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April 15, 2022 Articles

Suing Automakers in State Court—Personal Jurisdiction Clarified? Or Not?

The Court did not set forth a bright-line test for determining the limitations in all possible factual scenarios, leaving open the certainty of further litigation on the subject of personal jurisdiction limitations over corporations.

By Karen Aldridge Crawford

Two 2019 decisions, one by the Montana Supreme Court and the other by the Minnesota Supreme Court, allowed residents to sue Ford Motor Co. in those states for injuries involving vehicles initially sold outside those states. Ford petitioned the U.S. Supreme Court to review both decisions and, supported in briefs filed by companies representing many industries, sought additional limits on where manufacturers can be sued based on when the plaintiff’s claim must “arise out of or relate to” the defendant’s conduct in the forum state. The Supreme Court consolidated the two cases: Ford Motor Co. v. Montana Eighth Judicial District Court et al., No. 19-368, and Ford Motor Co. v. Adam Bandemer, No.19-369. While the justices provided some clarification and limitations, stemming the “jurisdictional free for all” that Ford argued was created by the two state court cases, the Court did not set forth a bright-line test for determining the limitations in all possible factual scenarios, leading to the certainty of further litigation on the subject of personal jurisdiction limitations over corporations. See Ford Motor Co. v. Mont. Eighth Jud. Dist. Ct., 141 S. Ct. 1017, 1024 (2021).

Just such a scenario occurred recently in Wallace v. Yamaha Motors Corp. USA, No. 19-2459, (4th Cir. Jan. 6, 2022), when the circuit court affirmed the district court’s decision to dismiss the plaintiff’s suit, finding no link between Yamaha’s conduct in South Carolina and the accident itself. In the underlying case, the plaintiff had borrowed a Yamaha motorcycle from its South Carolina owner and was it driving in Florida when she was struck from behind. The plaintiff alleged that a design flaw in the borrowed motorcycle caused severe injuries from the accident, and the plaintiff sued Yamaha in South Carolina, her home state. The plaintiff, citing the U.S. Supreme Court’s ruling in the two Ford cases, argued that suit in South Carolina was appropriate because Yamaha does business in the state and the lawsuit would not be a burden. The Fourth Circuit determined that the plaintiff was misreading that precedent.

In its appeal of the 2019 state court decisions to the U.S. Supreme Court, Ford had argued that the used vehicles involved in those two cases were designed, manufactured, distributed, and sold in states other than the forum states. Only the accidents had actually happened in the forum states. Ford argued that its extensive presence in the forum states did not provide a basis for personal jurisdiction in the lawsuits because the claims themselves did not “arise out of or relate to” that conduct, urging the Court to require a causal relationship. In an 8–0 ruling, the Court rejected Ford’s contentions.

Like Ford, Yamaha argued to the Fourth Circuit that the motorcycle involved in the accident at issue was designed, manufactured, and distributed in countries or states other than South Carolina but, further, that the accident and the plaintiff’s injuries were also out of state, in Florida, not South Carolina. The plaintiff argued that, as in the Ford cases, Yamaha sold the same model of motorcycle in South Carolina, that Yamaha offered extensive service through numerous state dealers, and that the motorcycle had been purchased and insured by a South Carolina resident from whom the plaintiff had borrowed it. While the Fourth Circuit did not reject the argument that Yamaha could be subject to personal jurisdiction in forum states other than those where the motorcycle was designed, manufactured, sold, or distributed, it distinguished the South Carolina plaintiff’s case from those the Supreme Court had considered.

The Fourth Circuit panel recognized that, in its Ford decision, the Supreme Court determined that Ford could be sued in the forum states even though the vehicles involved in the cases and injuries were not sold in those states, because Ford had “systematically served a market” in those forum states for the vehicles, satisfying the first prong of three required to establish personal jurisdiction. Similarly, the Fourth Circuit panel found that Yamaha purposely availed itself of South Carolina’s market through continuous and substantial in-state marketing activities. But the panel came to different conclusions concerning the two other prongs for establishing personal jurisdiction: that “there must be ‘an affiliation between the forum and the underlying controversy’” and that the exercise of jurisdiction should not make litigation so difficult and inconvenient that it is unfair or puts a party at a severe disadvantage. Wallace, No. 19-2459, slip op. at 5 (quoting Bristol-Myers Squibb Co. v. Super. Ct. of Cal., San Francisco Cty., 137 S. Ct. 1773, 1780 (2017)).

