By Michael Hoenig - New York Law Journal - July 11, 2011
Weeks ago the U.S. Supreme Court issued decisions in three products
liability cases. Two involved questions regarding personal jurisdiction
over foreign manufacturers.1 One concerned issues of warnings
liability on the part of generic drug manufacturers, notably whether
inadequate warnings claims were preempted by federal law.2 It
will be remembered that
our March 14 column already reported on the Supreme Court's
Williamson v. Mazda decision holding no implied preemption of a seat
belt design claim; the Court's grant of a "GVR" order in
Priester v. Ford Motor Co., remanding to the South Carolina Supreme
Court an automotive side window glass design claim, also raising
preemption issues; and the Court's
Bruesewitz v. Wyeth decision holding preemption of a child vaccine
claim, all issued in late February of this year.3 Witnessing
six products cases ruled upon by the nation's high Court in one term
seems at least some indication of just how important this field of
litigation has become.
On June 23 the Supreme Court issued its remarkable 5-4 decision in
Pliva Inc. v. Mensing,4 holding that inadequate warnings
claims filed against manufacturers of generic drugs were preempted because
federal drug regulations applicable to generic drug manufacturers directly
conflicted with the state law claims. Plaintiffs in these consolidated cases
were females prescribed a drug called metoclopramide that speeds movement of
food through the digestive system and, therefore, is used to treat digestive
The drug was first approved in 1980 and sold under the brand name Reglan.
Plaintiffs received the generic form of the drug from their pharmacists but
developed a severe neurological disorder called tardive dyskinesia, a
subject of warning labels that were strengthened and clarified several times
over the years.
Plaintiffs claimed that the risk of the disorder was far greater than
that indicated on the warning label. The Court held that the suits were
preempted because it was "impossible for the manufacturers to comply with
both state and federal requirements." Had the generic manufacturers
independently changed their labels, they would have violated the federal
requirement that generic drug labels be the same as the corresponding
brand-name drug labels. Yet, these lawsuits urged that state law required
stronger warnings from these manufacturers. Plaintiffs' further contention,
that the defendants could have asked the Food and Drug Administration's help
in strengthening the brand-name label, was rejected by the Court. The proper
question for "impossibility" preemption analysis is whether the private
party could independently do under federal law what state law requires of
Wyeth v. Levine,5 the Court, in 2009, held that an inadequate
warnings claim against a brand-name manufacturer was not preempted since it
was possible for the manufacturer there to comply with both state and
federal law. So why was the result different here? Because the federal
statutes and regulations applicable to brand-name manufacturers differ, by
Congress' design, from those applicable to generic drug manufacturers.
In its June 27
Goodyear Dunlop Tires decision,6 the Court dealt with a
so-called "general jurisdiction" question. Since the famous
International Shoe case,7 many courts have differentiated
between a state's "general," as opposed to "specific" jurisdiction over
foreign corporations. General jurisdiction refers to a foreign corporation's
"continuous and systematic" affiliations with a state as to render it
"essentially at home in the forum state."8 Sometimes, general
jurisdiction is referred to as "all-purpose" jurisdiction. Courts also use
language that a corporation is "doing business" or is "present" in the
What all this terminology means is that, consistent with the Due Process
Clause, the forum state has authority to adjudicate an underlying
controversy against the foreign company even though the out-of-state
defendant does not consent to such suit and the matter in dispute is
unrelated to or has nothing to do with the forum state. It is the court's
personal jurisdiction over the "at home" foreign company that allows the
court to adjudicate a lawsuit that may not even be related to any activity
by defendant within the state. Constitutionally speaking, assertion of
personal jurisdiction exposes a defendant to a state's coercive power so the
exercise of such authority must comport with the 14th Amendment's Due
When courts speak of "specific jurisdiction," they refer to state
authority to adjudicate controversies that are affiliated with the forum.
Specific jurisdiction, then, is confined to adjudication of "issues deriving
from, or connected with, the very controversy that establishes
jurisdiction."9 Principally, in products liability cases, the
jurisdictional nexus is an activity or occurrence that takes place in the
forum state or that satisfies due process standards.
