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Corporations Are Subject to Product Liability Suit in States Where They Market Their Products

Posted By Larry Coben on this August 4, 2021 at 5:47 pm

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Holding Multi-National and Interstate Corporations Subject To Suit In The States Where They Market Their Products Is Appropriate.

When the defendant’s product—designed and sold outside the Commonwealth—is used in the forum state while in a defective condition (that existed when it was first released into the stream of commerce) and the injury occurs in the forum, the tort has “arisen out of or relates to” the defendant’s activities, and jurisdiction lies in the Commonwealth. The location of the sale is not the controlling factor, nor should it be a controlling determinate. The marketing of its products throughout the U.S. establish a predicate for the application of the principles of law that embrace the stream of commerce jurisprudential logic. Personal jurisdiction over a non-resident defendant has been discussed and defined in both state and federal courts for decades. Essentially, a court has jurisdiction over a non-resident when the defendant has enjoyed appropriate contacts with the state warranting resolution of the legal conflict in that jurisdiction. To what extent a nonresident defendant has minimum contacts depends upon the facts of the individual case. One essential inquiry is whether the defendant has purposefully acted to obtain benefits or privileges in the forum state.  A state court’s assertion of personal jurisdiction over a non-resident defendant is consistent with due process if that defendant has sufficient minimum contacts with the forum state and maintenance of the suit would not offend traditional notions of fair play and substantial justice.

In a unanimous decision, the United States Supreme Court in Ford Motor Co. v. Montana Eighth Judicial District Court (March 25, 2021) agreed with the foregoing analysis and held:

“. . . allowing jurisdiction in these cases treats Ford fairly, as this Court’s precedents explain. In conducting so much business in Montana and Minnesota, Ford ‘enjoys the benefits and protection of [their] laws’— the enforcement of contracts, the defense of property, the resulting formation of effective markets. International Shoe, 326 U. S., at 319. All that assistance to Ford’s instate business creates reciprocal obligations—most relevant here, that the car models Ford so extensively markets in Montana and Minnesota be safe for their citizens to use there. Thus our repeated conclusion: A state court’s enforcement of that commitment, enmeshed as it is with Ford’s government-protected in-state business, can “hardly be said to be undue. . . . Precisely because that exercise of jurisdiction is so reasonable, it is also predictable—and thus allows Ford to “structure [its] primary conduct” to lessen or even avoid the costs of state-court litigation.

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Finally, principles of “interstate federalism” support jurisdiction over these suits in Montana and Minnesota. Id., at 293. Those States have significant interests at stake— ‘providing [their] residents with a convenient forum for redressing injuries inflicted by out-of-state actors,’ as well as enforcing their own safety regulations. Burger King, 471 U. S., at 473; see Keeton, 465 U. S., at 776. Consider, next to those, the interests of the States of first sale (Washington and North Dakota)—which Ford’s proposed rule would make the most likely forums. For each of those States, the suit involves all out-of-state parties, an out-of-state accident, and out-of-state injuries; the suit’s only connection with the State is that a former owner once (many years earlier) bought the car there. In other words, there is a less significant ‘relationship among the defendant, the forum, and the litigation.’”

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Here, resident-plaintiffs allege that they suffered in-state injury because of defective products that Ford extensively promoted, sold, and serviced in Montana and Minnesota. For all the reasons we have given, the connection between the plaintiffs’ claims and Ford’s activities in those States— or otherwise said, the “relationship among the defendant, the forum[s], and the litigation”—is close enough to support specific jurisdiction.

Thus, foreign corporations who have either registered to do business and/or simply taking advantage of marketing practices and carry-on continuous business in the forum state, are subject to jurisdiction when a citizen of this state suffers harm while using the out-of-state company’s product. This almost instinctively correct conclusion seems incontrovertible, but what if we change a fact?

What If The Injury Occurred In Another State?

In the Ford case, the product was sold outside the forum but the injury using the product occurred in the forum. The unanimous Supreme Court had no problem obtaining jurisdiction in the State where similar products were marketed, where the product was used and where the product caused harm. However, what if we change one fact—which in today’s America is quite normal, when people drive from state to state for business or pleasure—and the injury to a Pennsylvanian occurs in New Jersey? Does Pennsylvania enjoy jurisdiction over the manufacturer under these facts: (1) Pennsylvanian is injured, (2) vehicle was sold in Pennsylvania, (3) defendant extensively markets the product in every state, (4) vehicle originally designed, manufactured and sold as new outside of Pennsylvania, and (5) the injury occurred in New Jersey. The answer is yes. The Ford court stated:

The . . . place of a plaintiff ’s injury and residence . . . may be relevant in assessing the link between the defendant’s forum contacts and the plaintiff ’s suit—including its assertions of who was injured where. And indeed, that relevance is a key part of Bristol-Myers’ reasoning. [Slip Op., p. 18]

The focus of paramount importance is the defendant’s connection with the forum and the ancillary predicate that the Plaintiff’s claim is related to that connection. When the harm resulting to a Pennsylvanian from the use of a product sold in the forum occurs fortuitously in another State, that fact will not be a disqualifying fact in obtaining jurisdiction in Pennsylvania.  In conducting substantial business in the forum, the out-of-state defendant “enjoys the benefits and protection of [their] laws”— the enforcement of contracts, the defense of property, the resulting formation of effective markets.” Ford, supra. And, the Commonwealth’s assistance to in-state businesses creates reciprocal obligations—most relevant here, that the product so extensively marketed here will be safe for use. Consequently, a state court’s enforcement of that commitment constitutes a reasonable basis to the exercise of jurisdiction.

 

Larry CobenThis article was written by Larry E. Coben, a shareholder at Anapol Weiss, handles products liability cases at the firm. This article was originally published on https://www.law.com in April 2021.

Topics Product Liability