Federal Courts Hold the Line on Efforts to Expand Liability for Foreign-Made Products
For years, plaintiffs in product liability actions have cast a broad net in an attempt to hold either foreign companies or their United States counterparts responsible for foreign-made products that cause injury in the United States. This summer, several federal courts have soundly rejected such recent efforts, sending the message that a defendant must be subject to the Court’s jurisdiction and have a real connection with the product to be potentially liable for related injuries.
First, the United States Supreme Court in J. McIntyre Machinery, Ltd. V. Nicastro, 131 S. Ct. 2780 (June 27, 2011), refused to subject an English product manufacturer to the jurisdiction of a New Jersey state court where the company had no purposeful connection with the state. In this case, J. McIntyre Manufacturing Ltd. manufactured a metal-shearing machine in England, which was subsequently imported into the United States and sold by a different company. After suffering a hand injury while using the machine in New Jersey, Robert Nicastro commenced an action in New Jersey Superior Court against McIntyre as the manufacturer. McIntyre challenged the Court’s jurisdiction all the way up to New Jersey’s Supreme Court, which held that it could exercise jurisdiction over a foreign manufacturer without contravening the U.S. Constitution Due Process Clause of the Fourteenth Amendment. McIntyre appealed to the United States Supreme Court. In support of his position that jurisdiction existed, Nicastro relied on three primary facts: (1) an independent company agreed to sell McIntyre’s machines in the United States; (2) McIntyre attended various scrap metal conventions in different states (not New Jersey) to advertise its machine; and (3) perhaps as many as four machines ended up in New Jersey. The Supreme Court held that the relevant connection is not simply with the United States but must be with the particular state that is attempting to exercise jurisdiction over the company. Moreover, the contact must be “purposeful” and not simply that a company was aware that its product could potentially wind up in New Jersey. The Supreme Court reversed the New Jersey’s Supreme Court decision and held that McIntyre was not subject to personal jurisdiction of the New Jersey state courts under the Due Process Clause of the Fourteenth Amendment of the U.S. Constitution.
During the same Term, the United States Supreme Court decided another case involving the attempted assertion of jurisdiction over foreign subsidiary companies with respect to a product manufactured and accident that occurred overseas. In Goodyear Dunlop Tires Operations, S.A. v. Brown, __ S. Ct. __ (June 27, 2011), two boys were killed in a bus crash outside of Paris, France. The boys’ parents commenced an action in North Carolina state court, alleging that a defective tire manufactured in Turkey caused the accident. Plaintiffs sued Goodyear Tire and Rubber Company (Goodyear US), a U.S. company, along with three Goodyear subsidiaries located in Turkey, France and Luxembourg. Goodyear US did not contest jurisdiction, but the three subsidiaries challenged the jurisdiction of the North Carolina state court. After North Carolina’s highest court ruled there was personal jurisdiction over the three subsidiaries, Goodyear appealed to the United States Supreme Court. Justice Ginsberg, writing for the Court, wrote that specific jurisdiction was “confined to adjudication of ‘issues derived from, or connected with, the very controversy that establishes jurisdiction.” Since the product was not manufactured and the accident did not occur in North Carolina, the Court concluded there was no specific jurisdiction. With respect to general jurisdiction (not based on the specifics of the accident), the Court framed the issue as follows: “Are foreign subsidiaries of a United States parent corporation amenable to suit in state court on claims unrelated to any activity of the subsidiary in the forum state?” The argument was that some of the tires that had been manufactured abroad by these subsidiaries had made their way through the “stream of commerce” to North Carolina. However, the Supreme Court held that “[a] connection so limited between the forum and the foreign corporation, we hold, is an inadequate basis for the exercise of general jurisdiction.” For these reasons, the Supreme Court reversed and dismissed the claims against the foreign subsidiaries.
Lastly, this summer the United States District Court for the District of New Hampshire had the opportunity to consider whether a United States company that had no involvement with the product at issue could be held liable for the conduct of a foreign affiliated corporation. In Michnovez v. Blair, LLC, 2011 U.S. Dist. LEXIS 63339 (D.N.H. June 13, 2011), the plaintiff commenced a wrongful death action as a result of a bath robe that caught fire and killed a New Hampshire resident. The product was tested and manufactured in Singapore. Bureau Veritas Consumer Products Ltd., a Singapore company (BV Singapore), conducted pre-production testing of the product. Plaintiffs sued BV Singapore, its French parent Bureau Veritas S.A. (BVSA) and Bureau Veritas Consumer Products Services, Inc. (BVCPS), a Massachusetts company. BVCPS had no involvement with testing the robe and was named as a defendant solely on the basis that it was a U.S. subsidiary of BVSA. BVCPS moved to dismiss the complaint on the grounds that it had no involvement with the product and could not be held liable for the conduct of BV Singapore. Plaintiffs attempted to group all three BV companies together and threat them as one big company for jurisdictional and liability purposes. The United States District Court correctly recognized plaintiffs’ theory against BVCPS as an effort to pierce the corporate veil to hold BVCPS liable for BV Singapore’s alleged conduct. The Court concluded that there was no basis to pierce the corporate veil, dismissing the complaint against BVCPS.
Plaintiffs in product liability actions will continue to challenge the jurisdictional bounds of our court systems or devise creative theories to hold uninvolved U.S. companies liable for foreign-made products. From a practitioner’s perspective, an early litigation strategy focused on either a jurisdictional challenge or ferreting out a plaintiff’s liability theory against an uninvolved U.S. company may ultimately obviate the need for protracted discovery of the underlying claim. Also, being in federal court may increase the company’s chances of success.
If you have questions about how this may impact your business, please contact a member of the Goldberg Segalla Product Liability Practice Group.