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Presenting a live 90‐minute webinar with interactive Q&A

Personal Jurisdiction Over "Absent" Personal Jurisdiction Over Absent Product Liability DefendantsStrategies 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

THURSDAY, OCTOBER 13, 2011

Today’s faculty features:

Melissa Murphy-Petros, Wilson Elser Moskowitz Edelman & Dicker, Chicago

Ningur Akoglu, Herzfeld & Rubin, New York

Cary S. Sklaren, Herzfeld & Rubin, New York

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PresenterTitle

Melissa A. Murphy-PetrosOf Counsel

Wilson ElserOfficeDate“Stream of Commerce” v. “Stream of

Commerce Plus”I. The Current Supreme Court Landscape

Commerce Plus

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Introduction

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

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

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What is the stream of commerce theory?theory?

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

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Two Key Factors

1) Defendant is a non-resident acting outside of 1) Defendant is a non resident acting outside of plaintiff’s chosen forum.

2) Defendant has placed a product into the stream ) p pof commerce that causes harm inside plaintiff’s chosen forum.

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Origin

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

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World-Wide Volkswagen

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

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

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• 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.

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

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• Relevant foreseeability is based on defendant’s Relevant foreseeability is based on defendant s conduct and connection with the forum State –based on those factors, could defendant foresee being sued there?

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

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

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• Question left open: Under what circumstances will Question left open: Under what circumstances will defendant’s act of participating in the placement of a product in the stream of commerce render it subject defendant to personal jurisdiction in the forum state? In other words, when is it f bl t d f d t th t it d t ill i d foreseeable to defendant that its product will wind up in the forum state?

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Asahi Metal Industry Co., Ltd. v. Superior Court of Asahi Metal Industry Co., Ltd. v. Superior Court of California, 488 U.S. 102 (1987).

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Asahi

• Recognize lower federal and state courts’ differing Recognize lower federal and state courts differing interpretations of World-Wide Volkswagen’s “stream of commerce” statement.

BUT – Did not resolve the conflict.

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Asahi – “Stream of Commerce Plus”

• Plurality – Justice O’Connor, writing; Chief Justice Plurality Justice O Connor, writing; Chief Justice Rehnquist and Justices Powell and Scalia, joining

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• A defendant who places its product into the A defendant who places its product into the stream of commerce is subject to the forum state’s specific jurisdiction only where it has also done something to purposefully direct its product toward the forum state.

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

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

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

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

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• Specifically rejects Justice O’Connor’s view that “a Specifically rejects Justice O Connor s view that a plaintiff [must] show additional conduct directed toward the forum before finding the exercise of jurisdiction over the defendant to be consistent with the Due Process Clause.”

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Which “stream” to follow?

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

• The courts accordingly divided into three groups.

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“Stream of Commerce Plus”

• First and Sixth Circuits• Michigan• Mississippi• Missouri• Missouri• Montana• Nebraska• New Hampshire• Pennsylvania• Rhode Island• Rhode Island• South Dakota• District of Columbia

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“Stream of Commerce”

• In addition to Asahi, these courts rely on the “expectation- f ” i W ld Wid V lkstream of commerce” sentence in World-Wide Volkswagen

on the ground that World-Wide Volkswagen is the last Supreme Court case to yield a majority on the amount of contact required to support personal jurisdiction under the contact required to support personal jurisdiction under the stream of commerce theory.– Fifth, Seventh, and Eighth Circuits– AlabamaAlabama– Arizona– North Dakota– Utah– Washington– West Virginia– Wisconsin

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Deciding Not to Decide

• These courts decide each case on its own facts, These courts decide each case on its own facts, often after going through both tests.– Second, Third, and Eleventh Circuits

– Illinois

– Louisiana

– Minnesota

– New Jersey

T– Texas

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Why does it matter?

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

• Illinois – placement of product in national stream p pof commerce supports PJ in Illinois

• Connecticut – same conduct does not support PJ ppin Connecticut

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J. McIntyre Machinery, Ltd. v. Nicastro, 131 S. Ct. J. McIntyre Machinery, Ltd. v. Nicastro, 131 S. Ct. 2780 (June 27, 2011)

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Nicastro

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

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Nicastro

• The jurisdictional 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 of business there.

– Defendant sells its machines throughout the U.S. through a U.S. distributor that is not under its controldistributor 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

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technology.

Nicastro

• No PJ in New Jersey and no answer to AsahiNo PJ in New Jersey and no answer to Asahiconundrum.

