The stream of commerce flows on.

• Author: Jeffrey, Jessica
• Position: J. McIntyre Machinery Ltd. v. Nicastro

"The stream of commerce, like other metaphors, has its deficiencies as well as its utility. It refers to the movement of goods from manufacturers through distributors to consumers, yet beyond that descriptive purpose its meaning is far from exact." (1)

1. INTRODUCTION

   The Supreme Court's 2011 decision in J. McIntyre Machinery, Ltd. v. Nicastro (2) marked the first time the Court explored personal jurisdiction in a "stream-of-commerce" conflict since its 1987 decision in Asahi Metal Industry Co. v. Superior Court of California. (3) While many analysts and litigators hoped for clarification of the law, the Court's decision did little to refine the lines originally blurred in Asahi. (4) The Court failed to deliver a majority decision on the facts of the case, leaving circuit courts to rely on their own analytical devices. (5)

   McIntyre highlights a conflict that occurs when an American foreign defendant hires a national distributor to merchandise products to the United States. (6) While the corporation may aggressively target the United States as a whole, it often may not market its products and services to a specific state. (7) When an injury occurs in the forum state, the question remains: Are the defendant's contacts significant enough to warrant jurisdiction in that state? (8) The stream-of-commerce theory often comes into play in these cases. (9)

   Although the concurring Justices in McIntyre agreed the defendant's contacts did not warrant jurisdiction in the forum state, the Court did not produce a majority decision. (10) Moreover, the outcome in McIntyre suggests that foreign defendants could be insulated from jurisdiction throughout the United States, despite specifically targeting the country. (11) Unlike American businesses, which will be subject to jurisdiction at least in their home forum, the decision in McIntyre suggests that a foreign company could conceivably avoid litigation in the United States altogether, simply by hiring a national distributor. (12)

   This Note will track the evolution of personal jurisdiction by analyzing the current status of the stream-of-commerce theory in light of the decision in McIntyre. (13) Part II.A discusses the origins of personal jurisdiction, while Part II.B outlines the progression of the stream-of-commerce analysis. (14) Part II.C details the plurality's decision from McIntyre's forerunner, Asahi, and Part II.D presents the three-way circuit split prior to McIntyre. (15) Finally, Part II.D summarizes the McIntyre opinion. (16) Part III analyzes the decision in McIntyre, critiques the outcome, and suggests the implementation of a revised approach to personal jurisdiction, by adopting elements from Justice Stevens's concurring opinion in Asahi. (17)

2. HISTORY

   1. Personal Jurisdiction Beginnings

      The Due Process Clause of the Fourteenth Amendment prevents a state from depriving an individual of "life, liberty, or property," unless a court exercises its power lawfully. (18) Generally, personal jurisdiction requires that a defendant take some action toward a particular state for a court to gain power to hear a claim over the defendant in that state. (19) There are four ways a court may obtain jurisdiction over a defendant: A defendant may explicitly consent, be present in the state at the time of service, be a citizen or domiciled within the state, or initiate contacts arising out of, or connected to, activities within that state. (20)

      The Supreme Court first attempted to analyze personal jurisdiction in the late nineteenth century. (21) Asserting that a state only possesses power over persons and property within its boundaries, the Court in Pennoyer v. Neff explained that a plaintiff may not blindly bring suit wherever he chooses. (22) Citing the Fourteenth Amendment, the Court reasoned that judgments rendered by a court that lacks jurisdiction are unenforceable as a violation of due process. (23) Following Pennoyer, physical presence became the touchstone for a court's ability to gain jurisdiction over a defendant. (24)

      While Pennoyer laid the initial groundwork for analyzing personal jurisdiction, the Court first articulated the modern framework during the 1940s in International Shoe Co. v. Washington. (25) International Shoe, a Delaware corporation with its principal place of business in Missouri, was not physically present in Washington State, but employed about a dozen salesmen devoted to generating business there. (26) The International Shoe Court crafted a new test for personal jurisdiction, requiring not only mere presence within the state, but "certain minimum contacts with it such that the maintenance of the suit does not offend 'traditional notions of fair play and substantial justice.'" (27) This often quoted language set forth new guidelines to determine when a defendant has sufficient contacts with a forum state. (28)

