. Statutory Scheme has serious due process implications and its continued implementation raises two questions that this Court must address: (1) is the Pa. Statutory Scheme constitutional after Daimler,
B. The Applicable Law
In order to determine whether this Court may exercise personal jurisdiction over HIC, it must first analyze two questions: (1) whether Pennsylvania's long-arm statute provides for the exercise of long-arm jurisdiction, and, if so; (2) whether the exercise of long-arm jurisdiction in this case satisfies the requirements of the Due Process Clause of the Constitution. IMO Indus., Inc. v. Kiekert AG,
In addition to these specific instances, the statute also provides that "the jurisdiction of the tribunals of this Commonwealth shall extend ... to the fullest extent allowed under the Constitution of the United States and may be based on the most minimum contact with this Commonwealth allowed under the Constitution of the United States." 42 Pa.C.S § 5322(b). It is with this second section of the long-arm statute that the Court is concerned as the specific acts listed in Section 5322(a) are not implicated.
*537Because Section 5322(b) of Pennsylvania's long-arm statute is coextensive with the Due Process Clause, the Court need only analyze whether jurisdiction is proper under federal Fourteenth Amendment jurisprudence. See Daimler,
In Daimler, the Supreme Court reiterated that exercising general personal jurisdiction over a foreign corporation comports with due process only "when the corporation's affiliations with the State in which suit is brought are so constant and pervasive 'as to render [it] essentially at home in the forum State.' "
To put the reach of Daimler in context, it is important to understand how it radically shifted the legal landscape regarding the application of general personal jurisdiction. In 1945, the Supreme Court in International Shoe,
Thereafter, the Supreme Court solidified this concept in two additional cases, finding that a foreign corporation's "continuous and systematic general business contacts" in a state could allow its courts to exercise general personal jurisdiction over the corporation. Helicopteros Nacionales de Colombia, S.A. v. Hall,
In 2011, the Supreme Court retracted from this business contacts-based general jurisdictional analysis in Goodyear, defining to an extent the difference between specific and general jurisdiction. The Court held that a foreign corporation is subject to general personal jurisdiction only where it "is fairly regarded as at home." 564 U.S. at 924,
C. The Constitutionality of Pennsylvania's Statutory Scheme in Light of Daimler
Now that the Supreme Court has found that a foreign corporation's "substantial, continuous, and systematic" course of business in a state cannot be the basis for general personal jurisdiction, plaintiffs are increasingly reliant on business registration statutes such as the Pa. Statutory Scheme to attempt to establish general personal jurisdiction over a foreign corporation. This case is on point since: (1) HIC is neither incorporated in nor does it have its principal place of business in Pennsylvania; (2) Plaintiff does not allege any exceptional circumstances; and (3) none of the alleged exposure attributable to HIC occurred in Pennsylvania. Therefore, Plaintiff must turn to the Pa. Statutory Scheme in order to save her assertion of personal jurisdiction over HIC. Specially, Plaintiff contends that, while HIC is not necessarily "at home" in Pennsylvania, HIC or its alleged predecessors consented to general jurisdiction when they registered to do business in the state pursuant to the Pa. Statutory Scheme.
Daimler did not concern consent under a registration regime nor did it disturb absolutely a party's ability to consent to general personal jurisdiction under certain circumstances. See Ins. Corp. of Ireland v. Compagnie des Bauxites de Guinee,
It is axiomatic, and none of the cases discussing this issue dispute, that consent is only valid if it is given both knowingly and voluntarily. The issue is whether this sort of mandatory registration scheme which conditions the ability to do business in a particular state on consent to general personal jurisdiction satisfies these two requirements.
Most courts that have confronted the issue have determined that their state registration statutes do not imply consent to general jurisdiction because, inter alia, the language of the statutes are not explicit in this regard. These courts hold that, at a minimum, any consent to general personal jurisdiction cannot be implied from the mere act of registration, and therefore, the purported consent is not knowingly given.
*539The Pa. Statutory Scheme, on the other hand, is unique in that it provides explicitly that by the act of registering to do business in Pennsylvania, the foreign corporation consents to general jurisdiction. Thus, the statutory consent is arguably given knowingly under the Pa. Statutory Scheme in that it is expressly provided for in Section 5301. The question is, in light of the mandatory nature of registration to do business in Pennsylvania, whether the consent to general jurisdiction is voluntary. Below, the Court discusses both registration statutes generally and the Pa. Statutory Scheme specifically, and describes why such schemes do not comport with due process after Daimler.
