Stream of Commerce Arguments Drown in the Wake of Nicastro
Regular readers of this blog will recall that in late October, I wrote about an opinion by U.S. District Court Judge James K. Bredar, in which he concluded after analyzing the Supreme Court's fractured opinions in J. McIntyre Machinery Ltd. v. Nicastro, 131 S. Ct. 2780 (2011), that a majority of the Justices have rejected the "foreseeability" theory of personal jurisdiction in which jurisdiction may be premised solely upon the manufacturer's knowledge or expectation that its product may ultimately end up in a particular state after it is placed in the so-called stream of commerce. Personal jurisdiction requires something extra: stream of commerce "plus." The Supremes just can't agree on how to characterize the "plus" element that gets to the notion of purposeful availment of the forum state's laws.
Judge Bredar had been loathe to dismiss the claim against the foreign defendant without giving the plaintiff a post-Nicastro shot at proving there was a "plus" there in his case. Well, they have had the hearing, and now it's official: the Taiwanese supplier of the bicycle's "quick release skewer" is out of the case. As you may recall, there had been evidence that the supplier of the allegedly defective component had sold its components to bike manufacturers in the U.S., but there was no evidence that it had targeted Maryland in any way. And now, after the hearing, there still is none.
In Windsor v. Spinner Industry Co., Ltd., 2011 WL 5985804 (D. Md. Nov. 30, 2011), Judge Bredar explained that the only new evidence offered was testimony from the president of a Maryland company that buys and sells bicycle parts. Although he had bought a number of bicycle hubs made by the Taiwanese defendant, he bought them through a trading company in Taiwan and had never bought directly from the defendant. (Moreover, there apparently still was nothing to connect any so-called "purposeful availment" of the forum's laws to the particular component that failed in the plaintiff's bicycle. Thus, there was not even enough evidence to support specific jurisdiction, let alone general jurisdiction over the defendant.)
The court held that plaintiffs had "failed to carry their burden of demonstrating that [the Taiwanese defendant] is subject to personal jurisdiction in this forum." Thus, it dismissed the claims against that defendant without prejudice.
On the same day, a court on the opposite coast reached a similar conclusion. In Dow Chemical Canada ULC v. Superior Court, 2011 WL 6004358 (Cal. App. -- 2d Dist. Nov. 30, 2011), the plaintiffs had been injured when their 3-person personal watercraft -- think jet-ski, and then switch the brand to Sea Doo -- exploded on the California side of Lake Havasu. The suit alleged that a defect in the fuel tank had caused the explosion.
The Sea Doo had been manufactured by a Canadian company, Bombardier, in Canada. Bombardier had bought the allegedly defective fuel tank in Canada from a Canadian company, Wedco Molded Products, that ultimately became part of Dow Chemical Canada.
Dow Chemical Canada appeared specially in the case to quash the summons on the ground that it lacked minimum contacts with California to justify the state's assertion of personal jurisdiction. The trial court denied the motion to quash. In doing so, it relied on testimony from a Bombardier employee that sometime in the 1990s he told unidentified "representatives" of Wedco that the watercraft in which Wedco's gas tanks were used were being sold in California. Dow Chemical Canada sought a writ of mandate in the California Court of Appeal and the California Supreme Court. Both of them turned Dow down. It then sought certiorari in the U.S. Supreme Court. And then the U.S. Supremes issued Nicastro. Afterwards, the U.S. Supremes vacated the judgment against Dow Chemical Canada and remanded the case to the California Court of Appeal for reconsideration in light of Nicastro.
The California court got the hint. First, it described the issue presented as "whether merely depositing goods in the stream of commerce with knowledge that some will end up in a finished product manufactured by another and sold in the forum state, is enough to satisfy the minimum contacts standard for personal jurisdiction." Id. at *2. And after recounting the Supreme Court's history of "stream of commerce" analysis in Asahi and Nicastro, the court answered the question with a resounding "no." It reasoned:
At no time did Dow . . . engage in any activities in California that reveal an intent to invoke or benefit from the protection of its laws. Nor is there any evidence that the design of Dow's product was in any way California-specific. It is not sufficient for jurisdiction in this case that the defendant Dow might have predicted or known that its products would reach California.
[Wedco] never undertook to ship its components to California; it supplied its gas tanks and filler necks exclusively in Canada. It matters not whether [Wedco] knew or could have predicted that another party -- Bombardier, Inc. -- would sell Sea Doos incorporating the [Wedco] gas tanks in California. [Wedco] did not advertise or market products in California; it never sold products in, or to customers in, California; it never maintained an office or facility of any kind in California; it has never been qualified to do business in California; and it has no agent for service of process in California. Due process requires that Dow have engaged in additional conduct, directed at the forum, before it can be found to have purposefully availed itself of the privilege of conducting activities within California.
Id. at *6 (citations omitted, emphasis added). The court thus issued a writ of mandate to the trial court to grant Dow Chemical Canada's motion, and it awarded the company its costs for the proceeding.
The results in these cases are, of course, the right results. But lest one think that perhaps the fractured opinions in Nicastro were not such a tragedy after all, let me remind you that these are the easy cases. These are the cases in which there are absolutely no facts -- other than sheer foreseeability that a product will wash up on a forum's shores -- to support the exercise of personal jurisdiction. The real problem arises -- and in the wake of Nicastro, unfortunately will continue to arise -- where there may be some limited facts that tie a foreign defendant to the forum. How much (or what type) of contact is enough to support the exercise of specific jurisdiction? And general jurisdiction? There no doubt will be a sea of opinions that attempt to answer that question, and the results will be anything but predictable.