In Goodyear, a bus accident outside Paris, allegedly caused by a
defective tire, took the lives of two 13-year-old soccer players visiting
from North Carolina. The tire was manufactured in Turkey at the plant of a
foreign subsidiary of Goodyear USA. The boys' parents filed a lawsuit in a
North Carolina state court naming Goodyear USA (an Ohio corporation) as well
as Goodyear subsidiaries organized and operating in Turkey, France and
Luxembourg. Goodyear USA did not contest jurisdiction, but the foreign
The North Carolina court did not have specific jurisdiction over the
foreign companies because the manufacture, distribution and failure of the
tire and the accident and deaths occurred abroad. So the question was: did
the North Carolina court have general jurisdiction over the foreign
subsidiaries? The state courts answered that question, "Yes." They blended
general jurisdiction and specific jurisdiction concepts by reasoning that a
limited number of the foreign companies' tires made abroad reached North
Carolina through the so-called "stream of commerce."10
A unanimous Supreme Court, in an opinion written by Justice Ruth Bader
Ginsburg, held that the North Carolina courts were wrong. There was no
general jurisdiction here consistent with due process because evidence of
the limited connection with North Carolina did not establish the "continuous
and systematic" affiliation necessary "to empower the North Carolina courts
to entertain claims unrelated to the foreign corporation's contacts with the
State."11 The "stream of commerce" metaphor—where a nonresident
defendant acting outside the forum, places into marketing and distribution
channels, i.e., the stream of commerce, a product that ultimately causes
harm inside the forum—is an analysis connected to the exercise of specific
jurisdiction. "Flow of a manufacturer's products into the forum…may bolster
an affiliation germane to specific jurisdiction."12
The foreign subsidiaries were "in no sense at home in North Carolina."
Their "attenuated connections" to the state "fall far short of the
'continuous and systematic general business contacts' necessary to empower
North Carolina to entertain suit against them on claims unrelated to
anything that connects them to the State."13 Plaintiffs also
argued that the various Goodyear entities together constituted a "single
enterprise" with many contacts with the state, but the Court refused to
address this argument, concluding that the contention was "forfeited" by
inadequate argumentation on the subject.
The Court's June 27 decision in the
J. McIntyre Machinery case14 was an entirely different matter
in many respects. First, it was a specific jurisdiction case. Second, unlike
the unanimous Court decision in Goodyear, the justices divided
significantly. Thus, Justice Anthony M. Kennedy announced the judgment of
the Court but wrote an opinion in which only Chief Justice John G. Roberts
Jr. and Justices Antonin Scalia and Clarence Thomas joined. Justice Stephen
G. Breyer wrote a separate opinion joined by Justice Samuel A. Alito, Jr.
agreeing that the New Jersey Supreme Court's assertion of jurisdiction had
to be reversed but refusing to announce the rule of broad applicability
reflected in Justice Kennedy's opinion. Justice Ginsburg filed a dissenting
opinion in which Justices Sonia Sotomayor and Elena Kagan joined. As a
result, the vote stood 6-3 for reversal of the New Jersey Supreme Court's
finding that the state courts could exercise jurisdiction, but the hoped-for
clarity as to a number of "stream of commerce" scenarios may not have been
J. McIntyre deserves study, far more than we can specify in our
brief report here. Plaintiff Nicastro was an employee in New Jersey who
injured his hand while using a metal-shearing machine manufactured by the J.
McIntyre company in England. The English company at no time marketed goods
in New Jersey or shipped them there. Plaintiff filed suit in New Jersey
state court and contended personal jurisdiction was appropriate because a
U.S. distributor agreed to sell J. McIntyre's machines in this country; the
English manufacturer's officials attended trade shows in several states,
though not in New Jersey; and no more than four machines ended up in New
Jersey. The state's high Court also noted that J. McIntyre held U.S. patents
on its recycling technology and the U.S. distributor had structured its
advertising and sales efforts in accordance with J. McIntyre's direction and
guidance wherever possible.15
On these "contacts" the New Jersey Supreme Court concluded that the state
courts could exercise personal jurisdiction consonant with the Due Process
Clause. Thus, injury occurred in New Jersey; the manufacturer knew or
reasonably should have known that its products were distributed nationwide
leading to those products being sold in any of the 50 states; and J.
McIntyre "failed to take some reasonable step to prevent the distribution of
its products in this State." The state court bottomed its rationale on the
"stream-of-commerce doctrine of jurisdiction."
In the U.S. Supreme Court's 1987
Asahi decision16 and in its 1980
World-Wide Volkswagen decision,17 the term "stream of commerce"
was used to express the concept that a foreign defendant's placement of
goods into distribution channels "with the expectation that they will be
purchased by consumers within the forum State" may indicate the defendant's
purposeful availment of the privilege of conducting activities within the
state sufficient to justify specific jurisdiction in a suit arising out of
or related to the defendant's contacts with the forum.
In Asahi, however, two camps of four justices each split over
whether mere introduction of the product into the stream of commerce was
enough or whether more was required for specific jurisdiction. The Justice
William Brennan group of four justices reasoned that "fairness" and "foreseeability"
were paramount. Thus, the defendant's ability to anticipate suit in the
forum because it is aware that its goods are marketed there renders the
assertion of specific jurisdiction "fair." As Justice Kennedy put it in J.
McIntyre, Justice Brennan's approach in Asahi "made foreseeability the
touchstone of jurisdiction."18
However, Justice Sandra O'Connor's group of justices in Asahi reasoned
that something additional besides introduction of goods into the stream of
commerce was needed. She wrote: "The placement of a product into the stream
of commerce, without more, is not an act of the defendant purposefully
directed toward the forum State."19 Thus, more in the way of
"purposeful availment" evidence is needed. Since Asahi, courts have divided
over which approach should prevail or, as Justice Kennedy put it in J.