1. Are Registration Statutes that Extract Consent to General Jurisdiction in Exchange for the Ability to do Business Unconstitutional?
All states have business registration statutes that premise the ability of a foreign corporation to conduct business therein without penalty on its registration and appointment of an agent for service of process. See, e.g., Brown v. Lockheed Martin Corp.,
The original force behind business registration statutes is now archaic and moot. In the mid-nineteenth century, corporations were considered to exist only where they were incorporated. See Charles W. "Rocky" Rhodes, Nineteenth Century Personal Jurisdiction Doctrine in A Twenty-First Century World,
As noted by the Second Circuit:
A corporation's "consent" through registration has thus always been something of a fiction, born of the necessity of exercising jurisdiction over corporations outside of their state of incorporation: Consent was perhaps more of a promise, fairly extracted, to appear in state court on actions by a state's citizens arising from the corporation's operations in the jurisdiction.
Brown,
For example, in Brown, the Second Circuit concluded that:
If mere registration and the accompanying appointment of an in-state agent - without an express consent to general jurisdiction - nonetheless sufficed to confer general jurisdiction by implicit consent, every corporation would be subject to general jurisdiction in every state in which it registered, and Daimler's ruling would be robbed of meaning by a back-door thief.
*540
Similarly, in Genuine Parts Co. v. Cepec,
If all of our sister states were to exercise general jurisdiction over our many corporate citizens, who often as a practical matter must operate in all fifty states and worldwide to compete, that would be inefficient and reduce legal certainty for businesses. Human experience shows that "grasping" behavior by one, can lead to grasping behavior by everyone, to the collective detriment of the common good. It is one thing for every state to be able to exercise personal jurisdiction in situations when corporations face causes of action arising out of specific contacts in those states; it is another for every major corporation to be subject to the general jurisdiction of all fifty states.
Recognizing the sea change in personal jurisdiction brought about by Daimler and Goodyear, the Delaware Supreme Court found that Delaware's registration statute could not be read to force jurisdictional consent but instead would have to be interpreted so as not to offend the Due Process Clause.
An incentive scheme where every state can claim general jurisdiction over every business that does any business within its borders for any claim would reduce the certainty of the law and subject businesses to capricious litigation treatment as a cost of operating on a national scale or entering any state's market.
This Court agrees with the holdings in these cases that a mandatory statutory *541regime purporting to confer consent to general jurisdiction in exchange for the ability to legally do business in a state is contrary to the rule in Daimler and, therefore, can no longer stand.
2. Is the Pa. Statutory Scheme Saved by the Explicit Nature of the Consent?
The Pa. Statutory Scheme, however, goes a step further than other states' registration statutes in that it explicitly informs that registering to do business constitutes a sufficient basis for the exercise of general personal jurisdiction.
Nonetheless, the Pa. Statutory Scheme presents a foreign corporation with a Hobson's choice: consent to general personal jurisdiction or be denied the benefits of doing business in Pennsylvania.
As a general principle, the Supreme Court has recognized that the state cannot condition a benefit generally available to others in the state on the surrender of a constitutional right. Koontz v. St. Johns River Water Mgmt. Dist.,
This principle finds a home in the unconstitutional conditions doctrine. While the unconstitutional conditions doctrine most often is saluted in First and Fifth Amendment cases, "the logical foundation of the unconstitutional conditions doctrine applies with equal force in any case in which the enjoyment of a government-sponsored benefit is conditioned upon a person's nonassertion of any constitutional right." Wojtczak v. Cuyler,
Second, out-of-state corporations seeking to exercise their right to engage in commerce in Pennsylvania have only two unsatisfactory choices: (1) register and therefore consent to general personal jurisdiction in all cases; or (2) not register and be denied the opportunity to "do business" in the state. Given the fundamental importance of the ability to engage in interstate commerce, this Court concludes that the mandatory nature of the statutory consent extracted by the Pa. Statutory Scheme is, in fact, functionally involuntary. As a result, it is not true consent at all. See Monestier, supra at 1389-90 (opining that "[t]he notion of consent implies that a party has alternatives - in particular, the alternative not to consent" but that "[t]he option of refraining from doing business in [a] state is not really a viable one for most corporations"); see also Leonard v. USA Petroleum Corp.,
Finally, as noted by Professor Monestier, consent by registration is significantly dissimilar to other forms of accepted consent-based personal jurisdiction such as forum selection clauses and submission - consent based on appearing and defending in a lawsuit. Monestier, supra at 1380-84. These forms of consent are creatures of contract - transactional in nature - and the consents are limited to the parties to the transaction or discrete disputes. By contrast, this form of anticipatory consent, such as that contemplated by the Pa. Statutory Scheme, subjects the foreign corporation to unlimited general jurisdiction for all times and in all unforeseen circumstances.
