Client Alert: The United States Supreme Court Declines to Clarify Rules Governing States’ Exercise of Personal Jurisdiction Over Foreign Manufacturers

On October 9, 2012, the United States Supreme Court denied Haight’s petition for certiorari filed on behalf of Bombardier Recreational Products, Inc. in the case of Bombardier v. Dow Chemical Canada ULC. We petitioned the court to review the case of Dow v. Superior Court (2011) 202 Cal. App. 4th 170 (“Dow“) , where the California Court of Appeals, relying on J. McIntyre Machinery, Ltd. v. Nicastro, 564 U.S. ___, 131 S.Ct. 2785 (2011), held that California courts could not exercise personal jurisdiction over a foreign manufacturer, so long as that company did not directly ship, sell or advertise its products (or components) within the state, or own property or maintain an office or other facility there.

In Dow, several plaintiffs claimed serious injuries when a personal watercraft (PWC) exploded as a result of an allegedly defective fuel tank. Although Bombardier manufactured the PWC, a Canadian division of Dow Chemical manufactured the fuel tank. Bombardier attempted to bring Dow into the case, but Dow objected on jurisdictional grounds. After two years of appeals of consideration by the California Court of Appeals, most recently after remand back form the the U.S. Supreme Court in 2011, the California Court of Appeals sided with Dow.

The result of the Supreme Court’s denial of our petition for certiorari is that the Dow decision stands as California Court of Appeals precedent that precludes a foreign component part manufacturer, whose (exploding) component was the cause of injuries to California residents, from being subject to personal jurisdiction in California courts, even though that foreign manufacturer was certain that its product would be incorporated into finished product to be sold to and used by California residents, in this case, 43,000 of them.

Virtually all legal commentators have agreed with us that there is a pressing need for bright-line clarification by the Supreme Court of the personal jurisdiction rules applicable to foreign manufacturers (Law360 Article). There has been virtually no advancement in certainty on the issue since the landmark decision of Asahi Metal Industry Co., Ltd. v. Superior Court, 480 U.S. 102 (1987) (“Asahi“), despite the evolution of a truly global economy involving complex relationships between foreign companies and legal systems, where finished products are often comprised of component parts manufactured in multiple countries around the world.

Even in “stream-of-commerce plus” jurisdictions like California, providing a more stringent test for obtaining jurisdiction, however, a “no jurisdiction” result should not be presumed in every case where a foreign manufacturer without ownership of property or direct activity within a given state is alleged to be the cause of injuries to forum residents. Various facts may militate in favor of jurisdiction even under that test. For example, the nature and precise language of an exclusive supply agreement between the component part manufacturer and the finished product manufacturer or the nature and operation of a non-traditional distribution scheme of the foreign manufacturer may create jurisdiction over the foreign manufacturer even there. It is recommended that a close case-by-case jurisdictional analysis be undertaken in every important matter.

This document is intended to provide you with general information about current law developments. The contents of this document are not intended to provide specific legal advice. This communication may be considered advertising in some jurisdictions.

October 12, 2012