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Personal Jurisdiction Over "Absent" Personal Jurisdiction Over Absent Product Liability Defendants

Strategies to Establish or Defeat Personal Jurisdiction and Proactive Steps to Obtain Desired Jurisdiction

T d ’ f l f

1pm Eastern | 12pm Central | 11am Mountain | 10am Pacific THURS DAY, OCTOBER 13, 2011

Today’s faculty features: Melissa Murphy-Petros, Wilson Elser Moskowitz Edelman & Dicker, Chicago Ningur Akoglu, Herzfeld & Rubin, New Y

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Cary S . S klaren, Herzfeld & Rubin, New Y

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Presenter Title

Melissa A. Murphy-Petros Of Counsel Wilson Elser

Office Date

“Stream of Commerce” v. “Stream of Commerce Plus”

• I. The Current Supreme Court Landscape

Commerce Plus

5

Introduction

• Personal jurisdiction is frequently litigated in

Personal jurisdiction is frequently litigated in Personal jurisdiction is frequently litigated in Personal jurisdiction is frequently litigated in product liability cases. product liability cases.

6

When the When the product defendant is product defendant is “absent absent” from from When the When the product defendant is product defendant is absent absent from from plaintiff’s chosen forum, the plaintiff’s chosen forum, the personal jurisdiction personal jurisdiction question generally distills to the question generally distills to the scope and scope and application application of the stream

• f the stream of commerce
• f commerce theory

theory of

• f

specific jurisdiction. specific jurisdiction.

7

What is the stream of commerce theory? theory?

• Personal jurisdiction may be permissible over an

Personal jurisdiction may be permissible over an Personal jurisdiction may be permissible over an Personal jurisdiction may be permissible over an “absent” defendant whose product has traveled “absent” defendant whose product has traveled through a through a chain of distribution or manufacture chain of distribution or manufacture before reaching its before reaching its ultimate consumer. ultimate consumer.

8

Two Key Factors

1) 1) Defendant is Defendant is a non a non-resident resident acting outside acting outside of

• f

1) 1) Defendant is Defendant is a non a non resident resident acting outside acting outside of

• f

plaintiff’s chosen forum. plaintiff’s chosen forum. 2) Defendant has Defendant has placed a laced a product into the roduct into the stream stream ) p p p p

• f commerce that causes harm inside
• f commerce that causes harm inside plaintiff’s

plaintiff’s chosen forum. chosen forum.

9

Origin World World-wide Volkswagen v wide Volkswagen v Woodson Woodson World World wide Volkswagen v wide Volkswagen v. Woodson Woodson, 444 U.S. 444 U.S. 286 (1980). 286 (1980).

10

World-Wide Volkswagen

• May an Oklahoma court exercise PJ over an

May an Oklahoma court exercise PJ over an May an Oklahoma court exercise PJ over an May an Oklahoma court exercise PJ over an automobile retailer and wholesaler, both New automobile retailer and wholesaler, both New York corporations, in a York corporations, in a product liability action? product liability action?

• Defendants’ only contact with Oklahoma was

Defendants’ only contact with Oklahoma was through through the sale of a car the sale of a car to a non-resident to a non-resident consumer consumer in New York, who then drove the car in New York, who then drove the car to to Oklahoma where the Oklahoma where the subject accident occurred. subject accident occurred.

11

World-Wide Volkswagen

• No PJ in Oklahoma

No PJ in Oklahoma – No PJ in Oklahoma No PJ in Oklahoma

– Defendants did not make any efforts, either directly or indirectly, to serve the Oklahoma market. – PJ over defendants cannot be based solely upon unilateral act of the plaintiff-consumer.

12

World-Wide Volkswagen

• The Supreme Court rejected plaintiff

The Supreme Court rejected plaintiff’s argument s argument The Supreme Court rejected plaintiff The Supreme Court rejected plaintiff s argument argument that it was foreseeable to defendants that the that it was foreseeable to defendants that the car car could cause injury in Oklahoma because cars are could cause injury in Oklahoma because cars are mobile by their “very design and purpose.” mobile by their “very design and purpose.”

13

World-Wide Volkswagen

• Relevant foreseeability is

Relevant foreseeability is based on based on defendan defendant’s s Relevant foreseeability is Relevant foreseeability is based on based on defendan defendant s conduct and connection with the conduct and connection with the forum State – forum State – based on based on those those factors, could defendan factors, could defendant foresee t foresee being sued there? being sued there?

• The “mere likelihood that the product will find its

The “mere likelihood that the product will find its way into the way into the forum State” is forum State” is not “critical to the not “critical to the due due process analysis.” process analysis.”

14

World-Wide Volkswagen

• BUT

BUT – “ – “[T]he forum State does [T]he forum State does not exceed its not exceed its BUT BUT [T]he forum State does [T]he forum State does not exceed its not exceed its powers powers under the Due Process Clause if it asserts under the Due Process Clause if it asserts personal jurisdiction over a personal jurisdiction over a corporation that corporation that delivers its products into the stream of commerce delivers its products into the stream of commerce with the with the expectations that they will be purchased expectations that they will be purchased b b i i t th f S St t ” by consumers consumers i in th the f forum

• rum St

State. e.” ”

15

World-Wide Volkswagen

• Question left open:

Question left open: Under what circumstances will Under what circumstances will Question left open: Question left open: Under what circumstances will Under what circumstances will defendan defendant’s act of t’s act of participating participating in the in the placement placement

• f a product in the stream
• f a product in the stream of commerce
• f commerce render it

render it subject defendan subject defendant to t to personal jurisdiction in the personal jurisdiction in the forum state? forum state? In other words, when is In other words, when is it it f bl t t d f d t th th t it t it d t ill ill i d foreseea

• reseeabl

ble t to d defen endan ant th t that it t its pro produc uct t will ill wind d up in the forum state? up in the forum state?

