Another Federal Court Weighs In On Meaning of Nicastro

We have tried to keep an eye out for lower court cases interpreting the Supreme Court decision in J. McIntyre Machinery Ltd. v. Nicastro, as the lower courts parse through plurality, concurring and dissenting views on the exercise of personal jurisdiction over foreign defendants -- with mixed results.   Now comes another decision weighing in on what standard should be applied to the proposed  exercise of personal jurisdiction over nonresident defendants. Smith v. Teledyne Continental Motors Inc., No. 9:10-cv-02152 (D.S.C., 1/3/12).
 

In 2010, a vacationer was jogging on the beach at Hilton Head, South Carolina, when he was struck and killed -- by an airplane.  The plane, operated by Smith, was a single-engine aircraft
Smith had made from a kit. As he was flying the plane up the Atlantic coast about ten miles offshore, the propeller fell off the plane and into the sea. Smith attempted to make the Hilton Head airport, but came up short, crash landing on the beach and fatally striking the 38-year-old stockbroker who left behind his wife and two small children, according to the opinion.

The widow sued the pilot, the manufacturer of the airplane’s engine, the manufacturer of the airframe, a company which had serviced the plane prior to the crash; and the manufacturer of the propeller. Smith, the pilot, also sued the manufacturers. The cases were then consolidated, and eventually Teledyne, the engine maker, and a citizen of Delaware and Alabama, challenged personal jurisdiction in South Carolina.

The district court held that jurisdiction was proper.  This case did not involve the general jurisdiction that arises from pervasive contacts with a forum, but specific jurisdiction based on Teledynes' alleged contacts and purposeful availment of the forum.  And when one looks at the facts described, the conclusion may not come as a great surprise: Over the past ten years,
Teledyne sold at least 400 engines directly to South Carolina purchasers at a cost of about $40,000 apiece for a total revenue of approximately $1,600,000. Further, its engines were installed in approximately one-third of general aviation aircraft based in South Carolina. It maintained a continuous relationship with the owners of these engines through its warranty programs. Further, it advertised in South Carolina through aviation magazines. It maintained a distributor there until 2004. It directly sold parts for its engines in the forum state through interactive websites. Significantly, Teledyne maintained ongoing relationships with at least eleven “fixed base operators” --  stores/service centers located at South Carolina airports.  Teledyne had a contract with each FBO which required them to display Teledyne’s logos and actively promote the sale of its products. Teledyne maintained a continuing interactive Internet relationship with these FBOs, through which it provides them with technical support in repairing Teledyne products. Teledyne warranty work must be performed by these FBOs. Teledyne both buys and sells products over the Internet and through retailers to South Carolina residents. It admitted it had derived over $1 million in revenue from its sales to South Carolina residents over the past 10 years.  

This certainly was NOT the most narrow list of contacts we have seen litigated.  What was more intriguing about the opinion was the test the court adopted. The court concluded that the recent decision of the Supreme Court in J. McIntyre Machinery, Ltd. v. Nicastro, 131 S. Ct. 2780 (2011), and existing Fourth Circuit precedents were dispositive of the issue at bar.  The court observed that the decision was "somewhat difficult to interpret because no single opinion was adopted by a majority of the Justices. Rather, there are three opinions which must be synthesized."  But rather than, as some courts have done, looked for the grounds upon which the concurring justices agreed with the plurality, this court saw as the “common denominator of the Court’s
reasoning,” a "position approved by at least five Justices who support the judgment” -- the “stream-of-commerce plus” rubric previously enunciated in an opinion by Justice O’Connor in Asahi Metal Industry Co. v. Superior Court, 480 U.S. 102, 112 (1987). This view has come to be known as the “stream-of-commerce plus” test. Although it did not win the support of a majority of the Court in Asahi, or since, in the view of this court, it has now done so. 

In his concurring opinion, Justice Breyer rejected the notion that a non-resident defendant could be subjected to suit in a state based solely on foreseeability, agreeing with the plurality that personal jurisdiction required purposeful availment of a particular forum. He further explained that the standard of purposeful availment, the correct legal standard, may still require further explication in the context of modern global commerce, but that the facts of that case did not present an adequate vehicle for crafting any new rules. Although the concurrence and the plurality differed as to what might constitute “purposeful availment” in the context of national or global marketing, they both firmly embraced the continuing significance of individual state sovereignty and, on that basis, noted that specific jurisdiction must arise from a defendant’s deliberate connection with the forum state.  

Here, the court saw more overlap with the dissent. When the concurring Justices expressed the view that the case could be resolved by existing precedents, this meant Justice O’Connor’s opinion in Asahi, according to this district court.   

The court read the Fourth Circuit precedents as having already adopted this view and, therefore, the long-arm cases in the Fourth Circuit were not affected by Nicastro.

In applying this test, the court felt that plaintiffs had enumerated many significant contacts by which Teledyne targeted or purposefully directed commercial activities at South Carolina, as noted above.  Regarding whether the exercise of jurisdiction based on those minimum contacts would offend traditional notions of fair play and substantial justice, the court decided that the additional burden on the defendant was relatively slight as compared to the cost of litigating the matter in its home state because Teledyne had a national presence and organization. The interests of the forum state were extremely strong, in that South Carolina, located on a major coastal air corridor, had a compelling interest in protecting its citizens and visitors and their property from damage from falling airplanes.  

Motion denied, case to proceed in South Carolina.

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