Source: https://www.wlf.org/2018/10/05/publishing/the-case-against-coercion-why-state-registration-jurisdiction-statutes-do-not-comport-with-due-process/
Timestamp: 2019-04-24 20:41:34+00:00

Document:
By Anand Agneshwar and Paige Sharpe, Partners with Arnold & Porter, Mr. Agneshwar in the New York, NY office and Ms. Sharpe in the Washington, DC office. Mr. Agneshwar co-chairs the firm’s Product Liability Litigation group.
Nihil consensus tam contrarium est quam vis.—Nothing is so contrary to consent as force.
Jurisdictional jurisprudence has undergone a seismic shift in recent years with the Supreme Court’s trio of cases circumscribing the places in which an out-of-state defendant can be haled into court consistent with the Fourteenth Amendment. In Goodyear Dunlop Tires Operations, S.A. v. Brown, 564 U.S. 915 (2011), and Daimler AG v. Bauman, 571 U.S. 117 (2014), the Court made clear that a defendant is subject to general personal jurisdiction—that is, jurisdiction over claims brought by anyone, arising anywhere—only in the state where the defendant is “at home.” For a corporation, that virtually always means its state of incorporation or principal place of business. Daimler AG, 571 U.S. at 137. Bristol-Myers Squibb Co. v. Superior Court of California, 137 S. Ct. 1773 (2017), similarly limited the bounds of specific personal jurisdiction, instructing that a non-resident plaintiff can sue an out-of-state defendant in a given state consistent with the Fourteenth Amendment only if that defendant’s in-state conduct is connected to that plaintiff’s claims. These were not close decisions. Goodyear and Daimler were 9-0, and Bristol-Myers Squibb was 8-1.
Daimler made clear that subjecting out-of-state defendants to general jurisdiction “whenever they have an in-state subsidiary or affiliate . . . would sweep beyond even the ‘sprawling view of general jurisdiction’” that the Court rejected in Goodyear. 571 U.S. at 136. Yet registration jurisdiction encompasses a still more aggressive view. Because every state in the country has a statute that requires out-of-state companies that conduct business in the state to register, see Brown v. Lockheed Martin Corp., 814 F.3d 619, 640 (2d Cir. 2016), a large corporation could theoretically be subject to general jurisdiction in all 50 states simply by virtue of registering. This theory would permit registration jurisdiction regardless of how much business an out-of-state company did in the state, and certainly without regard to whether the company could fairly be considered “at home” there. If registration alone were sufficient, “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.” Id.
Aside from its practical effects, registration jurisdiction is unconstitutional because a company’s “consent” in this circumstance is a fiction. The ability to do business in each of the 50 states hinges on registration; a company has no choice in the matter. Registration is thus essentially coercive for a company that deals in goods or services nationwide, and “consent to general jurisdiction in exchange for the privilege of being able to do business in the state is most certainly an unfair deal.” Tanya J. Monestier, Registration Statutes, General Jurisdiction, and the Fallacy of Consent, 36 Cardozo L. Rev. 1343, 1397 (2015); see also Mallory v. Norfolk S. Ry. Co., Nos. 1961, 802 EDA 2018, 2018 WL 3025283, at *5 (Pa. Com. Pl. May 30, 2018) (“Faced with this Hobson’s choice, a foreign corporation’s consent to general jurisdiction in [a state] can hardly be characterized as voluntary.”). As one court has put it, “‘[e]xtorted actual consent’ and ‘equally unwilling implied consent’ are not the stuff of due process.” Leonard v. USA Petroleum Corp., 829 F. Supp. 882, 889 (S.D. Tex. 1993).
Other than registering (or violating the law), the only practical option for a nationwide company would be to choose not to do business in every state. This is akin to the stop-selling rationale that some courts have advanced in the preemption context, where they have suggested that a company can escape the impossibility of complying with both its federal- and state-law duties by choosing not to make a product altogether. The Supreme Court has flatly rejected such a suggestion, and the same rationale should apply here. See Mutual Pharm. Co. v. Bartlett, 570 U.S. 472, 488 (2013) (“Our pre-emption cases presume that an actor seeking to satisfy both his federal- and state-law obligations is not required to cease acting altogether in order to avoid liability.”).
The Due Process Clause also requires that companies have “fair warning that a particular activity may subject [them] to the jurisdiction of a foreign sovereign,” giving “a degree of predictability to the legal system that allows potential defendants to structure their primary conduct with some minimum assurance as to where that conduct will and will not render them liable to suit.” Burger King Corp. v. Rudzewicz, 471 U.S. 462, 472 (1985) (internal quotations omitted). This “predictability” consideration swayed the Court in Daimler, where it noted that subjecting a company to general jurisdiction wherever it did business would result in “exorbitant exercises of all-purpose jurisdiction that would scarcely permit out-of-state defendants to structure their primary conduct” in a way that would let them predict jurisdictional exposure. 571 U.S. at 139. But this is exactly what registration jurisdiction would allow: the prospect of a patchwork of exposure depending on how different forums come down on the question of registration jurisdiction.
Nor can a state manufacture general jurisdiction by enacting a statute providing explicitly that registration equals consent. Pennsylvania has tried just that: its jurisdictional statute provides that an out-of-state corporation consents to general jurisdiction by registering to do business. 42 Pa. Cons. Stat. Ann. § 5301. While some courts in Pennsylvania have sustained this requirement, see e.g., Webb-Benjamin LLC v. Int’l Rug Group LLC, __ A.3d __, 2018 WL 3153602, at *4 (Pa. Super. Ct. June 28, 2018) (“Consent remains a valid form of establishing personal jurisdiction under [42 Pa. Cons. Stat. Ann. § 5301] after Daimler.” (quoting Bors v. Johnson & Johnson, 208 F. Supp. 3d 648, 655 (E.D. Pa. 2016))), that reading is plainly wrong.
A state statute cannot trump the Fourteenth Amendment’s Due Process Clause. See Daimler, 571 U.S. at 125. A recent decision by the Philadelphia Court of Common Pleas rejected registration jurisdiction for this exact reason. Mallory, 2018 WL 3025283. As that court noted, “[t]he Due Process Clause, acting as an instrument of interstate federalism, may sometimes act to divest the State of its power to render a valid judgment.” Id. at *4 (quoting Bristol-Myers Squibb, 137 S. Ct. at 1780). “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. . . . Therefore, Plaintiff’s jurisdiction by consent argument infringes upon the doctrine of federalism, as protected by the Due Process Clause.” Id. at *6. This decision will, one hopes, shut down this line of argument in Pennsylvania.

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