16

Asahi Metal Industry Co., Asahi Metal Industry Co., Ltd. v. Superior Court of

• Ltd. v. Superior Court of

Asahi Metal Industry Co., Asahi Metal Industry Co., Ltd. v. Superior Court of

• Ltd. v. Superior Court of

California, California, 488 U.S. 102 (1987). 488 U.S. 102 (1987).

17

Asahi

• Recognize lower federal and state courts

Recognize lower federal and state courts’ differing differing Recognize lower federal and state courts Recognize lower federal and state courts differing differing interpretations of interpretations of World-Wide Volkswagen World-Wide Volkswagen’s ’s “stream of commerce” statement. “stream of commerce” statement. BUT – BUT – Did not resolve the conflict. id not resolve the conflict.

18

Asahi – “Stream of Commerce Plus”

• Plurality

Plurality – Justice O Justice O’Connor, writing; Chief Justice Connor, writing; Chief Justice Plurality Plurality Justice O Justice O Connor, writing; Chief Justice

• nnor, writing; Chief Justice

Rehnquist and Justices Powell and Scalia, joining Rehnquist and Justices Powell and Scalia, joining

19

Asahi – “Stream of Commerce Plus”

• A defendant who places its product into the

A defendant who places its product into the A defendant who places its product into the A defendant who places its product into the stream stream of commerce

• f commerce is subject

is subject to the forum to the forum state’s specific jurisdiction only where it state’s specific jurisdiction only where it has also has also done something to done something to purposefully direct its product purposefully direct its product toward the toward the forum state. forum state.

20

Asahi – “Stream of Commerce Plus”

• “The

“The placement of lacement of a a product roduct into the stream of into the stream of commerce commerce, p p p p , without more, is not an act of without more, is not an act of the defendant purposefully the defendant purposefully directed toward the forum State. directed toward the forum State. Additional conduct of Additional conduct of the the defendant may indicate an inte defendant may indicate an intent or purpose to serve the nt or purpose to serve the defendant may indicate an inte defendant may indicate an intent or purpose to serve the nt or purpose to serve the market in the forum State, for market in the forum State, for example, designing the example, designing the product for the market in the product for the market in the forum State, advertising in forum State, advertising in the forum State, establis the forum State, establishing channels hing channels for for providing providing regular advice to customers in the forum State, or regular advice to customers in the forum State, or marketin marketing the the product throu roduct through a h a distributor who as distributor who as greed reed g p g p g g to serve as the sales agent in the forum State.” to serve as the sales agent in the forum State.”

21

Asahi – “Stream of Commerce Plus”

• “[A] defendant

[A] defendant’s awareness that the s awareness that the stream of stream of [A] defendant [A] defendant s awareness that the awareness that the stream of stream of commerce commerce may or will sweep the product into the may or will sweep the product into the forum State does not convert the mere act of forum State does not convert the mere act of placing the placing the product into the product into the stream an act stream an act purposefully directed toward the forum State.” purposefully directed toward the forum State.”

22

Asahi – “Stream of Commerce Plus”

• Plurality

Plurality – Justice Brennan, writing; Justices Justice Brennan, writing; Justices Plurality Plurality Justice Brennan, writing; Justices Justice Brennan, writing; Justices White, Marshall, and Blackmun, joining White, Marshall, and Blackmun, joining

23

Asahi – “Stream of Commerce Plus”

• Defendant is

Defendant is subject to subject to the forum state the forum state’s specific s specific Defendant is Defendant is subject to subject to the forum state the forum state s specific specific jurisdiction whenever it jurisdiction whenever it is is “aware” that the “aware” that the “final “final product is being product is being marketed marketed in the forum in the forum State.” State.” In In this circumstance, “the po this circumstance, “the possibility of a ssibility of a lawsuit” in lawsuit” in the forum state “cannot come as a the forum state “cannot come as a surprise.” surprise.”

24

Asahi – “Stream of Commerce Plus”

• Specifically rejects Justice O

Specifically rejects Justice O’Connor Connor’s view that s view that “a a Specifically rejects Justice O Specifically rejects Justice O Connor

• nnor s view that

view that a a plaintiff [must] show additional conduct directed plaintiff [must] show additional conduct directed toward the toward the forum before finding the exercise of forum before finding the exercise of jurisdiction over the jurisdiction over the defendant to be defendant to be consistent consistent with the with the Due Process Clause.” Due Process Clause.”

25

Which “stream” to follow?

• The Supreme Court

The Supreme Court’s failure to reach a s failure to reach a majority in majority in The Supreme Court The Supreme Court s failure to reach a failure to reach a majority in majority in Asahi Asahi left the law unsettled in federal and state left the law unsettled in federal and state courts. courts.

• The courts accordingly divided into three groups.

The courts accordingly divided into three groups.

26

“Stream of Commerce Plus”

• First and

First and Sixth Circuits Sixth Circuits

• Michigan

Michigan

• Mississippi

Mississippi

• Missouri

Missouri

• Missouri

Missouri

• Montana

Montana

• Nebraska

Nebraska

• New Hampshire

New Hampshire

• Pennsylvania

Pennsylvania

• Rhode Island

Rhode Island

• Rhode Island

Rhode Island

• South Dakota

South Dakota

• District of

District of Columbia Columbia

27

“Stream of Commerce”

• In addition to

In addition to Asahi Asahi, these courts rely on the “expectation- , these courts rely on the “expectation- f f ” ” i W l W ld Wid Wid V V lk stream stream of f commerce commerce” ” sentence sentence i in Wor

• rld

ld-Wid Wide V Volk lkswagen swagen

• n the ground that
• n the ground that World-Wide Volkswagen

World-Wide Volkswagen is the last is the last Supreme Court case to Supreme Court case to yield a yield a majority on the amount of majority on the amount of contact required to support personal jurisdiction under the contact required to support personal jurisdiction under the contact required to support personal jurisdiction under the contact required to support personal jurisdiction under the stream of stream of commerce theory. commerce theory.

