Harrisburg, PA and Pittsburgh, PA
Law360
(by Stefanie Pitcavage Mekilo and Joseph Schaeffer)
On Nov. 22, the Pennsylvania Supreme Court issued its much-anticipated decision in Hangey v. Husqvarna Professional Products Inc. The majority opinion in Hangey claims to be a narrow one, providing clarification only regarding the standard for evaluating whether venue in any given Pennsylvania county is proper.[1]
That characterization is accurate so far as the legal principle goes: The court held as a matter of law that the percentage of a corporate defendant’s national revenue derived from a forum county alone is not sufficient to support a finding that the defendant does not “regularly conduct business” there for purposes of Pennsylvania’s venue rules.
But the court’s application of that principle to the facts before it — and its holding that the defendant’s de minimis sales in Philadelphia County were sufficient to establish proper venue there — has potential far-reaching consequences for corporate defendants sued in the commonwealth. Indeed, the plaintiffs’ lawyers in Hangey are already cheering the ruling as “one of if not the most impactful venue decisions in the last 20 years.”[2]
The facts of Hangey are uncomplicated. Ronald and Rosemary Hangey, residents of Wayne County, bought a Husqvarna-brand lawnmower from Trumbauer’s Lawn and Recreation Inc., in Bucks County.
Ronald Hangey suffered severe injuries when he was thrown off the lawnmower while operating it on his property in Wayne County. The Hangeys then sued Trumbauer’s, Husqvarna Professional Products Inc. and a handful of Husqvarna affiliates on various tort claims.
But rather than sue in Bucks County or Wayne County, the Hangeys sued in Philadelphia County — a venue with no connection to the underlying incident. Discovery in fact revealed that Husqvarna sold products through just two authorized dealers in Philadelphia County and derived only 0.005% of its national revenue from those business activities.
Husqvarna challenged the venue as improper under Pennsylvania Rule of Civil Procedure 2179(a), which provides that a suit against a corporation may be brought in, among other places, “a county where … the corporation or similar entity regularly conducts business.”[3]
The trial court applied Pennsylvania’s two-pronged “quality-quantity” test for evaluating whether a defendant was regularly conducting business in a county as required by Rule 2179(a). Under this test, the quality prong is met when a defendant’s activities in the forum directly further or are essential to the defendant’s business objectives, while the quantity prong is satisfied by activities that are “so continuous and sufficient to be general or habitual.”[4]
The trial court held that the quality prong was satisfied because Husqvarna’s placement of its products on the shelves of two authorized dealers in Philadelphia County furthered its business objectives.
On the quantity prong, however, the court held that the 0.005% of national revenue Husqvarna derived from Philadelphia County was de minimis, and not indicative of general and habitual contact, and so it transferred the case to Bucks County.
The Hangeys appealed, and the Pennsylvania Superior Court, sitting en banc, reversed. The Superior Court sided with the Hangeys and held that the trial court had abused its discretion in relying almost exclusively on the percentage of revenue in its analysis of the quantity prong.[5] The court further concluded that the record before the trial court established that venue was proper in Philadelphia County.
Husqvarna petitioned the Pennsylvania Supreme Court for review, and the Supreme Court granted the petition. The parties’ briefs and arguments before the Supreme Court centered solely on the trial court’s quantity analysis; no party disputed the quality analysis.
The Supreme Court held that the trial court abused its discretion in focusing its quantity analysis exclusively on the percentage of national revenue Husqvarna derived from the Hangeys’ chosen venue. According to the court, the percentage of revenue alone does not control the quantity inquiry. Rather, it is but one of the data points the court may consider — if it deems the percentage relevant on the facts before it — in its broader assessment of how regular a defendant’s business activities are in the forum.[6]
The court identified potential nonrevenue data points, including the number of “days out of the year a business is open to the public, … units of product sold, [and] … hours billed by employees.”[7]
Importantly, however, the Supreme Court did not remand the case to the trial court for further review in light of its clarification of the law. Instead, the court evaluated the record evidence de novo, and determined Husqvarna’s contacts with Philadelphia County were sufficient to establish proper venue as a matter of law.
The court’s analysis makes no mention of the percentage of revenue, nor any of the other quantitative metrics it identified as potential data points. In holding venue was proper, the court noted only that Husqvarna’s marginal sales to its two authorized dealers in Philadelphia County had been consistent and without interruption during the relevant two-year period, and that, even if Husqvarna was not succeeding, it was “at least trying to make sales in Philadelphia, regularly and continuously.”[8]
The court concluded that so long as “a company maintains a constant physical presence in the forum county” to perform acts in furtherance of its business objectives — even if only through an authorized dealer and even if without much success — venue will be appropriate in that county as a matter of law.[9]
The Hangey decision significantly dilutes the quantity prong of Pennsylvania’s quality-quantity test and seems to write typical quantitative metrics out of the venue analysis entirely. Indeed, under the majority’s reasoning, it is hard to imagine a scenario in which quantity will not follow quality in lockstep.
Pennsylvania Supreme Court Justice Kevin Brobson suggested as much in his dissenting opinion: He agreed with the majority that percentage of revenue alone should not control the outcome in any case, but expressed concern that the majority opinion “could be construed as holding that, as a matter of law, a corporation’s mere presence in a county is sufficient to establish that venue is proper in that county.”[10]
The majority’s response to Justice Brobson — that its holding is limited to only those cases in which a defendant’s physical presence is constant — is unsatisfying given how minimal Husqvarna’s activities in Philadelphia County otherwise were.
