District Court's Personal Jurisdiction Opinion Demonstrates the Confusion That Remains Post-Nicastro
I previously have carped about the Supreme Court's continued inability to get it together enough to give courts and litigants a clear rule to apply on a pretty basic legal issue: the constitutional limits of personal jurisdiction. Come on, folks, it ain't rocket science. For years we lived with the fractured opinion in Asahi Metal Industry Co. v. Superior Ct., 480 U.S. 102 (1987). And now we're stuck with pretty much the same split of opinions in J. McIntyre Machinery, Ltd. v. Nicastro, 131 S. Ct. 2780 (2011), which -- like Asahi -- could not garner a majority.
Yesterday, while flying to St. Louis -- GO CARDINALS! -- I read a thoughtful opinion by Judge James K. Bredar of the District of Maryland that confronted a personal jurisdiction challenge and seemed to summarize the legal landscape just right. See Windsor v. Spinner Industry Co., Ltd., 2011 WL 5005199 (D. Md. Oct. 20, 2011).
In Windsor, a boy had been injured when the wheel came off of his bicycle while he was riding it. He sued a number of companies, including the bike manufacturer and the manufacturer of the component that allegedly malfunctioned. That component, the "quick release skewer," is designed to allow the cyclist to remove the wheel from the frame easily; but it's also supposed to keep the wheel on the bike when he's riding it.
The component supplier was a Taiwanese corporation. It had no direct contacts with Maryland. It made its components abroad, and then sold them to bicycle manufacturers in the United States. Those manufacturers, who incorporated the component into their products, sold their products throughout the U.S., including in Maryland, using websites and distributors.
Remember that Justice Kennedy, writing for the four Justices in Nicastro who flatly rejected any stream of commerce theory, warned that under their purposeful availment approach, it was entirely possible that a company that targeted the U.S. market in the aggregate might not be subject to jurisdiction in any state if it had not taken any action to avail itself of the law of that state.
Judge Bredar began his analysis by recounting the current state of the law. He noted that for a court to exercise personal jurisdiction over a party, the party must have "certain minimum contacts with [the State] such that the maintenance of the suit does not offend 'traditional notions of fair play and substantial justice.'" 2011 WL 5005199 (quoting International Shoe). That means that specific jurisdiction may lie "where a non-resident lacks continuous and systematic contacts with the forum, but has nonetheless 'purposefully availed itself of the privilege of conducting activities within the forum State' and thereby 'invoke[d] the benefits and protections of its laws.'" Id. (citing Hanson v. Denkla).
The court framed the issue before it as "the extent to which a state may exercise specific jurisdiction over a non-resident manufacturer whose only connection to the forum is that its products are sold there by third-party distributors." Id. at *2. It cited World Wide Volkswagen in noting that the Supreme Court has sometimes relied on some form of stream-of-commerce theory in personal jurisdiction analysis. But, it noted, "Divining the precise contours of the doctrine has confounded and divided state and federal courts, including the Supreme Court itself, for many years." Id. (citing Asahi).
The court explained that ordinarily it would look to what the Fourth Circuit had held in interpreting Asahi, but because the Supreme Court recently had issued Nicastro and the Fourth Circuit had not yet interpreted it, the court was required to interpret Nicastro itself. In interpreting the plurality opinion, the court said it was required to "construe the holding as 'that position taken by those Members who concurred in the judgment on the narrowest grounds.'" Id. at *4.
Applying this standard, the court concluded:
First, McIntyre clearly rejects foreseeability as the standard for personal jurisdiction. Although the concurrence and the plurality differ as to what might constitute 'purposeful availment' in the context of national or global marketing, they both firmly embrace the continuing signficance of individual state sovereignty and, on that basis, hold that specific jurisdiction must arise from a defendant's deliberate connection with the forum state. That holding now commands the assent of six Justices of the Supreme Court, all on substantially the same grounds, and is therefore binding precedent.
Beyond this, however, McIntyre merely affirms the status quo. Justice Breyer states that his opinion is based solely on the Court's precedents and that he does not announce any new rule. . . .
This Court therefore construes McIntyre as rejecting the foreseeability standard of personal jurisdiction, but otherwise leaving the legal landscape untouched. The Court will therefore return to this circuit's post-Asahi precedents to resolve this case.
Id. at *4-*5.
As Judge Bredar described it, the Fourth Circuit precedents require "action purposefully directed toward the forum state or otherwise invoking the benefits and protections of the laws of the state," and specifically reject jurisdiction based merely on the expectation that the product ultimately would be sold in the state. Id. at *5. They also implicitly adopt Justice O'Connor's Asahi list of "additional conduct" that might serve as evidence of personal availment.
Applying these standards to the facts before him, Judge Bredar concluded that there were insufficient facts before him to support the exercise of personal jurisdiction. All of the arguments about web presence and internet marketing were irrelevant to specific jurisdiction because the plaintiff did not actually buy his bike off of the Internet. And there were simply no details about the chain of distribution that brought plaintiff's bike to Maryland. Moreover, plaintiff had offered no evidence of the defendant's "additional conduct" that might show purposeful availment. Rather, he had offered details about the general conduct of bike manufacturers and distributors. That wasn't enough:
These arguments entirely miss the substance of the jurisdictional inquiry, which is 'whether, focusing upon the relationship between "the defendant, the forum, and the litigation," it is fair, in light of the defendant's contacts with that forum, to subject the defendant to suit there.' At best, Plaintiff's theory of jurisdiction, as presented thus far, amounts to no more than the 'knew or should have known' standard that the Supreme Court explicitly rejected in McIntyre.
Id. at *5 (quoting Nicastro, emphasis in Judge Bredar's original).
Judge Bredar considered the opinion of another judge in his district, which would allow jurisdiction where a foreign manufacturer sells its product to a large retail chain that has an established presence in every U.S. state, reasoning that the foreign defendant clearly must have intended to serve the forum market. Judge Bredar rejected this rule, finding it indistinguishable from World-Wide Volkswagen's "stream-of-commerce plus expectation" standard:
The Fourth Circuit has unambiguously held that some forum-specific conduct in addition to this expectation is required to create minimum contacts. Although the Court believes that the [other district judge's] line of reasoning, and indeed the reasoning of the dissenters in McIntyre, represents the most sensible approach to personal jurisdiction in the context of global commerce, it nevertheless finds that that approach is clearly foreclosed by the precedents of the Supreme Court and of this Circuit.
Id. at *6 (citation omitted).
Having laid out the applicable legal standards, Judge Bredar postponed ruling on the motion, instead setting a hearing at which the plaintiff would be allowed to introduce evidence of the defendant's "additional conduct" directed at the forum that might support jurisdiction.
Personal jurisdiction analysis just shouldn't be this difficult.
