High Court reaffirms foreign machinery manufacturer’s liability limits

From LeClaireRyan, Corporate Counsel, Richmond, Va. … In a June 2011 decision, the U.S. Supreme Court reversed a New Jersey Supreme Court grant of personal jurisdiction over a non-resident product liability manufacturer. The decision reaffirms that the jurisdiction may not be based upon the state court’s “stream of commerce” theory. Under it, jurisdiction can be sustained where a manufacturer—merely by putting its products into the stream of U.S. commerce—may be deemed to have known that its products may be sold in the plaintiff’s jurisdiction.

The High Court’s decision arose in J. Mcintyre Machinery, Ltd. v. Robert Nicastro, an appeal from a New Jersey Supreme Court ruling finding jurisdiction over a metal-shear manufacturer incorporated and operating in England. The manufacturer’s products were sold in the U.S. by an independent distributor, and its officials attended trade shows here, though none in New Jersey. The manufacturer likewise maintained no office in New Jersey, nor did it pay taxes or own property there. Further, the manufacturer neither advertised in, nor sent any employees to, the state.

Despite this, New Jersey’s highest court held that jurisdiction was proper on the theory that: (a) the injury occurred in New Jersey; (b) the manufacturer either knew or should have known that distribution of its products through independent distributors might lead to products being sold in any of the 50 states; and (c) the manufacturer took no steps to prevent its products from being sold in New Jersey.

The U.S. Supreme Court reversed the New Jersey Supreme decision, holding that the manufacturer had not directed its business toward the state in such a way as to submit to New Jersey jurisdiction. Relying upon the Supreme Court’s 1987 opinion in Asahi Metal Industry Co. v. Superior Court of Cal., the J. Mcintyre Machinery Court held the facts did not prove the manufacturer “reasonably anticipated” its products would be sold in New Jersey.

Justice Anthony Kennedy, joined by three other justices in a plurality opinion, wrote “the question is whether a defendant has followed a course of conduct directed at the society or economy existing within the jurisdiction of a given sovereign,”such as a particular state in the United States. Consistent with Asahi Metal Industry, he wrote that it is a defendant’s purposeful contacts with the state, “not with the United States, that alone are relevant.”

Justice Stephen Breyer (joined by Justice Sam Alito) concurred in the decision to reverse the New Jersey Supreme Court, and agreed with Justice Kennedy that the manufacturer was not subject to personal jurisdiction. This concurrence created a majority on the court in favor of reversal. According to Justice Breyer, reversal of the New Jersey ruling was warranted based on Supreme Court precedent, but he declined to join with Justice Kennedy in expanding or revising existing precedent.

The J. Mcintyre Machinery holding reaffirms Supreme Court precedent, at times misunderstood or overlooked by some state courts, stating that Constitutional requirements for personal jurisdiction require more than foreseeability that a defendant’s products may end up in plaintiffs’ jurisdiction. Rather, those precedents demand “something more” in terms of minimum contacts, such as special advertising, advice, marketing or design directed at the plaintiffs’ state.   — [email protected]