444 U.S. 286 (1980)

A seminal United States Supreme Court opinion in the area of civil procedure/personal jurisdiction in which the Court held that the Due Process Clause of the United States Constitution does not permit a court to exercise personal jurisdiction over a nonresident defendant where that defendant’s conduct and connection with the forum state are of such nature that the defendant did not reasonably anticipate being haled into the court in that state.

The underlying facts involved the New York resident plaintiffs purchasing a vehicle from defendant retailer Seaway Volkswagen in New York.  Thereafter, plaintiffs were involved in an auto collision in Oklahoma during which their vehicle’s gas tank ignited and caused them serious bodily injuries.

The plaintiffs brought an action in Oklahoma state court against the vehicle manufacturer, importer, Wold-Wide Volkswagen and Seaway.

The Court held that the Oklahoma state court could not exercise personal jurisdiction over Seaway.  The Court explained that the only connection Seaway had with Oklahoma was the auto accident involving plaintiffs’ car that Seaway sold in New York to New York residents.  Seaway did not sell cars, advertise, or carry on any other activities in Oklahoma.  Thus, Seaway’s conduct was not such that it would lead to reasonable anticipation by Seaway to be sued in Oklahoma.

Reference Desk

Papafagos v. Fiat Auto, S.p.A., 568 F. Supp. 692 (D. N.H. 1983)

Fiat, as do other automobile manufacturers, expects that its vehicles will be sold in other countries, including the varied states of the United States. While it does not choose to market its manufactured motor vehicle products through franchised dealers in each of the varied United States, as do American automobile manufacturers, but rather to sell them to American distributors, who in turn resell them to such dealers, it clearly is aware that its motor vehicles will be placed into the “stream-of-commerce”, and as such that it can expect to be required to answer to any defects in such products wherever they may ultimately be consumed.

In a recent consideration of such circumstances, the Supreme Court stated:

When a corporation `purposefully avails itself of the privilege of conducting activities within the forum State,’ Hanson v. Denckla, 357 U.S. [235] at 253 [78 S.Ct. 1228 at 1239, 2 L.Ed.2d 1283] it has clear notice that it is subject to suit there, and can act to alleviate the risk of burdensome litigation by procuring insurance, passing the expected costs on to customers, or, if the risks are too great, severing its connection with the State. Hence if the sale of a product of a manufacturer or distributor such as Audi or Volkswagen is not simply an isolated occurrence, but arises from the efforts of the manufacturer or distributor to serve, directly or indirectly, the market for its product in other States, it is not unreasonable to subject it to suit in one of those States if its allegedly defective merchandise has there been the source of injury to its owner or to others. The forum State does not exceed its powers under the Due Process Clause if it asserts personal jurisdiction over a corporation that delivers its products into the stream of commerce with the expectation that they will be purchased by consumers in the forum State. Cf. Gray v. American Radiator & Standard Sanitary Corp., 22 Ill.2d 432, 176 N.E.2d 761 (1961).World-Wide Volkswagen Corp. v. Woodson, 444 U.S. 286, 297-98, 100 S.Ct. 559, 567-68, 62 L.Ed.2d 490 (1980).

Admittedly dictum, the above-quoted language from World-Wide Volkswagenhas caused a number of courts in products liability cases wherein manufacturers of allegedly defective products seek to escape jurisdiction on the ground of lack of minimal contact with the forum state to adopt the “stream-of-commerce” theory of jurisdiction, which in turn has been defined as follows:

The stream-of-commerce theory developed as a means of sustaining jurisdiction in products liability cases in which the product had traveled through an extensive chain of distribution before reaching the ultimate consumer. Under this theory, a manufacturer may be held amenable to process in a forum in which its products are sold, even if the products were sold indirectly through importers or distributors with independent sales and marketing schemes. Courts have found the assumption of jurisdiction in these cases to be consistent with the due process requirements identified above: by increasing the distribution of its products through indirect sales within the forum, a manufacturer benefits legally from the protection provided by the laws of the forum state for its products, as well as economically from indirect sales to forum residents. Underlying the assumption of jurisdiction in these cases is the belief that the fairness requirements of due process do not extend so far as to permit a manufacturer to insulate itself from the reach of the forum state’s long-arm rule by using an intermediary or by professing ignorance of the ultimate destination of its products.DeJames v. Magnificence Carriers, Inc., 654 F.2d 280, 285 (3d Cir.),cert. denied,454 U.S. 696*696 1085, 102 S.Ct. 642, 70 L.Ed.2d 620 (1981) (citation omitted).