*543For all of these reasons, the Pa. Statutory Scheme allows Pennsylvania to impermissibly extract consent at a cost of the surrender of a constitutional right. Absent voluntary consent, Daimler teaches that a corporation is only subject to general jurisdiction where it is "at home." The Pa. Statutory Scheme impermissibly re-opens the door to nation-wide general jurisdiction that Daimler firmly closed. Therefore, the Court concludes that the Pa. Statutory Scheme violates the Due Process Clause and is unconstitutional.
D. The Continuing Validity of Bane after Daimler
The Court turns to the validity of pre- Daimler Third Circuit precedent approving of the Pa. Statutory Scheme. In Bane, the Third Circuit held that a foreign corporation consents to general jurisdiction when it registers to do business in Pennsylvania under the Pa. Statutory Scheme.
Bane was issued well before the Supreme Court clarified the limits of general jurisdiction in Daimler. Bane was based on the then-understanding that "due process is ... not offended by the assertion of jurisdiction when the defendant has maintained continuous and substantial forum affiliations, whether or not the cause of action is related to those affiliations."
It is thus apparent that the constitutional regime under which Bane was decided has been superseded by a newer standard.
*544The district court is the lowest court in our federal hierarchical system and is bound by rulings of its circuit court and the Supreme Court. See Allegheny Gen. Hosp. v. N.L.R.B.,
However, the Third Circuit itself has recognized an exception to this rule. When a constitutional standard is replaced by newer Supreme Court law contrary to the law of the circuit, "the old standard [is] not binding" on lower courts. Planned Parenthood of Se. Pa. v. Casey,
In Casey, the Third Circuit (and later the Supreme Court) considered the constitutionality of various sections of the Pennsylvania Abortion Control Act of 1982.
*545The rule that emerges from Daimler changed the standard for determining when a state may exercise general personal jurisdiction over a foreign corporation. Therefore, applying Casey to the facts of this case, the result obtained under Bane (general personal jurisdiction over a foreign corporation by statutory consent) cannot stand under the new constitutional standard adopted in Daimler (general personal jurisdiction only where the foreign corporation is at home). Thus, this Court is bound to apply the new Daimler standard not withstanding previous circuit law.
IV. CONCLUSION
The Court concludes that the Pa. Statutory Scheme requiring foreign corporations to register to do business and, therefore, to consent to general personal jurisdiction in Pennsylvania, offends the Due Process Clause and is unconstitutional. As a result, the Court further concludes that the Third Circuit's pre- Daimler decision in Bane, finding that, by registering to do business in Pennsylvania, a foreign corporation consents to general personal jurisdiction, is irretrievably irreconcilable with the teachings of Daimler, and can no longer stand. Under the facts of this case, without the presence of: (1) specific jurisdiction; (2) HIC's voluntary consent; (3) HIC being incorporated in or having its principal place of business in Pennsylvania; or (4) some other extraordinary circumstance, this Court has no personal jurisdiction over HIC. Therefore, the Court grants HIC's motion to dismiss.
An appropriate order follows.
ORDER
AND NOW , this 6th day of June, 2019 , for the reasons set forth in the accompanying Memorandum of Law, and upon consideration of the motions detailed below, it is hereby ORDERED that:
1. Huntington Ingalls' motion for leave to file a reply (ECF 154) is GRANTED ;
2. Huntington Ingalls' motion to dismiss (ECF No. 106) is GRANTED and Huntington Ingalls is DISMISSED from the case for lack of personal jurisdiction;
3. John Crane's motion to dismiss (ECF No. 107) and BF Goodrich's motion to join (ECF No. 132) are DENIED ;
4. The motions to file replies in support of joinders to John Crane's motion to dismiss (ECF Nos. 155, 156, 158, 165) are DENIED as moot ; and
5. Plaintiff's motion for leave to file an amended complaint beyond the time ordered by the court (ECF No. 129) is DENIED as moot .
