Tagged: Pennsylvania Law

Pennsylvania Supreme Court Protects Due Process Rights and Rejects “Jurisdiction by Consent”

On December 22, 2021, a unanimous Pennsylvania Supreme Court held in Robert Mallory v. Norfolk Southern Railway Company that a foreign corporation is not subject to personal jurisdiction in the Commonwealth of Pennsylvania solely because of its registration to do business there. The Mallory decision is an affirmation of the due process rights of non-Pennsylvania corporate defendants and significantly impacts who can permissibly be sued in the Commonwealth. Mallory, a resident of the Commonwealth of Virginia, filed suit in Pennsylvania seeking damages under the Federal Employers’ Liability Act against his former employer, Norfolk Southern, a Virginia corporation, for injuries allegedly sustained in the course of the plaintiff’s work in Virginia and Ohio. The sole basis for the exercise of personal jurisdiction was Norfolk Southern’s registration to do business in the Commonwealth of Pennsylvania. Pennsylvania’s business registration statute is unique in that the statute conditions registration upon a corporation’s “consent” to personal jurisdiction in Pennsylvania courts. Before Mallory, Pennsylvania state courts and many of Pennsylvania’s federal courts generally permitted the exercise of personal jurisdiction over foreign corporations based solely on their registering to do business in Pennsylvania. The appeal in Mallory required the Pennsylvania Supreme Court to consider whether Pennsylvania’s broad exercise of personal jurisdiction through its corporate registration statute comports with the demands of due...

Don’t Sleep on Service of Process: The Middle District of Pennsylvania Denies Motion to Remand Because Plaintiffs Could Not Justify Out-of-State Service via Certified Mail

A recent decision from the United States District Court for the Middle District of Pennsylvania emphasizes the importance of meticulous adherence to the rules governing service of process. In Fox v. Chipotle, the plaintiffs’ failure to properly serve an out-of-state corporation via certified mail – where the plaintiffs’ service of process did not utilize the restricted delivery option offered by the United States Postal Service – resulted in the denial of the plaintiffs’ motion to remand and the associated loss of any tactical advantage the plaintiffs may have believed to exist in litigating their class action in state court instead of federal court. The plaintiff filed a class action complaint against Chipotle in the Court of Common Pleas of Allegheny County of Pennsylvania asserting violations of the Pennsylvania Unfair Trade Practices and Consumer Protection Law, 73 Pa. Cons. Stat. § 201-1, based on claims that Chipotle was “shortchanging” customers who made cash payments. Chipotle is a Delaware corporation with a principal place of business in California, and the plaintiffs’ motion to remand focused on the sufficiency of the plaintiffs’ attempts to serve Chipotle as an out-of-state defendant via certified mail, pursuant to Pennsylvania Rule of Civil Procedure 403. In particular, the plaintiffs claimed to have served Chipotle by certified mail at its corporate headquarters in...

Pennsylvania Superior Court Upholds Pennsylvania Choice-of-Law Provision in Restrictive Covenant Dispute Involving California Employee

In Synthes USA Sales, LLC v. Peter Harrison and Globus Medical, Inc., No. 12 EDA 2013, the Superior Court of Pennsylvania applied a Pennsylvania choice-of-law provision in an employment agreement containing confidentiality and non-solicitation provisions in a dispute over an employee who worked in California. In Pennsylvania, so-called “restrictive covenants” and “non-competes” are enforceable if they are incident to an employment relationship, reasonably necessary to protect the employer’s legitimate interests, reasonably limited in duration and geographical scope, and supported by adequate consideration. California law, in contrast, is notoriously hostile to restrictive covenants, with a statute rendering most employment restrictive covenants unenforceable.

In Refusing to Review Order Requiring Disclosure of Identities of Anonymous Internet Commentators, Pennsylvania Court Finds No Protectable First Amendment Interest in Maintaining Anonymity When One Comments Under Name of Real Person

In Amerisource Bergen Corporation v. John Does 1 and 2, the Superior Court of Pennsylvania recently held that two individuals who posted false and non-satirical comments to an online article under the name of an executive mentioned in the article had no protectable interest in their identities sufficient to invoke the collateral order doctrine and permit appellate review of a trial court order granting pre-complaint discovery of their identities, thus allowing an executive and his company to pursue claims against the posters for their unlawful appropriation of the executive’s name.

