Pennsylvania's New Long-Arm Statute: Extended Jurisdiction Over Foreign Corporations

Volume 79 Issue 1 Dickinson Law Review - Volume 79, 1974-1975 10-1-1974 Pennsylvania's New Long-Arm Statute: Extended Jurisdiction Over Foreign Corporations William J. Donohue Follow this and additional works at: https://ideas.dickinsonlaw.psu.edu/dlra Recommended Citation William J. Donohue, Pennsylvania's New Long-Arm Statute: Extended Jurisdiction Over Foreign Corporations, 79 DICK. L. REV. 51 (1974). Available at: https://ideas.dickinsonlaw.psu.edu/dlra/vol79/iss1/4 This Comment is brought to you for free and open access by the Law Reviews at Dickinson Law IDEAS. It has been accepted for inclusion in Dickinson Law Review by an authorized editor of Dickinson Law IDEAS. For more information, please contact [email protected]. PENNSYLVANIA'S NEW LONG-ARM STATUTE: EXTENDED JURISDICTION OVER FOREIGN CORPORATIONS INTRODUCTION In recent years, the Pennsylvania "long-arm" statute has been criticized as an ineffective means of obtaining jurisdiction over a foreign corporation.' The argument most frequently advanced was that the statute, in its original and amended versions, had been so narrowly constructed that the Pennsylvania courts were unable to exercise jurisdiction over a foreign corporation to the fullest extent allowed by the due process clause of the fourteenth amendment. This deficiency in the Pennsylvania statute worked a hard- ship upon its citizens, since they were subject to the expense and risk of litigating their claims in another jurisdiction. In an effort to correct this situation, the Pennsylvania legisla- ture has enacted a new long-arm statute. 2 The new statute not only liberalizes the "doing business" test which has traditionally determined a foreign corporation's amenability to suit in Pennsyl- vania but also purports to extend the jurisdiction of Pennsylvania courts over foreign corporations "to the fullest extent allowed un- der the Constitution of the United States."8 It is the purpose of this Comment to interpret the provisions of the new statute and to determine the extent of its jurisdictional reach over foreign corporations.4 In jurisdictional questions, the law of the forum state, as limited by the due process clause, determines the amenability of a corporation to suit in that state.5 This analysis of state court jurisdiction over nonresidents has often been described as a "two-step" test. First, the state must be empowered by its own statutory authority to subject the nonresident to suit in its courts. Second, this exer- 1. See, e.g., Cecere v. Ohringer Home Furniture Co., 208 Pa. Super. 138, 220 A.2d 350 (1966); Comment, InternationalShoe and Long-Arm Ju- risdiction-How About Pennsylvania?, 8 DuQ. L. REV. 319 (1970). 2. PA. STAT. ANN. tit. 42, §§ 8301-11 (Supp. 1974-75). 3. PA. STAT. ANN. tit. 42, § 8309(b) (Supp. 1974-75). 4. For a discussion of the former Pennsylvania long-arm statute as it applied to nonresident individuals, see Comment, The Pennsylvania Long-Arm: An Analytical Justification, 17 VILL. L. REv. 73 (1971). 5. E.g., Arrowsmith v. United Press International, 320 F.2d 219, 223 (2d Cir. 1963); Optico Corp. v. Standard Tool Co., 285 F. Supp. 46, 47 (E.D. Pa. 1968). cise of jurisdiction must not violate the nonresident's due process rights.6 Because the new statute defines the jurisdiction of Penn- sylvania courts as being coterminous with due process, the state has seemingly extended its powers to the permissible limit. However, it should be noted that the statute excludes from consideration for jurisdictional purposes any corporate activity in the area of real es- tate finance.7 This exclusion acts as a limitation upon the effective- ness of the statute. It reimposes upon Pennsylvania citizens the hardships of the former statute by creating a somewhat broad ex- ception to the state's jurisdictional powers not demanded by federal due process requirements. This Comment will first review the Supreme Court cases which have dealt with the issue of federal due process. Next, the original and amended versions of the former Pennsylvania long-arm statute will be considered together with decisions interpreting them. The relevant features of the new statute will then be presented. Fi- nally, the extended reach of the new statute will be examined in the context of the "single act" transactions which will now make a corporation amenable to suit in Pennsylvania. I. Tm LIBERALIZATION OF FEDERAL DUE PROCESS LIMITATIONS ON STATE COURT JURISDICTION OVER NONRESIDENTS Before a state can exercise in personam jurisdiction over a nonresident it is necessary that amenability to suit in that particular state does not violate the nonresident's due process rights as pre- scribed by the fourteenth amendment to the Constitution. If the forum state rendered judgment against a nonresident without the requisite personal jurisdiction, then this would amount to