Date: 02-09-2010

Case Style: Robert Nicastro v. McIntyre Machinery America, Ltd.

Case Number: a-29-08

Judge: Albin

Court: New Jersey Supreme Court

Plaintiff's Attorney: Alexander W. Ross, Jr. argued the cause for respondents (Rakoski & Ross, Marlton, New Jersey attorneys; Mr. Ross and Janice L. Heinold, on the brief).

Jonathan W. Miller argued the cause for amicus curiae Association of Trial Lawyers- New Jersey (Locks Law Firm, attorneys; Mr. Miller & Michael A. Galpern, on the brief).

Defendant's Attorney: Steven F. Gooby argued the cause for appellant (Morison Ansa Holden Assuncao & Prough, attorneys; Mr. Gooby and James S. Coons, on the briefs).

Description: Today, all the world is a market. In our contemporary international economy, trade knows few boundaries, and it is now commonplace that dangerous products will find their way, through purposeful marketing, to our nation's shores and into our State. The question before us is whether the jurisdictional law of this State will reflect this new reality.

In this case, the foreign manufacturer of an allegedly defective and dangerous industrial machine targeted the United States economy for the sale of its product. The machine was sold to a New Jersey business by the manufacturer's exclusive American distributor. An employee of that New Jersey business lost several fingers while using the machine because the machine allegedly lacked a safety guard. The foreign manufacturer knew or reasonably should have known that by placing a product in the stream of commerce through a distribution scheme that targeted a fifty-state market the product might be purchased by a New Jersey consumer. We must resolve whether under those circumstances the manufacturer is subject to the jurisdiction of our State court system in a product-liability action.

We affirm the Appellate Division, which found the New Jersey Superior Court, Law Division, as the proper forum for this action. We also reaffirm our decision in Charles Gendler & Co. v. Telecom Equipment Corp., in which we held that "the stream-of-commerce theory supports the exercise of jurisdiction if the manufacturer knew or reasonably should have known of the distribution system through which its products were being sold in the forum state." 102 N.J. 460, 480 (1986). The increasingly fast-paced globalization of the world economy has removed national borders as barriers to trade and has proven the wisdom of Charles Gendler. Due process permits this State to provide a judicial forum for its citizens who are injured by dangerous and defective products placed in the stream of commerce by a foreign manufacturer that has targeted a geographical market that includes New Jersey. See id. at 480-83. The exercise of jurisdiction in this case comports with traditional notions of fair play and substantial justice.

I.

A.

On October 11, 2001, plaintiff Robert Nicastro, an employee for thirty years of Curcio Scrap Metal, was operating the McIntyre Model 640 Shear, a recycling machine used to cut metal. Nicastro's right hand accidentally got caught in the machine's blades, severing four of his fingers. The Model 640 Shear was manufactured by J. McIntyre Machinery, Ltd. (J. McIntyre), a company incorporated in the United Kingdom, and then sold, through its exclusive United States distributor, McIntyre Machinery America, Ltd. (McIntyre America), to Curcio Scrap Metal.

In September 2003, plaintiff named J. McIntyre and McIntyre America as defendants in a product-liability action, N.J.S.A. 2A:58C-2, in the Superior Court, Law Division, Bergen County. The complaint alleged that the shear machine manufactured by J. McIntyre and distributed by McIntyre America "was not reasonably fit, suitable, or safe for its intended purpose." The complaint, in particular, asserted that the machine "failed to contain adequate warnings or instructions," and that its defective design "allow[ed] the plaintiff to become injured while operating the machine in the normal course of his employment." The focus of this product-liability lawsuit, as made clear from plaintiff's expert's report, is that the McIntyre Model 640 Shear did not have a safety guard that would have prevented the accident. Plaintiff is seeking damages for past and future medical expenses, lost wages, and physical pain and suffering.

B.

The trial court granted J. McIntyre's motion to dismiss the action, finding that the English manufacturer did not have sufficient minimum contacts with New Jersey to justify the State's exercise of personal jurisdiction over it. Alternatively, the court held that even under "the most liberal[ly] accepted form of the stream of commerce theory," J. McIntyre "would not be subject to personal jurisdiction in New Jersey."

In an unreported opinion, the Appellate Division reversed, allowing the parties to engage in discovery to establish whether New Jersey has the authority to exercise jurisdiction over J. McIntyre on the basis of either a traditional minimum-contacts analysis or the stream-of-commerce theory as articulated in Charles Gendler or in Justice O'Connor's plurality opinion in Asahi Metal Industry Co. v. Superior Court of California, 480 U.S. 102, 107 S. Ct. 1026, 94 L. Ed.2d 92 (1987) (plurality opinion).

Here is the relevant information adduced during the discovery period. In either 1994 or 1995, Frank Curcio, the owner of Curcio Scrap Metal of Saddle Brook, New Jersey, attended a trade convention in Las Vegas, Nevada, sponsored by the Institute of Scrap Recycling Industries. While there, he visited the booth of McIntyre America and was introduced to the McIntyre Model 640 Shear.

In 1995, Curcio Scrap Metal purchased the machine from McIntyre America at a cost of $24,900. The machine was shipped from McIntyre America's headquarters in Stow, Ohio to Saddle Brook, and the invoice instructed that the check be made payable to "McIntyre Machinery of America, Inc." Affixed to the machine was a label with the following information: "J. McIntyre Machinery," its address, and the model and serial number of the machine. Curcio also received an information sheet listing J. McIntyre's address in Nottingham, England, as well as its telephone and fax numbers. An instruction manual that accompanied the shear machine referenced both United States and United Kingdom safety regulations. Based on documentation received with the machine, Curcio concluded that "had we needed any repair parts, we would have called J. McIntyre Machinery Ltd. in England, which is where we would call today for repairs or parts."

