New Channels Carved in the River of Commerce

If a manufacturer targets the United States market for the sale of its product, knowing that its product will be purchased by a forum state consumer, can that manufacturer be subjected to jurisdiction in the forum state without more conduct specifically directed toward the forum state? In Asahi Metal Indus. Co., Ltd. v. Superior Court, the Supreme Court split 4 to 4 on this question. Justice Brennan “thought it was enough that a defendant knew its product was going to a forum and that the defendant benefitted from it.” Justice O’Connor rejected this approach in favor of “a heightened test requiring more evidence that the defendant was intentionally trying to serve the forum.” U.S. Supreme Court Shifts Basic Personal Jurisdiction Rules.

In June 2011, the Supreme Court decided two stream of commerce cases supporting the Justice O’Connor view in Asahi; only one will be discussed here. For those of us who took Professor Mushlin’s Civ. Pro. exam last Spring, the facts of J. McIntyre Machinery, Ltd. v. Nicastro should be familiar: A “three-ton metal shearing machine” manufactured by McIntyre “severed four fingers on Robert Nicastro’s right hand.” Nicastro filed a products liability action against McIntyre in New Jersey Superior Court. McIntrye is a British corporation and has “no office in New Jersey; it neither paid taxes or owned property there; and it neither advertised in, nor sent any employees to, the State.” Rather, McIntyre’s only contact with New Jersey was the metal shearing machine itself, which an independent distributor sold to Nicastro’s employer.

The New Jersey Supreme Court took the Justice Brennan approach, ruling that McIntyre is subject to jurisdiction in New Jersey because it was foreseeable that its product would end up in New Jersey. The United States Supreme Court reversed, finding that at no time did McIntyre “engage in any activity in New Jersey that reveal[ed] an intent to invoke or benefit from the protection of its laws…[I]it is the defendant’s actions, not his expectations, that empower a State’s courts to subject him to judgment.”

What do you think about Nicastro? Certainly there is an international interest in not subjecting a foreign entity to United States Jurisdiction. Doesn’t it make sense that in today’s international trade environment we have clearly established rules for when a foreign manufacturer can be hailed into federal court? On the other hand, the United States has an interest in protecting its citizens and in locating a forum to redress grievances. Doesn’t Nicastro cut against these interests by allowing a foreign entity to avoid liability in the U.S., even when it knows its products are being marketed here? Professor Jack Baldwin LeClair, Deputy Chair of Law and Director of the M.A. in Law and Governance at Montclair State University comments on the decision: “Placing a time bomb in a river is one thing but wanting it to kill someone is, apparently, something else entirely.”

6 comments

  1. As to your point that there exists an international interest in not subjecting a foreign entity to United States jurisdiction, I believe in respecting foreign state’s sovereignty. However, in light of the current global economic environment, I believe the FSIA, and the FSIA alone, is sufficient in addressing that issue. Personally and theoretically (i.e. legally), I think McIntrye has satisfactorily “purposefully availed” itself of the protections of the United States to subject itself to personal jurisdiction. I do not think issues of sovereignty should be considered in deciding a question of personal jurisdiction with respect to a foreign entity, because the doctrine of subject matter jurisdiction and the FSIA do more than enough in my mind to satisfy modern conceptions of foreign sovereignty.

  2. Adam, I agree with your ultimate conclusion regarding McIntyre. Distributing its products in the United States is sufficient purposeful availment to subject McIntyre to personal jurisdiction in New Jersey- where the product was purchased and where the harm occurred. I disagree, however, with your analysis of the FSIA. The FSIA only applies to lawsuits against a “foreign state.” 28 U.S.C. § 1603(a) defines “foreign state” as a “political subdivision of a foreign state or an agency or instrumentality of a foreign state.” McIntrye is not a political subdivision of Britian. Further, there are no facts to suggest that McIntrye is a corporation owned by the governemt of Britan, nor are there any facts to suggest that McIntrye performed any governmental functions. Accordingly, McIntrye is not a “foreign state” to whom the FSIA applies.

