Monday, January 30, 2006

Personal Jurisdiction Heats Up

Those who watch for cert-worthy decisions should watch the Fifth Circuit's Luv N' Care, Ltd. v. Insta-Mix opinion, handed down January 25th. The concurring opinion by Judge DeMoss openly begs the Supreme Court to take the case to resolve a split in the circuits on an important issue of specific personal jurisdiction: does one use the mere stream of commerce approach or the stream of commerce plus approach advocated by Justice O'Connor in her 1987 plurality opinion in Asahi.

Personal jurisdiction is, in federal question cases such as copyright, intertwined with service of process. A suit for copyright infringement is instituted by the filing of a complaint with the clerk of the district court and serving a copy of the complaint along with a summons on the defendant. Technically, FRCP 4 does not directly deal with personal jurisdiction, only service of process, and with the exception of FRCP 4(k)(2), valid service of process does not necessarily ensure that the court may exercise in personam jurisdiction over a defendant. One might assume that in exclusively federal cases such as copyright, the exercise of personal jurisdiction over the parties would not raise questions of state law. Such an assumption would be erroneous. While amendments to the FRCP in 1963 led some to hope that a step had been taken toward an eventual nationwide service of process, which would in turn lead to a reorganization and reorientation of personal jurisdiction issues in the federal courts, no progress has been made. There is, therefore, an anomaly in a federal question case, such as copyright, in which original and exclusive jurisdiction is vested in federal courts: the federal court’s ability to hear the case at all will be determined by state laws that can and do vary considerably. But even state laws are constrained by constitutional due process considerations, and it is in articulating the requisite minumum to justify the exercise of jurisdiction over non-residents that the trouble has arisen.

In 1980, the Supreme Court issued its landmark opinion in World Wide Volkswagen Corp. v. Woodson, 444 U.S. 286, which introduced the stream of commerce theory. World Wide Volkswagen involved an attempt by a couple who purchased an Audi automobile in New York and who were injured in Oklahoma to bring a products liability suit in Oklahoma against the New York retailer and the New York wholesale distributor. In a 5–4 opinion, the Supreme Court rebuffed the effort. In so doing, the Court held that “a state court may exercise personal jurisdiction over a nonresident defendant only so long as there exist “minimum contacts” between the defendant and the forum State. . . . The concept of minimum contacts, in turn, can be seen to perform two related, but distinguishable, functions. It protects the defendant against the burdens of litigating in a distant or inconvenient forum. And it acts to ensure that the States, through their courts, do not reach out beyond the limits imposed on them by their status as coequal sovereigns in a federal system.”

One might have assumed that on the facts plaintiffs would have prevailed; however, the Court held it was not foreseeable that a New York retailer and a New York wholesale distributor selling a car to a New York couple reasonably foresaw the car traveling to Oklahoma. One wonders if the same result would have been obtained if car had been sold by the New York retailer to an individual from New Jersey or Connecticut. Reasonable minds (including four dissenting Justices) could disagree with the majority’s narrow view. Presumably, though, a unanimous court would have agreed that Volkswagen as the manufacturer would have foreseen nationwide mobility.

Product liability arguments akin to those in World Wide Volkswagen were raised in the Supreme Court’s 1987 effort at again taking up the stream of commerce theory, Asahi Metal Industry Co. v. Superior Court of California, 480 U.S. 102. Unfortunately, no majority opinion resulted, with Justice O’Connor authoring a plurality opinion as to the result. Cutting back on liberal interpretations of World Wide Volkswagen given by some lower courts, the plurality sided with those lower courts which interpreted the Due Process Clause to require “something more” than that the defendant was aware of its product’s entry into the forum state through the stream of commerce in order for the state to exercise jurisdiction over the defendant.

Justice O’Connor wrote:
The “substantial connection” . . . between the defendant and the forum State necessary for a finding of minimum contacts must come about by an action of the defendant purposefully directed toward the forum State. The placement of a product into the stream of commerce, without more, is not an act of the defendant purposefully directed toward the forum State. . . . . Additional conduct of the defendant may indicate an intent or purpose to serve the market in the forum State, for example, 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. But a defendant’s awareness that the stream of commerce may or will sweep the product into the forum State does not convert the mere act of placing the product into the stream into an act purposefully directed toward the forum State.

Although only a plurality opinion, Justice O’Connor’s approach has been treated by many courts as a majority opinion, although other courts do not follow it, opting instead to rely on their interpretation of World Wide Volkswagen. As a result, care should be taken to determine the state of stream of commerce jurisdiction in the relevant jurisdiction. On the whole, though, Asahi has fared well in copyright litigation, but not in the Fifth Circuit, which follows the stream of commerce approach, although before Luv N' care, that court had been reluctant to apply the stream of commerce approach outside of product liability cases.

In Luv N’Care, Ltd. v. Insta-Mix, the court reversed a district court that found no personal jurisdiction over infringement of a bottle label. The Fifth Circuit held that under its more relaxed approach, defendant, a Colorado company had complete control over where the goods were shipped, including in this case, to Lousiana.

Judge DeMoss, specially concurred for the sole purposes of having his views on a circuit split on record and begging the Supremes to take the case put into the petition for cert. In an amazing end to his opinion, he concludes:

“I hope Insta-Mix will apply for a writ of certiorari and I urge the Supreme Court to take up the minimum contacts issue and reolve it and the increasing circuit divide with clarity. The recent changes in the composition of the Court should produce a new effort by the Court to definitively answer this controversy. The sovereignty of the individual states in one the line.”

Talk about a guy who thinks his ship has come in! The recent changes he refers to can’t produce the result he wants: Justice O’Connor was the author of the plurality opinion he favors and Rehnquist joined her. It is true that Brennan, Marshall, White and Powell were on the 1987 Court, and aren't now, but those changes are hardly recent. Nevertheless, while the composition of the Court now is quite different than in 1987, it remains to be seen whether the issue is a liberal versus conservative one.


Anonymous said...


Brand new 1L here trying to make sense of the stream of commerce theory in civpro...

Found this on Google & it was very helpful, thanks.


Anonymous said...

As far as Woodson goes, the Supreme Court did find that it was foreseeable that a mobile car sold in NY could be involved in an accident in Oklahoma, but the exact quote is that "foreseeability alone" does not suffice to establish jurisdiction in the absence of other minimum contacts with that state. In the case of NY, NJ and CT, obviously these two companies could be held liable because they advertise and cater to those states.

Anonymous said...

I believe that the foreseeability issue in World Wide Volkswagen was that foreseeability that a car bought from a dealership in NY is not the important part. The important part of the foreseeability issue was whether it is foreseeable that the NY dealership would be haled into court in OK. The Supreme Court said while it is foreseeable that the car would be driven to OK, it was not foreseeable that the NY dealership would be haled into court in OK because of the car.
So the miminum contacts test, started by International Shoe and fleshed out by World Wide Volkswagen and Burger King v. Rudzewicz, is two-pronged: there has to be purposeful availment and foreseeability/reasonableness. (Then there are the fairness factors that go w/ the minimum contacts, also described in World Wide Volkswagen.)