Published Decision: Knox v. MetalForming, Inc., 914 F.3d 685 (1st Cir. 2019)
The extent to which state and federal courts may exercise specific personal jurisdiction over foreign defendants has long been an area of ambiguity and disharmony. Notably, the U.S. Supreme Court’s two most recent attempts to address the issue both failed to produce a majority opinion. The lower courts have thus been tasked with delineating the boundaries of jurisdictional authority, armed only that the competing tests articulated in the Supreme Court’s fractured pronouncements. On January 30, 2019, the Court of Appeals for the First Circuit issued a decision in the matter of Knox v. MetalForming, Inc. and Schechtl Maschinenbau GmbH, which provides much needed clarity concerning the relevant factors and applicable standards for the exercise of personal jurisdiction over foreign product manufacturers.
- Case-Specific Jurisdiction Precedent and the Stream-of-Commerce Analysis
For the exercise of personal jurisdiction to be constitutional, a defendant must have “certain minimum contacts” with the forum state such that the maintenance of the suit does not offend “traditional notions of fair play and substantial justice.” In the absence of general jurisdiction, a plaintiff must establish that the court has case-specific jurisdiction over the defendant, for which a three-part test applies. First, the plaintiff’s claim must directly arise out of, or relate to, the defendant’s forum-state activities. Second, the defendant’s forum contacts must represent a purposeful availment of the privilege of conducting activities in the forum state. Third, the exercise of jurisdiction must be reasonable.
While the test is well established, it is “’not susceptible of mechanical application” and requires a highly fact-specific inquiry. Particularly, the Supreme Court’s efforts to provide guidance in the application of “purposeful availment” prong to foreign manufacturers has resulted in competing variations of the so-called “stream-of-commerce” test. The Supreme Court first set forth the “stream-of-commerce” standard in World-Wide Volkswagen v. Woodson, stating that a “forum State does not exceed its powers under the Due Process Clause if it asserts personal jurisdiction over a corporation that delivers its products into the stream of commerce with the expectation that they will be purchased by consumers in the forum State.” In Asahi Metal Indus. v. Super. Ct., Justice O’Connor, writing for three other justices, stated that placing a defective product into the stream of commerce combined with “an intent or purpose to serve the market in the forum State” satisfied purposeful availment. This “stream-of-commerce plus” standard, sought “[a]dditional conduct of the defendant” to “indicate an intent or purpose to serve the market in the forum State.” Examples included designing the product for the market in the forum state, advertising in the forum state, establishing channels for providing regular advice to customers in the forum state, or marketing the product through a distributor who has agreed to serve as the sales agent in the forum state.
The Supreme Court revisited its stream-of-commerce precedent most recently in J. McIntyre Mach., Ltd. v. Nicastro. There, the plaintiff was injured in New Jersey while operating a machine that was manufactured in England by J. McIntyre Machinery (“McIntyre”), sold to a U.S. distributor, who in turn sold and shipped the machine to New Jersey. In a split opinion, the Supreme Court ruled that the New Jersey courts lacked jurisdiction over McIntyre. Both Justice Kennedy’s plurality opinion and Justice Breyer’s concurrence emphasized that McIntyre did not have a single contact with New Jersey apart from the fact that the machine in question ended up there. Justice Kennedy, joined by three other justices, stated the stream-of-commerce “metaphor” merely acknowledges the “unexceptional proposition” that “a defendant may in an appropriate case be subject to jurisdiction without entering the forum . . . as where manufacturers or distributors seek to serve a given State’s market.” Justice Kennedy continued that jurisdiction is appropriate only where the defendant “can be said to have targeted the forum.”
In a concurrence, Justice Breyer rejected the plurality’s “strict rules that limit jurisdiction where a defendant does not intend to submit to the power of a sovereign and cannot be said to have targeted the forum.” He observed that the case could be decided merely by applying the Court’s existing precedents and did not require the Court to promulgate a new standard. Justice Breyer noted that the Court had never held that a single isolated sale is sufficient. Thus, McIntyre was not subject to the court’s jurisdiction because there was no evidence of a “regular flow or regular course of sales in New Jersey” nor the examples of “something more” identified in Asahi. Courts have subsequently recognized Justice Breyer’s opinion as the narrowest grounds for the Court’s decision, and thus the binding opinion.