J. McIntyre's principal place of business is in Nottingham, England, where it designs and manufactures metal recycling machinery and equipment. It holds American and European patents in recycling technology. Michael Pownall, the president of J. McIntyre, attended the scrap metal conventions held in Las Vegas in 1994 and 1995, including the one where Curcio visited the McIntyre America booth. Additionally, from at least 1990 until 2005, J. McIntyre officials, including Pownall, attended trade conventions, exhibitions, and conferences throughout the United States in such cities as Chicago, Las Vegas, New Orleans, Orlando, San Diego, and San Francisco. During the period that McIntyre America was the exclusive United States distributor for J. McIntyre's products, McIntyre America fielded any requests for information about those products at the scrap metal conventions and trade shows in the United States.

J. McIntyre and its American distributor were distinct corporate entities, independently operated and controlled, without any common ownership. McIntyre America, however, "structured [its] advertising and sales efforts in accordance with [J. McIntyre's] direction and guidance whenever possible." Although J. McIntyre claimed that it sold its machines outright to McIntyre America, the correspondence between the two companies suggests that at least some of the machines were sold on consignment to its American distributor. For example, in a 1999 letter to McIntyre America, J. McIntyre's president noted: "[Y]ou still have new machines in stock, which you are presently unable to sell. Please note that those machines are our property until they have been paid for in full." Indeed, in a 1999 e-mail, McIntyre America reported to J. McIntyre that it had "no problem waiting for [J. McIntyre] to receive payment from the customer first before requesting our commission via a company invoice in the future."

At the conclusion of jurisdictional discovery, the trial court again granted J. McIntyre's motion to dismiss for lack of personal jurisdiction. The court emphasized that J. McIntyre had "no contacts with the state of New Jersey" -- it did not directly sell or solicit business in this State or have a physical presence here. Not only did the court find no evidence establishing a connection between J. McIntyre and this State, but it also concluded that J. McIntyre had no "expectation that its product would be purchased and utilized in New Jersey." The court maintained that "[t]he fact that [J. McIntyre] may have sufficient aggregate minimum contacts with the United States to establish jurisdiction in this country is not a reason to extend jurisdiction to the Superior Court of New Jersey." In the court's view, J. McIntyre could be haled into a New Jersey court under the stream-of-commerce theory only if the company engaged in a nationwide distribution scheme that "purposefully brought [J. McIntyre's] shear machines to New Jersey" and the company "purposely availed itself of the protections of [this State's] laws."

II.

In an opinion authored by Judge Lisa, the Appellate Division reversed, concluding that the exercise of jurisdiction by New Jersey "would not offend traditional notions of fair play and substantial justice" and was justified "under the `stream-of-commerce plus' rationale espoused by Justice O'Connor in Asahi." Nicastro v. McIntyre Mach. Am., Ltd., 399 N.J. Super. 539, 545 (App. Div. 2008) (citing Asahi, supra, 480 U.S. at 112, 107 S. Ct. at 1032, 94 L. Ed. 2d at 104). The panel noted that in Asahi two different views of the stream-of-commerce doctrine of jurisdiction were advanced, one by Justice O'Connor and the other by Justice Brennan, with each view supported by four different members of the Court. Id. at 555-56. The panel held that the facts of this case met Justice O'Connor's more restrictive stream-of-commerce plus test, and therefore also satisfied Justice Brennan's framework for jurisdiction in stream-of-commerce cases. Id. at 557-58, 565.

The Appellate Division ultimately found that J. McIntyre not only "plac[ed] the shear machine that injured plaintiff into the stream of commerce by transferring it to its distributor, McIntyre America, with an awareness that its machine might end up in New Jersey, [but] also engaged in additional conduct indicating an intent or purpose to serve the New Jersey market." Id. at 558, 564-65 (citing Asahi, supra, 480 U.S. at 112, 107 S. Ct. at 1032, 94 L. Ed. 2d at 104). The Appellate Division identified a number of factors in reaching its determination: (1) J. McIntyre "designated McIntyre America as its exclusive distributor for the entire United States," and did so "for the purpose of selling its machines in all fifty states," id. at 558; (2) J. McIntyre knew "that McIntyre America was not the end user of the many machines it sold to McIntyre America," id. at 559; (3) when J. McIntyre's management officials attended trade conventions in cities in this country, the company "was engaged in purposeful conduct to avail itself of the entire United States market," ibid.; (4) the sale to Curcio of the McIntyre Model 640 Shear "was the result of the very distribution scheme purposefully established by [J. McIntyre] for the sale of its machines to potential customers located anywhere within the exclusive sales territory of McIntyre America," which included New Jersey, ibid.; and (5) J. McIntyre designed the Model 640 Shear "to conform to United States specifications and requirements, and represented such compliance in the instruction manual that came with the machine," id. at 564.

Last, the panel emphasized New Jersey's "strong interest in providing a forum for its injured workers who sustain industrial accidents" and the practical benefits of litigating the case in this State, where the injury occurred and where the evidence and most of the witnesses are located. Id. at 565. The panel also noted that it would not be unreasonable to expect J. McIntyre officials, who have visited this country to promote its products, to travel to this State to respond to claims that one of its defectively designed machines caused serious and permanent injuries to a worker operating it. Id. at 565-66. For those reasons, the Appellate Division had "no hesitancy" in finding J. McIntyre subject to the jurisdiction of the New Jersey Superior Court. Id. at 566.

We granted J. McIntyre's petition for certification. 196 N.J. 344 (2008). We also granted the motion of the Association of Trial Lawyers - New Jersey to participate in this case as amicus curiae.

III.

Defendant J. McIntyre argues that the Appellate Division, in holding it subject to the jurisdiction of the New Jersey court system, did not properly apply Justice O'Connor's "stream-of-commerce plus" test as set forth in Asahi. Moreover, J. McIntyre posits that even under Justice Brennan's stream-of-commerce test, a New Jersey court could not assert its jurisdictional authority.