– Fifth, Seventh, and Eighth Circuits – Alabama Alabama – Arizona – North Dakota – Utah – Washington – West Virginia – Wisconsin

28

Deciding Not to Decide

• These courts decide each case on its own facts,

These courts decide each case on its own facts, These courts decide each case on its own facts, These courts decide each case on its own facts,

• ften after going through both tests.
• ften after going through both tests.

– Second, Third, and Eleventh Circuits – Illinois – Louisiana – Minnesota – New Jersey T – Texas

29

Why does it matter?

• Saia

Saia (Illinois) v. (Illinois) v. Savage Savage (Connecticut) (Connecticut) – same same Saia Saia (Illinois) v. (Illinois) v. Savage Savage (Connecticut) (Connecticut) same same facts, opposite results facts, opposite results

• Illinois –

Illinois – placement of lacement of product in roduct in national stream national stream p p p p

• f commerce supports PJ in Illinois
• f commerce supports PJ in Illinois
• Connecticut –

Connecticut – same conduct does not su ame conduct does not supp pport PJ

• rt PJ

pp pp in Connecticut in Connecticut

30

• J. McIntyre Machinery, Ltd. v. Nicastro,
• J. McIntyre Machinery, Ltd. v. Nicastro, 131 S. Ct.

131 S. Ct.

• J. McIntyre Machinery, Ltd. v. Nicastro,
• J. McIntyre Machinery, Ltd. v. Nicastro, 131 S. Ct.

131 S. Ct. 2780 (June 27, 2011) 2780 (June 27, 2011)

31

Nicastro

• Recognized confusion caused by

Recognized confusion caused by Asahi Asahi, but did , but did Recognized confusion caused by Recognized confusion caused by Asahi Asahi, but did , but did not really resolve it. not really resolve it.

32

Nicastro

• The

The jurisdictional facts – urisdictional facts – j

– Plaintiff was injured in New Jersey by a machine manufactured by defendant in England. – Defendant was incorporated in England and has its principle place Defendant was incorporated in England and has its principle place

• f business there.

– Defendant sells its machines throughout the U.S. through a U.S. distributor that is not under its control distributor that is not under its control. – Defendant’s management attended annual conventions for the scrap recycling industry in the U.S., but never in New Jersey. Only four of defendant’s machines ended up in New Jersey – Only four of defendant s machines ended up in New Jersey, including the one at issue. – Defendant held both U.S. and European patents on its recycling technology

33

technology.

Nicastro

• No PJ in New Jersey and no answer to

No PJ in New Jersey and no answer to Asahi Asahi No PJ in New Jersey and no answer to No PJ in New Jersey and no answer to Asahi Asahi conundrum. conundrum.

34

Nicastro – Kennedy plurality

• The Kennedy plurality

The Kennedy plurality – “ – “Stream of Stream of Commerce Commerce The Kennedy plurality The Kennedy plurality Stream of Stream of Commerce Commerce Plus” (O’Connor) Plus” (O’Connor)

35

Nicastro – Kennedy plurality

• “The defendant

The defendant’s transmission of s transmission of goods permits goods permits The defendant The defendant s transmission of transmission of goods permits goods permits the exercise of the exercise of jurisdiction only where the jurisdiction only where the defendan defendant can t can be said to have targeted the forum; be said to have targeted the forum; as a general rule it is not enough that the as a general rule it is not enough that the defendant might have predicted that its goods will defendant might have predicted that its goods will h th h th f f St St t ” reac reach th h the f forum

• rum St

State. e.”

36

Nicastro – Kennedy plurality

• “Justice Brennan

Justice Brennan’s concurrence [in s concurrence [in Asahi Asahi], ], Justice Brennan Justice Brennan s concurrence [in concurrence [in Asahi Asahi], ], advocating a advocating a rule based on general notions of rule based on general notions of fairness and foreseeability, is inconsistent with the fairness and foreseeability, is inconsistent with the premises of premises of lawful judicial power. lawful judicial power. This Court’s This Court’s precedents make clear that it precedents make clear that it is the is the defendant’s defendant’s ti ti t t hi hi t ti th th t t ac acti tions,

• ns, no

not hi t his expec expectati tions,

• ns, th

that t empower empower a State’s courts to State’s courts to subject him subject him to to judgment.” judgment.”

37

Nicastro – Kennedy plurality

• BUT

BUT – This is a fact This is a fact-specific inquiry and its results specific inquiry and its results BUT BUT This is a fact This is a fact specific inquiry and its results specific inquiry and its results will vary from case to case: will vary from case to case:

– “The defendant’s conduct and the economic realities of the market the defendant seeks to serve will differ across cases, and judicial exposition will, in common- law fashion clarify the contours of that principle ” law fashion, clarify the contours of that principle.

38

Nicastro – Kennedy plurality

• Two guidelines for future litigation:

Two guidelines for future litigation: Two guidelines for future litigation: Two guidelines for future litigation:

1) A “forum-by-forum” analysis of defendant’s conduct is required. 2) Although it would be an “exceptional case,” it is possible for a defendant to be subject to the jurisdiction of federal courts but not subject to the jurisdiction of federal courts but not subject to the jurisdiction of any particular state court.

39

Nicastro – Breyer concurrence

• Deciding Not

Deciding Not to to Decide Decide Deciding Not Deciding Not to to Decide Decide

• Justices Breyer and Alito concurred in the

Justices Breyer and Alito concurred in the jud udgment that New ment that New Jerse Jersey did not have did not have personal ersonal j g j g y p jurisdiction over defendant, but opined that this jurisdiction over defendant, but opined that this con conclusion can be lusion can be based on long-stan based on long-standing ing precedents such as precedents such as International Shoe International Shoe and would and would not go further than that. not go further than that.

40

Nicastro – Ginsburg dissent

• “Stream of Commerce

Stream of Commerce” Stream of Commerce Stream of Commerce

• Justice Ginsburg writing; Justices Sotomayor and

Justice Ginsburg writing; Justices Sotomayor and Ka Kagan an joinin

• ining

g j g j g

• Focus on

Focus on “fairness” and “foreseeability” “fairness” and “foreseeability”

41

Conclusion

• Still no uniform national interpretation of the

Still no uniform national interpretation of the Still no uniform national interpretation of the Still no uniform national interpretation of the stream of commerce theory. stream of commerce theory.