AND IT IS SO ORDERED.
This statute allows government contractor defendants like HIC to remove an action from state court on the theory that it acted under the direction of an officer of the United States. 28 U.S.C. 1442(a)(1).
While Plaintiff does allege that Sullivan was exposed to asbestos in Pennsylvania, it was not asbestos for which HIC could be responsible.
The modern notion of personal jurisdiction comes in two flavors: specific and general jurisdiction. Specific jurisdiction exists when the underlying controversy arises from actions taken in the forum. Goodyear Dunlop Tires Operations, S.A. v. Brown,
The parties argue whether the various companies are, in fact, predecessors of HIC, whether HIC would be liable for its predecessors' actions, and the effect of the timing of HIC's registration on its liability. Given the Court's holdings in this case, the Court concludes that these issues are immaterial.
Int'l Shoe Co. v. State of Wash., Office of Unemployment Comp. & Placement,
Pennoyer v. Neff,
Two years previously, the United States District Court for the District of Delaware had predicted this result concluding that, while Daimler did not concern the issue of consent by registration, its overall message encompassed the issue. The Delaware District Court held that because "[b]oth consent and minimum contacts (and all questions regarding personal jurisdiction) are rooted in due process," and "[j]ust as minimum contacts must be present so as not to offend 'traditional notions of fair play and substantial justice,' the defendant's alleged 'consent' to jurisdiction must do the same." AstraZeneca AB v. Mylan Pharm., Inc.,
The Supreme Court's discussion of due process in Daimler, therefore, informs the court's [consent] analysis here. In holding that "continuous and systematic contacts" alone are insufficient to establish general jurisdiction, the Supreme Court rejected the idea that a company could be haled into court merely for "doing business" in a state.
Id. at 556 (quoting Daimler,
As described below, the reasoning of these cases applies equally to the Pa. Statutory Scheme.
Specifically, in that the Pa. Statutory Scheme requires foreign corporations to register, a non-registering foreign corporation can either not do business in the state or do business illegally without the protection of the court system. This Court concludes that the choice of doing business illegal is no more of a choice than not doing business in the state at all.
Moreover, in support of its alternative holding that the defendant had consented to general jurisdiction through registration, the Third Circuit in Bane cited Hess v. Pawloski,
Several district courts within this circuit have followed Bane even after Daimler, and have held that a defendant's compelled consent to jurisdiction is not nullified by Daimler's limitations on general personal jurisdiction - especially in light of the fact that the Pa. Statutory Scheme explicitly informs the entity that it will be subject to general jurisdiction once it registers to do business. See Gorton v. Air & Liquid Sys. Corp.,
However, as discussed, while the explicit Pa. Statutory Scheme may indicate that consent to jurisdiction is knowing, it does not make it voluntary. Thus, this Court departs from these holdings as the consent extracted is invalid. Contrary to these courts' view, the issue was never whether Daimler invalidated consent to personal jurisdiction, but whether a scheme that forces consent can be found valid after Daimler.
The Pennsylvania Superior court has also followed this line of district court cases in reaching the same conclusion. Webb-Benjamin, LLC v. Int'l Rug Grp., LLC,
John Crane seeks dismissal of the amended complaint because it was filed ten days late. While this Court has discretion to strike the untimely pleading, it will not do so because: (1) Plaintiff has established good cause for the delay; and (2) John Crane points to no specific prejudice from the tardy pleading, and the Court finds no prejudice to any Defendant. The Court would prefer to determine the case on the merits rather than on a procedural error that prejudiced no one.
Reference
- Full Case Name
- IN RE: ASBESTOS PRODUCTS LIABILITY LITIGATION (NO. VI) Jackie L. Sullivan, of The Estate of John L. Sullivan, and Widow in Her Own Right v. A. W. Chesterton, Inc.
- Cited By
- 23 cases
- Status
- Published