J. McIntyre disclaims any responsibility for the fact that its shear machine "made its way to New Jersey." It only admits that it did "limited business" in the United States and sold a purportedly defective machine to an Ohio distributor. It insists that it had no knowledge that the distributor would later sell the machine to a New Jersey customer. Because it claims to have had no role or control over the sale of the machine to a New Jersey business owner, J. McIntyre contends the "single act of placing the machine into the stream of commerce outside of New Jersey is not enough [for this State's courts] to exercise personal jurisdiction over [it] in accordance with due process." J. McIntyre disavows marketing its products in, or having any contacts or relationships with, New Jersey and therefore maintains that it would "offend traditional notions of fair play and substantial justice" for it to be subject to the jurisdiction of our courts. (Citation and internal quotation marks omitted). Finally, J. McIntyre submits that the Appellate Division has rendered meaningless Justice O'Connor's requirement that, in addition to placing a product in the stream of commerce, a manufacturer engage in conduct "`purposefully directed toward the forum State,'" such as direct marketing or designing a product for a customer in a particular state. (Quoting Asahi, supra, 480 U.S. at 112, 107 S. Ct. at 1032, 94 L. Ed. 2d at 104). Due process, it submits, does not empower a state, such as New Jersey, to exercise jurisdiction over a foreign manufacturer doing business generally in the United States.

In contrast, plaintiff Nicastro asks this Court to affirm the Appellate Division and find that J. McIntyre is subject to the jurisdiction of this State's courts because it targeted the United States as its geographical market and placed in the stream of commerce the defective industrial machine that permanently injured him. Plaintiff considers the jurisdictional issue at the heart of this case settled by this Court's decision in Charles Gendler. He asserts that J. McIntyre "sells its products throughout the United States, and yet claims immunity from suit anywhere, due to the strategy of using . . . [a] financially-irresponsible distributor with a nearly identical name." He prophesizes that "[t]o permit [J. McIntyre] to avoid personal jurisdiction in this products-liability matter will create a road-map for foreign manufacturers on how to dump their unsafe products in the United States" and escape liability in the state where their products cause personal injuries. Plaintiff urges that public policy should not allow such a "flanking maneuver" that will "leav[e] a catastrophically-injured citizen without legal recourse."

Amicus curiae, the Association of Trial Lawyers - New Jersey, urges this Court to reaffirm the stream-of-commerce doctrine adopted in Charles Gendler and espoused by Justice Brennan in Asahi as the basis for our courts to exercise jurisdiction over a foreign manufacturer whose defective product injures a New Jersey resident. The Association maintains that the use of the stream-of-commerce plus theory to "requir[e] additional conduct directed specifically to New Jersey . . . is a refusal to acknowledge the reality of globalization." It observes that "[n]o foreign manufacturer can expect to sell its product to the United States market, whether through a distributor or otherwise, without the product ultimately becoming located in one of the fifty states," and therefore J. McIntyre should not be surprised to be haled into a court of a state where its defective machine caused injury. Moreover, "[e]ven if there were personal jurisdiction over [J. McIntyre] in another State or the United Kingdom," the Association believes that requiring plaintiff to file a lawsuit in a place other than New Jersey, where he was injured and where everything relevant to his case is located, would defy this State's public policy to provide a forum for relief for workers victimized by defective products.

IV.

In determining whether our State courts have authority to exercise personal jurisdiction over J. McIntyre, we begin by dispensing with certain jurisdictional doctrines that do not apply in this case. We do not find that J. McIntyre had a presence or minimum contacts in this State -- in any jurisprudential sense -- that would justify a New Jersey court to exercise jurisdiction in this case. Plaintiff's claim that J. McIntyre may be sued in this State must sink or swim with the stream-of-commerce theory of jurisdiction. Before turning to that claim, a brief history of the development of our law governing jurisdiction will help inform our analysis.

A.

The power of a state to subject a person or business to the jurisdiction of its courts has evolved with the changing nature of the American economy. Our country has grown from an agrarian/manufacture-based economy dominated by local markets to a national economy fueled by the forces of industrialization. See generally Walter Licht, Industrializing America: The Nineteenth Century 133 (1995) (documenting evolution of American businesses from "producer[s] of small batches of goods sold in local and regional markets" to "marketers of mass-produced items nationally and even internationally"). Now, our nation is part of a global economy driven by startling advances in the transportation of products and people and instantaneous dissemination of information. The expanding reach of a state court's jurisdiction, as permitted by due process, has reflected those historical developments.

In the nineteenth century, and earlier, a state court generally could not exercise personal jurisdiction over a non-resident defendant in accordance with due process unless the defendant was subject to process while physically present in the state. See Pennoyer v. Neff, 95 U.S. 714, 720-22, 24 L. Ed. 565, 568 (1878). That scheme emphasized the limits of a state's authority to subject a person outside its borders to the jurisdiction of its courts.

With the passage of time, technological progress in communications and transportation "increased the flow of commerce between States" and, correspondingly, "the need for [state courts to exercise] jurisdiction over nonresidents." Hanson v. Denckla, 357 U.S. 235, 250-51, 78 S. Ct. 1228, 1238, 2 L. Ed.2d 1283, 1296 (1958). That same technological progress has "made it much less burdensome for a party sued to defend [it]self in a State where [it] engages in economic activity." McGee v. Int'l Life Ins. Co., 355 U.S. 220, 223, 78 S. Ct. 199, 201, 2 L. Ed.2d 223, 226 (1957). With the changing nature of the economy evolved a more flexible standard of jurisdiction "from the rigid rule of Pennoyer v. Neff." Hanson, supra, 357 U.S. at 251, 78 S. Ct. at 1238, 2 L. Ed. 2d at 1296. "In a continuing process of evolution [the United States Supreme Court] accepted and then abandoned `consent,' `doing business,' and `presence' as the standard for measuring the extent of state judicial power over [foreign] corporations." McGee, supra, 355 U.S. at 222, 78 S. Ct. at 200-01, 2 L. Ed. 2d at 225. The Court "expand[ed] the permissible scope of state jurisdiction over foreign corporations and other nonresidents" due in large part "to the fundamental transformation of our national economy." Id. at 222, 78 S. Ct. at 201, 2 L. Ed. 2d at 226.

