We often say, as we said last week, that this blog is not designed to do plaintiffs' work for them. Thus, we are a heckuva lot more likely to trumpet pro-defense rulings than wrong ones. Still, it is important to know the problem areas out there, and today's case displays one of them. It relates to personal jurisdiction, where the momentum has very much been in defendants' favor since the SCOTUS decisions in the Bauman and BMS cases.
In Collett v. Olympus Medical Systems Corp., 2020 U.S. Dist. LEXIS 10170 (M.D. Ga. Jan. 22, 2020), the court held that it could exercise personal jurisdiction over a Japanese parent company that did not actually do anything in Georgia. The Japanese parent company designed and manufactured colonoscopes. It then supplied the colonoscopes to a U.S. subsidiary that distributed them throughout the United States. A plaintiff in Georgia claimed that she had contracted an immunodeficiency virus from a defective colonoscope. She sued both the Japanese parent company and the U.S. distributing company.
The Japanese parent company challenged personal jurisdiction, furnishing an affidavit that it was not responsible for and did not control the marketing, advertising, promotion, sale, or distribution of the colonoscope in the United States, did not transact any business in Georgia, did not derive any direct revenues from Georgia, etcetera, etcetera. That "etcetera, etcetera" sounds like the King's throwaway phrase in "The King and I," but take it as shorthand for saying that the Japanese company had nothing to do with Georgia.
The court began its jurisdictional analysis by deciding that the Georgia long-arm statute reached the Japanese parent company because its conduct outside Georgia – the design and manufacture of the colonoscope – caused tortious injury inside Georgia. Moreover, the Japanese company expected that its products would be distributed everywhere in the U.S. – it certainly did not exclude Georgia. Further, at least some of its revenues indirectly came from Georgia.
But what about due process? Under the Bauman case, Georgia clearly could not exercise general jurisdiction over the Japanese company. All the conceptual action in the case concerned whether specific jurisdiction existed. Looking to some of the older specific jurisdiction cases – Burger King, Keegan, Helicopteros, World-Wide Volkswagen – the Collett court reasoned that a forum state does not offend due process by asserting "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 and those products subsequently injure forum consumers."
We are not in love with the stream of commerce theory. It too quickly veers into the boundless. It also threatens to make a mockery of recent SCOTUS personal jurisdiction teaching. Speaking of recent SCOTUS personal jurisdiction teaching, the Collett court dispensed with BMS on the grounds that BMS merely excluded personal jurisdiction when the plaintiffs were not residents of the forum state. The plaintiff in Collett, by contrast, was a Georgia resident. Okay, but we think there is a little more to BMS than that. How much more? Lots more. For example, as we recently blogged, BMS means that a defendant cannot be dragged into court based solely on its relationship with a third-party.
The SCOTUS case that really posed a problem for exercising personal jurisdiction over the parent company in Collett is the 2011 J. McIntyre Machinery case. In J. McIntyre, the Supreme Court plurality opinion applied a "stream of commerce plus" test, reversing the New Jersey Supreme Court's decision that a New Jersey Court could exercise personal jurisdiction over a British manufacturer that sold a single machine to a New Jersey customer through an American distributor but had no other contacts with New Jersey. That "plus" is an additional requirement along the lines of purposeful availment. The Collett emphasized that the SCOTUS plurality was not a majority, and therefore declined to add that "plus" to the stream of commerce test. That is a surprising, and perhaps unnecessary way to go. One could see the Collett court emphasizing the singularity of the transaction in J. McIntyre, and going off on a Hegelian riff on how quantitative differences at a certain point become qualitative. (Not that we would advocate citations to anything by Hegel, who is more opaque than the tax code.)
J. McIntyre is a real barrier to Collett's outcome because SCOTUS said that a foreign company that markets a product to the United States generally but does not purposefully direct its product to an individual state is not subject to specific jurisdiction in the state where its product causes injury. J.McIntyre and an earlier personal jurisdiction case, Asahi, rejected the view that a foreign company is subject to jurisdiction so long as it could reasonably foresee that the distribution of its products through a nationwide system might lead to those products being sold in any of the 50 states. Not to put too fine a point on it, Collett appears to be on the wrong side of SCOTUS doctrine. At the very least, Collett's side-step of J.McIntyre via the plurality/majority distinction does not do much to reinforce the strength of the Collett decision.
The Collett court was plainly troubled by the notion that a "manufacturer can escape legal responsibility for any defect in its product because it has decided that its product will be sold generally everywhere but nowhere in particular." We are not so troubled. This was not an instance of a wrong without a remedy (a dumb concept anyway – even an inattentive student of life knows that wrongs without remedy abound). After all, the plaintiff was able to sue the U.S. distributor. We did not see in the Collett case any allegation of an alter ego relationship between the parent and subsidiary, or that the subsidiary was some sort of insolvent shell or conduit. In Collett, it is as if doctrine was sacrificed out of fear of a nonproblem.
The Collett case came out last January. Around that same time, we blogged about how SCOTUS granted certiorari for a pair of automobile cases that would permit elaboration of the vitality – or non-vitality – of the stream of commerce test for personal jurisdiction. Then came Covid-19 and arguments for those cases were put off until next term. You can read the supremely well-reasoned amicus brief here.
Shameless Promotion
McConnell, doubtless the grouchiest blogster of the group, has turned his July 22 post on "Watch Your (Deposition) Language" into a webinar. It runs this afternoon and is available thereafter on demand. You can find it here.
So if reading his various scolds about sloppy depositions isn't enough for you, and you actually want to hear the frustration and exasperation in his voice, be sure to tune in.
Originally published by Reed Smith, September 2020
This article is presented for informational purposes only and is not intended to constitute legal advice.
