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Courts Struggle to Understand the "Stream of Commerce" Theory of Personal Jurisdiction Over Product Manufacturers

August 21, 2013

Entering the field of personal jurisdiction again after nearly twenty-five years, the U.S. Supreme Court’s decision in J. McIntyre Machinery Ltd. v. Nicastro, 131 S. Ct. 2780 (2011) was expected to offer clarity to the standards for exercise of personal jurisdiction over foreign manufacturers. The last prior ruling on the issue, Asahi Metal Indus. Co. v. Superior Court, 480 U.S. 102 (1987), yielded multiple opinions regarding the effect of a defendant’s placement of a product in the “stream of commerce,” which led the product to be used in the forum state, but provided little clarity regarding the boundaries of due process in that context.

Lower courts continue to struggle with the meaning of the “stream of commerce metaphor” and how it guides the analysis of personal jurisdiction with respect to product manufacturers. These courts find that Asahi and Nicastro “provided no clear guidance regarding the scope and application of the theory, leaving little uniformity among the many different federal and state courts decisions,” and therefore simply disregard these cases and attempt to formulate their own understanding of “stream of commerce.” Sproul v. Rob & Charlies, Inc., --- P.3d ---, 2012 WL 6662638, *6 (N.M. App. Aug. 15, 2012).

 In considering Asahi, the Nicastro plurality correctly noted that “stream of commerce” is simply a “metaphor” to describe the “purposeful availment” analysis in the context of the sale of goods. “[T]he stream-of-commerce metaphor cannot supersede either the mandate of the Due Process Clause or the limits on judicial authority that Clause ensures.” Nicastro 131 S. Ct. at 2791 (Kennedy, J., for the plurality). 

The flow of products into the forum state “may bolster an affiliation” between the foreign defendant and the forum state that is germane to the jurisdictional analysis. Goodyear Dunlop Tires Operations, S.A. v. Brown, 131 S. Ct. 2846, 2855 (2011). However, there is simply no precedent supporting various lower courts’ conclusions that proof that a product entered the “stream of commerce” and ended up in the forum state is alone sufficient to constitutionally exercise specific personal jurisdiction, or that it is a substitute for proof of purposeful availment by the defendant. Indeed, Justices Breyer and Scalia joined the Nicastro plurality in reflecting the New Jersey court’s foreseeability rule as “rest[ing] jurisdiction . . . upon no more than the occurrence of a product-based accident in the forum State.” Id. at 2793.

The mere possibility that a product might end up in a given state cannot constitute the specific intent necessary to support personal jurisdiction. “‘[F]oreseeability’ alone has never been a sufficient benchmark for personal jurisdiction under the Due Process Clause.” World-Wide Volkswagen, 444 U.S. at 295. Were it otherwise, “[e]very seller of chattels would in effect appoint the chattel his agent for service of process. His amenability to suit would travel with the chattel.” Id. at 296. 

[T]he foreseeability that is critical to due process analysis is not the mere likelihood that a product will find its way into the forum State. Rather, it is that the defendant’s conduct and connection with the forum State are such that he should reasonably anticipate being haled into court there. 

World-Wide Volkswagen, 444 U.S. at 297. The “stream of commerce” metaphor invites unwarranted reliance upon hypothetical expectations and “should have knowns,” rather than admissible evidence that establishes conduct by the defendant designed to take advantage of the forum state.

Before Nicastro was decided, courts expressed widely divergent views of how to apply due process considerations to the assessment of the constitutional exercise of specific personal jurisdiction over a foreign defendant. Based on Asahi, certain courts concluded that bare stream of commerce was not enough, seemingly moving to the “stream of commerce plus” test set out by Justice O’Connor in that case. See Kernan v. Kurz-Hastings, Inc., 175 F.3d 236, 243-44 (2d Cir. 1999); Pennzoil Products Co. v. Colelli & Associates, Inc., 149 F.3d 197, 203-05 (3d Cir. 1998); Vermeulen v. Renault, U.S.A., Inc., 985 F.2d 1534, 1548 (11th Cir. 1993), cert. den., 508 U.S. 907 (1993); Ruckstuhl v. Owens Corning Fiberglas Corp., 731 So.2d 881, 889-90 (La. 1999), cert. den., 528 U.S. 1019 (1999); Juelich v. Yamazaki Mazak Optonics Corp., 682 N.W.2d 565, 572 (Minn. 2004); CMMC v. Salinas, 929 S.W.2d 435, 439-40 (Tex. 1996). 