In the mid-twentieth century, in International Shoe Co. v. Washington, the Court held that the State of Washington's courts could exercise personal jurisdiction over a Delaware corporation in proceedings instituted "to recover [the corporation's] unpaid contributions to the state unemployment compensation fund." 326 U.S. 310, 311, 321, 66 S. Ct. 154, 156, 161, 90 L. Ed. 95, 99, 105 (1945). The Delaware corporation had no offices or stock of merchandise in Washington but it directed eleven to thirteen salesmen who resided there and filled orders for products shipped into the state. Id. at 313-14, 66 S. Ct. at 157, 90 L. Ed. at 100. Because of the salesmen's "systematic and continuous" activities in Washington, the Court found that the jurisdictional requirements of due process had been met in rendering the out-of-state corporation accountable in Washington's courts. Id. at 320, 66 S. Ct. at 160, 90 L. Ed. at 104. In words now familiar, the Court noted that

due process requires only that in order to subject a defendant to a judgment in personam, if he be not present within the territory of the forum, he have certain minimum contacts with it such that the maintenance of the suit does not offend "traditional notions of fair play and substantial justice."

[Id. at 316, 66 S. Ct. at 158, 90 L. Ed. at 102 (second and third emphases added) (quoting Milliken v. Meyer, 311 U.S. 457, 463, 61 S. Ct. 339, 343, 85 L. Ed. 278, 283 (1940)).]

In McGee v. International Life Insurance Co., the Court held that a California state court properly exercised personal jurisdiction over a Texas life insurance company, which reneged on paying the beneficiary -- a California resident -- the proceeds of a policy on the death of the insured. 355 U.S. at 221-23, 78 S. Ct. at 200-201, 2 L. Ed. 2d at 224-26. Although the Texas company was not technically "present" in California, "[t]he [insurance] contract was delivered in California, the premiums were mailed from there and the insured was a resident of that State when he died." Id. at 222-23, 78 S. Ct. at 200-01, 2 L. Ed. 2d at 225-26. For due-process purposes, it was sufficient "that the suit was based on a contract which had [a] substantial connection with [California]." Id. at 223, 78 S. Ct. at 201, 2 L. Ed. 2d at 226.

During the thirty-five years following International Shoe, a rapidly changing world economy required the United States Supreme Court to think anew about the limits of a state court's jurisdictional reach. In World-Wide Volkswagen Corp. v. Woodson, the Court addressed for the first time whether an international manufacturer or distributor that places in the stream of commerce a purportedly defective product could be subject to the jurisdiction of a state where the product was purchased or accident occurred. 444 U.S. 286, 297-98, 100 S. Ct. 559, 567, 62 L. Ed.2d 490, 501-02 (1980).

In that case, the Robinsons claimed that they were traveling through Oklahoma in their Audi when another vehicle struck their car in the rear, causing severe injuries due to a fire triggered by the "defective design and placement of the Audi's gas tank and fuel system." Id. at 288, 100 S. Ct. at 562, 62 L. Ed. 2d at 495. The Robinsons, who were residents of New York where the Audi was purchased, filed a product-liability action in Oklahoma. Ibid. The Court reaffirmed International Shoe's minimum-contacts test and pronounced that the Due Process Clause did not permit an Oklahoma court to exercise in personam jurisdiction over an Audi's retailer and wholesale distributor, both incorporated in New York, when their "only connection with Oklahoma [was] the fact that an automobile sold in New York to New York residents became involved in an accident in Oklahoma." Id. at 287-89, 299, 100 S. Ct. at 562-63, 568, 62 L. Ed. 2d at 495-96, 502.

However, the Court posited a new theory of state-court jurisdiction -- the stream of commerce -- to respond to the contemporary realities of modern commerce. The Court stated that

[w]hen a corporation "purposefully avails itself of the privilege of conducting activities within the forum State," it has clear notice that it is subject to suit there, and can act to alleviate the risk of burdensome litigation by procuring insurance, passing the expected costs on to customers, or, if the risks are too great, severing its connection with the State. Hence if the sale of a product of a [foreign automobile] manufacturer or distributor . . . is not simply an isolated occurrence, but arises from the efforts of the manufacturer or distributor to serve, directly or indirectly, the market for its product in other States, it is not unreasonable to subject it to suit in one of those States if its allegedly defective merchandise has there been the source of injury to its owner or to others. The 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.

[Id. at 297-98, 100 S. Ct. at 567, 62 L. Ed. 2d at 501-02 (emphasis added) (citation omitted).]

That formulation of the stream-of-commerce theory did not afford jurisdiction to an Oklahoma court against the automobile's retailer and distributor. Id. at 298, 100 S. Ct. at 567, 62 L. Ed. 2d at 502.

Interestingly, in his dissent, Justice Brennan observed that "[t]he model of society on which the International Shoe Court based its opinion is no longer accurate" given the increased mobility of people and products due to the advances in transportation and communication. Id. at 308-09, 100 S. Ct. at 568, 62 L. Ed. 2d at 508-09 (Brennan, J., dissenting). He did not believe that if "a State [gave] a nonresident defendant adequate notice and opportunity to defend, . . . the Due Process Clause is offended merely because the defendant has to board a plane to get to the site of the trial." Id. at 310-11, 100 S. Ct. at 568, 62 L. Ed. 2d at 510. Nevertheless, Justice Brennan would require the plaintiff to bear the burden of "demonstrat[ing] sufficient contacts among the parties, the forum, and the litigation to make the forum a reasonable State in which to hold the trial." Id. at 312, 100 S. Ct. at 568, 62 L. Ed. 2d at 511.

In the wake of World-Wide Volkswagen, and in recognition of the complex international marketing schemes that bring products into our State, in Charles Gendler & Co. v. Telecom Equipment Corp., we "adopt[ed] the stream-of-commerce theory as a basis for asserting personal jurisdiction over a non-resident defendant." 102 N.J. 460, 477 (1986). In Charles Gendler, the defendant Japanese manufacturer opposed New Jersey's assertion of jurisdiction in a suit involving its sale of an allegedly defective telephone system through its New York subsidiaries to an independent New Jersey corporation, which then sold the defective product to the plaintiff, Charles Gendler & Co., Inc., a company with a business office in New Jersey. Id. at 467.

