There are many benefits if you decide to incorporate your business in Pennsylvania, such as avoiding personal liability for the company’s debts. But can incorporating your business — in the Commonwealth of Pennsylvania in particular — increase your business’s chances of being sued in PA?
Yes.
Personal Jurisdiction Created by Incorporating in PA
Pennsylvania is the only state requiring every business incorporated in PA to submit to the personal jurisdiction of PA courts — even for conduct and injuries that occur outside of Pennsylvania.
But is that constitutional? Doesn’t the United States Constitution require proof of “certain minimum contacts” for a state to have general jurisdiction over a person or company? The answer is yes. See the holding of Burger King Corp. v. Rudzewicz, 471 U.S. 462 (1985). For example, a state can exercise general jurisdiction over a company headquartered or primarily doing business in that state.
But what if no such contacts exist? Can PA’s incorporate statute create personal jurisdiction?
Mallory v. Norfolk Southern Railway Co.
In Mallory v. Norfolk Southern Railway Co., a Virginia resident claimed that a Virginia company — Norfolk Southern Railway Co — exposed him to cancer-causing materials when he worked in Ohio and Virginia.
However, Plaintiff-Mallory filed suit in Pennsylvania. The PA trial court dismissed Mallory’s case for want of personal jurisdiction over the defendant-corporation. PA’s Supreme Court affirmed the trial court’s decision. Ultimately, Plaintiff appealed to the United States Supreme Court, claiming the defendant had consented to general jurisdiction when it voluntarily registered to do business in Pennsylvania. Defendant, on the other hand, alleged that PA had coerced consent relative to PA’s unique business incorporation laws, which are unlike any other state.
The result?
The US Supreme Court’s Decision in Mallory
In the end, the United States Supreme Court narrowly upheld PA’s law requiring those registering to do business in PA to submit to its general personal jurisdiction. But the decision was far from unanimous. Chief Justice John Roberts, Justices Elena Kagan and Brett Kavanaugh joined in a dissenting opinion penned by Justice Amy Coney Barrett:
“Permitting Pennsylvania to impose a blanket claim of authority over controversies with no connection to the Commonwealth intrudes on the prerogatives of other States—domestic and foreign—to adjudicate the rights of their citizens and enforce their own laws.”
All that said, the Supreme Court left open the door for future challenges to PA’s law creating PA jurisdiction over those incorporating in PA.
Let’s Get Started!
Contact a Pittsburgh lawyer at our Western PA firm to learn your options today! We’re happy to explain about entity formation in this Commonwealth.
412.780-0008