Practice Tip: Establishing Jurisdiction Over Foreign Manufacturers

What if the defendant delivers a product into the stream of commerce knowing it may end up in the forum state? The limits in obtaining jurisdiction over such foreign manufacturers are uncertain. In Asahi Metal Industrial v. Superior Court of California, 480 US 102, 94 L.Ed. 92 (1987), the Supreme Court was faced with the question of whether a Japanese component parts manufacturer would be subject to jurisdiction in California for having placed its products in the stream of commerce. Four Justices (O'Connor, Rehnquist, Powell and Scalia) held that the exercise of personal jurisdiction cannot be based on the defendant's mere act of placing its product in the stream of commerce with the expectation that the products eventually might be sold in the forum. Something more is required to “indicate an intent or purpose to serve the market of the forum state.”

Justice Sandra Day O'Connor, who wrote the majority opinion, stated that the mere relinquishment of goods, even with the expectation of arrival in the forum state, does not reveal a purpose and intent to reach the forum state. She would require other activities by the defendant to show that the placement of goods in the stream of commerce was done with the purpose and intent that the goods reach the forum state. Such “added activity” may be, for example, designing the product for the market in the forum state, advertising in the forum state, establishing channels or providing regular advice to customers in the forum state or marketing the product through a distributor who has agreed to serve as the sales agent in the forum state.

Four other justices (Brennan, White, Marshall and Blackmun) rejected her “awareness plus” standard and decided that jurisdiction may be properly based upon the mere placement of products into the regular and anticipated flow of products from manufacturer to distribution to retail. The justices did unanimously agree that the defendant must have the purpose and intent to reach the forum state in order for a court to assert jurisdiction over it; however, the court concluded that California courts did not have jurisdiction over Asahi because assertion of jurisdiction under the circumstances would “offend traditional notions of fair play and substantial justice.”

Minimum contacts alone do not satisfy due process. The prospect of defending a suit in the forum state must also comport with traditional notions of fair play and substantial justice. Burger King Corp, v. Rudzewicz, 471 US 462, 85 L.E2d, 528 (1985).

It now appears that in order to obtain jurisdiction over a foreign manufacturer, one must show: 1) that the defendant created a substantial connection to the forum state by actions purposefully directed toward the forum state or 2) by invoking the benefits and protections of the law of the state and 3) that the exercise of jurisdiction based on those minimum contacts would not offend traditional notions of fair play and substantial justice.

Based on the above, therefore, plaintiff's attorneys should allege the following in their pleadings against foreign manufacturers:

• Defendant has created a substantial connection to [forum state] by action purposefully directed toward the [forum state];
• Defendant attempted to serve, directly or indirectly, the market for its products in the state of ____.
• Defendant has invoked the benefits and protection of the laws of [the state].
• The exercise of jurisdiction by this court over defendant does not offend traditional notions of fair play and substantial justice.

Additionally, the forum state's statute should also be pleaded if it requires more than the above. For example, New York's long arm statute requires that the defendant derive substantial revenue from interstate or international commerce. Thus, this should also be pleaded.

An example of minimum contacts in a recent case arose in Allen v. Marais, 762 NYS2d 188 (Sup. Ct. App. Div. 3d, NY) (July 24, 2003). Plaintiff sued the French manufacturer of a trenching machine that crushed his hand. The manufacturer had sent training technicians to New York and also employees to repair the machinery. Such activities, the court held, showed the defendant engaged in a course of business conduct within the scope of New York's long arm jurisdiction. The court went on to say that by purposefully availing itself of conducting activities in New York, it had sufficient minimum contacts, such that it should reasonably anticipate being sued there. The court also stated that subjecting defendant to suit in New York did not offend traditional notions of fair and substantial justice.

Consequently, the fact that the defendant is not registered to do business in a particular state, had no agents, employees, offices, property or bank accounts in that state will not necessarily defeat personal jurisdiction if the court finds that the defendant purposefully directed its commercial efforts toward that state's residents and if it would not be unreasonable to require that the defendant re-defend its action there.

When suing a foreign manufacturer, the plaintiff's attorney must take into account jurisdictional rules set by the Supreme Court as well as the long arm statute of his/her forum state.