In adopting the stream-of-commerce theory, we took into account the contemporary reality of how companies in foreign countries market their products in the United States. See id. at 477-79. We observed that for a foreign manufacturer, "the sale of its product in a distant state is not simply an isolated event, but the result of the corporation's efforts to cultivate the largest possible market for its product." Id. at 477-78. We acknowledged that "[i]n today's complex business world, foreign manufacturers rarely deliver products directly to consumers in the United States," but instead "employ middlemen, many of whom are often independent, to act as their distribution arms." Id. at 479. With that understanding, we rejected the notion that foreign manufacturers should "be allowed to insulate themselves by using intermediaries in a chain of distribution or by professing ignorance of the ultimate destination of their products." Ibid.

In Charles Gendler, in considering a state court's power to exercise in personam jurisdiction, we charted the contours of the stream-of-commerce theory. See id. at 480-81. First, "the stream-of-commerce theory supports the exercise of jurisdiction if the manufacturer knew or reasonably should have known of the distribution system through which its products were being sold in the forum state." Id. at 480. Second, "a manufacturer need not so control the distribution system to place its products into the stream of commerce and, therefore, control of that system is not necessary to subject the manufacturer to the jurisdiction of the forum state." Id. at 481. Thus, "[t]he focus is on the manufacturer's actual or constructive awareness of the system, not on control of the distribution of its products." Ibid. Third, "[a] manufacturer's awareness of the distribution system, through which it receives economic and legal benefits, justifies subjecting the manufacturer to the jurisdiction of every forum within its distributors' market area." Ibid. "Accordingly, a manufacturer that knows its products are distributed through a nationwide distribution system should reasonably expect that those products would be sold throughout the fifty states and that it will be subject to the jurisdiction of every state." Ibid. Last, a manufacturer that wishes to avoid the jurisdiction of a particular state must at least "attempt[] to preclude the distribution and sale of its products in [that] state." Ibid.

In light of that new pronouncement on the stream-of-commerce theory, we remanded for additional discovery relating to jurisdiction, with a specific focus on "whether [the foreign defendant] was aware or should have been aware of a system for distributing its telephones throughout the United States." Id. at 483.

A year after Charles Gendler, the United States Supreme Court in Asahi Metal Industry Co. v. Superior Court of California, 480 U.S. 102, 107 S. Ct. 1026, 94 L. Ed.2d 92 (1987), elaborated on the stream-of-commerce theory in two competing four-member opinions. In that case, the plaintiff in a product-liability action sued the Taiwanese manufacturer of an allegedly defective motorcycle tire tube that exploded on a California roadway, causing an accident that severely injured the plaintiff-driver and killed his wife. Id. at 105-06, 107 S. Ct. at 1029, 94 L. Ed. 2d at 100. The Taiwanese manufacturer, in turn, sought indemnification from its codefendant, Asahi Metal Industry Co., Ltd., the Japanese manufacturer of the tube's valve assembly. Id. at 106, 107 S. Ct. at 1029, 94 L. Ed. 2d at 100-01. After the plaintiff's claims were settled and dismissed, the Taiwanese manufacturer's indemnification action against Asahi in California remained. Id. at 106, 107 S. Ct. at 1029, 94 L. Ed. 2d at 100. On one point all nine members of the Court agreed: the California state court could not, consistent with due process, exercise personal jurisdiction over Asahi in the indemnification action. Id. at 113-16, 107 S. Ct. at 1033-34, 94 L. Ed. 2d at 105-07.

In finding that the California court lacked personal jurisdiction, Justice O'Connor, writing for four members of the Court, construed the facts under a test that has become known as stream-of-commerce plus. Id. at 108-13, 107 S. Ct. at 1030-32, 94 L. Ed. 2d at 102-05 (plurality opinion). Under that test, the actions of a defendant must be "purposefully directed toward the forum State" for a court of that state to exercise personal jurisdiction. Id. at 112, 107 S. Ct. at 1032, 94 L. Ed. 2d at 104. In Justice O'Connor's view, "[t]he placement of a product into the stream of commerce, without more, is not an act of the defendant purposefully directed toward the forum State." Ibid. The stream-of-commerce plus test requires that the defendant engage in "[a]dditional conduct . . . indicat[ing] an intent or purpose to serve the market in the forum State." Ibid. That "additional conduct" could be "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." Ibid. Justice O'Connor emphasized that "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." Ibid.

Within that framework, Justice O'Connor found that the Japanese corporation Asahi did not "purposefully avail itself of the California market" simply by selling component parts to a Taiwanese manufacturer, even if Asahi was aware that the completed product would be sold in California. Id. at 112, 114, 107 S. Ct. at 1032-33, 94 L. Ed. 2d at 104-06. Justice O'Connor reasoned that because Asahi had no offices or agents in California, did not advertise or solicit business in the state, and "did not create, control, or employ the distribution system that brought its valves" there, a California court could not exercise personal jurisdiction. Id. at 112-13, 107 S. Ct. at 1032, 94 L. Ed. 2d at 105. Justice O'Connor concluded that there was a lack of "minimum contacts" with California and therefore "the exercise of personal jurisdiction is [not] consistent with fair play and substantial justice." Id. at 116, 107 S. Ct. at 1034, 94 L. Ed. 2d at 107.