• Both theories –

Both theories – O’Connor and Brennan – ’Connor and Brennan – are still re still in play. in play.

42

Contact us

Melissa A. Melissa A. Murph Murphy-Petros

• Petros

y

Of Counsel Chicago, IL 312.821.6154 melissa.murphy-petrose@wilsonelser.com

43

Personal Jurisdiction Over "Absent" Product-Liability Defendants

II II. Effect of Recent Decisions

• n the Application of
• n the Application of

Long-Arm Statutes and Jurisdictional Theories

Ningur Akoglu

OUTLINE G l J i di ti G d ’ Eff t

• General Jurisdiction – Goodyear’s Effect
• Specific Jurisdiction – Nicastro’s Effect

f S

• Acquiring Jurisdiction – Viability of Long-Arm Statutes
• Acquiring Jurisdiction – Alternate Paths
• Piercing the Corporate Veil / Agency (general and specific jurisdiction)
• Piercing the Corporate Veil / Agency Light (specific jurisdiction)
• Relaxed “Relatedness” (specific jurisdiction)

Relaxed Relatedness (specific jurisdiction)

• Internet Activities
• The Federal Long-Arm Statute
• II. Long-Arm Statutes and Jurisdictional Theories - 45

General Jurisdiction – Goodyear’s Effect Precedent

Helicopteros (1983)  borrowed the “continuous and systematic contacts” label from Perkins (1952);  h ld th t l hi h l h ( t 80%) d i id t l  held that regular high volume purchases (up to 80%) and incidental contacts (training and business visits) were insufficient;  but did not explain what other activity might be regarded as  but did not explain what other activity might be regarded as continuous and systematic. Some lower courts, over time, developed expansive notions of general jurisdiction based on business activity in the state.

• II. Long-Arm Statutes and Jurisdictional Theories - 46

General Jurisdiction – Goodyear’s Effect Goodyear’s Jurisdictional Facts

• Two North Carolina teenagers had died in a bus crash outside of Paris.
• The estate blamed the accident on the tires manufactured and sold by
• The estate blamed the accident on the tires manufactured and sold by

Goodyear’s subsidiaries in Turkey, France and Luxembourg.

• The model of tire was marketed and sold and in Europe, not in the U.S.
• But a few special orders of the model had found their way to the U.S.
• The actual tires at issue had had no contact with the U.S.

Jurisdictional Theory

 The NC Court of Appeals: continuous flow of other tires by manufacturers (approx. 44,000 tires) continuous flow of other tires by manufacturers (approx. 44,000 tires)

• ver 3 years into NC via the “stream of commerce” = general jurisdiction.

 Belated assertion of the "single enterprise" theory.

• II. Long-Arm Statutes and Jurisdictional Theories - 47

General Jurisdiction – Goodyear’s Effect Unanimous Rejection of Stream of Commerce continuous and systematic affiliations extend to states “in which the corporation is fairly regarded as at home.”

Paradigm bases: domicile, place of incorporation, and principal place of business.

Not enough Not enough

“Doing business” in some sense (ordinary sales/purchases, servicing, and marketing), especially if relatively insubstantial objectively or given the defendant’s operations the defendant s operations.

See Viasystems, Inc. v. EBM-Papst St. Georgen GmbH & Co., 646 F.3d 589 (8th Cir. July 21, 2011) (“Our precedent and the Supreme Court's decision in Goodyear make clear that even if a foreign corporation ‘pours its products’ into a regional distributor with the expectation that the distributor will penetrate a discrete, multi-State trade area this connection alone is ‘so limited’ that it ‘is an inadequate basis for the exercise of general jurisdiction.’”) (internal

• II. Long-Arm Statutes and Jurisdictional Theories - 48

citation omitted).

General Jurisdiction – Goodyear’s Effect Needed

Plurality of contacts: property, facilities, centralized activities, employment, regulatory, as well as sales and purchases.

O Q i Open Questions

• Registering to do business or Appointing SoP agents.
• Imputation of subsidiaries’/distributors’ activities to manufacturers.
• II. Long-Arm Statutes and Jurisdictional Theories - 49

Specific Jurisdiction – Nicastro’s Effect Purposeful Availment*

≠

Plurality (eschewing Asahi’s Brennan plurality): Stream of Commerce + Prediction of Product Reaching the Forum Concurrence (under any of past opinions): Mere Foreseeability + Single Occurrence / Isolated Sales Mere Foreseeability + Single Occurrence / Isolated Sales (But other factors, not present in Nicastro, may be enough to infer intention to serve and submit to the laws of the forum state.)

*Justice Scalia: “What’s that crazy word?. . . Availment. I meant to look that up. I am not sure it’s ever been used except in this courtroom”, Oral arguments in Goodyear v. Brown, t i t 49 l 4

• II. Long-Arm Statutes and Jurisdictional Theories - 50

transcript p. 49, ln.4.

Specific Jurisdiction – Nicastro’s Effect Reaffirms

 Contact due to unilateral activity of others is not sufficient. Hanson (1958); Kulko (1978), WorldwideVW (1980).  A single direct contact or direct efforts to target the forum may be

• sufficient. Hess (1927); McGee (1957); Burger King (1985).

Overrules

Lower-court jurisprudence that intent to serve the nationwide market is intent to serve each of the states within that market, unless defendant shows manifest intent to exclude itself from a particular state or states.*

* Barone v. Rich Bros. Interstate Display Fireworks Co., 25 F.3d 610 (8th Cir. 1994); Tobin v. Astra Pharm. Prods., Inc., 993 F.2d 528 (6th Cir. 1993); OneBeacon Ins. Group v. Tylo AB, 731 F.Supp.2d 250 (D. Conn. 2010); McGlone v. Thermotex, Inc., 740 F.Supp.2d 381 (E.D.N.Y. 2010); Power Integrations, Inc. v. BCD Semiconductor Corp 547 F Supp 2d 365 (D Del 2008)

• II. Long-Arm Statutes and Jurisdictional Theories - 51

Semiconductor Corp., 547 F.Supp.2d 365 (D. Del. 2008).