      The Court suggested that a state's jurisdiction over a defendant depends on the "quality and nature" of the defendant's contacts within the state, concluding that a defendant must possess ties, relationships, or contacts with the forum to satisfy minimum contacts. (29) The Court further proposed that a defendant is only subject to jurisdiction if the suit either arises out of those contacts, or the contacts are continuous and substantial enough to permit unrelated suits. (30) Additionally, the Court concluded that International Shoe could be subjected to suit in Washington because it took advantage of the "benefits and protection of the laws" of the state by conducting business there. (31) Although International Shoe introduced a new test for establishing personal jurisdiction, the decision left many questions unanswered. (32)

      The Court's analysis in International Shoe identified two separate types of personal jurisdiction: general and specific. (33) General jurisdiction requires that the defendant be considered "at home" in the forum state. (34) Under general jurisdiction, the cause of action may be completely unrelated to the defendant's contacts with the state, so long as the defendant possesses considerable contacts within the forum. (35) Conversely, specific jurisdiction will subject a defendant to jurisdiction in the forum state only if the current cause of action arises out of, or is closely related to, the defendant's contacts with the state. (36) Thus, it is often suggested that specific jurisdiction is "dispute specific," whereas general jurisdiction is "dispute blind." (37)

      Defining the "nature and quality" of contacts significant enough to warrant specific jurisdiction continues to create controversy, and analysis is frequently centered on the defendant's purposeful acts in the forum. (38) In Hanson v. Denckla, (39) the Court held that jurisdiction is proper only when a defendant "purposefully avails itself of the privilege of conducting activities within the forum State, thus invoking the benefits and protections of its laws." (40) The Court asserted that while the nature and quality of a defendant's contacts may vary from case to case, the actions must be purposeful. (41)

      In (1980), the Court further analyzed both purposeful availment and foreseeability in a products liability case. (42) In World-Wide Volkswagen Corp. v. Woodson, (43) the Court determined that the New York Audi dealers did not purposefully avail themselves to Oklahoma, even though they could foresee their transient product landing in the forum state. (44) The Court reasoned that the defendants could not be hailed into a state based on an isolated incident or "fortuitous circumstance." (45) Believing that jurisdiction must arise out of an effort to directly or indirectly serve the market, the Court explained that the defendant must reasonably anticipate the possibility of suit in the forum state. (46)

   2. Evolution of Stream of Commerce

      The issue of purposeful availment is often at the forefront of what are known as "stream-of-commerce" cases. (47) In the first type of stream-of-commerce case, an out-of-state component manufacturer sells its product to an out-of-state manufacturer, who then incorporates the component into a final product and distributes it into the forum state. (48) In this type of stream-of-commerce case, it is questionable whether the out-of-state component manufacturer may be hailed into court, despite having no direct contacts with the forum state. (49) The second instance typically occurs when a manufacturer employs a wholesaler or distribution representative outside of the forum, who markets the product to retailers in multiple states. (50) The retailer then sells the product to an individual within the forum state. (51)

      The second type of stream-of-commerce conflict is illustrated in the Asahi case. (52) In Asahi, Gary Zurcher was severely injured in California when his motorcycle tire exploded. (53) Zurcher filed a complaint against Cheng Shin, a Taiwanese company that manufactured the tire tube. (54) Cheng Shin then filed a cross complaint against Asahi, the Japanese corporation that manufactured the tube's valve. (55) The initial claims against Cheng Shin were eventually settled, but the question of whether California could assert jurisdiction over Asahi remained. (56)

      In a series of concurring opinions, the Court decided that litigation in California was improper. (57) In the plurality opinion, Justice O'Connor explained that "[t]he placement of a product into the stream of commerce, without more, is not an act of the defendant purposefully directed toward the forum State." (58) Justice O'Connor argued that jurisdiction requires additional conduct, such as advertising or marketing within the state, to indicate intent to serve the market there. (59) Implying that due process requires a connection between the forum and the defendant, Justice O'Connor concluded that Asahi did not control its distribution in California. (60) Further, Justice O'Connor suggested that even if Asahi possessed sufficient contacts within the state...