Joined by three other members of the Court, Justice Brennan did not believe that Justice O'Connor's opinion kept faith with the stream-of-commerce theory enunciated in World-Wide Volkswagen. Id. at 116-21, 107 S. Ct. at 1034-37, 94 L. Ed. 2d at 107-10 (Brennan, J., concurring in part and concurring in judgment). To trigger a court's power to exercise personal jurisdiction under the stream-of-commerce doctrine, Justice Brennan saw no need for a plaintiff to present "additional conduct" to establish that the defendant's acts were "purposefully directed toward the forum State." Id. at 116-17, 107 S. Ct. at 1034, 94 L. Ed. 2d at 107 (citation and internal quotation marks omitted). According to Justice Brennan, "[t]he stream of commerce refers . . . to the regular and anticipated flow of products from manufacture to distribution to retail sale." Id. at 117, 107 S. Ct. at 1034, 94 L. Ed. 2d at 107. Therefore, "[a]s long as a participant in this process is aware that the final product is being marketed in the forum State, the possibility of a lawsuit there cannot come as a surprise." Ibid. Thus, the burden of litigation in the forum state is an economic expense related to the cost of doing business. Id. at 117, 107 S. Ct. at 1034-35, 94 L. Ed. 2d at 107. Justice Brennan observed that the commercial benefits of selling a product in a state "accrue regardless of whether that participant directly conducts business in . . . or engages in additional conduct directed toward that State." Id. at 117, 107 S. Ct. at 1035, 94 L. Ed. 2d at 107. He noted that "most courts and commentators have found that jurisdiction premised on the placement of a product into the stream of commerce is consistent with the Due Process Clause, and have not required a showing of additional conduct." Id. at 117, 107 S. Ct. at 1035, 94 L. Ed. 2d at 107-08.

Although Justice Brennan concluded that Asahi had the necessary minimum contacts with California, id. at 121, 107 S. Ct. at 1036-37, 94 L. Ed. 2d at 110, he nevertheless agreed with Justice O'Connor that California's exercise of personal jurisdiction over Asahi would not comport with "fair play and substantial justice," id. at 116, 107 S. Ct. at 1034, 94 L. Ed. 2d at 107 (citation and internal quotation marks omitted).

B.

After Asahi, some federal and state courts have applied Justice O'Connor's stream-of-commerce plus theory. Other courts have taken Justice Brennan's approach or have read World-Wide Volkswagen more expansively than Justice O'Connor's parsing of that opinion in Asahi. Yet, others simply have declined to choose between the views of the two Justices -- instead applying both, with some directing their analyses to Justice O'Connor's more restrictive approach without explicitly rejecting Justice Brennan's approach.

In some cases, courts have dodged the stream-of-commerce conflict entirely by deciding a jurisdictional issue on firmer and more traditional grounds. For example, in Lebel v. Everglades Marina, Inc., a contract-dispute case involving a claim of fraud, we saw no need to decide whether the defendant Florida company, which sold a luxury racing boat to a New Jersey resident, was subject to the jurisdiction of a New Jersey court based on the stream-of-commerce theory. 115 N.J. 317, 319-20 (1989) ("Rather than embark on a prediction of the future course of this stream of jurisprudence, we shall hew closely to the limited fundamentals about which there is little or no dispute or debate."). Instead, we turned to the traditional International Shoe standard, finding that the defendant's actions met the minimum-contacts requirement and that the exercise of jurisdiction by New Jersey would not offend "`traditional notions of fair play and substantial justice.'" Id. at 321-29 (quoting Int'l Shoe Co., supra, 326 U.S. at 316, 66 S. Ct. at 158, 90 L. Ed. at 102).

Here, unlike in Lebel, we cannot evade consideration of the stream-of-commerce theory for it is the only basis on which the English manufacturer could be subject to the jurisdiction of a New Jersey court.

V.

New Jersey has a long-arm rule that permits service of process on a non-resident defendant "consistent with due process of law." R. 4:4-4(b)(1). Therefore, our State courts may exercise jurisdiction over a non-resident defendant "to the uttermost limits permitted by the United States Constitution." Avdel Corp. v. Mecure, 58 N.J. 264, 268 (1971). There is no question that the United States Supreme Court in Asahi embraced the stream-of-commerce theory in one form or another. In the twenty-two years since Asahi, transnational commerce has accelerated, and we realize more than ever that we live in a global marketplace. In light of Asahi, and given what we know of the modern economic world, we must decide whether the stream-of-commerce test that we set forth in Charles Gendler comports with the Due Process Clause of the Fourteenth Amendment.

A.

Today, we reaffirm the reasoning of our decision in Charles Gendler, and hold that a foreign manufacturer that places a defective product in the stream of commerce through a distribution scheme that targets a national market, which includes New Jersey, may be subject to the in personam jurisdiction of a New Jersey court in a product-liability action. All in all, Charles Gendler, in pronouncing when a State court can exercise personal jurisdiction over a defendant based on the stream-of-commerce doctrine, gave a faithful and fair reading of World-Wide Volkswagen, one that is more reflective of Justice Brennan's views expressed in Asahi.

Notably, where a foreign manufacturer has sold its products through a nationwide distribution scheme, some courts -- including the Appellate Division in this case -- have construed Justice O'Connor's stream-of-commerce plus theory in Asahi in a way that is indistinguishable from Charles Gendler and the general language of World-Wide Volkswagen. See, e.g., Tobin v. Astra Pharm. Prods., Inc., 993 F.2d 528, 543-45 (6th Cir.), cert. denied, 510 U.S. 914, 114 S. Ct. 304, 126 L. Ed.2d 252 (1993); A. Uberti & C. v. Leonardo, 892 P.2d 1354, 1360-64 (Ariz.), cert. denied, 516 U.S. 906, 116 S. Ct. 273, 133 L. Ed.2d 194 (1995); Nicastro, supra, 399 N.J. Super. at 557-560, 564-65.