Specific Jurisdiction – Nicastro’s Effect Concrete guidance?

Plurality (on the “plus” / “something more”): The defendant’s conduct and the economic realities of the market the defendant seeks to serve will differ across cases and market the defendant seeks to serve will differ across cases, and judicial exposition will, in common-law fashion, clarify the contours of that principle. Concurrence (deciding Nicastro on its narrow facts) No change to the law without a better understanding of the relevant contemporary commercial circumstances. p y

Open Questions / Lower-Court Appplication

A General rule? A General rule?  Some courts simply quote the plurality as the holding of Nicastro.  Some courts follow Asahi/Worldwide VW and ignore Nicastro wholly.

• II. Long-Arm Statutes and Jurisdictional Theories - 52

Specific Jurisdiction – Nicastro’s Effect

Open Questions / Lower-Court Appplication cont.

Is Nicastro merely an isolated-occurrence case?

State v. NV Sumatra Tobacco Trading Co., 2011 Tenn. App. LEXIS 470 (Tenn Ct App Aug 24 2011) (Tenn. Ct. App. Aug. 24, 2011) “[The machine in Nicastro] was an isolated defective product”; “the only machine” to find its way into the forum state”  “nationwide distribution should not, ipso facto, insulate manufacturers jurisdiction” (jurisdiction over manufacturer, 11.5M cigarettes of which reached the forum). Ainsworth v. Cargotec USA, Inc., 2011 U.S. Dist. LEXIS 109255 (S.D.

• Miss. Sept. 23, 2011)

“[In Nicastro], a single machine manufactured…shipped to the forum…”.  “no reason to depart from the Fifth Circuit precedents following Asahi’s Brennan plurality” (203 forklifts over 10 years in MS via a ti id di t ib t (1 55% f U S l ))

• II. Long-Arm Statutes and Jurisdictional Theories - 53

nationwide distributor (1,55% of U.S sales)).

Specific Jurisdiction – Nicastro’s Effect

Open Questions / Lower-Court Appplication cont. p ppp Northern Ins. Co. of N.Y. v. Constr. Navale Bordeaux, 2011 U.S. Dist. LEXIS 74132 (S D Fla July 11 2011) LEXIS 74132 (S.D. Fla. July 11, 2011) Sales of 20 boats over the last 2.4 years directly to FL dealers; C t l d l ’ l d k ti Control over dealers’ sales and marketing; Appearance at six trade shows in FL satisfy the general-jurisdiction provision of the FL long-arm statute, but the manufacturer could not have anticipated being hailed into FL t t di t f l ld i CT th t ht fi d courts over a warranty dispute for a vessel sold in CT that caught fire and got serviced in FL.

• II. Long-Arm Statutes and Jurisdictional Theories - 54

Specific Jurisdiction – Nicastro’s Effect Conclusion

• The Brennan approach is still alive.
• No meaningful standard on interpretation of sales volume and

revenues. Control over distribution and marketing a key item to be litigated

• Control over distribution and marketing, a key item to be litigated.
• Inconsistency to reign until App. Courts and the SCOTUS step in.
• II. Long-Arm Statutes and Jurisdictional Theories - 55

Acquiring Jurisdiction

Viability of Long-Arm Statutes

Two Categories: 1) Provides jurisdiction as long as it is not inconsistent with the 1) Provides jurisdiction as long as it is not inconsistent with the federal constitutional restrictions. 2) Enumerates with some particularity factual situations  Questions of interpretation of the words used often arise.  Nicastro & Goodyear raise serious questions about the viability and constitutionality of some provisions of these statutes.

• II. Long-Arm Statutes and Jurisdictional Theories - 56

Delaware Long-Arm Statute 10 Del. C. § 3104 (2011)

(c)(1) Transacts any business or performs any character of work or service in the State; ( )(4) C t ti i j i th St t t id f th St t b (c)(4) Causes tortious injury in the State or outside of the State by an act or omission outside the State if the person regularly does or solicits business, engages in any other persistent course of conduct in the State or derives substantial revenue from services or things used or State or derives substantial revenue from services, or things used or consumed in the State;

 (c)4 is a general-jurisdiction provision. LaNuova D & B S.p.A. v. Bowe Co., 513 A.2d 764, 768 (Del. 1986).  $270,000 in sales to exclusive national distributor resulting in 50 tons of  $270,000 in sales to exclusive national distributor resulting in 50 tons of asbestos per month flowing into DE over 10 years satisfies (c)(1) “transacting business” and (c)(4)’s “persistent course of conduct” and “substantial revenue”. Boone v. Oy Partek Ab, 724 A.2d 1150, (Del. Super. Ct. 1997).

• II. Long-Arm Statutes and Jurisdictional Theories - 57

Georgia Long-Arm Statute O.C.G.A. § 9-10-91 (2011)

(1) Transacts any business within this state; (3) Commits a tortious injury in this state caused by an act or omission

• utside this state if the tort-feasor regularly does or solicits business, or

engages in any other persistent course of conduct, or derives substantial revenue from goods used or consumed or services rendered i thi t t in this state;

 A component-part manufacturer’s shipment of goods to an intermediary with the expectation that they will be distributed to a region that includes GA amounts to “transacting business” in GA. Vibratech, Inc. v. Frost, 661 S.E.2d 185 (Ga. Ct.

