Foreign Businesses Can Keep State Courts at Bay

(CN) - State courts cannot exercise jurisdiction over foreign manufacturers just because such companies might expect that their products would reach the U.S. market, the U.S. Supreme Court ruled Monday.

Robert Nicastro lost four fingers on his right hand in a 2001 accident with a 3-ton, metal-shearing machine at Curcio Scrap Metal in Saddle Brook, N.J.

He sought damages from the machines Nottingham, England-based manufacturer, J. McIntyre Machinery, and ultimately the New Jersey Supreme Court said the lawsuit could go forward, even though the company had never advertised in, sent goods to or targeted the New Jersey in any relevant sense.

On Monday, however, the U.S. Supreme Court, 7-2, noting that the this question of jurisdiction has been unclear for decades in the wake of the court's 1987 decision in Asahi Metal Industry Co. v. Superior Court of California, Solano City.

"Although the New Jersey Supreme Court issued an extensive opinion with careful attention to this Court's cases and to its own precedent, the 'stream of commerce' metaphor carried the decision far afield," Justice Anthony Kennedy wrote for the majority. "Due process protects the defendant's right not to be coerced except by lawful judicial power. As a general rule, the exercise of judicial power is not lawful unless the defendant 'purposefully avails itself of the privilege of conducting activities within the forum State, thus invoking the benefits and protections of its laws.' There maybe exceptions, say, for instance, in cases involving an intentional tort. But the general rule is applicable in this products-liability case, and the so-called 'stream-of-commerce' doctrine cannot displace it."

Justice Stephen Breyer authored an opinion concurring the judgment, joined by Justice Samuel Alito, that says the lower court erred in basing its judgment on the conclusion that increased "globalization of the world economy has removed national borders as barriers to trade."

"[O]n the record present here, resolving this case requires no more than adhering to our precedents," Breyer wrote.

"I would not go further," he added. "Because the incident at issue in this case does not implicate modern concerns, and because the factual record leaves many open questions, this is an unsuitable vehicle for making broad pronouncements that refashion basic jurisdictional rules."

Justice Ruth Bader Ginsburg took the opposite stance in her dissenting opinion, joined by Justices Sonia Sotomayor and Elena Kagan.

"Inconceivable as it may have seemed yesterday, the splintered majority today 'turn[s] the clock back to the days before modern long-arm statutes when a manufacturer, to avoid being haled into court where a user is injured, need only Pilate-like wash its hands of a product by having independent distributors market it,'" Ginsburg wrote, quoting Russell Weintraub's "A Map Out of the Personal Jurisdiction Labyrinth" from the U.C. Davis Law Review, Spring 1995.

"The machine arrived in Nicastro's New Jersey workplace not randomly or fortuitously, but as a result of the U. S. connections and distribution system that McIntyre UK deliberately arranged," Ginsburg wrote. "On what sensible view of the allocation of adjudicatory authority could the place of Nicastro's injury within the United States be deemed off limits for his products liability claim against a foreign manufacturer who targeted the United States (including all the States that constitute the Nation) as the territory it sought to develop?" (Parentheses in original.)

McIntyre opened itself up to this very liability by transacting internationally, according to the dissent.

"McIntyre UK dealt with the United States as a single market," Ginsburg wrote. "Like most foreign manufacturers, it was concerned not with the prospect of suit in State X as opposed to State Y, but rather with its subjection to suit anywhere in the United States."

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