Those courts did not believe that Justice O'Connor intended that a foreign manufacturer seeking to capture a national market through a nationwide distribution scheme would be immune from suit in every state. In the views of those courts, the additional conduct required by Justice O'Connor under her stream-of-commerce approach would be the targeting of the national market through, among other things, general sales solicitations orchestrated by a manufacturer's independent distributor. See, e.g., Tobin, supra, 993 F. 2d at 543-45; A. Uberti & C., supra, 892 P. 2d at 1360-65; Nicastro, supra, 399 N.J. Super. at 557-560, 564-65. Thus, even under Justice O'Connor's approach, arguably, a manufacturer would be amenable to jurisdiction in every state that is part of its national distribution scheme. See, e.g., Tobin, supra, 993 F. 2d at 543-45 (permitting Kentucky to exercise personal jurisdiction over Netherlands drug manufacturer, which sought Federal Drug Administration approval for drug and, through American distributor, "made a deliberate decision to market [the drug] in all 50 states, including Kentucky"); A. Uberti & C., supra, 892 P. 2d at 1360-65 (permitting Arizona to exercise personal jurisdiction over Italian firearms manufacturer, which sold revolvers intended for sale in United States through American distributor); Nicastro, supra, 399 N.J. Super. at 564 ("[D]efendant's conduct in establishing and operating under this exclusive distributorship arrangement constituted the necessary other conduct by which it purposefully availed itself of the benefits and protections of all fifty states, including New Jersey.").

Charles Gendler, although decided twenty-three years ago, speaks to the present realities of international trade and complex marketing techniques of transnational corporations that bring products, some dangerous and defective, into our State. In Charles Gendler, we recognized approaches concerning jurisdiction in stream-of-commerce cases that had long been in use in New Jersey courts. See Charles Gendler, supra, 102 N.J. at 476-77 (citing Coons v. Honda Motor Co., Ltd. of Japan, 176 N.J. Super. 575 (App. Div. 1980), vacated and remanded, 455 U.S. 996, 102 S. Ct. 1625, 71 L. Ed.2d 857 (1982), rev'd on other grounds, 94 N.J. 307 (1983), reh'g granted, 95 N.J. 234, modified, 96 N.J. 419 (1984), cert. denied, 469 U.S. 1123, 105 S. Ct. 808, 83 L. Ed.2d 800 (1985); Certisimo v. Heidelberg Co., 122 N.J. Super. 1 (Law Div. 1972), aff'd sub nom. Van Eeuwen v. Heidelberg E., Inc., 124 N.J. Super. 251 (App. Div. 1973)).

The preeminent issue is whether we will read the Due Process Clause in a way that renders a state, such as New Jersey, powerless to provide relief to a resident who suffers serious injuries from a product that was sold and marketed by a manufacturer, through an independent distributor, knowing that the final destination might be a New Jersey consumer.

A number of significant policy reasons animate the approach articulated in Charles Gendler -- the approach we follow today. A state has a strong interest in protecting its citizens from defective products, whether those products are toys that endanger children, tainted pharmaceutical drugs that harm patients, or workplace machinery that causes disabling injuries to employees. A state also has a paramount interest in ensuring a forum for its injured citizens who have suffered catastrophic injuries due to allegedly defective products in the workplace. See Burger King Corp. v. Rudzewicz, 471 U.S. 462, 473, 105 S. Ct. 2174, 2182, 85 L. Ed.2d 528, 541 (1985) ("A State generally has a manifest interest in providing its residents with a convenient forum for redressing injuries inflicted by out-of-state actors." (citation and internal quotation marks omitted)); see also Charles Gendler, supra, 102 N.J. at 483 ("A state's interest in providing a forum for its residents is more compelling in a personal injury action than in commercial litigation.").

It would be strange indeed if a New Jersey manufacturer that makes a defective and dangerous product and is both subject to the jurisdiction of our courts and accountable under our product-liability laws would be able to move its plant to a foreign land and peddle its wares through an independent distributor across the nation, with some purchased by New Jersey consumers, and suddenly become beyond the reach of one of our injured citizens through this State's legal system. Our conception of jurisdiction must surely comport with traditional notions of fair play and substantial justice, but must also reflect modern truths -- the radical transformation of the international economy. Just as changing times led the United States Supreme Court to jettison "`consent,' `doing business,' and `presence' as the standard for measuring the extent of state judicial power over [foreign] corporations," McGee, supra, 355 U.S. at 222, 78 S. Ct. at 200-01, 2 L. Ed. 2d at 225, so too must we discard outmoded constructs of jurisdiction in product-liability cases, and embrace a modality that will provide legal relief to our citizens harmed by the products of a foreign manufacturer that knows or should know, through the distribution scheme it employs, that its wares might find their way into our State.

In today's world, foreign manufacturers, plying overseas markets, should be covered by insurance, accounting for the risks of doing business and providing a fund for consumers who may be injured by their products. See World-Wide Volkswagen, supra, 444 U.S. at 297, 100 S. Ct. at 567, 62 L. Ed. 2d at 501. Defending a suit in one of the United States, moreover, is not as burdensome as it once might have been, given that air transport can bring the principals of a business here within hours and instantaneous communication allows an ongoing dialogue with counsel in this country. See McGee, supra, 355 U.S. at 223, 78 S. Ct. at 201, 2 L. Ed. 2d at 226. If it is not inconvenient for the principals of a company to attend trade conventions and conduct business meetings with an independent distributor in this country for the purpose of marketing its products, then it should not be too great a burden to defend a lawsuit here when one of its defective products causes serious bodily injury. Although we cannot control manufacturing plants leaving this country or control a foreign manufacturer's employment policy, working conditions, or the quality of its operations, we can ensure that a manufacturer that targets its defective products at a wide geographic market that includes New Jersey will not be immune from suit in our State's courts. A manufacturer that wants to avoid being haled into a New Jersey court need only make clear that it is not marketing its products in this State. See Charles Gendler, supra, 102 N.J. at 481.

B.