In Oswalt v. Scripto, 616 F.2d 191 (5th Cir.1980), plaintiff brought action in Texas against a Japanese manufacturer of cigarette lighters and its American distributor to recover for injuries sustained by the alleged malfunction of the lighter. The Court held that the manufacturer, which had manufactured, assembled, sold and delivered millions of lighters to its distributor with the understanding that the distributor would sell them to a customer with national retail outlets, had reason to know or expect that the lighters would reach Texas in the course of distribution and was thus subject to in personam jurisdiction in Texas. See also Stabilisierungsfonds Fur Wein v. Kaiser Stuhl Wine Distributors, et al., 647 F.2d 200 (D.C.Cir.1981); Rockwell International Corporation v. Costruzioni Aeronautiche Giovanni Agusta, et al., 553 F.Supp. 328 (E.D.Pa.1982); Santiago v. BRS, Inc.,528 F.Supp. 755 (D.P.R.1981). Simply stated,

a manufacturer or major distributor should not be allowed to profit from the sale of a product in a state while simultaneously insulating itself from liability by establishing an indirect and multi-faceted chain of distribution…. Simply because a business operation is structured in such a way as to avoid direct activity [in the forum state] would not prevent the state courts from imposing personal jurisdiction upon the nonresident defendant.Rockwell International Corporation v. Construzioni Aeronautiche Giovanni Agusta, supra, 553 F.Supp. at 334 (citations omitted).

Abraham v. Agusta, 968 F. Supp. 1403 (D. Nev. 1997)

The seminal case for contested personal Jurisdiction in products liability actions is the U.S. Supreme Court’s decision in World-Wide Volkswagen Corp. v. Woodson,444 U.S. 286, 100 S.Ct. 559, 62 L.Ed.2d 490 (1980). In World-Wide Volkswagen,the issue was whether “an Oklahoma court [could] exercise in personamjurisdiction over a nonresident automobile retailer and its wholesale distributor in a products-liability action, when the defendants’ only connection with Oklahoma [was] the fact that an automobile sold in New York to New York residents became involved in an accident in Oklahoma.” Id. at 287, 100 S.Ct. at 562. The holding in that case has been widely cited for the proposition that “[t]he forum State does not exceed its powers under the Due Process Clause if it asserts personal jurisdiction over a corporation that delivers its products into the stream of commerce with the expectation that they will be purchased by consumers in the forum State.” Id. at 298, 100 S.Ct. at 567 (emphasis added). In other words, a defendant corporation “purposefully avails” itself of a forum where the defendant places its products into interstate commerce and reasonably foresees that those products will be delivered into the forum.

Notwithstanding the broad language of the “stream of commerce” standard, the Court clearly stated that, for purposes of due process analysis, merely placing a product into the “stream of commerce” does not itself give rise to the requisite “expectation” that the product will enter a particular state. The Court specifically stated that “`foreseeability’ alone has never been a sufficient benchmark for personal jurisdiction under the Due Process Clause[,]'” Id. at 295, 100 S.Ct. at 566, precisely because “foreseeability,” taken to its logical extremes, would permit every seller of a product to be amenable to suit where ever the product traveled. Id. at 296, 100 S.Ct. at 566. Instead, the Supreme Court instructed that “the 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.” Id. at 297, 100 S.Ct. at 567 (emphasis added). Thus, this court interprets World-Wide Volkswagen to stand for the proposition that, in products liability cases, an out-of-state defendant can be found to have purposefully availed itself of the forum only on the basis of its own affirmative 1409*1409 conduct directed at the forum state.[2] See id. at 297-98, 100 S.Ct. at 567 (stating that the forum’s exercise of personal jurisdiction over a non-resident defendant is reasonable where the sale of a product “is not simply an isolated occurrence, but arises from the efforts of the … distributor to serve, directly or indirectly, the [forum] market”).

This interpretation of World-Wide Volkswagen is consistent with Ninth Circuit precedent. In Brand v. Menlove Dodge, 796 F.2d 1070 (9th Cir.1986), Menlove, a Utah auto dealership, sold an allegedly defective automobile in Utah to Patterson, a used-car dealer. Patterson took the car to California where he resold it to Brand, an Arizona auto dealer. Thereafter, Brand sold the car to a customer in Arizona. When the wheels on the car broke apart, litigation ensued. After the customer obtained a favorable judgment against Brand, the plaintiff sued Menlove and other defendants in a federal district court in California. Menlove moved to quash service of process on the grounds that the court lacked personal jurisdiction. The Ninth Circuit held that the plaintiff did not make out a prima facie case of personal jurisdiction over the defendant under the minimum contacts test. Id. at 1075. Crucial to the court’s holding was the fact that there was no showing that Menlove purposefully directed any affirmative activity into the California forum. Significantly, after discussing World-Wide Volkswagen, the court found it lacked personal jurisdiction even though Menlove “knew” the car would be resold in California. Id.Thus, the Ninth Circuit rejected the notion that merely placing a product into the stream of commerce with knowledge or awareness that the product would end up in a particular forum, without more, is sufficient for that forum to exercise personal jurisdiction over the defendant. Rather, to make out a prima facie case for personal jurisdiction, the plaintiff must point to some affirmative conduct by the defendant to deliver its product to the forum. Id. at 1074-75; see also Plant Food Co-op v. Wolfkill, 633 F.2d 155, 159 (9th Cir.1980) (stating that “[the defendant] engaged in affirmative conduct to deliver its product into Montana.”).

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