• App. 2008).
• II. Long-Arm Statutes and Jurisdictional Theories - 58

Florida Long-Arm Statute

• Fla. Stat. § 48.193 (2011)

§ ( )

(1)(f) Causing injury to persons or property within this state arising out of an act or omission by the defendant outside this state, if, at or about the time of the injury, either:

• 1. The defendant was engaged in solicitation or service activities within

this state; or 2 P d t t i l thi d i d

• 2. Products, materials, or things processed, serviced, or

manufactured by the defendant anywhere were used or consumed within this state in the ordinary course of commerce, trade, or use.

 Foreign fireworks reseller’s assembly of 3,797 cases of fireworks for shipment to FL over 2 years amounted to “processing” under (1)(f)(2) justifying jurisdiction

• e

yea s a

• u

ed o p ocess g u de ( )( )( ) jus y g ju sd c o where an independent, single sale to PA company caused injury to its FL

• employee. Wetzel v. Fisherman's Wharf of Pompano Beach Inc., 771 So. 2d 1195

(Fla. 4th DCA 2000), but see Blumberg v. Steve Weiss & Co., 922 So. 2d 361 (2006)

• II. Long-Arm Statutes and Jurisdictional Theories - 59

(2006).

• Fla. Stat. § 48.181 (2011)

Service on nonresident engaging in business in state

(3) Any person, firm, or corporation which sells, consigns, or leases by any means whatsoever tangible or intangible personal property, through brokers, jobbers, wholesalers, or distributors to any person, firm, or ti i thi t t i l i l d t b b th d corporation in this state is conclusively presumed to be both engaged in substantial and not isolated activities within this state and

• perating, conducting, engaging in, or carrying on a business or

business venture in this state business venture in this state.

• Fla. Stat. § 48.193 (2011)

(2) A defendant who is engaged in substantial and not isolated activity within this state, whether such activity is wholly interstate, intrastate, or

• therwise, is subject to the jurisdiction of the courts of this state,

whether or not the claim arises from that activity.

 See Northern Ins. Co. of N.Y. v. Constr. Navale Bordeaux, 2011 U.S. Dist. LEXIS 74132 (S.D. Fla. 2011), discussed on slide 9.

• II. Long-Arm Statutes and Jurisdictional Theories - 60

New York Long-Arm Statute N.Y. C.P.L.R. § 302 (2011)

(a)(3) commits a tortious act without the state causing injury to person or property within the state, except as to a cause of action for defamation

• f character arising from the act if he
• f character arising from the act, if he

(i) regularly does or solicits business, or engages in any other persistent course of conduct, or derives substantial revenue from goods used or consumed or services rendered in the state or goods used or consumed or services rendered, in the state, or (ii) expects or should reasonably expect the act to have consequences in the state and derives substantial revenue from interstate or international commerce;

• te state o

te at o a co e ce;

 The substantial-interstate-revenue requirement is designed to exclude defendants whose operations are of a local character. Ingraham v. Carroll, 687 N.E.2d 1293 (N.Y. 1997), accord LaMarca v. Pak-Mor Mfg. Co., 735 N.E.2d 883 (N Y 2000)

• II. Long-Arm Statutes and Jurisdictional Theories - 61

(N.Y. 2000).

Acquiring Jurisdiction - Alternate Paths

Piercing the Corporate Veil / Agency (general jurisdiction or specific jurisdiction) (general jurisdiction or specific jurisdiction)

• II. Long-Arm Statutes and Jurisdictional Theories - 62

Acquiring Jurisdiction - Alternate Paths

Piercing the Corporate Veil / Agency Light ( ifi j i di ti ) (specific jurisdiction)

• II. Long-Arm Statutes and Jurisdictional Theories - 63

Acquiring Jurisdiction - Alternate Paths

Relaxed “Relatedness” (specific jurisdiction) ( p j )

Most jurisdictions apply the “but for” or “proximate cause” test, requiring that a claim arise out of the forum contacts in a narrow sense. The minority “substantial connection” test: A claim need not arise directly from the forum contacts. It is sufficient that an alleged injury is substantially connected to defendant’s business relationships purposefully established in the p p p y forum.

See Third Nat'l Bank v. Wedge Group, Inc., 882 F.2d 1087 (6th Cir. 1989); I Oil S ill b A C di ff C t f F 699 F 2d 909 (7th Ci Ill In re Oil Spill by Amoco Cadiz off Coast of France, 699 F.2d 909, (7th Cir. Ill. 1983); Promero, Inc. v. Mammen, 2002 U.S. Dist. LEXIS 21232 (N.D. Ill. 2002); Snowney v. Harrah's Entertainment, Inc., 112 P.3d 28, (Cal. 2005) (following Vons Companies Inc v Seabest Foods Inc 926 P2d 1085 (Cal 1996))

• II. Long-Arm Statutes and Jurisdictional Theories - 64

Vons Companies, Inc. v. Seabest Foods, Inc., 926 P.2d 1085 (Cal. 1996)).

Acquiring Jurisdiction - Alternate Paths

Internet Activities

The sliding-scale Zippo test — level of interactivity and commercial nature of the exchanged information on a web site.  is under- and overinclusive  ignores modern geolocation technologies. In the future courts are likely to consider a defendant’s ability and decision to implement of geolocation technologies as part of the purposeful availment analysis. p p y

See e g Nat'l Fed'n of the Blind v Target Corp 452 F Supp 2d 946 (N D Cal See e.g. Nat l Fed n of the Blind v. Target Corp., 452 F. Supp. 2d 946 (N.D. Cal. 2006) (considering the feasibility of defendant to use geolocation tools to offer a "separate website" for CA in deciding to dismiss claims of CA law violations).

• II. Long-Arm Statutes and Jurisdictional Theories - 65

Acquiring Jurisdiction - Alternate Paths

Federal Long-Arm Statute - FRCP 4(k)(2)

allows jurisdiction to be obtained when the claim arises under federal law and th d f d t i t bj t t j i di ti i t t the defendant is not subject to jurisdiction in any state.