McIntyre, "have sought to reconcile the conflicting opinions."20 For
convenience and ease of memory, I refer to Justice O'Connor's approach as
"stream of commerce plus." In J. McIntyre, Justice Kennedy suggested
that the Asahi decision may be responsible, in part, for the New Jersey
court's "error regarding the stream of commerce" and viewed this case as "an
opportunity to provide greater clarity."
Justice Kennedy views the "principal inquiry" in cases where
manufacturers or distributors seek to serve a given state's market as:
"whether the defendant's activities manifest an intention to submit to the
power of a sovereign." 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 reach the forum State." It is the "defendant's
actions, not his expectations, that empower a State's courts to subject him
Personal jurisdiction requires a forum-by-forum or sovereign-by-sovereign
analysis. Has a defendant "followed a course of conduct directed at the
society or economy existing within the jurisdiction of a given sovereign, so
that the sovereign has the power to subject the defendant to judgment
concerning that conduct?" Justice Kennedy sides with Justice O'Connor's
"purposeful availment" approach in Asahi and rejects Justice Brennan's "foreseeability"
rationale. Here defendant did not purposefully avail itself of the New
Jersey market and revealed no intent to invoke or benefit from the
protection of its laws.22
Justices Breyer and Alito voted to reverse the New Jersey court's
assertion of specific jurisdiction. Justice Breyer viewed the case as
adequately decided by adhering to the Court's existing precedents. He was
loath to agree with a "strict no-jurisdiction rule" in the face of modern
technological marketing methods. For example, what do the terms "submission
to the power of a sovereign" or "targeting the forum" mean when a company
"targets the world by selling products from its Web site?" Justice
Ginsburg's dissenting opinion, on the other hand, would uphold jurisdiction
since the English defendant engaged a U.S. distributor to promote and sell
its machines in the U.S. market and "purposely availed" itself of the U.S.
market. Fundamental "fairness," she argues, makes the defendant amenable to
suit in the forum where plaintiff is injured.
Supreme Court watchers looking for greater clarity since Asahi may
have gotten some. There seems to be Court unity that general jurisdiction is
not to be based on stream of commerce or other concepts unique to specific
jurisdiction determinations. General jurisdiction means the foreign
corporation being "at home" in the forum. Further, in specific jurisdiction
marketing scenarios of the traditional distribution kind, a majority of the
justices would apply or at least lean to the "purposeful availment" or
"stream of commerce plus" approach of Justice O'Connor. However, the
jurisdictional facts in each case are key. Even Justice Kennedy's plurality
group sees the court's analysis as one of forum-by-forum.
Modern marketing scenarios—a global website sales fact pattern, for
example—may well see the Court revisiting jurisdiction issues. Similarly,
the question of affiliated foreign companies being viewed together with a
domestic corporation as a "single enterprise" could invite review. Likewise,
the approach of some courts that independent franchises or distributors or
subsidiary companies that scrupulously observe corporate separation are
little more than "agents" of a foreign parent company could attract Supreme
Court review. In the meantime, it is clear that jurisdiction issues are
alive and well and bench and bar have much to ponder on the specific
jurisdiction front when suits are filed against foreign companies.
Michael Hoenig is a
member of Herzfeld & Rubin.
1. Goodyear Dunlop Tires Operations, S.A. v. Brown, No. 10-76
(U.S. Sup. Ct. June 27, 2011) (Slip Opinion); J. McIntyre
Machinery, Ltd. v. Nicastro, No. 09-1343 (U.S. Sup. Ct. June 27,
2011) (Slip Opinion).
2. Pliva Inc. v. Mensing, No. 09-993 (U.S. Sup. Ct. June 23,
2011) (Slip Opinion).
3. Hoenig, "Supreme Court Speaks (Again) on Preemption of
Lawsuits," New York Law Journal, March 14, 2011, p. 3.
4. Supra n. 2.
5. 555 U.S. 555 (2009).
6. Supra n. 1.
7. International Shoe Co. v. Washington, 326 U.S. 310 (1945).
8. Goodyear, supra n. 1, Slip Op. at p. 2.
9. Goodyear, Slip Op. at p. 2 (quoting from Harvard Law Review
10. Goodyear, Slip Op. at p. 3.
12. Id., Slip Op. at p. 10 (citing cases).
13. Id., Slip Op. at p. 13.
14. Supra n. 1.
15. J. McIntyre, supra n. 1, Slip Op. at p. 3.
16. Asahi Metal Industry Co. v. Superior Court of California,
480 U.S. 102 (1987).
17. World-Wide Volkswagen Corp. v. Woodson, 444 U.S. 286, 289
18. J. McIntyre, Slip Op. at p. 7.
19. Asahi, 480 U.S. at 112.
20. J. McIntyre, Slip Op. at p. 8.
21. Id., Slip Op. at pp. 7-8.
22. Id., Slip Op. at pp. 10-12.
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