The panel pointed out that in the Ford cases, those states had specific jurisdiction because the injuries had also happened in the forum states, unlike the South Carolina plaintiff’s injuries, which had occurred in Florida. The panel observed in its decision that the Supreme Court’s decision in the Ford cases might allow suit against Yamaha in Florida, but that it does not allow the suit in South Carolina, finding that specific jurisdiction for a products liability case requires a stronger connection to the state than the defendant simply doing business in it. Rather, specific jurisdiction requires that the defendant, not the plaintiff, create contacts with the state relevant to the claims. The plaintiff had no dealings with defendant Yamaha at all, having borrowed the motorcycle from a third person. Finally, the court recognized that the third jurisdictional prong was not in dispute. However, the plaintiff’s failure to show a connection between Yamaha’s in-state conduct and the out-of-state accident resulted in a conclusion by the Fourth Circuit panel that the plaintiff’s claims did not arise out of or relate to “Yamaha’s South Carolina–directed conduct,” leaving one of the required three prongs unsatisfied.

The Yamaha opinion is another indication that the Supreme Court’s Ford decision will require other courts to interpret where the lines for personal jurisdiction limitations should be drawn and that numerous other scenarios could occur that do not clearly fit into the factual scenarios addressed by the Supreme Court’s decision in those cases. It is also helpful to understand prior precedent that the Court was considering at the time of its Ford decision. The Court’s landmark decision in International Shoe Co. v. Washington, 326 U.S. 310 (1945), held that a party, particularly a corporation, may be subject to the personal jurisdiction of a state court if it has “minimum contacts” with that state, setting forth the types of contact that a defendant can have with a state, absent actual physical presence, that can provide a basis for jurisdiction over corporations. The types of contacts were broken down into “casual” and “systematic and continuous,” where “casual” contact is not a basis for bringing unrelated claims, but “systematic and continuous” contact allows both claims related to the contact and unrelated claims to be brought in the forum state.

In World-Wide Volkswagen Corp. v. Woodson, 444 U.S. 286 (1980), the Court held that when a company places a defective product into the stream of commerce with the purpose of serving a particular forum, the company is subject to personal jurisdiction for the resulting injuries in that forum. Despite its earlier broad holdings, in 2017 the Court narrowed that precedent by determining there must be a factual connection between the defendant’s conduct or contacts in the forum and the claims being made in the litigation, holding in Bristol-Myers, 137 S. Ct. at 1785, that a defendant must “have purposefully availed itself of the privilege of conducting activities within the forum state,” and the plaintiff’s claim must “arise out of or relate to” the defendant’s forum conduct or contacts.

While the result in the consolidated Ford cases was unanimous, there were two concurring opinions expressing concern that more clarity was needed to avoid future jurisdictional litigation. Justice Alito took issue with the majority’s treatment of the phrase “arise out of or relate to,” which he said treated those words as two separate categories of cases permitting personal jurisdiction in the forum, and Justice Gorsuch (joined by Justice Thomas) wrote separately that the majority’s new test might create more confusion, rather than more clarity.

In Yamaha, the Fourth Circuit did not seem to have any of the concurring justices’ predicted trouble understanding the limitations on personal jurisdiction and the conduct required to create sufficient contact to establish such jurisdiction in a forum state. However, given that there is no bright-line test and that the Ford precedent could affect manufacturers and businesses of all sizes selling many types of products through different distribution channels, including the internet, we can likely expect much more litigation involving personal jurisdiction questions.

Karen Aldridge Crawford is the owner of the KLAC Law Firm in Columbia, South Carolina.

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