J. McIntyre Two Years Later: The Stream-of-Commerce Test Keeps on Rolling

McIntyre—An Opportunity to Revisit Asahi
The U.S. Supreme Court in McIntyre addressed the test for personal jurisdiction over a foreign manufacturer whose defective goods injure a consumer in the United States. McIntyre, a British manufacturer, was sued in a New Jersey state court when McIntyre’s metal shears injured a worker in New Jersey. The trial court found that McIntyre did not have sufficient minimum contacts with New Jersey and dismissed the complaint. The Appellate Division of the Superior Court reversed the trial court, finding that McIntyre placed the machine in the stream of commerce and engaged in additional conduct that indicated intent to serve the New Jersey market. The New Jersey Supreme Court granted McIntyre’s petition for certification and held that McIntyre was subject to personal jurisdiction in New Jersey because McIntyre had placed its products in the stream of commerce by using a distributor that targeted all 50 states. Thus, McIntyre either knew or should have known that the product might be purchased by a New Jersey consumer. The McIntyre Court reversed the decision but failed to produce a majority opinion.

The Plurality Opinion
Justice Kennedy wrote the plurality opinion and Chief Justice Roberts and Justices Scalia and Thomas joined. The plurality rejected Justice Brennan’s “foreseeability” test from Asahi. “[A]dvocating a rule based on general notions of fairness and foreseeability, is inconsistent with the premises of lawful judicial power. This Court’s precedents make clear that it is the defendant’s actions, not his expectations, that empower a State’s courts to subject him to judgment.” McIntyre, 131 S. Ct. at2789. According to the plurality, the question must be whether the corporation directed its conduct at the forum jurisdiction; it is not enough that the company could have predicted that its goods would reach the forum state. Similarly, a corporation that directs its conduct to the United States may be subject to the courts of the United States but not necessarily subject to the jurisdiction of any particular state.

The plurality emphasized three facts defeating personal jurisdiction over McIntyre. First, McIntyre used an independent company to distribute its products in the United States. Second, only four machines ended up in New Jersey. Third, McIntyre’s only contact with the United States was attendance at trade shows, none of which was in New Jersey. In the situation presented by McIntyre, the plurality determined that McIntyre may have intended to serve the U.S. market, but there was nothing to show that McIntyre purposefully availed itself of the New Jersey market; therefore, New Jersey did not have personal jurisdiction.

The Concurring Opinion
In the concurrence, Justice Breyer, joined by Justice Alito, disagreed with the plurality’s reasoning. The concurrence relied on the Court’s precedent, specifically Justice O’Connor’s stream-of-commerce-plus test, and noted that the Court has never held that personal jurisdiction could be exercised over a corporation based on a single sale in that forum “even if that defendant places his goods in the stream of commerce, fully aware (and hoping) that such a sale will take place.” 131 S. Ct. at 2792 (Breyer, J., concurring). In the case presented in McIntyre, there was no regular flow or course of sales in New Jersey, and there was no “something more,” such as special state-related design or marketing. The concurrence was concerned that the New Jersey Supreme Court’s approach would base jurisdiction on the mere occurrence of a product-based accident in that forum and thus agreed that New Jersey did not have personal jurisdiction over McIntyre.

The Dissenting Opinion
In the dissent, Justice Ginsburg, joined by Justices Sotomayor and Kagan, asserted that the plurality and concurring opinions would allow manufacturers to evade personal jurisdiction by the simple expedient of using independent distributors to market their products. The dissent argued that McIntyre had “purposefully availed” itself of the U.S. market as a whole and thus also had availed itself of the market in any state where its products were sold.

McIntyre’s Limited Impact on the Lower Federal Courts
Although it is clear that a majority of the Court has rejected Justice Brennan’s foreseeability test from Asahi, the Court’s failure to produce a majority opinion has blunted the impact of McIntyre on the lower federal courts. Without a majority opinion, many lower courts are unwilling to disturb their own prior precedents.

For example, in Ainsworth v. Moffett Engineering, Ltd., a panel of the Fifth Circuit held that Mississippi had jurisdiction over a foreign manufacturing company. The personal-jurisdiction test developed in the Fifth Circuit requires that a company expect that its product would be purchased or used by consumers in the forum state, but the contacts must be more than “random, fortuitous, or attenuated.” Ainsworth, 2013 WL 1920729, at *2 (5th Cir. 2013) (internal quotations and citation omitted). The court noted that its stream-of-commerce test was in tension with the plurality’s opinion, but because a majority was not reached in McIntyre, the court only had to follow the narrow holding created by Justice Breyer’s concurrence—that a single sale was not an adequate basis for jurisdiction. Therefore, the Fifth Circuit’s existing stream-of-commerce test “does not run afoul of McIntyre’s narrow holding.” Id.