Before addressing the facts in this case, we restate the governing stream-of-commerce principles in Charles Gendler that will apply in a product-liability case. A foreign manufacturer will be subject to this State's jurisdiction if it knows or reasonably should know that through its distribution scheme its products are being sold in New Jersey. Id. at 480. A manufacturer that knows or reasonably should know that its products are distributed through a nationwide distribution system that might lead to those products being sold in any of the fifty states must expect that it will be subject to this State's jurisdiction if one of its defective products is sold to a New Jersey consumer, causing injury. Id. at 480-81. The focus is not on the manufacturer's control of the distribution scheme, but rather on the manufacturer's knowledge of the distribution scheme through which it is receiving economic benefits in each state where its products are sold. Ibid. A manufacturer cannot shield itself merely by employing an independent distributor -- a middleman -- knowing the predictable route the product will take to market. Id. at 479-80. If a manufacturer does not want to subject itself to the jurisdiction of a New Jersey court while targeting the United States market, then it must take some reasonable step to prevent the distribution of its products in this State. Id. at 481.

C.

In light of those principles, we find that the record supports the exercise of jurisdiction over J. McIntyre under the stream-of-commerce doctrine. J. McIntyre, a company incorporated in the United Kingdom, targeted the United States market for the sale of its recycling products. It did so by engaging McIntyre America, an Ohio-based company, as its exclusive United States distributor for an approximately seven-year period ending in 2001. J. McIntyre knew or reasonably should have known that the distribution system extended to the entire United States, because its company officials, along with McIntyre America officials, attended scrap metal trade shows and conventions in various American cities where its products were advertised. Indeed, J. McIntyre's president was present at the Las Vegas trade convention where his exclusive distributor introduced plaintiff's employer to the allegedly defective McIntyre Model 640 Shear that severed four of plaintiff's fingers.

It is clear that those attending the scrap metal trade shows and conventions came from areas other than the cities hosting those events, and that the joint appearances by J. McIntyre and McIntyre America were calculated efforts to penetrate the overall American market. Plaintiff's employer, a New Jersey businessman, is just one example of a person who traveled thousands of miles to a convention where, by dint of a sales effort, he purchased one of J. McIntyre's machines. J. McIntyre may not have had access to McIntyre America's customer list, but J. McIntyre knew or reasonably should have known that its machines were being sold in states other than Ohio and in cities other than where the trade conventions were held. J. McIntyre may not have known the precise destination of a purchased machine, but it clearly knew or should have known that the products were intended for sale and distribution to customers located anywhere in the United States.

J. McIntyre and McIntyre America shared a common name that may have suggested to unwitting members of the public some form of corporate relationship, despite the fact that both companies were independent business entities with different owners and management. The information sheet that accompanied the 640 Model Shear included J. McIntyre's address and telephone number and, according to the New Jersey businessman who purchased that machine, "had we needed any repair parts, we would have called J. McIntyre Machinery Ltd. in England, which is where we would call today for repairs or parts." There can be little doubt that J. McIntyre and McIntyre America worked together to promote and sell J. McIntyre products in the United States as evidenced by their shared communications and joint participation at industry trade conventions. It bears mentioning that J. McIntyre maintained ownership of at least some of its products delivered to McIntyre America until the distributor sold the products to a United States customer. Under that product-consignment relationship, McIntyre America would earn a commission from its sale of J. McIntyre's products after J. McIntyre collected its payment.

Because J. McIntyre knew or reasonably should have known that its distribution scheme would make its products available to New Jersey consumers, it now must present a compelling case that defending a product-liability action in New Jersey would offend "`traditional notions of fair play and substantial justice.'" Lebel, supra, 115 N.J. at 328 (citing Burger King Corp., supra, 471 U.S. at 477, 105 S. Ct. at 2184, 85 L. Ed. 2d at 544). However, J. McIntyre cannot make out a case that travel to New Jersey is onerous or an unfair burden for it to bear. J. McIntyre's officials have visited various cities throughout the United States to promote its business interests, attending trade conventions and meeting with representatives of its exclusive distributor. Certainly, defending the product-liability action in Ohio, where J. McIntyre's now-defunct exclusive distributor conducted business, or in Nevada, the site of the 1994 and 1995 trade conventions, would be no more convenient than in New Jersey. Indeed, New Jersey is a shorter distance from England than those locales, and neither the Ohio nor Nevada courts would seem to have an interest in resolving a product-liability action in which an English manufacturer's product injured a New Jersey resident in New Jersey.

On the other hand, New Jersey has a strong interest in exercising jurisdiction. Plaintiff is a New Jersey resident; the allegedly defective product was purchased by a New Jersey consumer, plaintiff's employer; the injury occurred in a New Jersey workplace; plaintiff was treated for his injuries in the New Jersey regional area; the evidence -- the shear machine -- and most of the necessary witnesses are located in New Jersey; and last, the law of this State likely will govern the action. It would be unreasonable to expect that plaintiff's only form of relief is to be found in the courts of the United Kingdom, which may not have the same protections provided by this State's product-liability law. Under all the circumstances, New Jersey has a rightful claim to resolve the dispute between the parties and to assert jurisdiction over this product-liability action. We will not deny plaintiff a forum in the courts of this State.

VI.

The stream-of-commerce doctrine of jurisdiction is particularly suitable in product-liability actions. It will not necessarily be a substitute for other jurisdictional doctrines, i.e., minimum contacts, that will apply in contract and other types of cases. See McKesson Corp. v. Hackensack Med. Imaging, 197 N.J. 262, 266-67, 277-78 (2009) (applying minimum-contacts test in holding that Texas court properly exercised personal jurisdiction over defendant New Jersey corporation that entered into commercial transactions with plaintiff-corporation in Texas). Within the confines of due process, jurisdictional doctrines must reflect the economic and social realities of the day. The exercise of jurisdiction by New Jersey in this case is a reasoned response to the globalization of commerce that permits foreign manufacturers to market their products through distribution systems that bring those products into this State. With the privilege of distributing products to consumers in our State comes the responsibility of answering in a New Jersey court if one of those consumers is injured by a defective product.


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See: http://lawlibrary.rutgers.edu/courts/supreme/a-29-08.opn.html

Outcome: For the reasons expressed, we affirm the judgment of the Appellate Division, which reinstated plaintiff's product-liability action, and remand this matter to the trial court for proceedings consistent with this opinion.

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