A trilogy of decisions in Canada provides new guidance on exercising jurisdiction over defendants from outside Canada. In general, the new standard is more expansive than past standards. The cases and the new standard are reviewed in many online memos - one is here, from McMillan.
The US Supreme Court issued two end of term opinions which in the long-term ultimately will stimulate the global expansion of the plaintiff's bar. In the short-term, the result ultimately may hurt US businesses by allowing overseas competitors to dump defective products into the US with less fear of being sued. The opinions address issues regarding when a non-US company is subject to suit in the US for injuries caused by allegedly defective products. This prior post collected links to the oral arguments for both cases.
In one case, the injuries occurred outside the US, but the parents of the injured child brought suit in the US. In the second case, the injuries were suffered in New Jersey. The opinion was unanimous in the overseas injury case, but a fractured plurality opinion was issued for the case arising from injuries in New Jersey. Both opinions held that suit in the US was not proper. A detailed summary from ReedSmith is here.
These cases are notable as the Court tries to define jurisdictional principles in an increasingly small world with increasing globalization. Of special note, the result reached conflicts with the expressed hopes of both the US Chamber of Commerce and the US plaintiff's bar. Really? Yes. As described in this prior post, both asked Congress to make it easier to sue overseas companies in the US. The plaintiff's bar of course wants more targets, and the US Chamber of Commerce wants a "level playing field" in terms of exposure to product liability risks.
Lessons from the rulings ? For US importers of products made overseas, it's time to look carefully at the contracts and think about litigation and insurance possibilities. For example, if the injured person sues only the US importer, can the US importer bring in that case a contribution claim against the manufacturer, or is doing so blocked by an arbitration clause or a forum clause. Does the US entity have explicit rights to indemnification from the manufacturer? Does it have insurance coverage?
For the plaintiff's bar, this is simply the latest in a series of cases that force the US plaintiff's bar to look outwards towards partnering with lawyers overseas. Such partnerships seem inevitable to reach the deep pockets. The plaintiff's bar also will have to think harder about when and how discovery can be obtained. For example, do these opinions protect an overseas manufacturer from a subpoena for documents or deposition testimony in an underlying case filed in the US? If not, one may see a pattern of discovery-intensive US suits against "middlemen," followed by suits overseas against the manufacturer.
Overall the lesson seems to be that domestic lawyers for manufacturers must increasingly think critically about international issues, and how to deal with litigation realities.
With a hat tip to Sean Wajert at the MassTort Defense blog, for an article on the opinon, set out below are recent, striking words from the New Jersey Supreme Court on the scope of the state's power to exercise jurisdiction over non-US companies that export goods to the United States, The Court minces no words in responding to the huge onset of imports. One assumes that both US manufacturers and plaintiff's counsel will like this ruling since it helps to preserve a level playing field for US and non US manufacturers. As some will recall, the US Chamber of Commerce and AAJ last August agreed on efforts to broaden jurisdiction over non-US manufactrurers. The opinion is Nicastro v. McIntyre Machinery America Ltd., No. A-29-08 (N.J. 2/2/10).
"JUSTICE ALBIN delivered the opinion of the Court.
Today, all the world is a market. In our contemporary
international economy, trade knows few boundaries, and it is now
commonplace that dangerous products will find their way, through
purposeful marketing, to our nation’s shores and into our State.
The question before us is whether the jurisdictional law of this
State will reflect this new reality.
In this case, the foreign manufacturer of an allegedly
defective and dangerous industrial machine targeted the United
States economy for the sale of its product. The machine was
sold to a New Jersey business by the manufacturer’s exclusive
American distributor. An employee of that New Jersey business
lost several fingers while using the machine because the machine
allegedly lacked a safety guard. The foreign manufacturer knew
or reasonably should have known that by placing a product in the
stream of commerce through a distribution scheme that targeted a
fifty-state market the product might be purchased by a New
Jersey consumer. We must resolve whether under those
circumstances the manufacturer is subject to the jurisdiction of
our State court system in a product-liability action.
We affirm the Appellate Division, which found the New
Jersey Superior Court, Law Division, as the proper forum for
this action. We also reaffirm our decision in Charles Gendler &
Co. v. Telecom Equipment Corp., in which we held that “the
stream-of-commerce theory supports the exercise of jurisdiction
if the manufacturer knew or reasonably should have known of the
distribution system through which its products were being sold
in the forum state.” 102 N.J. 460, 480 (1986). The
increasingly fast-paced globalization of the world economy has
removed national borders as barriers to trade and has proven the
wisdom of Charles Gendler. Due process permits this State to
provide a judicial forum for its citizens who are injured by
dangerous and defective products placed in the stream of
commerce by a foreign manufacturer that has targeted a
geographical market that includes New Jersey. See id. at 480-
83. The exercise of jurisdiction in this case comports with
traditional notions of fair play and substantial justice."
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