Purpose and intent: seeking a more consistent approach to stream of commerce personal jurisdiction.

Author:Yeargan, Shane
  1. Introduction

    Whether a court may exercise personal jurisdiction over a defendant because the defendant manufactured an allegedly defective product that caused an injury in the forum has proved to be a difficult question in the united States. Despite multiple efforts, the Supreme court has not developed a definite standard for determining what conduct subjects a manufacturer to personal jurisdiction in a given forum. (1) This confusion arises largely out of the Court's varied interpretations of the "stream of commerce" theory of personal jurisdiction. Beginning with the Court's decision in Asahi Metal Industry Co. v. Superior Court of California, (2) two competing versions of the stream of commerce theory developed within the justices' opinions. The first, expressed by Justice Brennan, suggested that foreseeability of a product causing injury in the forum is sufficient to create the necessary minimum contacts to support personal jurisdiction. (3) The alternative theory endorsed by Justice O'Connor does not recognize minimum contacts unless there is some conduct by the defendant--in addition to placing the product in the stream of commerce--that is directed specifically at the forum. (4) Neither version of the theory commanded a majority of the court, which led to plurality opinions and subsequent confusion among lower courts about how to properly assess personal jurisdiction in stream of commerce situations.

    This Note seeks to examine this controversy in light of the Supreme Court's decision in the recent stream of commerce case, J. McIntyre Machinery, Ltd. v. Nicastro. (5) After discussing the limited clarification that J. McIntyre offers regarding the limits of stream of commerce jurisdiction, the Note considers various approaches from the federal courts of appeals to examine how lower courts have applied the principles articulated by the Supreme Court. Finally, the Note suggests a guiding principle and a series of rules that would create a more definite and predictable framework for determining whether stream of commerce personal jurisdiction exists.

    This Note argues that the jurisprudence surrounding J. McIntyre and Asahi largely conflates the doctrine of stream of commerce personal jurisdiction with the types of proof sufficient to support such jurisdiction. Further, this Note contends that the focus when determining personal jurisdiction in a stream of commerce context should be on the intent of the defendant regarding the forum, which serves as a means of determining whether there is purposeful availment that creates the necessary minimum contacts between the forum and defendant. A series of concrete rules are proposed to give form to this principle. First, this proposed framework seeks to address possibly the most difficult issue in stream of commerce jurisdiction analysis--whether or not the use of a distributor by the defendant shields the defendant from personal jurisdiction. The proposed rule directly connects the intent of the defendant regarding the relevant forum with the issue of purposeful availment, such that if a defendant intends to market its product in the forum, that forum may exercise personal jurisdiction over the defendant. Second, this framework retains the currently accepted rule that non-sales conduct in a forum, such as advertising, may create personal jurisdiction in a forum regardless of the defendant's intent when arranging distribution of its products. Third, purposeful availment of the national market constitutes purposeful availment of each state within the United States. Finally, this framework retains the independent reasonableness requirement, which serves largely as a safety valve for extreme situations in which the stream of commerce theory of personal jurisdiction creates jurisdiction in a manner that is fundamentally unfair to the defendant.

  2. History

    Early formulations of the standard for personal jurisdiction in the United States did not contemplate extraterritorial jurisdiction. (6) In Pennoyer v. Neff, (7) the Supreme Court definitively expressed the classic grounds for personal jurisdiction. (8) In 1945, the Court expanded this traditional view of personal jurisdiction with its decision of International Shoe Co. v. Washington (9) by authorizing the exercise of extraterritorial personal jurisdiction over nonresidents in some circumstances. (10) Such jurisdiction, however, must be premised upon the party's exercise of the "privilege of conducting activities within a state (11) ... The exercise of such a privilege may give rise to personal jurisdiction so long as the party's contacts with the forum are sufficient to make the existence of personal jurisdiction "reasonable and just according to our traditional conception of fair play and substantial justice." (12) In Hanson v. Denckla, (13) the Supreme Court further refined the International Shoe principles when it pronounced a new rule requiring "some act by which the defendant purposefully avails itself of the privilege of conducting activities within the forum State, thus invoking the benefits and protections of its laws" (14) in order for personal jurisdiction to exist in a forum.