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Nicastro – Kennedy plurality

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

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• “The defendant’s transmission of goods permits The defendant s transmission of goods permits the exercise of jurisdiction only where the defendant can be said to have targeted the forum; as a general rule it is not enough that the defendant might have predicted that its goods will

h th f St t ”reach the forum State.”

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• “Justice Brennan’s concurrence [in Asahi], Justice Brennan s concurrence [in Asahi], advocating a rule based on general notions of fairness and foreseeability, is inconsistent with the premises of lawful judicial power. This Court’s precedents make clear that it is the defendant’s

ti t hi t ti th t actions, not his expectations, that empower a State’s courts to subject him to judgment.”

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• BUT – This is a fact-specific inquiry and its results BUT This is a fact specific inquiry and its results 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.

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• 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.

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Nicastro – Breyer concurrence

• Deciding Not to DecideDeciding Not to Decide

• Justices Breyer and Alito concurred in the judgment that New Jersey did not have personal j g y pjurisdiction over defendant, but opined that this conclusion can be based on long-standing precedents such as International Shoe and would not go further than that.

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Nicastro – Ginsburg dissent

• “Stream of Commerce”Stream of Commerce

• Justice Ginsburg writing; Justices Sotomayor and Kagan joiningg j g

• Focus on “fairness” and “foreseeability”

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Conclusion

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

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

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Contact us

Melissa A. Murphy-PetrosyOf CounselChicago, [email protected]

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Personal Jurisdiction Over "Absent" Product-Liability Defendants

IIII.Effect of Recent Decisions on the Application ofon the Application of

Long-Arm Statutes andJurisdictional 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 fromPerkins (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.



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) over 3 years into NC via the “stream of commerce” = general jurisdiction.

Belated assertion of the "single enterprise" theory.


General Jurisdiction – Goodyear’s EffectUnanimous 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 enoughNot enough“Doing business” in some sense (ordinary sales/purchases, servicing, and marketing), especially if relatively insubstantial objectively or given the defendant’s operationsthe 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


citation omitted).


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

O Q iOpen Questions• Registering to do business or Appointing SoP agents.

• Imputation of subsidiaries’/distributors’ activities to manufacturers.


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 SalesMere 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


transcript p. 49, ln.4.

Specific Jurisdiction – Nicastro’s EffectReaffirms

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).

OOverrulesLower-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)


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

Specific Jurisdiction – Nicastro’s EffectConcrete 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 andmarket 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.


Specific Jurisdiction – Nicastro’s EffectOpen 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 ))


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

Specific Jurisdiction – Nicastro’s EffectOpen 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 tiControl 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 dcourts over a warranty dispute for a vessel sold in CT that caught fire and

got serviced in FL.


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.


Acquiring JurisdictionViability of Long-Arm Statutes

Two Categories:

1) Provides jurisdiction as long as it is not inconsistent with the1) 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.


Delaware Long-Arm Statute10 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 orState 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).


Georgia Long-Arm StatuteO.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 outside 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 tin 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).


Florida Long-Arm StatuteFla. 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; or2 P d t t i l thi d i d2. 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 o o e yea s a ou ed o p ocess g u de ( )( )( ) jus y g ju sd c owhere 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)


(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 dcorporation in this state is conclusively presumed to be both engaged in substantial and not isolated activities within this state and operating, conducting, engaging in, or carrying on a business or business venture in this statebusiness venture in this state.

Fla. Stat. § 48.193 (2011)(2) A defendant who is engaged in substantial and not isolated activitywithin this state, whether such activity is wholly interstate, intrastate, or otherwise, 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.


New York Long-Arm StatuteN.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 defamationof character arising from the act if heof character arising from the act, if he

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


(N.Y. 2000).

Acquiring Jurisdiction - Alternate PathsPiercing the Corporate Veil / Agency

(general jurisdiction or specific jurisdiction)(general jurisdiction or specific jurisdiction)


Acquiring Jurisdiction - Alternate PathsPiercing the Corporate Veil / Agency Light

( ifi j i di ti )(specific jurisdiction)


Acquiring Jurisdiction - Alternate PathsRelaxed “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 yforum.

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 IllIn 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) (followingVons Companies Inc v Seabest Foods Inc 926 P 2d 1085 (Cal 1996))


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

Acquiring Jurisdiction - Alternate PathsInternet 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 CalSee 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).


Acquiring Jurisdiction - Alternate PathsFederal 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 tthe 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)


Ningur Akoglu

[email protected]

(212) 471-8459( )


Personal Jurisdiction Over "Absent" Product Liability Defendants

III

Absent Product Liability Defendants

III.Practical implications for pmanufacturers, suppliers, i d l i tiffinsurers and plaintiffs

Cary Stewart Sklaren

OutlineOutline

• Pre‐Lawsuit Personal Jurisdiction PlanningPre 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 forCounsel for plaintiffs, counsel for defendants and insurers need to

h l j i di ti iapproach personal jurisdiction issues over “absent” products liability defendants with their eyes wide open.

