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Williams v. Yamaha Motor Co.: No Jurisdiction over a Foreign Company

Posted in California Courts, Litigation Trends, Products Liability, Uncategorized

lawjUSTICEBWIn its recent decision in Williams v. Yamaha Motor Co., 851 F.3d 1015 (9th Cir. 2017), the Ninth Circuit affirmed dismissal against a Japanese manufacturer because it was not “at home” in the forum. This consistent application of Daimler provides the benefit of predictable results.

In 2013, George Williams filed suit, on behalf of himself and others similar situated, against Yamaha Motor Co. Ltd (“YMC”), a Japanese corporation, and Yamaha Motor Corporation, U.S.A. (“YMUS”), YMC’s wholly-owned subsidiary. Those plaintiffs were purchasers of outboard motors, which were designed and manufactured by YMC, then, marketed and imported in California by YMUS. Despite being properly serviced and maintained, the motors failed after 500 to 700 hours of use, far less than the expected motor life of 2,000 hours. Williams alleged that YMC had knowledge of the defect, but failed to remedy the issue because the defect did not typically manifest until after the three-year warranty period expired.

After multiple amendments to the initial complaint, the district court dismissed Williams’ only remaining claim, granting YMC’s motion to dismiss for lack of personal jurisdiction and YMUS’s motion to dismiss pursuant to Fed. R. Civ. P. 12(b)(6). Williams appealed and the Ninth Circuit affirmed the dismissal, finding that the district court lacked general jurisdiction of YMC and that Williams failed to adequately plead the elements of his claim against YMUS.

The Ninth Circuit relied on Daimler AG v. Bauman, 134 S. Ct. 746 (2014) in reviewing the jurisdiction issue. The court stated that the analysis for general jurisdiction is whether “corporation is essentially ‘at home’ in the forum state.” The court applied this analysis and expressly considered the following facts: Japan was YMC’s principal place of business; YMC had no offices or employees in California; and YMC’s total sales in North America made up only 17% of YMC’s total net sales. Accordingly, the Ninth Circuit was persuaded that YMC was not “at home” in California.

The Ninth Circuit acknowledged that its decisions after Daimler applied the alternative “alter ego test for ‘imputed’ general jurisdiction.” Under this theory, a foreign company would need to be so intertwined with its subsidiary that neither would have a separate identity and would merely function as alter egos of each other. However, even under this theory, the Ninth Circuit found no facts regarding the “nature of the parent-subsidiary relationship. “ Accordingly, the court declined to find support for the “alter ego” theory of jurisdiction.

This case is another example of a post-Daimler court strictly following the “at home” rule of general jurisdiction over a foreign business. Some argue that Daimler’s “at home” rule is inconsistent with historical trends and serves to “shrink the jurisdiction” where suits may be brought against corporations.[1] However, these concerns are outweighed by the benefits of a clear and predictable alternative to the previous “minimum [or substantial] contacts” analysis set forth by International Shoe and its progeny.

The “at home” rule is a straightforward analysis as compared to the previous analysis. See Daimler, 134 S. Ct. at 761 (holding that the jurisdictional analysis under International Shoe and its progeny was “unacceptably grasping.”). Jurisdictional rules which employ a straightforward and understandable analysis “promote greater predictability.” Hertz  Corp. v. Friend, 559 U.S. 77, 94 (2010).

Predictability yields two key benefits. First, a court’s resources are preserved from lengthy inquiries into whether a defendant’s contacts were “minimal” enough as under the former rule for general jurisdiction. The previous analysis, which gave “prime place to reason and fairness,” involved a highly fact-specific inquiry into the details of the relationship between the defendant and the forum in each case. See J. McIntyre Mach., Ltd. v. Nicastro, 564 U.S. 873, 903 (2011). Now, as is demonstrated in Williams v. Yamaha, a question of general jurisdiction may be simply resolved based on a review of the principal place of business, location of offices, and amount of revenue generated in the forum. Second, predictable results also allow litigants to better understand the merits of their respective cases before pursuing legal remedies through litigation. See Hertz, 559 U.S. at 94 (“Predictability also benefits plaintiffs deciding whether to file suit in state or federal court.”). Specifically, plaintiffs can better predict the one forum in which they can seek recourse for their claims. Therefore, the “at home” approach to questions of general jurisdiction is an analysis with predictable outcomes, which benefits all parties involved in complex litigation. See Stouffer Corp. v. Breckenridge, 859 F.2d 75, 77 (8th Cir. 1988) (noting the favorability of a rule that “enhances predictability of result and promotes judicial economy”).

Whether Daimler’s “at home” rule will continue to be consistently applied with the longevity of International Shoe will remain to be seen. However, the benefits of the predictability of this clearer rule of jurisdiction will continue to benefit courts and litigants in resolving this important procedural question.

 

[1] See Judy M. Cornett & Michael H. Hoffheimer, Goodbye Significant Contacts: General Personal Jurisdiction After Daimler AG v. Bauman, 76 Ohio St. L.J. 101, 105-07 (2015).