U.S. v. Swiss American Bank, 191 F.3d 30 (1st Cir. 1999) (plaintiff must certify that defendant is not subject to suit in any state, then the burden shifts to defendant to show that it is subject to suit in one or more states); ISI Int’l Inc. v. Borden Ladner Gervais LLP, 256 F.3d 548, 552 (7th Cir. 2001) (a defendant who does not concede to jurisdiction of any state may be subject to jurisdiction based on national contacts). ju sd ct o based o at o a co tacts)

• II. Long-Arm Statutes and Jurisdictional Theories - 66

Ningur Akoglu nakoglu@herzfeld-rubin.com (212) 471-8459 ( )

• II. Long-Arm Statutes and Jurisdictional Theories - 67

Personal Jurisdiction Over "Absent" Product Liability Defendants

III

Absent Product Liability Defendants

III.

Practical implications for p manufacturers, suppliers, i d l i tiff insurers and plaintiffs

Cary Stewart Sklaren

Outline Outline

• Pre‐Lawsuit Personal Jurisdiction Planning

Pre Lawsuit Personal Jurisdiction Planning, Plaintiffs

• Pre Lawsuit Personal Jurisdiction Planning
• Pre‐Lawsuit Personal Jurisdiction Planning,

Defendants (Manufacturers, Insurers) D li i h J i di i l Di

• Dealing with Jurisdictional Discovery

69

Counsel for plaintiffs counsel for Counsel for plaintiffs, counsel for defendants and insurers need to h l j i di ti i approach personal jurisdiction issues

• ver “absent” products liability

defendants with their eyes wide open. Nothing should happen by accident. Nothing should happen by accident.

70

Pre‐Lawsuit Planning: Plaintiffs Pre Lawsuit Planning: Plaintiffs

• Policy Question for Client and Counsel:

Policy Question for Client and Counsel: Is personal jurisdiction, in this forum, against this defendant, worth fighting for? this defendant, worth fighting for?

–Delay –Aggravation –Reward Reward –Expense

71

Pre‐Lawsuit Planning: Plaintiffs Pre Lawsuit Planning: Plaintiffs

• Delay in Beginning Substantive Discovery

Delay in Beginning Substantive Discovery

– Jurisdictional discovery of defendant; If suing a non US defendant possible need to – If suing a non‐US defendant, possible need to resort to Hague Evidence Convention; – Inevitable motion practice (motions to compel – Inevitable motion practice (motions to compel, motions for protective orders); – Possible interlocutory appeals (if permitted); Possible interlocutory appeals (if permitted); writs to intermediate appellate courts.

72

Pre‐Lawsuit Planning: Plaintiffs Pre Lawsuit Planning: Plaintiffs

• Do I Need This Defendant?

Do I Need This Defendant?

– Is there a deep‐pocket, easily served local entity (e.g., subsidiary, distributor, importer, retailer)? ( g , y, , p , ) – Will state laws enable me to get a full recovery from the local entity? – Will an entity sued join the far‐away defendant? – Is discovery from the far‐away defendant crucial? (A d th H E id C ti f US (And the Hague Evidence Convention, for non‐US entities, if required, too cumbersome, expensive

• r restrictive?)

73

Pre‐Lawsuit Planning: Defendants Pre Lawsuit Planning: Defendants

• Policy Question No 1 for Defendants

Policy Question No. 1 for Defendants, Counsel and Insurers: Have you done your homework? homework?

• Have all of the facts, figures and data been

gathered and analyzed so as to know about gathered and analyzed so as to know about the relationships and details among the defendant and others in the chain of defendant and others in the chain of distribution with respect to the forum?

74

Pre‐Lawsuit Planning: Defendants Pre Lawsuit Planning: Defendants

• Policy Question No. 2 for Defendants,

Policy Question No. 2 for Defendants, and Counsel, and Insurers: Is personal jurisdiction in any forum Is personal jurisdiction, in any forum, against any plaintiff, worth resisting?

P

d / bl

–Precedent/Publicity –Expense –Aggravation –Reward

75

Pre‐Lawsuit Planning: Defendant Pre Lawsuit Planning: Defendant

• Aggravation

Aggravation

– Jurisdictional discovery; Witness depositions; – Witness depositions; – Inquiry into sensitive business and legal matters, trade secrets financial issues; trade secrets, financial issues; – Intrusive electronic discovery; Business interruption from preparation for and – Business interruption from preparation for and depositions of Apex personnel or other high‐level employees. employees.

76

Pre‐Lawsuit Planning: f d ll h d Defendant Will Fight Jurisdiction

• Preparation for Jurisdictional Discovery

p y

– What kind of information will the plaintiff seek?

• Internal/external correspondence (including email),

/ p ( g ), memos, agreements, etc.;

• Board of directors level minutes and materials;
• Financial information (much of it not public);
• Names of those officers and employees, past and

present involved or knowledgeable; present, involved or knowledgeable;

• Paper, electronic materials, “things”;
• Materials re relationship with subsidiary/parent.

p y/p

77

Pre‐Lawsuit Planning: f d ll h d Defendant Will Fight Jurisdiction

• What is the time frame? Pre‐computer?
• Where will the information be located and by whom?
• Who will review the information for client/counsel? Are

t l ti f i ? translations necessary for review?

• Are there any trade secrets? Are non‐disclosures and

protective orders needed? p

• Does disclosure violate any local (non‐US) laws?
• What formats will be used for production of materials?
• What are the ramifications of Apex depositions?
• How will e‐discovery be handled? (Litigation hold?)

78

Pre‐Lawsuit Planning: f d ll h d Defendant Will Fight Jurisdiction

• Is the defendant vulnerable to a general

s t e de e da t u e ab e to a ge e a jurisdiction attack like the one referenced by Justice Ginsburg in Goodyear?

“Respondents belatedly assert a "single enterprise" theory, asking us to consolidate petitioners' ties to North Carolina with those of Goodyear USA and North Carolina with those of Goodyear USA and

• ther Goodyear entities. . . . In effect, respondents

would have us pierce Goodyear corporate veils, at least for jurisdictional purposes ” Goodyear Dunlop least for jurisdictional purposes. Goodyear Dunlop Tires Operations, S.A. v. Brown, 180 L.Ed.2d 796, 809‐810 (2011).

