March 26, 2026|Franchise Frontlines
March 26, 2026 | U.S. District Court for the Eastern District of Pennsylvania | Memorandum
Executive Summary
In a memorandum opinion, Judge Gerald J. Pappert of the U.S. District Court for the Eastern District of Pennsylvania granted a motion to dismiss for lack of personal jurisdiction filed by a delivery services company in a Fair Labor Standards Act (“FLSA”) misclassification case, but transferred the action rather than dismissing it outright. Plaintiffs, delivery drivers based in Tennessee, alleged that a pharmaceutical distributor and its logistics contractor jointly employed them and misclassified them as independent contractors. The court held that plaintiffs could not establish personal jurisdiction over the out-of-state contractor in Pennsylvania, rejecting the argument that a joint employer relationship or contractual ties to a Pennsylvania company were sufficient to create jurisdiction. The court further held that transfer to the Eastern District of Tennessee was appropriate in the interest of justice.
Relevant Background
The plaintiffs were Tennessee-based delivery drivers who transported pharmaceutical products pursuant to arrangements involving a national distributor and a third-party delivery company. The distributor, headquartered in Pennsylvania, supplied products and assigned delivery routes, while the delivery company, headquartered in Alabama, assigned those routes to drivers and handled compensation.
The plaintiffs performed all delivery work in Tennessee. They signed their agreements in Tennessee, operated out of a Tennessee warehouse, and completed deliveries exclusively within that state. They alleged that both entities jointly employed them and misclassified them as independent contractors, requiring them to bear various operational expenses without reimbursement.
The plaintiffs filed suit in Pennsylvania, asserting that jurisdiction was proper based on the distributor’s presence in the forum and the alleged joint employment relationship between the defendants. The delivery company moved to dismiss for lack of personal jurisdiction, and the court permitted jurisdictional discovery before resolving the motion.
Decision
The court granted the motion, concluding that it lacked personal jurisdiction over the delivery company.
Applying the traditional minimum contacts framework, the court found no evidence that the delivery company purposefully availed itself of conducting activities in Pennsylvania. The company had no offices, employees, facilities, bank accounts, or delivery routes in the state, and none of the plaintiffs’ work occurred there. All relevant conduct—execution of agreements, performance of deliveries, and compensation—took place outside Pennsylvania.
The plaintiffs’ primary argument was that jurisdiction could be established through the alleged joint employer relationship with the Pennsylvania-based distributor. The court rejected that theory, drawing a clear distinction between liability and jurisdiction. It explained that a joint employer theory may be relevant to whether a defendant can be held liable, but it does not establish the forum contacts necessary for a court to exercise personal jurisdiction. The court emphasized that jurisdiction must be based on the defendant’s own contacts with the forum, not the unilateral activity of another entity or the existence of a contractual relationship.
The court similarly rejected reliance on the contractual relationship between the defendants. It noted that merely entering into a contract with a forum resident, without evidence that the contract was negotiated, executed, or performed in the forum, is insufficient to establish jurisdiction. Here, there was no evidence that the delivery company engaged in any relevant conduct in Pennsylvania connected to the plaintiffs’ claims.
Because the plaintiffs failed to establish minimum contacts or a sufficient nexus between the forum and the underlying claims, the court held that exercising jurisdiction would not comport with due process.
Rather than dismissing the claims against the delivery company, however, the court transferred the case to the Eastern District of Tennessee. The court found that transfer would promote judicial efficiency and avoid duplicative litigation, particularly given that the plaintiffs’ work, the relevant witnesses, and the underlying conduct were all centered in Tennessee. The court also transferred the claims against the distributor to ensure that the entire dispute could proceed in a single forum.
Looking Forward
This decision offers a useful reminder that courts continue to draw a firm line between theories of liability and the constitutional requirements for personal jurisdiction. For franchisors and other multi-entity systems operating across state lines, that distinction carries practical significance.
The court’s analysis reinforces that a plaintiff cannot create jurisdiction simply by alleging a joint employer relationship or by pointing to a contractual relationship with an in-state entity. Instead, jurisdiction must be grounded in the defendant’s own forum-specific conduct. For franchisors, this principle may provide an important layer of protection against being haled into distant forums based solely on system relationships or allegations of shared control.
At the same time, the decision highlights the importance of carefully structuring operational relationships to maintain clear geographic and functional boundaries. Where a franchisor or affiliated entity avoids direct involvement in in-state activities giving rise to a claim, it may be better positioned to challenge personal jurisdiction even if broader system relationships exist.
The court’s decision to transfer rather than dismiss also underscores a practical reality of modern litigation. Even where jurisdiction is lacking, courts may favor transfer to a proper forum to promote efficiency and avoid piecemeal litigation. For multi-state systems, this means that jurisdictional defenses may shape where a case is litigated, even if they do not ultimately eliminate exposure.
In the franchise context, this case illustrates how courts may treat system-wide relationships as insufficient, standing alone, to establish jurisdiction, while still ensuring that disputes proceed in a forum connected to the underlying conduct. Maintaining that separation between system structure and forum-specific activity remains an important consideration in managing litigation risk.
This article is based solely on the opinion of the Court in this matter. The author has not conducted any independent investigation into the facts. For the avoidance of doubt, each statement related to the law and facts in this article is drawn from the Court’s opinion in this case.
Thomas O’Connell is a Partner at Buchalter LLP and Chair of the firm’s Franchise Practice Group. For questions about this article or media inquiries, you can contact Tom at toconnell@buchalter.com.
This communication is not intended to create, and does not create, an attorney-client relationship or any other legal relationship. No statement herein constitutes legal advice, nor should it be relied upon or interpreted as such. This communication is for general informational purposes only and is not a substitute for legal counsel. Readers should not act or refrain from acting based on any information provided without seeking appropriate legal advice specific to their situation. For more information, visit www.buchalter.com.