depriva- tion of personal property without due process of law.8 It is necessary that the nonresident have some "minimal contacts" or relation to the forum state before the requirements of due process are satisfied.9 The determination of the relationship needed to satisfy the federal due process requirements has generated much of the litigation concerning the limits of state court jurisdiction. In Pennoyer v. Neff' ° the Supreme Court formulated a rule of jurisdiction which was based upon the physical power of the forum state over the defendant.' It was held that the forum state could 6. Pulson v. American Rolling Mill, Co., 170 F.2d 193, 194 (1st Cir. 1948); Orange-Crush Grapico Bottling Co. v. Seven-Up Co., 128 F. Supp. 174, 175 (N.D. Ala. 1955). 7. PA. STAT. ANN. tit. 42, § 8309(c) (Supp. 1974-75). 8. See Currie, The Growth of the Long-Arm: Eight Years of Ex- tended Jurisdictionin Illinois, 1963 U. ILL. L. FORUM 533 (1963). 9. E.g., International Shoe Co. v. Washington, 326 U.S. 310, 319 (1945). 10. 95 U.S. 714 (1877). 11. See Ehrenzweig, The Transient Rule of Personal Jurisdiction: The Power Myth and Forum Conveniens, 65 YALE L.J. 289 (1956); Comment, Comments DICKINSON LAW REVIEW not obtain in personam jurisdiction over a nonresident unless he was personally served within the state or voluntarily appeared there to defend the suit.12 However, this jurisdictional rule of physical power over the defendant could not be applied to corporations because of their special status as legal fictions existing only in the state of their incorporation. The rule's shortcomings became a serious problem when national commerce increased and corporations expanded their operations beyond the state of their domi- cile.12 The courts responded to this need to make corporations amenable to state court jurisdiction, within the framework of Pennoyer, by developing the theories of "presence" and "implied consent. ' 14 A corporation, although not incorporated in the forum state, was deemed to have established the "presence" necessary for jurisdiction if it had conducted business there.' 5 Alternatively, the corporation was found to have impliedly consented to the jurisdiction of the forum state through the operation of business activities within the state. 16 These doctrines employed fictional concepts of corporate presence and consent so that the jurisdictional requirements of Pennoyer could be satisfied. The landmark case of International Shoe Co. v. Washington 7 rejected the implied consent and presence theories. The Court held that a Delaware corporation which had sent salesmen into Washing- ton was subject to the jurisdiction of that state in an action to re- cover unpaid contributions to the state unemployment compensa- tion fund. In what has become the fundamental inquiry of any court considering the issue, Chief Justice Stone outlined the relevant factors in determining whether a foreign corporation has a suf- Alabama's Nonresident-JurisdictionStatutes: The Reach of the Long- Arm, 24 ALA. L. REv. 777, 780-84 (1972). 12. Pennoyer v. Neff, 95 U.S. 714, 733 (1877). 13. See Comment, Developments in the Law-State Court Jurisdiction, 73 HAv. L. REV. 909, 919-23 (1960). 14. See Kurland, The Supreme Court, The Due Process Clause and the In Personam Jurisdiction of State Courts, 25 U. Cmi. L. REv. 569, 577-86 (1958). 15. In Philadelphia and Reading R.R. v. McKibbin, 243 U.S. 264 (1917) Mr. Justice Brandeis stated: A foreign corporation is amenable to process to enforce a personal liability, in the absence of consent, only if it is doing business within the State in such manner and to such extent as to warrant the inference that it is present there. Id. at 265. 16. E.g., St. Clair v. Cox, 106 U.S. 350 (1882). It developed that much litigation and judicial discussion were devoted to a determination of the corporate activities necessary to constitute "doing business." See Comment, Developments in the Law-State Court Jurisdiction, 73 HARv. L. REV. 909, 922 (1960). 17. 326 U.S. 310 (1945). ficient nexus with a state such that it is subject to its jurisdiction: [D] ue process requires only that in order to subject a defendant to a judgment in personam, if he be not present within the territory of the forum, he have certain minimum contacts with it such that the maintenance of the suit does not offend "traditional notions of fair play and sub- stantial justice."'I This "minimum contacts" test marked a considerable extension of state jurisdictional power because it eliminated the Pennoyer re- quirement of physical dominion over the defendant. It was no longer necessary to establish the "presence" of a corporation in the forum state. Instead, the activities of its agents there were relevant only to determine if the corporation had established the requisite minimum contacts with the forum state so that the exercise of jurisdiction was reasonable.

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