    In 1980, the Supreme Court first considered what has become known as the stream of commerce theory as it applies to the concept of minimum contacts in World-Wide Volkswagen Corp. v. Woodson. (15) The Court expressly stated that "[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 expectation that they will be purchased by consumers in the forum State." (16)

    The Court applied these principles directly to a stream of commerce scenario in Asahi, which considered whether the California courts had personal jurisdiction over a Japanese defendant in a cross-claim stemming from a product liability suit concerning an allegedly defective motorcycle tire. (17) Although the Court directly considered whether the foreign defendant was subject to personal jurisdiction based on a stream of commerce theory, the resulting opinion did not provide a reliable test for the stream of commerce issue. (18) In fact, many commentators have expressed dissatisfaction with the Court's handling of the issue. (19) Lower courts were also frustrated by the lack of certainty that the Asahi plurality opinions created. (20)

    In 2011, the Court revisited the issue of stream of commerce personal jurisdiction in J. McIntyre Machinery, Ltd. v. Nicastro. (21) Commentators expressed hope that the Court would provide more reliable guidance on these issues. (22) These hopes were largely dashed, however, as the Court was again unable to produce a majority opinion. (23)

  3. Asahi's Competing Rationales

    In Asahi, the Court considered a products liability case in which the plaintiffs alleged that defective tires on a motorcycle caused a crash that injured the plaintiffs. (24) Eventually, only a cross-claim between two foreign defendants, Asahi and Cheng Shin, remained. (25) Asahi moved to quash Cheng Shin's service on the grounds that California could not exert jurisdiction over Asahi within the boundaries of the Due Process Clause of the Fourteenth Amendment. (26)

    Although the Court unanimously held that the California courts did not have personal jurisdiction over Asahi, it could not produce a majority opinion. (27) Opinions by Justice O'Connor and Justice Brennan each won the support of four Justices. Justice Stevens wrote a separate opinion. (28)

    A. Justice O 'Connor's Opinion

    Justice O'Connor's opinion, joined by Chief Justice Rehnquist, and Justices Powell and Scalia, concluded that when a defendant places a product in the stream of commerce with the knowledge that the product will eventually end up in the forum state the action will not constitute minimum contacts between the defendant and the forum. (29) O'Connor stressed that there must be "[a]dditional conduct of the defendant [indicating] an intent or purpose to serve the market in the forum State." (30) Such conduct must be directed at the market in the forum state. (31)

    Justice O'Connor's opinion succinctly demonstrates the importance of purposeful availment to the stream of commerce theory. The "constitutional touchstone" of personal jurisdiction remains minimum contacts with the forum state. (32) Further, such contacts arise from conduct in which the defendant "purposefully avails itself of the privilege of conducting activities within the forum State...." (33) Forum-directed conduct serves as Justice O'Connor's method of determining whether the defendant has created minimum contacts through purposeful availment. (34)

    B. Justice Brennan's Opinion

    Justice Brennan's opinion, joined by Justice Marshall, Justice White, and Justice Blackmun, did not accept the need for additional conduct on the part of the defendant. (35) He argued that the Court's opinion in World-Wide Volkswagen relied on foreseeability as a distinguishing characteristic between cases in which the Court found personal jurisdiction and others that lacked personal jurisdiction. (36) Brennan argued further that a defendant that regularly and foreseeably sends its products into the forum state benefits indirectly from the forum's laws that regulate commerce. (37) Finally, the Brennan opinion contended that where a defendant is aware that the final product is marketed in the forum, it cannot be surprised if it is subject to liability arising from a lawsuit in that forum. (38)

    Justice Brennan's foreseeability standard, like Justice O'Connor's forum-directed activity standard, relies on purposeful availment. For Justice Brennan, placing a product in the stream of commerce with the knowledge that it will be sold in the forum constitutes purposeful availment sufficient to create minimum contacts. (39)

    C. Justice Stevens's Opinion

    Justice Stevens argued that resolution of the stream of commerce issue was not...

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