NJ Supreme Court Extends Long-Arm Jurisdiction to Foreign Manufacturers

Facts

Plaintiff Robert Nicastro, with his wife Roseann, filed a product liability lawsuit in New Jersey state court, alleging that he lost four fingers while working with a recycling machine due to the lack of a safety guard. Defendant J. McIntyre Machinery, Ltd. (“J. McIntyre”) designed and manufactured the machine at its headquarters in the United Kingdom and sold it to its exclusive U.S. distributor, McIntyre Machinery America, Ltd. (“McIntyre America”), located in Ohio. McIntyre America then sold and shipped the machine to Nicasto's employer, Curcio Scrap Metal (“Curcio”), located in New Jersey. Curcio had decided to purchase the machine after its owner had met representatives from McIntyre America at a trade convention in Las Vegas, also attended by a J. McIntyre representative.

Discovery established that J. McIntyre and McIntyre America were independently owned, operated and controlled, but that J. McIntyre directed much of McIntyre America's advertising and sales efforts. The machine was labeled and came with instructions listing J. McIntyre's name, address, telephone number and fax number, and referencing both U.S. and UK safety regulations. J. McIntyre executives attended exhibitions, trade conventions and conferences around the United States between 1990 and 2005, although none were in New Jersey. The court found that these facts demonstrated “calculated efforts to penetrate the overall American market” and that J. McIntyre “clearly knew or should have known that the products were intended for sale and distribution to customers located anywhere in the United States.”

The 'Preeminent Issue'

The “preeminent issue” for the court was whether the Due Process Clause, properly applied, rendered a state powerless to provide relief to a resident who suffered serious injury from a product sold and marketed by a foreign manufacturer through an independent distributor, knowing that the final destination might be a New Jersey consumer. Reviewing personal jurisdiction jurisprudence, the court explained that “[t]he power of a state to subject a person or business to the jurisdiction of its courts has evolved with the changing nature of the American economy.” The court's analysis included a review of its decision in Charles Gendler & Co. v. Telecom Equipment Corp., 102 N.J. 460 (1986), as well as the U.S. Supreme Court's decision in Asahi Metal Industry Co. v. Superior Court of California, 480 U.S. 102 (1987), and its progeny.

The Nicastro court concluded that “a foreign manufacturer that places a defective product in the stream of commerce through a distribution scheme that targets a national market, which includes New Jersey, may be subject to the in personam jurisdiction of a New Jersey court in a product-liability action.” This holding would ensure that manufacturers who target defective products “at a wide geographic market that includes New Jersey will not be immune from suit” in New Jersey. The court observed that the stream-of-commerce theory is “particularly suitable” in product liability cases, but would not necessarily substitute for other analysis'namely, minimum contacts'in contract or other cases.

Nicastro, which arguably extends prior precedent, may be reviewed by the U.S. Supreme Court, as suggested by the two dissenting justices. For now, this decision will subject foreign or out-of-state manufacturers to jurisdiction in New Jersey product liability suits.

James J. (“J.”) Ferrelli, a Partner in the Princeton, NJ, office of Duane Morris LLP, concentrates his practice primarily in the areas of business litigation, product liability, and class actions. Paul M. da Costa, an associate in the firm's Newark office, is a member of the Trial Practice Group.

By James J. (“J.”) Ferrelli and Paul M. da CostaOn Feb. 2 of this year, the Supreme Court of New Jersey (“Court”), in Nicastro v. McIntyre Machinery America, Ltd., 2010 N.J. LEXIS 19 (N.J. Feb. 2, 2010). held that a foreign manufacturer of an industrial recycling machine is subject to New Jersey's long-arm jurisdiction under the stream-of-commerce theory. The evolution and integration of the American economy into the global economy served as the foundation for the court's ruling, notwithstanding the absence of traditional jurisdictional factors based upon physical presence or a minimum-contacts analysis.