The Supreme Court notably also gave no consideration to the consequences of its decision for Husqvarna’s codefendants. There was no evidence that Trumbauer’s, which sold the Hangeys the allegedly defective lawnmower, transacted any business in Philadelphia County. But because Pennsylvania law requires plaintiffs to satisfy venue only for a single defendant, Trumbauer’s must now defend itself in a forum with which it has no connection.
The decision is all the more concerning when considered alongside litigation patterns in the commonwealth — namely, the plaintiffs’ strategic channeling of lawsuits to notoriously plaintiff-friendly venues like Philadelphia and Allegheny County, and their success in achieving, and seeing appellate courts affirm, nuclear and thermonuclear verdicts returned in those venues.[11]
Also concerning are judicial trends winnowing available off ramps for corporate defendants hauled into Pennsylvania courts with little connection to the parties or the claims.
In its recent decision in Mallory v. Norfolk Southern Railway Co., the U.S. Supreme Court rejected a due-process challenge to Pennsylvania’s consent-by-registration statute, which requires out-of-state corporations to consent to general jurisdiction in the commonwealth as a condition of doing business. The court held that the statute broadly gives Pennsylvania personal jurisdiction over out-of-state corporations in suits brought by plaintiffs with no ties to Pennsylvania, for conduct occurring beyond the commonwealth’s borders.[12]
And while the doctrine of forum non conveniens once provided a reliable safety valve for defendants sued in forum-shopped venues, recent decisions from the Pennsylvania Superior Court have sown uncertainty into the once-settled doctrine, with some decisions appearing to increase the burden on defendants seeking transfer out of what they may consider oppressive and vexatious forums.[13]
Nonetheless, the final word has not yet been said on many of these jurisprudential shifts. Other potential challenges to the consent-by-jurisdiction statute, for example, remain pending: Litigants recently filed petitions for permission to appeal in the Pennsylvania Superior Court, raising a dormant commerce clause challenge to the consent-by-jurisdiction statute.
Appeals seeking clarity — and reaffirmance of the long-settled status quo — regarding forum non conveniens are making their way to Pennsylvania appellate courts. And it is too early to predict how Pennsylvania’s trial and intermediate appellate courts will read and apply Hangey. Although the majority did not factor the percentage of revenue into its own analysis, it authorized other courts to do so in appropriate cases, and it remains to be seen what lower courts will do, if anything, with that invitation.
In the immediate future, however, the Hangey decision will likely only exacerbate the forum-shopping problem already plaguing corporate defendants sued in Pennsylvania and overburdening Pennsylvania’s busiest trial courts. As a result, all businesses — and small businesses in particular — should proceed with caution in considering whether the potential revenue stream to be derived from placing products in Pennsylvania’s most plaintiff-friendly counties is worth the attendant litigation risk.
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[1] Hangey v. Husqvarna Prof’l Prods. Inc. , No. 14 EAP 2022, slip op. at 44 n.23 (Pa. 2023).
[2] Aleeza Furman, Pa. High Court Rejects ‘Percentage of Revenue’ Venue Defense, The Legal Intelligencer (Nov. 22, 2023), https://www.law.com/thelegalintelligencer/2023/11/22/pa-high-court-rejects-percentage-of-revenue-venue-defense/.
[3] Pa. R. Civ. P. 2179(a)(2).
[4] Purcell v. Bryn Mawr Hosp. , 579 A.2d 1282, 1285 (Pa. 1990) (quoting Shambe v. Del. & Hudson R.R. CO. , 135 A. 755, 757 (Pa. 1927)).
[5] Hangey v. Husqvarna Prof’l Prods. Inc. , 247 A.3d 1136, 1143 (Pa. Super. Ct. 2021) (en banc).
[6] Hangey, slip op. at 39.
[7] Id.
[8] Id. at 45.
[9] Id. at 44.
[10] Hangey, slip op. at 4 & n.2 (Brobson, J., dissenting).
[11] See, e.g., Amagasu v. Mitsubishi Motors N. Am., No. 181102406 (Phila. Cnty. Ct. Com. Pl.) ($908 million Philadelphia jury verdict); Caranci v. Monsanto, No. 210602213 (Phila. Cnty. Ct. Com. Pl.) ($175 million Philadelphia verdict); see also Nuclear Verdicts Trends, Causes, and Solutions, U.S. Chamber of Com. Inst. for Legal Reform (Sept. 2022) (noting “[m]ore than half” of commonwealth’s nuclear verdicts are returned in Philadelphia County).
[12] For a more comprehensive discussion of Mallory and its potential implications, see Christina Manfredi McKinley & Joseph Schaeffer, Where Can a Corporation Be Sued for, Well, Anything? (An Evolving Test), Babst Calland Litigation Alert (July 18, 2023), https://www.babstcalland.com/news-article/where-can-a-corporation-be-sued-for-well-anything-an-evolving-test/.
[13] See, e.g., Ehmer v. Maxin Crane Works, L.P., 296 A.3d 1202 (Pa. Super. Ct. 2023); Tranter v. Z&D Tour Inc., ___ A.3d ___, 2023 WL 6613731 (Pa. Super. Ct. 2023).
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Reproduced with permission. The article was first published on Law360, December 4, 2023.
