27 June 2011

SCOTUS Puts Slight Boundaries On Product Liability Jurisdiction

In a product liability suit arising from an allegedly defective European tire design that caused in injury to a North Carolina resident in Paris, (Goodyear v. Brown) and a product liability suit involving an English machine marketed in some U.S. states but not New Jersey where no more than four of the machines, and perhap just one, ended up being sold, and one of those machines allegedly caused the injury, (but in which the manufacturer did hold a U.S. patent) (J. McIntyre v. Nicastro) the U.S. Surpeme Court held that long arm jurisdiction over the manufacturers was not present on a "stream of commerce" theory.

These would be landmark decisions in personal jurisdiction if they spoke with one voice, but they don't. As the lead opinion in the second case explains:

The rules and standards for determining when a State does or does not have jurisdiction over an absent party have been unclear because of decades-old questions left open in Asahi Metal Industry Co. v. Superior Court of Cal., Solano Cty., 480 U. S. 102 (1987).

The first case, unanimously decided, was as much error correcting and precedent changing. Incidental sales of a few products not marketed there in the forum state, when those product that actually caused an injury to the Plaintiff were never present in the forum state, would not generally give rise to personal jurisdiction under a fair reading of existing law. The injuries involve didn't result from a products being carried in the stream of commerce to the place where the harm was caused in the case.

The second case, decided on a 6-3 basis, with two of the majority judges (Breyer and Alito) concurring in judgment, but not reasoning of Justice Kennedy's ruling on behalf of four judges, is a case that was a close one, quite plausibly providing a basis for personal jurisdiction in a U.S. state under a stream of commerce theory (although Breyer and Alito find that it does not under existing precedents because it involves a single isolated sale with no contacts in New Jersey in particular, rather than a regular stream of products), and it may constrain that theory of personal jurisdiction in personal injury cases going forward. The concurrence also argues that what makes since for a large scale manufacturer may not make sense in the case of a small craft manufacturer operating through big business distributors.

Justice Kennedy's opinion, whose rational fails to secure a majority, rejects a theory based on "fairness and foreseeability" under Ashai, and instead reverts to an earlier precedent out of which the stream of commerce standard arose that is still a touchstone for personal jurisdiction cases outside the product liability area, which holds that a court can have long arm jurisdiction over a party when it "“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)."

The dissent would have transferred a clear intent to market in the United States to the particular state, New Jersey, where the product happens to wind up.

The practical impact of these particular cases is material for the defendants involved. French and English forums, in addition to being inconvenient for U.S. defendants, do not award signficant damages for non-economic harms like pain and suffering, do not afford a right to trial by jury for Plaintiffs in products liability lawsuits, and arguably have less generous standards for finding liability at all on failure to warn theories.

But, since the first case was well within past precedents, and the major change in the standard for applying its personal jurisdiction precedents in the second one did not secure majority support (while the broadened standard advanced by the dissenters also failed to secure majority suport), the net effect of all of these suits is to leave the legal standard for asserting personal jurisdiction in product liability suits essentially unchanged while reaffirming that not every single product liability suit brought by a U.S. defendant against a foreign manufacturer is within the long arm jurisdiction of state courts.

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