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ALERT
D e l a wa r e
March
2012
Pennsylvania District Court Finds Supreme Court Failed to Adopt Clear Personal Jurisdiction Standard Over Foreign Defendant
By H a r r i s N ea l Fe l d m a n , H a n Ng u y e n , a n d Ca rl J . Sch a erf
A foreign manufacturer sued in the U.S. District Court for
the Middle District of Pennsylvania recently prevailed in
its motion to dismiss for lack of personal jurisdiction even
though it did not dispute that its consumer product was
used by the injured Pennsylvania plaintiffs. In an opinion
that gives essentially no credit to a 2011 U.S. Supreme
Court decision on personal jurisdiction — noting “the failure of a Supreme Court majority to adopt clearly one of the
two [stream-of-commerce theory] standards” — the District Court in Sieg v. Sears Roebuck & Co., No. 3:10-606
(Feb. 24, 2012), concluded that a foreign defendant was
not subject to personal jurisdiction under either of the two
standards for the stream-of-commerce theory despite the
fact that it has a presence in the United States and previously defended other lawsuits in Pennsylvania.
In Sieg, the plaintiffs sued Sears Roebuck and Leviton
Manufacturing for property damage and personal injuries caused by a fire in their house. The plaintiffs alleged
that a defective power tap, or power strip, started the fire.
Plaintiffs purchased the power tap from Sears and alleged
that Leviton manufactured or distributed the product. The
power tap, however, was manufactured by Taiwan-based
Primax Electronics, whom Leviton promptly joined in a
third-party action. Primax moved to dismiss for lack of
personal jurisdiction on the theory that it did not purposefully avail itself to Pennsylvania’s markets.
The Court conducted the standard three-part inquiry to
dispose of the motion — whether the defendant purposefully directed its activities at the forum; whether the litigation arises out of or relates to at least one of those activities; and whether the exercise of jurisdiction comports
with traditional notions of fair play and substantial justice.
Leviton argued that personal jurisdiction was proper under
the stream-of-commerce theory. This theory has been addressed twice by the Supreme Court — first in Asahi Metal
Industry Co. v. Superior Court of California, 480 U.S. 102
(1987) and most recently in J. McIntyre Machinery, Ltd. v.
Nicastro, 131 S. Ct. 2780 (2011) — but neither case established a definitive approach for its application. As a result,
the stream-of-commerce theory remains potentially subject
to two standards, one more stringent than the other because
a majority of the U.S. Supreme Court has yet to agree on
one standard. The less stringent approach dictates that personal jurisdiction is proper so long as the defendant places
goods into the stream of commerce. This standard was, at
minimum, questioned by the Nicastro Court and arguably
rejected. In the more stringent approach — called “stream
of commerce plus” — the plaintiff must establish something in addition to placing the product into the stream of
commerce to show that the defendant intended to serve the
specific foreign market. Prior to Nicastro, the Third Circuit
analyzed personal jurisdiction under both standards as pronounced in Asahi, so the court in Sieg followed suit.
The Sieg court concluded that Leviton failed to meet even
the less stringent stream-of-commerce standard despite
the factual record establishing that Primax:
•had sales offices in the United States since 1990,
•honored a 2001 Leviton purchase order for thousands
of products that Leviton shipped from California to
New York, and
•participated in litigation in Pennsylvania state court
cases in 2002 and 2003.
While Leviton argued that these facts were sufficient to
establish that Primax was aware its products were being
delivered to Pennsylvania, sold in Pennsylvania and used
by residents in Pennsylvania, the court was not swayed. In
particular, the sales offices were of no value because there
was no allegation that any of those sales offices were in
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Pennsylvania; the 2001 purchase order did not indicate if
the products sold in that order included the allegedly defective power tap at issue in this case; there was no indication
that any of the products in the purchase order were shipped
to Pennsylvania; and there was nothing to suggest that the
earlier state court litigation involved the same products at
issue in this case.
The court reasoned that Leviton failed to establish that
Primax’s products regularly flowed through the stream-ofcommerce into Pennsylvania and did not even allege how
the specific product at issue was delivered to Pennsylvania.
Perhaps the most telling comment in the opinion is that
“evidence that a few products made their way into the forum state, in itself, is insufficient to establish personal jurisdiction,” especially where there remained the possibility
that Primax was not aware its specific power tap was sold
in Pennsylvania.
This decision is important, and serves to reemphasize the
need for U.S. manufacturers, distributors and retailers to
take action to protect themselves in product liability suits
involving goods made abroad. Although Sieg involved a
foreign manufacturer, these personal jurisdictional principles apply equally to domestic manufacturers whose
products are sold in other states. Domestic manufacturers, distributors, and retailers who partner with foreign
manufacturers should learn from Sieg and consult with
knowledgeable defense counsel when communicating
with a foreign manufacturer so as to protect themselves
and help establish the requisite facts needed to satisfy the
evolving stream-of-commerce theories. Additional protection can take the form of contractual indemnification
provisions, technical assistance guarantees in the event
of litigation, and/or provisions containing consent to suit
and venue clauses. Insurance can be furnished, with appropriate vendor’s endorsements. At minimum, these efforts will lay the groundwork for jurisdictional discovery
when seeking to include a foreign manufacturer in product liability litigation. Product liability litigation is difficult enough to defend, but when a global “chase” component is added just to reach the real manufacturer the costs
of product defense can become acute.
Foreign manufacturers should likewise be guided by Sieg
and take the necessary measures to limit their exposure in
U.S. markets. Foreign manufacturers seeking dismissal
on personal jurisdiction grounds should consider following the guidance in Sieg and the handful of other decisions
post-Nicastro.
In order to manage risk and anticipate potential litigation,
foreign and domestic manufacturers and domestic distributors and retailers all need to understand the jurisdictional
rules that are somewhat in flux and how these rules might
be applied to them. Manufacturers, distributors and retailers should consult with counsel to discuss what actions
may limit their exposure in various jurisdictions. u
This summary of legal issues is published for informational purposes only. It does not dispense legal advice
or create an attorney–client relationship with those who
read it. Readers should obtain professional legal advice
before taking any legal action.
For more information about our Product Liability Practice Group or to speak with a member of the group at a
particular Schnader office location, please contact:
Keith E. Whitson, Chair
412-577-5220
kwhitson@schnader.com
Harris Neal Feldman
856-482-5734
hfeldman@schnader.com
Han Nguyen
215-751-2528
hnguyen@schnader.com
Carl J. Schaerf
212-973-8005
cschaerf@schnader.com
w w w. s c h n a d e r. c o m
©2012 Schnader Harrison Segal & Lewis LLP
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