Nothing should happen by accident.Nothing should happen by accident.

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Pre‐Lawsuit Planning: PlaintiffsPre 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

–RewardReward–Expense

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• Delay in Beginning Substantive DiscoveryDelay 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.

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• 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 or restrictive?))

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Pre‐Lawsuit Planning: DefendantsPre Lawsuit Planning: Defendants

• Policy Question No 1 for DefendantsPolicy 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 aboutgathered and analyzed so as to know about the relationships and details among the defendant and others in the chain ofdefendant and others in the chain of distribution with respect to the forum?

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Pre‐Lawsuit Planning: DefendantsPre Lawsuit Planning: Defendants

• Policy Question No. 2 for Defendants,Policy Question No. 2 for Defendants, and Counsel, and Insurers: Is personal jurisdiction in any forumIs personal jurisdiction, in any forum, against any plaintiff, worth resisting?P d / bl–Precedent/Publicity

–Expense–Aggravation–Reward

75

Pre‐Lawsuit Planning: DefendantPre Lawsuit Planning: Defendant

• AggravationAggravation– 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.

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

• Preparation for Jurisdictional Discoveryp 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

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• 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?)

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• Is the defendant vulnerable to a general s t e de e da t u e ab e to a ge e ajurisdiction 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 andNorth Carolina with those of Goodyear USA and other Goodyear entities. . . . In effect, respondents would have us pierce Goodyear corporate veils, at least for jurisdictional purposes ” Goodyear Dunlopleast for jurisdictional purposes. Goodyear Dunlop Tires Operations, S.A. v. Brown, 180 L.Ed.2d 796, 809‐810 (2011).

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Pre‐Lawsuit Planning:d l dConsidering General Jurisdiction

• Justice Ginsburg cited L Brilmayer &• Justice Ginsburg cited L. Brilmayer & K. Paisley, Personal Jurisdiction and Substantive Legal Relations: Corporations, Conspiracies, andCorporations, 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.

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– 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 ginformation, personnel, and group resources”; and

– Do “parent and subsidiary present consolidated tax returns and/or annual reports ”returns and/or annual reports.

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• Practically however each state has its ownPractically, however, each state has its own approach to general jurisdiction, veil‐piercing and the “single enterprise theory” and youand 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 factsset of facts.

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• Recent statistics show successful veil‐piercingRecent statistics show successful veil piercing in the parent‐subsidiary context in all situations is 20 56% (There is no separatesituations is 20.56%. (There is no separate data for jurisdictional attacks.)

John H Matheson Why Courts Pierce: AnJohn 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).

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• It has been suggested in opinions and articles thatIt 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 tin piercing. Robert B. Thompson, Piercing the Corporate Veil: An Empirical Study, 76 Cornell L. Rev. 1036, 1060 (1991).

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• In contrast Stephen M BainbridgeIn contrast, Stephen M. Bainbridge, Abolishing Veil Piercing, 26 Iowa J. Corp. L. 479 513 (2001) states: “Judicial opinions in479, 513 (2001), states: Judicial opinions in this area tend to open with vague generalities and close with conclusorygeneralities 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] brightline rules for deciding when courts will pierce the corporate veil.”the corporate veil.

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Jurisdictional DiscoveryJurisdictional 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 thdiscovery is available to ascertain the facts bearing on such issues.”

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

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Jurisdictional DiscoveryJurisdictional Discovery

• There has been little analysis of jurisdictional e e as bee tt e a a ys s o ju sd ct o adiscovery because:– “[I]t remains largely hidden from view.”– “[I]t is extremely discretionary.”– “[U]nlikely to be the subject of published trial court opinions ”opinions.

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

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Jurisdictional Discoveryf dNon‐US Defendants

• Does the Hague Evidence Convention apply to oes t e ague de ce Co e t o app y tojurisdictional discovery?

• In federal courts, conventional wisdom says no, ybased 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).

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Jurisdictional Discovery( f d )(Specific Jurisdiction)

• In products liability cases specific p y pjurisdictional discovery typically involves highly detailed interrogatories, requests for g y g , qproduction 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.

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Jurisdictional Discovery( l d )(General Jurisdiction)

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

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Cary Stewart Sklaren

(212) 471‐8468(212) 471 8468

CSklaren@herzfeld‐rubin.com

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