Pennsylvania Supreme Court Loosens Venue Rules Further
On November 22, 2023, the Pennsylvania Supreme Court issued its much-anticipated opinion in Hangey v. Husqvarna Professional Products, Inc., affirming the Superior Court’s polarizing decision. Hangey makes it easier for plaintiffs to bring suit in their preferred venues by diluting the common defense argument that a corporate defendant does only a de minimis amount of business in a plaintiff’s chosen forum.
At issue in Hangey was the standard for venue over business entities under Pennsylvania Rule of Civil Procedure 2179(a)(2), which vests venue wherever an entity “regularly conducts business.” Prior decisional law explained that this standard required the business activities of a corporate defendant to be evaluated for both their quality and their quantity. Focusing on the “quantity” prong of the analysis, defendants have argued for years that venue is improper in counties where they conduct only a tiny proportion of their business. Results varied from case to case, but a general rule of thumb was that business activity below 1%—the proverbial “drop in the bucket”—was not enough to justify venue in a particular forum.
The Hangey case is noteworthy because venue hinged on one of several defendants selling $75,000 worth of goods to Philadelphia customers, or just 0.005% of its total sales for that year. However, because the defendant had an authorized dealer in Philadelphia through which many of its sales were made, the Superior Court found that those contacts were sufficiently continuous so as to satisfy the quantity prong of the venue test.
On appeal, the Supreme Court affirmed the Superior Court’s decision, emphasizing that, for purposes of the venue standard, “it is the word ‘regularly’ which we are construing and not ‘principally.’” A company could, therefore, perform acts “regularly” “even though these acts make up a small part of its total activities.” It was thus an abuse of the trial court’s discretion to find venue improper based solely on the 0.005% statistic.
Instead, percentage of revenue is simply one data point to be considered in determining “regularity.” Also to be considered is consistency of business and a physical presence in the county. Because the defendant in Hangey had ongoing contractual relationships with two authorized dealers in Philadelphia, because its products were on display in Philadelphia stores day after day, and because its sales were generally consistent from year to year, the defendant’s business in Philadelphia was therefore “regular,” even if that business was a tiny fraction of the defendant’s overall sales. The Supreme Court noted, too, that “business” may be quantified in metrics other than units sold, such as hours billed by employees or days open to the public. The court gave the example of a company with a brick-and-mortar building in the forum county that opens its doors to prospective customers day after day; that company may be said to be regularly conducting business, even if it fails to make a sale or otherwise generate income.
Even before the Hangey decision, Pennsylvania’s venue rules were fairly lax. Venue only needs to be proper as to one defendant for it to be proper for the entire case. Thus, an array of far-flung defendants may be subject to venue in Philadelphia because of the connections of just one defendant. The Supreme Court’s decision in Hangey loosens those venue rules further by lowering the bar for what constitutes “regular business”: a mere handful of sales from year to year may be sufficient to justify venue and anchor a case for all parties in a forum where the accident did not occur, and where no defendant is located.
Hangey has raised the hurdle for defendants seeking to object to a plaintiff’s chosen venue. While statistics of the proportion of sales made in the forum county should still be considered, courts will demand that venue objections go further to present evidence of a lack of “regularity”: perhaps sales to the forum county have been sporadic, or their dealers or distributors are located elsewhere, or the defendant otherwise lacks a physical presence in the county.
Please contact me with any questions about this important venue decision from the Pennsylvania Supreme Court.
Legal Update for Pennsylvania Civil Litigation Defense, November 28, 2023, has been prepared for our readers by Marshall Dennehey. It is solely intended to provide information on recent legal developments and is not intended to provide legal advice for a specific situation or to create an attorney-client relationship. We welcome the opportunity to provide such legal assistance as you require on this and other subjects. If you receive the alerts in error, please send a note to tamontemuro@mdwcg.com. ATTORNEY ADVERTISING pursuant to New York RPC 7.1. © 2023 Marshall Dennehey. All Rights Reserved.