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Personal Jurisdiction: The Enigma of Minimum Contacts

PURPOSEFUL AVAILMENT

The toughest problem in applying the minimum contacts test has been defining the “quality and nature” that makes a contact sufficient to support jurisdiction. Many cases have relied on the statement in Hanson v. Denckla that the defendant must have “purposely avail[ed] itself of the privilege of conducting activities within the forum State, thus invoking the benefits and protections of its laws.” 357 U.S. 235, 253 (1958). This language emphasizes that the defendant must have made a deliberate choice to relate to the state in some meaningful way before she can be made to bear the burden of defending there. Unilateral contacts of the plaintiff or others will not do.

Although scholars have criticized this emphasis on the defendant’s purposeful in-state contacts,[2] the Court has consistently required it. In World-Wide Volkswagen v. Woodson, 444 U.S. 286 (1980), for example, the Court concluded that a New York Audi dealer, Seaway, had not purposely availed itself of the opportunity to conduct activities in Oklahoma, although it could foresee that its buyers might take its cars there. The dealer had not sold cars there, advertised there, cultivated Oklahoma customers, or deliberately focused on Oklahoma as a market. Thus, it had not sought any direct benefit from Oklahoma activities sufficient to require it to submit to jurisdiction there. In Keeton v. Hustler Magazine, Inc., 465 U.S. 770, 780 (1984), by contrast, the defendant had purposely availed itself of the opportunity to engage in in-state activities, by distributing its magazines within the state. Those contacts supported jurisdiction even though the defendant’s acts had greater impact in other states, and the plaintiff had few contacts with the forum state.

Much debate has swirled around application of this purposeful availment requirement in cases where the defendant’s goods reach the forum state through the so-called “stream of commerce.” This often happens in one of two ways. First, an out-of-state component manufacturer sells components to a manufacturer of a finished product outside the state (or outside the country). That manufacturer then incorporates the component into a finished product and distributes the finished product into the forum state. Asahi Metal Industry Co. v. Superior Court, 480 U.S. 102 (1987), is an example of this situation. Second, a manufacturer sells finished products to a wholesaler outside the state, the wholesaler then resells to a retailer in the forum state, and the retailer resells to the consumer. In these situations, the party at the beginning of the stream of commerce (the component maker in the first situation, and the manufacturer in the second) did not import the product into the forum state itself; it sold to others who did. The manufacturer or component maker may know that such resales take place in the state, may think it highly likely, or may not know or care about the ultimate destination of its product.

In Asahi, the Court split on the question of whether the mere act of selling goods outside the forum state that will likely be imported into the forum state for resale suffices to support jurisdiction. Justice O’Connor’s opinion, joined by three other Justices, rejected the premise that “mere awareness” that the stream of commerce may sweep goods into the state after they leave the defendant’s hands suffices to satisfy “purposeful availment.” O’Connor would require clearer evidence that the defendant seeks to serve the market in the particular state, such as designing the product for the market in that state or advertising there. 480 U.S. at 112-113. However, the concurring Justices in Asahi would find that sending goods into the stream of commerce, at least in substantial quantities, constitutes “purposeful availment,” whether or not the original maker knows that the goods will be sold in a particular state or cultivates customers there. The rationale for this view is that the maker both foresees and benefits from such sales in other states, whether it distributes them there directly or indirectly profits from the fact that another entity conveniently does so in its place.

More than two decades after Asahi, the Supreme Court reconsidered stream-of-commerce jurisdiction in J. McIntyre Machinery Ltd. v. Nicastro, 131 S. Ct. 2780 (2011). The defendant in McIntyre made a metal-shearing machine in England and sold it to a distributor in the United States, which resold it into New Jersey. The plaintiff was injured using it in New Jersey and sued there for his injuries. There was no question that McIntyre had sought to serve the U.S. marketit used an Ohio-based company as its exclusive U.S. distributor, sold its machines into the United States, attended conventions here to promote its machinery, and at least one of its machines was resold into New Jersey. Yet the majority of the Court held (over a fervent dissent by three Justices) that McIntyre’s contacts in New Jersey would not support specific in personam jurisdiction in New Jersey for Nicastro’s claim.

McIntyre seems a stronger case for jurisdiction than Asahi, because the defendant had reached out to sell its products in the United States. And it had sold the product that caused the injury into New Jersey, though indirectly. It not only knew that its products were entering the U.S. market, but promoted that market. The argument that it purposely availed itself to the United States, but not to the states where its products were actually resold, seems mildly disingenuous. In McIntyre five Justices— the two concurring Justices and the three dissenters— at least leave open the question whether a foreign manufacturer is subject to jurisdiction in states where substantial amounts of its goods are regularly redistributed.

Some things are reasonably clear based on these two cases. A foreign manufacturer or component maker that sells its products to wholesalers outside the United States, without cultivating the U.S. market in any way, will likely not be subject to jurisdiction, even if its product is imported into the United States and injures a consumer here. If that manufacturer develops a relationship with a U.S. distributor, sells goods to that distributor, and encourages U.S. sales, it will likely be subject to jurisdiction for claims arising from those sales in the state where it directs its goods, that is, where the U.S. distributor is located. However, it is not clear whether the manufacturer will be subject to jurisdiction in other states where the distributor resells the goods. The plurality opinion in J. McIntyre suggests that it will not be, yet the concurring and dissenting opinions suggest that jurisdiction may be proper if the defendant regularly serves the market in the state where its product causes injury.

It also seems quite likely that a foreign manufacturer that engages in the type of conduct described in Justice O’Connor’s opinion in Asahi, which is intended to promote its goods in that state, will be subject to specific in personam jurisdiction for claims that arise out of sales (including indirect sales) in that state. If J. McIntyre had maintained a service network for its products in New Jersey, it would probably have been found subject to the court’s jurisdiction in Nicastro’s case. Establishing the service network would represent “purposeful availment” sufficient to support jurisdiction if its product causes the injury in New Jersey.


[2]. See, e.g., M. Weber, Purposeful Availment, 39 S.C.L. Rev. 815, 865-871 (1988).

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