  3. Pete, I want to clarify my argument from my earlier post. I believe the FSIA, and the FSIA alone, is sufficient in addressing the modern notion of sovereignty, and therefore sovereignty should not be a factor in deciding a question of personal jurisdiction. I understand that the FSIA only offers protections to “foreign states.” Personally, I believe the protection from adjudication in U.S. courts provided to foreign states, and not to foreign corporations unless they are agents or instrumentalities of the foreign state, by the FSIA does more than enough to satisfy the general idea of respecting the sovereign in the modern international environment. This is true even in light of the fact that the protection provided by the FSIA is subject to a number of exceptions (we can go into the merits of these later, if you’d like). In the modern, global political economy, sovereignty does not mean the same thing as it did one hundred years ago, or even thirty years ago, and to me, the FSIA alone appropriately codifies the current sovereignty ideal. I do not believe it necessary or proper for US law to offer any additional protections for the sovereign on top of the FSIA.

  4. If I understand your argument correctly, you contend that foreign sovereignty is a question for subject matter jurisdiction and is not appropriately analyzed under personal jurisdiction. On that premise you argue that the FSIA limits the subject matter jurisdiction of United States courts in a manner that sufficiently protects the sovereign interests of foreign states; and therefore, U.S. law should not “offer any additional protections for the sovereign on top of the FSIA.”

    I’d like to press you, if I may, on your first premise. Sovereignty absolutely has a place in a personal jurisdiction analysis: a court is deciding whether it has the power to hail a defendant into the forum. This is fundamentally a question of sovereignty, is it not?

    In a previous post, I blogged about the recent seizures of domain names registered to foreign entities (https://pilr.blogs.law.pace.edu/2011/10/01/in-rem-seizures-of-domain-names-registered-to-foreign-entities/). Essentially, the DHS and ICE proceed on a theory of in rem jurisdiction to shut down websites that allegedly host, according to U.S. copyright law, infringing material. I’d be very interested to know whether you think the FSIA is adequate here. I will concede that there are some important distinctions between domain name seizures and the Nicastro case- both on the issues and on the facts. But, the overarching principles are the same: subjecting a foreign entity to U.S. jurisdiction and the proper importance of sovereignty in a jurisdictional analysis.

  5. I’d just like to say I am enjoying this discussion very much. Now, you are correct in saying that it is my belief that sovereignty does not belong in the personal jurisdiction analysis. I have done a little google research on this area, and I have found that I am not alone in my belief, and in fact, neither are you in yours. Here is an interesting blog post that touches on some of the ideas mentioned in these posts. And, here is a law review article.

    In my understanding of personal jurisdiction there is no place for the consideration of foreign state sovereignty. If a defendant has purposefully availed themselves of the authority of the state as established by the rule of minimum contacts or whatever mechanism, then you simply have your answer as to whether or not there exists personal jurisdiction without ever needing to address the idea of sovereignty of the foreign state. While “traditional notions of fair play and substantial justice” are appropriately considered in deciding whether a court has personal jurisdiction, notions of sovereignty are not. Traditional notions of fair play and substantial justice, like convenience, and closeness/remoteness of the relationship to the state, may lead a court in Idaho to decide that it would be unfair to hail in a defendant from South Africa, but the “sovereignty” of South Africa should have no affect on the analysis.

    For me, if we are in a federal court in Arizona for example, given that all other considerations are the same, the personal jurisdiction analysis is unaffected by whether the defendant in question is a Mexican entity or an American entity from an equally “inconvenienced” state. And, as to your question about the recent seizures of domain names, if we assume for arguments sake that a domain name is property that a court can properly exercise in rem jurisdiction over, then yes, the FSIA alone (which is probably inapplicable given those probably don’t fit into the definition of the“Foreign State,” and even if they do, the commercial activity exception likely applies) adequately incorporates the modern understanding of sovereignty, even though the defendants in those cases may not want to admit it.

    I should also note that I believe the act of state doctrine should be deemed a dead letter, but that is for another post.

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