US Supreme Court Ruling to Make Philadelphia the Center of Personal Injury Litigation

August 2023 • Source: Ross J. Di Bono., Zarwin, Baum, DeVito, Kaplan Schaer Toddy, PC

On June 27, 2023, the United States Supreme Court issued a ruling in Malloy v. Norfolk Southern Railway Co. (600 U.S. ___ (2023))[1], that upheld a Pennsylvania Statute granting Pennsylvania State Courts general jurisdiction over all foreign corporations that register to do business in Pennsylvania.  This ruling has the potential to drastically increase the number of cases that are filed in Pennsylvania, with a particular emphasis on personal injury cases. 

The Mallory case involved a claim for damages due to illnesses that were allegedly caused by exposure to carcinogens.  Plainitff was a longtime Norfolk Southern freight mechanic and worked for the company in Ohio and Virginia.  While Plainitff lived in Pennsylvania for a period of time, he does not allege that he sustained any exposure to the cancer-causing chemicals while in Pennsylvania. 

Ultimately, Malloy retained a Pennsylvania personal injury attorney and filed suit in Pennsylvania state courts for his alleged injuries.  He asserted that the Pennsylvania state courts had personal jurisdiction over Norfolk Southern pursuant to a Pennsylvania Statute that governed registration of foreign corporations doing business in Pennsylvania.  Pursuant to 42 Pa. Cons. Stat. §5301(a)(2), as a requirement of registering to do business in Pennsylvania, a foreign corporation must consent to Pennsylvania state courts exercising general jurisdiction over the foreign corporations.  This means that by way of registering to do business in Pennsylvania, a foreign corporation is consenting to be sued in Pennsylvania even though the cause of action did not arise in that state. 

Norfolk Southern opposed this lawsuit and argued that the consent to general jurisdiction set forth in 42 Pa. Cons. Stat. §5301(a)(2) violated its due process rights under the 14^th Amendment of the US Constitution.  This issue proceeded before the Pennsylvania Supreme Court which sided with Norfolk Southern and ruled that the consent to general jurisdiction requirement violated Due Process under the 14^th Amendment. 

Malloy appealed this ruling to the US Supreme Court.  In a divided, 5 to 4 opinion, Justice Gorsuch overruled the Pennsylvania Supreme Court and held that the consent to jurisdiction requirement set forth in 42 Pa. Cons. Stat. §5301(a)(2) did not violate the 14^th Amendment.  Justice Gorsuch noted that this issue was not a new issue and had been decided by the Supreme Court in 1917 in the Pennsylvania Fire Ins. Co. of Philadelphia v. Gold Issue Mining & Milling Co., 243 U.S. 93. 

Per Justice Gorsuch, Pennsylvania Fire specifically ruled that similar consent to general jurisdiction clauses did not violate the 14^th Amendment’s Due Process Clause.  Thus, Pennsylvania Fire was binding precedent.  Justice Gorsuch specifically rejected Norfolk Southern’ s argument that the Pennsylvania Fire ruling had been chipped away by subsequent Supreme Court decisions.  Thus, and by a 5 to 4 margin, the Court vacated the ruling of the Pennsylvania Supreme Court and remanded Malloy for further proceedings. 

While Justice Gorsuch was clear that the consent to general jurisdiction clause does not violate Due Process, Malloy may be overturned on other grounds.  In a concurring decision, Justice Alito noted that, while he agrees that the consent to general jurisdiction clause does not violate the 14^th Amendment’s Due Process Clause, he believes it may violate the Dormant Commerce Clause.  Per Justice Alito, Norfolk Southern raised the Commerce Clause issue with the Pennsylvania Supreme Court, but that court did not rule on this specific issue as it had reached a dispositive conclusion on the Due Process argument.  Pursuant to Justice Gorsuch’s ruling, Malloy is now being remanded back to the Pennsylvania Supreme Court, which is expected to rule on the Dormant Commerce Clause issue.

Given that the Pennsylvania Supreme Court already found the consent to general jurisdiction clause unconstitutional, there is a chance that the court once again rejects this requirement.  As Just Alito noted, under the Commerce Clause, the Constitution grants Congress the power to regulate commerce among the States.  The Dormant Commerce Clause prohibits States from enacting laws that unduly restrict interstate commerce.    Justice Alito also noted that the Constitution also restricts a state’s power to reach out and regulate conduct that has little, if any, connection to the State’s legitimate interest.

Based on his concurring concurrence, Justice Alito has left to door open for Malloy to be revaluated under the Dormant Commerce Clause as he noted that the consent to general jurisdiction clause allows Pennsylvania State Court to govern over issues that have little to no connection to the state, and therefore interferes with interstate commerce.  As Malloy was decided by a slim margin, there are signs that should the case get back in front of the Supreme Court on the Dormant Commerce Clause argument, the vote may proceed differently. 

Practically, this decision opens the door for Pennsylvania to see an influx of personal injury lawsuits, with most of them to be filed in Philadelphia.  As Justice Alito noted, Philadelphia is especially favorable to tort plaintiffs.  Since forum shopping is not prohibited by the Constitution, it is anticipated that most of these new cases will be filed in Philadelphia, even those they have no tangible connection to the City or State.

Because of this, there will be a renewed focus on Motions challenging the propriety of venue in Philadelphia, as well as removal proceedings.  In Pennsylvania, venue is proper in any county where a corporation “regularly conducts business.” Pa. R. C. P. 2179 (a)(2).  When a corporation challenges venue solely based on its business contacts, the courts conduct a so-called the quality-quantity analysis. Substantively, venue is proper under Rule 2179(a)(2) where there is: (1) a “quality of acts” conducted by the corporation that directly further or are essential to corporate objectives; and (2) a “quantity of acts” that are “sufficiently continuous so as to be considered habitual.”

Recently, the Pennsylvania Supreme Court heard oral argument regarding the “quantity” prong of the venue analysis. Hangey v. Husqvarna Prof'l Prods[2]. There, the Plaintiff purchased a lawnmower from a retailer in Bucks County. PA.  After falling off the lawnmower while in use, the Plaintiff sustained severe injuries to both legs when the lawnmower continued to operate and ran over his legs. Plaintiff, a resident of Wayne, Pa, filed a products liability case against the manufacturer and retailer in Philadelphia County. The trial court issued an order transferring this case Bucks County based on the defendants’ preliminary objections for improper venue. The trial court reasoned that although .005% of sales from a multi-billion-dollar company satisfied the “quality prong,” the tiny percentage failed to meet the “quantity” standard.

The Superior court disagreed, and overturned the trial court, stating it abused its discretion by focusing on the percentage of business when ruling the contacts did not satisfy the quantity prong of the venue analysis. Because the Defendants are vast, billion-dollar entities with at least one authorized dealer in Philadelphia, the court held the trial court abused its discretion.

Accordingly, venue is going to be one of the most “hot button” issues before the Pennsylvania Supreme Court this coming year.  Not only will the court be addressing the consent to general jurisdiction clause under the auspice of the Dorman Commerce Clause, but it will have the chance to set a definitive rule by which to measure a corporation’s quality of contacts with a given county.  

These rulings have the potential to make Pennsylvania, and Philadelphia in particular, a major focus of personal injury litigation throughout the country.  These decisions will also place a renewed focus on the challenging venue, either by Preliminary Objection or removal.  Since a challenge to venue must occur within twenty days of service, and removal within thirty days of service, foreign corporation, registered to do business in Pennsylvania, must be judicious in reporting new lawsuits and obtaining defense counsel to make sure that all proper precautions are taken to ensure that case are not tried in an improper venue.