Due process is not satisfied unless a foreign defendant has “minimum contacts” with the forum state. The test is whether it should be reasonably anticipated that the defendant would be

sued in the forum. Worldwide Volkswagen Corp. v. Woodson , 444 US 286, 62 L.Ed.2d 490 (1980). If a nondomiciliary tort-feasor has certain contacts with the forum state, it may reasonably foresee the prospect of defending the suit there if it purposefully availed itself of the privilege of conducting activities within that state. Thus, in Worldwide Volkswagon, a New York car dealer who sold an Audi to a New York plaintiff who was then injured driving from New York through Oklahoma on the way to Arizona could not be sued in Oklahoma because the defendants could not have reasonably foreseen being sued there. It was merely a fortuitous circumstance that a single Audi automobile sold in New York to New York residents happened to be in an accident while passing through Oklahoma.

What if the defendant delivers a product into the stream of commerce knowing it may end up in the forum state? The limits in obtaining jurisdiction over such foreign manufacturers are uncertain. In Asahi Metal Industrial v. Superior Court of California , 480 US 102, 94 L.Ed. 92 (1987), the Supreme Court was faced with the question of whether a Japanese component parts manufacturer would be subject to jurisdiction in California for having placed its products in the stream of commerce. Four Justices (O'Connor, Rehnquist, Powell and Scalia) held that the exercise of personal jurisdiction cannot be based on the defendant's mere act of placing its product in the stream of commerce with the expectation that the products eventually might be sold in the forum. Something more is required to “indicate an intent or purpose to serve the market of the forum state.”

Justice Sandra Day O'Connor, who wrote the majority opinion, stated that the mere relinquishment of goods, even with the expectation of arrival in the forum state, does not reveal a purpose and intent to reach the forum state. She would require other activities by the defendant to show that the placement of goods in the stream of commerce was done with the purpose and intent that the goods reach the forum state. Such “added activity” may be, for example, designing the product for the market in the forum state, advertising in the forum state, establishing channels or providing regular advice to customers in the forum state or marketing the product through a distributor who has agreed to serve as the sales agent in the forum state.

Four other justices (Brennan, White, Marshall and Blackmun) rejected her “awareness plus” standard and decided that jurisdiction may be properly based upon the mere placement of products into the regular and anticipated flow of products from manufacturer to distribution to retail. The justices did unanimously agree that the defendant must have the purpose and intent to reach the forum state in order for a court to assert jurisdiction over it; however, the court concluded that California courts did not have jurisdiction over Asahi because assertion of jurisdiction under the circumstances would “offend traditional notions of fair play and substantial justice.”

Minimum contacts alone do not satisfy due process. The prospect of defending a suit in the forum state must also comport with traditional notions of fair play and substantial justice. Burger King Corp, v. Rudzewicz , 471 US 462, 85 L.E2d, 528 (1985).

It now appears that in order to obtain jurisdiction over a foreign manufacturer, one must show: 1) that the defendant created a substantial connection to the forum state by actions purposefully directed toward the forum state or 2) by invoking the benefits and protections of the law of the state and 3) that the exercise of jurisdiction based on those minimum contacts would not offend traditional notions of fair play and substantial justice.

Based on the above, therefore, plaintiff's attorneys should allege the following in their pleadings against foreign manufacturers:

• Defendant has created a substantial connection to [forum state] by action purposefully directed toward the [forum state];
• Defendant attempted to serve, directly or indirectly, the market for its products in the state of ____.
• Defendant has invoked the benefits and protection of the laws of [the state].
• The exercise of jurisdiction by this court over defendant does not offend traditional notions of fair play and substantial justice.

Additionally, the forum state's statute should also be pleaded if it requires more than the above. For example, New York's long arm statute requires that the defendant derive substantial revenue from interstate or international commerce. Thus, this should also be pleaded.

An example of minimum contacts in a recent case arose in Allen v. Marais , 762 NYS2d 188 (Sup. Ct. App. Div. 3d, NY) (July 24, 2003). Plaintiff sued the French manufacturer of a trenching machine that crushed his hand. The manufacturer had sent training technicians to New York and also employees to repair the machinery. Such activities, the court held, showed the defendant engaged in a course of business conduct within the scope of New York's long arm jurisdiction. The court went on to say that by purposefully availing itself of conducting activities in New York, it had sufficient minimum contacts, such that it should reasonably anticipate being sued there. The court also stated that subjecting defendant to suit in New York did not offend traditional notions of fair and substantial justice.

Consequently, the fact that the defendant is not registered to do business in a particular state, had no agents, employees, offices, property or bank accounts in that state will not necessarily defeat personal jurisdiction if the court finds that the defendant purposefully directed its commercial efforts toward that state's residents and if it would not be unreasonable to require that the defendant re-defend its action there.