Despite Nicastro, Some Courts Still Fish for Jurisdiction in the Stream of Commerce
I said it this summer and I'll say it again: The Supreme Court has done a particularly crummy job of setting clear standards for evaluating personal jurisdiction. A good example of that is the recent opinion in Irvin v. Southern Snow Manufacturing, Inc., 2011 WL 4833047 (S.D. Miss. Oct. 12, 2011), which failed to even cite the Supreme Court's two most recent personal jurisdiction decisions, J. McIntyre Machinery, Ltd. v. Nicastro, 131 S. Ct. 2780 (2011) and Goodyear Dunlop Tires Operations, S.A. v. Brown, 131 S. Ct. 2846 (2011). Presumably, the analysis in those cases just wasn't that helpful.
In Southern Snow, a Mississippi resident's right hand and fingers were severely injured in Mississippi while she was cleaning her shaved ice machine. The machine had been manufactured by a Louisiana company -- Southern Snow -- in Louisiana. It had been sold in Louisiana to a third party, Misty Trant. Trant subsequently sold the machine to the plaintiff, who had traveled to Louisiana to pick it up and take it home to Mississippi. After her injury, plaintiff sued in Mississippi, and Southern Snow moved to dismiss for lack of personal jurisdiction. The district court granted the motion. The interesting thing is how the court reached its conclusion.
First, the court looked at Mississippi's long-arm jurisdiction statute, concluding that it was drafted to extend as far as due process would allow. Then, it considered whether Mississippi could constitutionally exercise jurisdiction over Southern Snow, a Louisiana resident. First, it noted that the issue was one of specific jurisdiction, rather than general jurisdiction. Southern Snow did not market its products in Mississippi or even ship them there. Rather, it sold its shaved ice machines on its premises in Louisiana or by the phone. For phone orders, Southern Snow required customers either to come to the store to pick the machine up, or to arrange for a shipper to come and pick it up. Southern Snow did not ship into Mississippi itself. Thus, Mississippi could not have general jurisdiction over Southern Snow.
So did it have specific jurisdiction over Southern Snow? The seemingly obvious answer is "no." The only contact that Southern Snow had with Mississippi was that it was its shaved ice machine that injured the plaintiff there. It did not sell the machine to plaintiff, and did not sell, distribute or ship the machine into Mississippi.
The plaintiff relied on a stream of commerce theory -- which a plurality of four Justices had rejected this summer in Nicastro. The district court did not even mention the debate in Nicastro, instead looking to Fifth Circuit precedent (relying on Asahi Metal Indus. Co. v. Superior Ct., 480 U.S. 102, 112 (1987)) holding that stream-of-commerce theory alone can provide a sufficient basis for personal jurisdiction if the product made its way into the forum while still in the stream of commerce. 2011 WL 4833047 at *4 (citation omitted). The point here, the district court noted, was that the shaved ice machine already had left the stream of commerce when it made its way into Mississippi. It was not "distributed" there; rather, plaintiff bought a used product and went to a neighboring state to fetch it into the forum. That is not the stream of commerce. And thus it doesn't matter whether stream-of-commerce theory really applies at all:
Since specific jurisdiction is proper only when the proven contacts derive from the defendant's purposeful conduct and not the unilateral activity of the plaintiff, the acts of Southern Snow cannot be said to be purposefully directed toward the forum State. Southern Snow's product made its way into the State of Mississippi only through the unilateral action of the plaintiff. Nor can it be said that [plaintiff's] cause of action arose from or is related to any contacts the defendant may have had with the State of Mississippi. The plaintiff has therefore failed to establish that specific jurisdiction applies to this case.
2011 WL 4833047 at *4 (citation omitted).
Interestingly, at the end of its opinion, the district court included a discussion of why there could be no general jurisdiction. In light of Southern Snow's policy of tendering the machines to buyers at its Louisiana plant, or letting them arrange for their own shipping from that location, the court rejected the idea that Southern Snow had sales in Mississippi:
. . . Southern Snow reported 8% of its gross sales derived from Mississippi residents. However, while Southern Snow may be doing business with Mississippi, it is not doing business in Mississippi. These sales all derive from the manufacturing facility in Belle Chasse, Louisiana, not from within the State of Mississippi.
Id. at *5 (citation omitted).
Further, apropos of Justice Breyer's statement in his Nicastro concurrence that he would prefer to know more about modern marketing technologies before ruling on "stream-of-commerce" theory, the district court in Southern Snow considered how the defendant marketed its products. Basically, Southern Snow maintained a passive website that advertised its products, but did not allow a browser to place an order. The only way to order a shaved ice machine was to call, fax, mail, or e-mail the company in Louisiana. The district court thus held that the website was not "purposeful availment" of the benefits of the Mississippi forum that would support the exercise of general jurisdiction. 2011 WL 4833047 at *5-*6 (relying on Mink v. AAAA Development, Inc., 190 F.3d 333, 336 (5th Cir. 1999)).
The district court's decision in Southern Snow was made much easier by the facts regarding the product seller. But the analysis that it took to get there -- including the application of "stream-of-commerce" theory -- demonstrates that we still need clear guidance and a workable standard from the U.S. Supreme Court.
In your article "The Courts Still Fish for Jurisdiction in the Stream of Commerce", I am Ms. Irvin. I very much agree with the crummy part. I am permanently injured. This is not a frivolous Lawsuit. The machines are dangerous. You can not tell that the machine is on just by looking at it. There are ways to prevent this from happening to someone else. My worry is that a teenager will be hurt next if not already.