Personal jurisdiction is required in any action that seeks to impose personal liability against a defendant. Whether a defendant is subject to personal jurisdiction in a United States court involves two separate requirements: (1) there must be a constitutionally-sufficient basis for personal jurisdiction over the party; and (2) the party must be properly served in accordance with statutory and due process requirements.
With respect to the first requirement, the courts in the United States can exercise jurisdiction over a defendant when the defendant “purposefully avails itself of the privilege of conducting activities within the forum State, thus invoking the benefits and protections of its laws.” Hanson v. Denckla, 357 U.S. 235, 253 (1958). When a defendant places products into the “stream of commerce” and is aware that some of the products may enter the United States, the issue is whether this is sufficient to exercise personal jurisdiction over the defendant.
The United States Supreme Court addressed this issue in J. McIntyre Machinery, Ltd. v. Nicastro, 564 U.S. – , 131 S.Ct. 2780, 2783 (June 27, 2011). The Supreme Court held that the “principal inquiry in cases of [a foreign party being subject to jurisdiction] is whether the defendant’s activities manifest an intention to submit to the power of a sovereign.” In Nicastro, an English manufacturer was sued when a third party was injured in the State of New Jersey while using one of the English manufacturer’s metal shearing machines. The English manufacturer had an agreement with a United States distributor to sell its machines in the United States. Four metal-shearing machines manufactured by the English manufacturer were purchased and used in the United States, including the machine that caused the third party’s injury in New Jersey. Further, company officials attended various trade shows in United States, although none of them were in New Jersey where the accident occurred.
The Supreme Court held that, despite the English manufacturer knowing that its product might end up in the United States, the activities of the manufacturer were not sufficient to confer jurisdiction in New Jersey. The Supreme Court noted that the English manufacturer did not advertise in New Jersey, did not send goods to New Jersey, and did not, in any relevant sense, target New Jersey for the sale of its product. As a result, the Supreme Court held that the English manufacturer did not manifest an intention to submit to the jurisdiction of the New Jersey courts, and therefore, the New Jersey courts did not have jurisdiction over the English manufacturer.
Similarly, in the recent case of Dow Chemical Canada ULC v. Superior Court (Fandino), WL 6382110 (Cal.App. 2 Dist., Dec. 21, 2011), a fuel tank exploded, resulting in a products liability action filed in California against the Canadian manufacturer of the fuel tank. The California Court of Appeal held that the Canadian manufacturer was not subject to personal jurisdiction in California because it did not purposefully avail itself of the privilege of conducting activities in California. The Canadian manufacturer supplied its products exclusively in Canada, did not advertise or market products in California, never maintained an office or other facility in California, never qualified to do business in California, and had no agent for service of process in the state. Merely placing its product into the “stream of commerce” and having its product end up in California was not sufficient to confer jurisdiction over the Canadian manufacturer in the California courts.
These recent rulings highlight the general trend that foreign companies will not be subject to the jurisdiction of United States courts simply by placing their products into the “stream of commerce.” However, courts will conduct a fact-specific analysis in making jurisdictional determinations. Thus, foreign companies should carefully evaluate how best to structure business ventures and commerce if they desire to minimize exposure to the United States courts and laws.
For further information, please contact: Nicholas P. Connon, Managing Partner and Chair of the Middle East Practice Group; Tel: +1.626.638.1757; e-mail: firstname.lastname@example.org
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