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Monday, June 27, 2011

Corporate Court Allows Foreign Companies to Aim for Big Profits in U.S. With Less Accountability

In a four-member plurality decision issued today, the Supreme Court limited the ability of individuals injured by a negligently manufactured foreign product to sue the manufacturer in state court. Robert Nicastro lost four of his fingers at work in New Jersey when his hand was accidentally caught in the blades of a metal cutting machine manufactured by J. McIntyre Machinery (J. McIntyre), a company incorporated in England. He claims the machine was missing a safety guard that could have prevented the accident. J. McIntyre sells machines, including the one that injured Nicastro, to an American distributor that it knows will sell the products in many regions of the U.S. Nicastro’s employer purchased the machine that injured him at a trade show in Las Vegas.

The Supreme Court of New Jersey held that personal jurisdiction over a foreign manufacturer is appropriate when the manufacturer uses a distribution scheme that targets a national market that includes New Jersey. Despite J. McIntyre’s long history of doing business in the U.S. and its attendance at trade shows throughout the country, the U.S. Supreme Court reversed and held that the company did not engage in conduct purposefully directed at New Jersey. Therefore Nicastro cannot sue J. McIntyre in New Jersey courts. Justice Breyer, joined by Justice Alito, concurred in the judgment but argued that the plurality created a rule that provides needlessly broad protections for corporate defendants. They argued that the plurality’s holding might not be appropriate in other settings in which a company targets a global market through a website or uses an intermediary like Amazon.com.

The dissent, authored by Justice Ginsburg and joined by Justices Sotomayor and Kagan, argued that J. McIntyre should not be granted a free pass to avoid liability in every state court in the United States merely because it directed its distributor to attract customers “from anywhere in the United States.” McIntyre UK’s president described the company’s strategy in the following way: “All we wish to do is sell our products in the [United] States—and get paid!” Ginsburg argued that “[t]he machine arrived in Nicastro’s New Jersey not randomly or fortuitously, but as a result of the U.S. connections and distribution system that McIntyre UK deliberately arranged.” Invoking the reasonableness and fairness considerations at the heart of jurisdiction questions, the dissent asked the following rhetorical questions.

On what measure of reason and fairness can it be considered undue to require McIntyre UK to defend in New Jersey as an incident of its efforts to develop a market for its industrial machines anywhere and everywhere in the United States? Is not the burden on McIntyre UK to defend in New Jersey fair, i.e., a reasonable cost of transacting business internationally, in comparison to the burden on Nicastro to go to Nottingham, England to gain recompense for an injury he sustained using McIntyre’s product at his workplace in Saddle Brook, New Jersey?
By siding with J. McIntyre, the U.S. Supreme Court ensured that many individuals who are harmed by defective products made by foreign manufacturers will be denied access to justice even when the manufacturers are intentionally profiting from U.S. consumers.

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