Previously we alerted readers to the introduction of The Foreign Manufacturers Legal Accountability Act of 2009 (S. 1606), introduced in the Senate in August 2009 by Sen. Sheldon Whitehouse (D-R.I.). The bill followed up on hearings last Spring during which witnesses testified about the perceived delays and difficulties with serving foreign manufacturers with process and establishing jurisdiction.
Last week, Rep. Betty Sutton (D-Ohio) and several co-sponsors introduced in the House their own version of the Foreign Manufacturers Legal Accountability Act of 2010 (H.R. 4678). The operative provisions of the House bill overlap those in the Senate bill, although the Senate bill also includes a section which discusses the alleged need for the legislation.
The proposed legislation would impact five categories of products: drugs, devices and cosmetics; biological products; chemical substances; pesticides; and consumer products. The bills only apply to manufactured products “in excess of a minimum value or quantity established by the head of the applicable agency” in regulations applying the legislation.
Both bills make consent to jurisdiction and service of process a condition of importing products into the United States. That is, the bills instruct several relevant product-regulating agencies to issue regulations requiring foreign manufacturers and producers to designate a registered agent. A person would not be able to import into the United States a covered product (or component part that will be used in the United States to manufacture a covered product) if such product or any part of such product (or component part) was manufactured or produced outside the United States by a manufacturer or producer who does not have a registered agent.
Such a system which requiring an agent for service of process for every foreign manufacturer or producer who imports products into the U.S. would render the Hague Convention’s methods for service abroad unnecessary for such companies, and raises the risk that other countries may choose to create similar rules, subjecting U.S. companies to litigation in those other countries where their products may be sold.
Under the bills, a foreign manufacturer or producer of covered products that registers an agent as above thereby consents to the personal jurisdiction of the State or Federal courts of the State in which the registered agent is located for the purpose of any civil or regulatory proceeding. Presumably, the expanded jurisdiction would also make it easier for U.S. companies to pursue indemnification claims against foreign manufacturers who were upstream suppliers.
Currently, foreseeing that one’s product may enter a state is not, on its own, a sufficient basis for that state to assert jurisdiction. Asahi Metal Industry Co., Ltd. v. Superior Court, 480 U.S. 102, 112(1987); but cf. Nicastro v. McIntyre Machinery America Ltd., No. A-29-08 (N.J. 2/2/10). It has been argued that Congress cannot create jurisdiction where the Constitution would forbid it. And it may be that a constitutional challenge would lie to some applications of the proposed bills. E.g., Texas Trading & Milling Corp. v. Federal Republic of Nigeria, 647 F.2d 300 (2d Cir. 1981). Presumably, the sponsors are looking to bypass the due process concerns by providing for consent to jurisdiction.
It is unclear what the effect of the bills might be on countries around the world regarding their willingness to enforce judgments entered in the United States, as the issue of the lack of foreign manufacturer assets in the U.S. is not addressed by the proposed legislation.