Consumer Class Actions and Mass Torts : Class Action Lawyer & Attorney : J. Russell Jackson : Skadden Law Firm : Complex Class Actions : Consumer Class Actions & Mass Torts Law Blog

Wednesday.  Woden's day.  The day between Tyr's day and Thor's day.  The middle of the week.  Humpday.  It's all downhill from here, baby.

I've awakened this Humpday with a grab bag of cases, each of moderate interest, but none with enough meat to fully satisfy.  So today, readers, it's tapas.  Small plates for you.  Mangia.

First plate:  Personal Jurisdiction.  The Utah Court of Appeals recently issued an interesting opinion that applied the U.S. Supreme Court's recent gallimaufry of opinions in J. McIntyre Machinery, Ltd. v. Nicastro, 131 S. Ct. 2780 (2011).

In Gardner v. SPX Corp., 2012 WL 503722 (Utah. Ct. App. Feb. 16, 2012), the plaintiff's husband, a truck driver, was killed on his employer's loading dock when a vertical dock leveler fell on him.  Plaintiff alleged that the control box was defective.  It had been designed and made by a Canadian company.  A Delaware corporation had an ownership interest in the Canadian company, but they were separate companies and all of the corporate formalities had been been observed, so no veil piercing could occur.

The control box manufacturer made its boxes based on the specifications of another Canadian company to which it sold the boxes.  That company, in turn, sold the boxes to another Canadian company, which then sold the boxes to a US company that incorporated the boxes into dock levelers.  Plaintiff argued that the Canadian control box manufacturer knew that the majority of dock levelers incorporating its component ultimately were sold in the United States to US users, particularly in the West. 

The court held that this was not enough to meet the minimum requirements inherent in the due process concept of "fair play and substantial justice."  The court analyzed the various opinions in Nicastro, observing that the "Court splintered on the question whether, in products liability cases, and especially products liability cases involving foreign defendants, the United States is more properly regarded as a 'single market' or fifty separate markets, each subject to a different authority."  2012 WL 503722 at *5.  Focusing on the lack of "purposeful availment" of the forum's laws, the Utah court held that the Canadian control box manufacturer ("Schneider Canada") had not purposefully availed itself of the benefits of Utah law:

We conclude that, under the foregoing authorities, Schneider Canada lacks the requisite minimum contacts with the State of Utah.  Schneider Canada is located and operates in Canada; it maintains no offices, owns no property, and has no employees in Utah.  Schneider Canada manufactured the control box in question in Canada and sold it to a Canadian distributor. . . .  Schneider Canada did not purposefully avail itself of the Utah market.  It did not take active steps to sell its products in Utah.  Although it was aware of potential sales in the United States, it neither advertised in Utah nor sent sales representatives to Utah.  In short . . . the record does not show "special designing for Utah's market, advertising in Utah, establishing channels for providing regular advice to customers in Utah, or marketing the product through a distributor who has agreed to act as a sales agent in Utah."  And although this was not as isolated a sale as occurred in [Nicastro], the record here does not show "special state-related design, advertising, advice, marketing or . . . special effort by the [Canadian] Manufacturer to sell in [Utah]."

Id. at *6 (citations omitted).

The court also focused on two other facts, which are interesting:  regional sales, and the nature of the product as a component:

In addition, Schneider Canada's "knowledge of the mere possibility that its product might be taken into a region of the country in which Utah is located is not sufficient" to subject it to Utah's jurisdiction.  Finally, unlike [the manufacturer in Nicastro], Schneider Canada "was a component-part manufacturer with 'little control over the final destination of its products once they were delivered into the stream of commerce.'"

Id. at *7 (citations omitted).  The Utah court affirmed the dismissal of the Canadian control box manufacturer.

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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.

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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.

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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.   

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Not long ago I published an article on personal jurisdiction, explaining the tension between courts that believe it is sufficient for a foreign manufacturer to place the product in the stream of commerce, and those that require something more:  some form of purposeful availment of the forum's laws and benefits.

Last week the Colorado Court of Appeals was faced with a case that presented these issues.  The trial court had concluded that the Chinese manufacturer of an electric meter that exploded in Colorado, injuring a Colorado resident, was not subject to personal jurisdiction in Colorado.  The Court of Appeals reversed.  See Etchieson v. Central Purchasing, No. 09CA0218, Slip op. (Colo. Ct. App. Apr. 15, 2010).

The Court of Appeals noted that what constitutes "purposeful availment of the forum" is an open question.  It walked through the U.S. Supreme Court's decisions in World Wide Volkswagen and Asahi, as well as the Colorado Supreme Court's decision in Alliance Clothing Ltd. v. District Court, 532 P.2d 351 (Colo. 1975), in which the court found that because it was foreseeable that the subject ski pants would be sold and used in Colorado, personal jurisdiction was proper.

The Court of Appeals ultimately did not decide what the appropriate test for personal jurisdiction was, instead finding that even under Justice O'Conner's most stringent "stream of commerce plus" test, jurisdiction was proper in this case.  The Chinese manufacturer, Precision, sold the meters to a California company, Central Purchasing.  Precision put Central Purchasing's branding on the products and packaged them for sale in the United States.  It knew that Central Purchasing sold the meters throughout the United States.  It helped arrange for shipping of the goods to California and South Carolina for distribution throughout the United States.  Precision also advertised its own meters in U.S. publications with a national reach.

The Court of Appeal rejected the argument that these facts did not represent purposeful availment of Colorado's laws and benefits:

[S]imply because these activities were directed toward the United States market generally rather than toward the Colorado market exclusively did not make Precision's availment of the benefits of the Colorado market any less purposeful. 

Neither Asahi nor any other precedent requires a court to exclude from consideration a nonresident defendant's actions relating to a forum simply because those actions also constituted availment of other forums.  To the contrary, as other courts have determined, it is proper to consider contacts with the United States market as a whole in assessing whether a defendant had established minimum contacts with a particular state.

Indeed, excluding regional or national contacts in considering minimum contacts in product liability cases could allow any foreign-nation manufacturer that marketed and sold its products throughout the United States to avoid being haled into a state court anywhere in the country, thus impairing the states' ability to protect their respective citizens from injury from defective products, simply by refusing to tailor its product specifically to any state.

Slip op. at 12-14 (citations omitted).

Accordingly, the Court of Appeals reversed the trial court, holding that the exercise of personal jurisdiction over Precision was constitutionally permissible.

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In keeping with yesterday's theme regarding foreign parent corporations, I thought today I would refer you to a column I wrote for this week's National Law Journal on the subject of personal jurisdiction in product liability cases.  The column, Buy Globally, Sue Locally, describes the New Jersey Supreme Court's recent decision adopting the stream of commerce test as the sole constitutional measure of personal jurisdiction.  It also describes other states' approaches, which typically require some sort of purposeful availment of the jurisdiction's benefits in addition to the stream of commerce.

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