Still other courts applied Justice Brennan’s “foreseeability” test in Asahi to establish specific personal jurisdiction, See Barone v. Rich Bros. Interstate Display Fireworks Co., 25 F.3d 610, 615 (8th Cir. 1994), cert. den., 513 U.S. 948 (1994); Ruston Gas Turbines, Inc. v. Donaldson Co., Inc., 9 F.3d 415, 418-420 (5th Cir. 1993); Ex Parte Lagrone v. Norco Industries, Inc., 839 So.2d 620, 627-628 (Ala. 2002); A. Uberti and C. v. Leonardo, 892 P.2d 1354, 1362-64 (Ariz. 1995); Grange Ins. Assoc. v. State, 757 P.2d 933, 938 (Wash. 1988), cert. den., 490U.S. 1004 (1989); Hill v. Showa Denko, K.K., 425 S.E.2d 609, 616 (W. Va. 1992), cert. den., 508 U.S. 908 (1993); Kopke v. A. Hartrodt S.R.L., 629 N.W.2d 662, 674 (Wis. 2001), cert. den., 534 U.S. 1079 (2002). 

Still other Courts, notably including the Third Circuit, attempted to apply both tests proposed by Justices O’Connor and Brennan in Asahi. See, e.g., Pennzoil Prods.,149 F.3d at 205-207 n. 11. 

Nicastro, however, brought little clarity to the landscape. As noted above, some courts have simply ignored Nicastro altogether. Others, concluding that Nicastro’s precedential effect, if any, is limited to closely analogous facts, have attempted to define the boundaries of “stream of commerce jurisdiction” by the number of sales that occur within the forum state. See, e.g., Askue v. Aurora Corp. of Am., 2012 WL 843939, at *6-7 (N.D. Ga. March 12, 2012); Oticon, Inc. v. Powell v. Profile Design LLC, No. 4:10–cv–2644, 2012 WL 149518, at *8 (S.D. Tex. Jan. 18, 2012); Ainsworth v. Cargotec USA, Inc., 2011 WL 6291812, *2 (S.D. Miss. Dec. 15, 2011); Dejana v. Marine Tech., Inc., No. 10–CV–4029, 2011 WL 4530012, at *6 (E.D.N.Y. Sept. 26, 2011); Sebotek Hearing Sys., LLC, No. 08–5489, 2011 WL 3702423, at *10 (D.N.J. Aug. 22, 2011); N. Ins. Co. of N.Y. v. Constr. Navale Bordeaux, No. 11–60462–CV, 2011 WL 2682950, at *5 (S.D. Fla. July 11, 2011). This approach, as is true of the ad hoc approach, does not provide a clear standard by which a defendant may predict whether it will be subject to specific jurisdiction, because the inquiry is so fact- and product-specific.

In the wake of Nicastro, a single defendant in the course of a single week was subjected to different jurisdictional rulings from two courts. See Lindsey v. Cargotec USA, Inc., No. 4:09CV-00071-JHM, 2011 WL 4587583 (W.D. Ken. Sept. 30, 2011); Ainsworth v. Cargotec USA, Inc., 2011 WL 4443626 (S.D. Miss. Sept. 23, 2011), aff’d, Ainsworth v. Moffet Eng’g Ltd., 716 F.3d 174, 179 (5th Cir. 2013).  In both cases, the same Irish manufacturer of forklifts had sold its products to a legally distinct U.S.-based corporation that distributed the products. The Kentucky court held that it did not have jurisdiction over the foreign defendant, while the Mississippi court held that it did. 

Inconsistent holdings will no doubt continue to bedevil international companies whose products are sold within the various states, absent a clarifying decision by the Supreme Court. The plethora of conflicting results speaks to the essential need for the Court to speak with clarity and finality regarding the due process factors to be satisfied before courts may exercise specific personal jurisdiction over foreign manufacturers.

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Baker Sterchi's Product Liability Blog examines significant developments, trends, and topics in product liability law of interest to individuals and product manufacturers, distributors and sellers. Learn more about the editor, David E. Eisenberg, and our Product Liability practice.

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