Moffett, an Irish manufacturing company, was sued in a Mississippi state court after a farm worker was run over and killed by one of Moffett’s forklifts in Mississippi. Moffett, like McIntyre, did not sell its own products in the United States; rather, it had an independent company market and distribute its forklifts throughout the 50 states. While the situation was similar to that in McIntyre, the Fifth Circuit found that the facts were different enough to fall outside McIntyre’s scope. First, there was more than a single sale in Mississippi; over 200 forklifts were sold in Mississippi. Second, Moffett provided “something more” when it developed products for the poultry industry. Because Mississippi is the fourth largest poultry-producing state in the United States, Moffett could have reasonably expected that its forklifts would be sold there. These facts established that Moffett could have “reasonably anticipated” suit in Mississippi; therefore, Mississippi had personal jurisdiction over Moffett.

The Fifth Circuit noted that the only other circuit court to address McIntyre’s narrowest holding was the Federal Circuit in AFTG-TG, LLC v. Nuvoton Technology Corp., 2013 WL 1920729 (Fed. Cir. May 9, 2013). AFTG brought suit against numerous defendants in the District Court of Wyoming for patent infringement. AFTG asserted that the district court had jurisdiction over the defendants under a stream-of-commerce theory because the defendants sold AFTG’s products to various companies, and those companies then sold the products to Wyoming consumers. In analyzing personal jurisdiction post-McIntyre,the Federal Circuit noted that the narrowest holding that could be distilled from Justice Breyer’s concurrence was that the law on personal jurisdiction had not changed. The Federal Circuit applied its precedent and held that personal jurisdiction was not supported because, at most, only one defendant made isolated shipments to Wyoming.

Lower federal courts have followed the same reasoning as the Federal and Fifth Circuits when determining whether a state has personal jurisdiction over a foreign manufacturing company. For example, when Monje v. Spin Master, 2013 WL 2369888 (D. Ariz. May 29, 2013), was decided, the Ninth Circuit had not yet applied McIntyre in a stream-of-commerce setting. The court noted that Justice Breyer’s concurring opinion preserved the status quo in the Ninth Circuit. To meet the “something more” that would allow the District Court of Arizona to exercise jurisdiction, the company must not only place the product in the stream of commerce, but it must also “coax” the product to its intended destination. Additionally, the court must also consider the number of products that end up downstream—there must be more than a single sale.

The facts presented to the court were similar to the facts in McIntyre. A foreign corporation, Moose, used an independent company to distribute its products throughout the United States, and a consumer was injured by one of Moose’s products. But the court found that the extent of Moose’s involvement in the distribution of its products exceeded that of McIntyre’s involvement, as did the number of products sold in the United States. In McIntyre, only one metal shear entered New Jersey; whereas in Monje, over four million items were sold in the United States, with Arizona receiving numerous shipments. As the Fifth Circuit determined in Ainsworth, the facts present in Monje took it out of McIntyre’s limited scope and allowed the District Court of Arizona to determine that it had personal jurisdiction over Moose.

While most courts have relied on the narrow holding created by Justice Breyer’s concurring opinion, some courts have been willing to accept the plurality’s opinion that intent to serve the United States market is not the same as intent to serve a specific state’s market. In Oticon, Inc. v. Sebotek Hearing Systems, LLC, the District Court of New Jersey stated that McIntyre “stands for the proposition that targeting the national market is not enough to impute jurisdiction to all the forum states. In that regard, [McIntyre] overruled the line of cases exemplified by Tobin [6th Cir. 1993], Barone [8th Cir. 1994], and Power Integrations [D. Del. 2008], which held to the contrary.” 865 F. Supp. 2d 501, 513 (D.N.J. 2011) (emphasis in original). The court found that five or nine sales in New Jersey did not justify a New Jersey court exercising personal jurisdiction over a foreign defendant, especially now that the “national market theory is no longer viable.” Id. A few other courts have also accepted this proposition; however, the recent decisions by the Federal and Fifth Circuits as well as the District Court of Arizona seem to indicate that courts are not likely to change their jurisprudence until a majority opinion on stream of commerce is reached by the Supreme Court.

Will the Court Ever Reach a Majority on the Stream of Commerce?
Twenty-four years had passed between the Supreme Court’s decisions in Asahi and McIntyre.The McIntyre concurrence seems to suggest that the Court would potentially take a case that speaks to “contemporary commercial circumstances,” but the factual situation presented by McIntyre was not the proper case for the Supreme Court to create “broad pronouncements that refashion basic jurisdictional rules.” 131 S. Ct. at 2793. Hopefully, clarification of the standard will not require another 24 years.

Keywords: litigation, pretrial practice, discovery, jurisdiction, stream of commerce

Katherine G. Cisneros is an associate with Schiff Hardin LLP in Chicago, Illinois.

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