Latest U.S. Supreme Court Decision on Personal Jurisdiction is a New Jersey Case

J. McIntyre Machinery, Ltd. v. Nicastro, 131 U.S. 2780 (2011).  Lawyers and judges sometimes refer to new cases that grow out of an older, seminal case as the “progeny” of that earlier decision.  Well, welcome a new arrival among the progeny of International Shoe Co. v. Washington, 326 U.S. 310 (1945), the leading case on personal jurisdiction.  J. McIntyre was an appeal from a 5-2 ruling of the Supreme Court of New Jersey, which had found that there was personal jurisdiction over a British company.

The Supreme Court of the United States reversed that decision.  Justice Kennedy wrote a plurality opinion in which the Chief Justice and Justices Scalia and Thomas joined.  The plurality announced a new rule that limited the “stream of commerce” doctrine that had split the Court in Asahi Metal Industry Co. v. Superior Court of California, 480 U.S. 102 (1987), and on which the Supreme Court of New Jersey had relied.  Justices Breyer and Alito, an unusual pairing, agreed that New Jersey lacked personal jurisdiction, but on different grounds.  Justice Ginsburg, writing for herself and Justices Sotomayor and Kagan, dissented.

Robert Nicastro injured himself, in Saddle Brook, New Jersey, while using a metal-shearing machine manufactured by J. McIntyre in England.  Nicastro sued J. McIntyre in New Jersey state court.  But J. McIntyre did not itself sell its machines in New Jersey, or anywhere in the United States.  Instead, an independent company acted as distributor, structuring its advertising and sales efforts in accordance with J. McIntyre’s direction and guidance whenever possible.  J. McIntyre officials came to the United States for scrap recycling industry conventions, but those conventions never took place in New Jersey, and J. McIntyre personnel never came to New Jersey.  J. McIntyre had no New Jersey office, owned no property in New Jersey, paid no taxes here, and never even advertised its products in New Jersey.  Finally, no more than four, and likely only one, of J. McIntyre’s machines ended up in New Jersey.  J. McIntyre thus argued that it had no contacts with New Jersey sufficient to justify personal jurisdiction.

The Supreme Court of New Jersey found jurisdiction because J. McIntyre knew or should have known “that its products are distributed through a nationwide distribution system that might lead to those products being sold in any of the fifty states,” and J. McIntyre had not acted to prevent its machines from reaching New Jersey.  That approach was consistent with an opinion by Justice Brennan (a distinguished son of New Jersey) in Asahi that commanded four votes.

Justice Kennedy and the plurality in J. McIntyre, however, stated that “[t]he defendant’s 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.”  That view adopted the principles of Justice O’Connor’s opinion in Asahi for four other Justices.

As Justice Kennedy summarized, the “general notions of fairness and foreseeability” that underlay Justice Brennan’s Asahi opinion, and the ruling of the Supreme Court of New Jersey in J. McIntyre, are “inconsistent with the premises of lawful judicial power.”  “It is the defendant’s actions, not his expectations, that empower a State’s courts to subject him to judgment.”

Justices Breyer and Alito took a different tack.  They found no jurisdiction based on the fact that the machine that injured Nicastro may have been the only one sold in New Jersey.  Prior precedents had held that a single sale in a state does not create personal jurisdiction.  The concurring Justices noted the Supreme Court of New Jersey’s view that the fast-based globalization of the economy had removed national boundaries as barriers to trade, but found no need to “announce a rule of broad applicability” in this case.  Since the concurrence declined to endorse the plurality’s rule, the tension created by the competing opinions in Asahi, each of which got four votes, remains unresolved.

The dissenters looked to the realities of current commerce.  By engaging a distributor to disseminate its products in the United States, J. McIntyre had “‘purposefully availed itself’ of the United States market nationwide, not a market in a single State or a discrete collection of States.”  And, Justice Ginsburg asked, “[h]ow could [J. McIntyre] not have intended, by its actions targeting a national market, to sell products in the fourth largest destination for imports among all States of the United States [that is, New Jersey] and the largest scrap metal market?”

Justice Ginsburg summarized the dissenters’ view of the law as follows.  “The modern approach to jurisdiction over corporations and other legal entities, ushered in by International Shoe, gave prime place to reason and fairness.  Is it not fair and reasonable, given the mode of trading of which this case is an example, to require the international seller to defend at the place its products cause injury?”  It was not “undue to require [J. McIntyre] to defend in New Jersey as an incident of its efforts to develop a market for its industrial machines anywhere and everywhere in the United States.”  That was certainly more fair, Justice Ginsburg said, than forcing Nicastro to sue in Nottingham, England.

Finally, anticipating complaints that allowing personal jurisdiction in the United States would discourage international firms from doing business here, the dissenters observed that their view accorded with the way that other countries deal with such issues.  “Of particular note, within the European Union, in which the United Kingdom is a participant, the jurisdiction New Jersey would have exercised is not at all exceptional.”

The dissenters have the better of the argument, 66 years after International Shoe.  In our “flat” world, there is no reason not to require a party who takes the “sweet” (the availability of the rich United States market for its products) also to accept the “bitter” (the obligation to defend here when those products cause injury).  The issue remains open, awaiting a case that Justices Breyer and Alito believe presents the question squarely.