Broad Implications

Nicastro has broad implications for manufacturers outside New Jersey ' both in the U.S. and other nations ' that sell products for distribution in the United States. Irrespective of its involvement in the actual distribution system, a foreign or out-of-state manufacturer that knows or reasonably should know that its products are distributed through a nationwide system that might result in sales in any state “must expect” that it will be subject to jurisdiction in New Jersey if one of its products is sold to a New Jersey company and injures a New Jersey consumer. The manufacturer's mere awareness and use of a distribution system through which it receives economic benefits from possible sales to New Jersey companies would trigger personal jurisdiction in New Jersey. The holding of Nicastro may well be followed and applicable in some or all of the other 49 states, the District of Columbia and other U.S. territories.

Facts

Plaintiff Robert Nicastro, with his wife Roseann, filed a product liability lawsuit in New Jersey state court, alleging that he lost four fingers while working with a recycling machine due to the lack of a safety guard. Defendant J. McIntyre Machinery, Ltd. (“J. McIntyre”) designed and manufactured the machine at its headquarters in the United Kingdom and sold it to its exclusive U.S. distributor, McIntyre Machinery America, Ltd. (“McIntyre America”), located in Ohio. McIntyre America then sold and shipped the machine to Nicasto's employer, Curcio Scrap Metal (“Curcio”), located in New Jersey. Curcio had decided to purchase the machine after its owner had met representatives from McIntyre America at a trade convention in Las Vegas, also attended by a J. McIntyre representative.

Discovery established that J. McIntyre and McIntyre America were independently owned, operated and controlled, but that J. McIntyre directed much of McIntyre America's advertising and sales efforts. The machine was labeled and came with instructions listing J. McIntyre's name, address, telephone number and fax number, and referencing both U.S. and UK safety regulations. J. McIntyre executives attended exhibitions, trade conventions and conferences around the United States between 1990 and 2005, although none were in New Jersey. The court found that these facts demonstrated “calculated efforts to penetrate the overall American market” and that J. McIntyre “clearly knew or should have known that the products were intended for sale and distribution to customers located anywhere in the United States.”

The 'Preeminent Issue'

The “preeminent issue” for the court was whether the Due Process Clause, properly applied, rendered a state powerless to provide relief to a resident who suffered serious injury from a product sold and marketed by a foreign manufacturer through an independent distributor, knowing that the final destination might be a New Jersey consumer. Reviewing personal jurisdiction jurisprudence, the court explained that “[t]he power of a state to subject a person or business to the jurisdiction of its courts has evolved with the changing nature of the American economy.” The court's analysis included a review of its decision in Charles Gendler & Co. v. Telecom Equipment Corp. , 102 N.J. 460 (1986), as well as the U.S. Supreme Court's decision in Asahi Metal Industry Co. v. Superior Court of California , 480 U.S. 102 (1987), and its progeny.

The Nicastro court concluded that “a foreign manufacturer that places a defective product in the stream of commerce through a distribution scheme that targets a national market, which includes New Jersey, may be subject to the in personam jurisdiction of a New Jersey court in a product-liability action.” This holding would ensure that manufacturers who target defective products “at a wide geographic market that includes New Jersey will not be immune from suit” in New Jersey. The court observed that the stream-of-commerce theory is “particularly suitable” in product liability cases, but would not necessarily substitute for other analysis'namely, minimum contacts'in contract or other cases.

Nicastro, which arguably extends prior precedent, may be reviewed by the U.S. Supreme Court, as suggested by the two dissenting justices. For now, this decision will subject foreign or out-of-state manufacturers to jurisdiction in New Jersey product liability suits.

James J. (“J.”) Ferrelli, a Partner in the Princeton, NJ, office of Duane Morris LLP, concentrates his practice primarily in the areas of business litigation, product liability, and class actions. Paul M. da Costa, an associate in the firm's Newark office, is a member of the Trial Practice Group.