Pennsylvania Superior Court Defines Standard for Determining Insurer’s Control of Litigation and Settlement When Seeking to Defend Insured Subject to a Reservation of Rights

The Pennsylvania Superior Court recently set forth a new standard for determining when an insured must seek the insurer’s consent to settle underlying third-party claims where the insurer had previously offered to defend the insured under a reservation of its right to decline coverage for any adverse judgment that might be entered against the insured later.

Communication Between Counsel and Client’s Independent Contractors May Be Privileged

The Eastern District of Pennsylvania recently found that communications generated and documents created by a party’s independent consultant may be entitled to attorney-client privilege protection. In In re Flonase Antitrust Litigation, direct and indirect purchasers of Flonase launched a class action against GlaxoSmithKline PLC (“GSK”) for allegedly delaying market entry of generic Flonase into the market. A dispute arose between GSK and direct purchasers as to whether the attorney-client privilege protects communications between GSK and its independent contractor, Swiftwater, which is a pharmaceutical consulting company. In this case, Swiftwater assisted GSK’s Flonase brand team in three areas: legal and regulatory, business development, and standard business practices. In the legal arena, Swiftwater assisted in the evaluation of legal and regulatory matters, such as evaluating GSK’s patent and intellectual property rights and FDA application to market over-the-counter Flonase.

Pennsylvania Supreme Court Concludes That Dissenting Shareholders’ Post-Merger Recourse Is Limited to Judicial Appraisal

As discussed in a previous post, the Third Circuit’s August 2012 ruling in Mitchell Partners, L.P. v. Irex Corp. predicted that the Pennsylvania Supreme Court would “permit a post-merger suit for damages based on the majority shareholders’ breach of their fiduciary duties.” As a result, the Third Circuit concluded that Pennsylvania’s appraisal statute did not preclude dissenting minority shareholders who are “squeezed out” in a merger from seeking remedies beyond the appraisal remedies provided in the statute. However, on certification, the Pennsylvania Supreme Court concluded that minority shareholders who oppose a merger have no recourse — in the absence of fraud or fundamental unfairness — other than to seek judicial appraisal of the value of their post-merger shares.

Claims Handling Manuals Discoverable in Bad Faith Insurance Actions

In Platt v. Fireman’s Fund Insurance Company, the Eastern District of Pennsylvania held that an insurer sued for insurance coverage benefits and for bad faith under Pennsylvania law was required to produce any material which pertains to instructions and procedures given to the adjuster for adjusting the plaintiff’s claims.

Pennsylvania Appellate Court Finds No Bad Faith When Insurer Demands Examination Under Oath of Insured’s Indicted Principal

On cross appeals from a $1.4 million judgment, the Superior Court of Pennsylvania, in Portside Investors, L.P. v. Northern Ins. Co. of N.Y., affirmed judgment in favor of an insured for breach of a property insurance policy, but also affirmed judgment in favor of the insurer on the insured’s statutory claim for bad faith under 42 Pa.C.S.A. § 8371.

Third Circuit: In Pennsylvania, Creditors’ Deepening Insolvency Claims Still Fair Game

In September of this year, the Third Circuit reaffirmed that creditor claims against corporate directors and officers for fiduciary duty and related breaches under the “deepening insolvency” theory are alive and well, at least under Pennsylvania law. In Official Committee of Unsecured Creditors, on Behalf of the Estate of Lemington Home for the Aged v. Baldwin, the court considered an appeal from the District Court’s grant of summary judgment in favor of the D&O defendants, predicated upon that court’s finding that (i) the business judgment rule and the in pari delicto defense barred recovery on fiduciary duty claims and (ii) the Committee failed to establish a material issue of fact as to whether the defendants committed the fraud necessary to sustain a deepening insolvency claim.