79

Pre‐Lawsuit Planning: d l d Considering General Jurisdiction

• Justice Ginsburg cited L Brilmayer &
• Justice Ginsburg cited L. Brilmayer &
• K. Paisley, Personal Jurisdiction and

Substantive Legal Relations: Corporations, Conspiracies, and Corporations, Conspiracies, and Agency, 74 Cal. L. Rev. 1, 14, 29‐30 (1986) ith it h t li t f il (1986) with its short list of veil‐ piercing factors.

80

Pre‐Lawsuit Planning: d l d Considering General Jurisdiction

– Is subsidiary “financially dependent on the parent”; – Is subsidiary “not an independent decision making body”; body ; – Is “subsidiary's administrative organization incomplete”; D “ t d b idi j t i t t d – Do “parent and subsidiary project an integrated posture to the public”; – Do “parent and subsidiary interchange p y g information, personnel, and group resources”; and – Do “parent and subsidiary present consolidated tax returns and/or annual reports ” returns and/or annual reports.

81

Pre‐Lawsuit Planning: d l d Considering General Jurisdiction

• Practically however each state has its own

Practically, however, each state has its own approach to general jurisdiction, veil‐piercing and the “single enterprise theory” and you and the single enterprise theory and you cannot avoid doing state‐specific research.

• In theory the “corporate veil” can be pieced
• In theory, the corporate veil can be pieced

in one state and not in another on the same set of facts set of facts.

82

Pre‐Lawsuit Planning: d l d Considering General Jurisdiction

• Recent statistics show successful veil‐piercing

Recent statistics show successful veil piercing in the parent‐subsidiary context in all situations is 20 56% (There is no separate situations is 20.56%. (There is no separate data for jurisdictional attacks.) John H Matheson Why Courts Pierce: An John H. Matheson, Why Courts Pierce: An Empirical Study of Piercing the Corporate Veil 7 Berkeley Bus L J 1 11 (2009) Veil, 7 Berkeley Bus. L.J. 1, 11 (2009).

83

Pre‐Lawsuit Planning: d l d Considering General Jurisdiction

• It has been suggested in opinions and articles that

It has been suggested in opinions and articles that “a more lenient standard applies in deciding whether to pierce the veil in order to establish jurisdiction, than in deciding whether the links are sufficient to make the shareholders liable for t d bt ” corporate debts.”

• 36.88% of attempts based on jurisdiction resulted

in piercing R b

t B Th Pi i th C t

in piercing. Robert B. Thompson, Piercing the Corporate

Veil: An Empirical Study, 76 Cornell L. Rev. 1036, 1060 (1991).

84

Pre‐Lawsuit Planning: d l d Considering General Jurisdiction

• In contrast Stephen M Bainbridge

In contrast, Stephen M. Bainbridge, Abolishing Veil Piercing, 26 Iowa J. Corp. L. 479 513 (2001) states: “Judicial opinions in 479, 513 (2001), states: Judicial opinions in this area tend to open with vague generalities and close with conclusory generalities and close with conclusory statements with little or no concrete analysis in between. There simply are no [sic] bright‐ in between. There simply are no [sic] bright line rules for deciding when courts will pierce the corporate veil.” the corporate veil.

85

Jurisdictional Discovery Jurisdictional Discovery

“[D]iscovery is not limited to issues [D]iscovery is not limited to issues raised by the pleadings, for discovery itself is designed to help define and clarify the issues. . . . [W]here issues arise as to jurisdiction or venue, di i il bl t t i th discovery is available to ascertain the facts bearing on such issues.”

h i d d Oppenheimer Fund, Inc. v. Sanders, 437 U.S. 340, 351 (1978) (footnotes and citations

• mitted)
• mitted).

86

Jurisdictional Discovery Jurisdictional Discovery

• There has been little analysis of jurisdictional

e e as bee tt e a a ys s o ju sd ct o a discovery because:

– “[I]t remains largely hidden from view.” – “[I]t is extremely discretionary.” – “[U]nlikely to be the subject of published trial court

• pinions ”
• pinions.

– “Appellate decisions are even less common.” S.I. Strong, Jurisdictional Discovery in United States S.I. Strong, Jurisdictional Discovery in United States Federal Courts, 67 Wash. & Lee L. Rev. 489, 490‐ 492 (2010).

87

Jurisdictional Discovery f d Non‐US Defendants

• Does the Hague Evidence Convention apply to
• es t e

ague de ce Co e t o app y to jurisdictional discovery?

• In federal courts, conventional wisdom says no,

y based on Societe National Industrielle Aerospatiale v. U.S. District Court, 482 U.S. 522 (1987) (1987).

• But the Supreme Court has not spoken.

S N t R thi ki J i di ti l Di

• See, Note, Rethinking Jurisdictional Discovery

Under the Hague Evidence Convention, 44 Vand. J Transnat’l L 155 (2011) (K B Gilchrist)

• J. Transnat l L. 155 (2011) (K.B. Gilchrist).

88

Jurisdictional Discovery ( f d ) (Specific Jurisdiction)

• In products liability cases specific

p y p jurisdictional discovery typically involves highly detailed interrogatories, requests for g y g , q production of documents, e‐discovery and depositions limited to the state at issue, the p , facts at issues and the defendant’s relationship with those in the state, as well p , as more general requests regarding international and interstate commerce.

89

Jurisdictional Discovery ( l d ) (General Jurisdiction)

• After Goodyear, in products liability cases

y , p y general jurisdictional discovery typically involves highly detailed interrogatories, g y g , requests for production of documents, e‐ discovery and depositions limited to the state y p at issue and the defendant’s relationship with those in the state. “Stream of commerce” is not an aspect of general jurisdiction. j

90

Cary Stewart Sklaren (212) 471‐8468 (212) 471 8468 CSklaren@herzfeld‐rubin.com