Determining whether there is a contact through the “stream of commerce” has been a difficult issue for the courts to resolve. By stream of commerce, I mean that one company could develop a product, sell it to a manufacturer who incorporated it into a larger product, which is then sold to another individual.
Gray v. American Radiator illustrates this principle. A valve was developed by Titan in Ohio, who sold its product to a company in Pennsylvania. This Pennsylvania company used the valve in a water heater and sold the water heater to several states, including Illinois. The plaintiff in this case was injured by the water heater in Illinois and sued Titan in Illinois. The Illinois court said that the stream of commerce was sufficient to establish a minimum contact.
However, this principle has continued to be an issue. Many jurisdictions have disagreed on whether the “stream of commerce” is sufficient. Even the Supreme Court has disagreed on this principle. Consider Asahi Metal Indus. Co. v. Superior Court of California.
Asahi Metal Industry Co. v. Superior Court of California
480 U.S. 102 (1987).
Asahi Metal (Japan) is the defendant while Zurcher (California) is the original plaintiff. The other plaintiff is Cheng Shin (Taiwan) who seeks to include Asahi in this lawsuit. The trial court found jurisdiction, the appellate court said that there was jurisdiction, to which the Supreme Court now reviews.
Question
Is the stream of commerce alone sufficient enough to establish a sufficient minimum contact?
Rule
There must be more than foreseeability to determine a sufficient minimum contact.
The interest of the plaintiff and forum must outweigh the burden on the defendant to find specific personal jurisdiction
Holding
O’Conner says no, this is foreseeability alone which is not enough to purposefully avail. The court also says that this puts an unfair burden on Asahi, therefore, there is no specific personal jurisdiction. Reversed.
Facts
Tire valve was created by Asahi in Japan which sold it to Cheng Shin in Taiwan. Cheng Shin then creates tire tubes to be sold in several places, including California. They claim that Asahi knows that this is the case and seeks to indemnify Asahi here. Zurcher was riding his motorcycle when the tire pressure released and he lost control of the bike, injuring himself and killing his wife.
He filed suit in the California court.
Additional Facts
- Cheng Shin is in Taiwan (a parts manufacture)
- Honda is in Japan. Honda is the original defendant here.
- Honda has a contract with Cheng Shin who builds tire tubes for Honda.
- Asahi (in Japan) manufactures a tire valve used in the tire tubes.
- So, the component is being manufactured in Japan, manufactured in Taiwan, sent to Honda in Japan, which transports to California.
So, lawsuit had occurred in California. All parties were originally sued. Honda had settled. By the time the case makes it to the Supreme Court, the only parties left are Cheng Shin and Asahi. Cheng Shin wants Asahi to be a part of the case (so they can be liable for the damage) and they argue that there is no personal jurisdiction.
Analysis
The court is divided in its opinion here. They are all agreed that it was unreasonable to find personal jurisdiction because of the burden on the defendants. This is because the plaintiff had a limited interest in suing in California.
On the matter of “stream of commerce” the court was split. O’Conner said that the foreseeability is not enough to establish and that is all that is is at stake here. Instead, the actions needed to be foreseeable and the defendant would have needed to do something more to personally avail themselves to the forum.
Others disagree, saying that the conduct of the defendant here was enough to establish specific personal jurisdiction.
Notes
Asahi is definitely benefiting from sales in California, and they know it. So, why is there a disagreement? Let’s look at both approaches
O’Connor
Foreseeability alone is not enough to establish a sufficient minimum contact. The action of the conduct needs to be enough to purposefully avail themselves to the forum state. Here, because Asahi does not do anything with California (marketing, sales, etc.) and instead focuses on Taiwan, there is not a substantial connection.
Brennan
Brennan disagrees because the defendants were aware that their component parts were being sold in California and they are indirectly profiting from those sales. However, it is now unreasonable. How do we determine if things are reasonable?
- Look at the interest of the forum state
- Compared with the burden of the defendants
The difference is between “direct” and “indirect”. O’Connor wants direct evidence that sales had occurred. Brennen wants evidence that the defendants are profiting from their awareness and use of the state.
Additional Notes
For a law to become the law of the land, 5 Supreme Court justices need to agree on the reasoning. However, there are times when the when the court provides plurality opinions. This is when the court might agree on the holding (outcome of the case), but disagree with the reasoning.
If the Supreme Court has only 4 people who concur in the reasoning, then the reasoning is not binding on lower courts. Therefore, we can have a holding with no additional guidance on how the other courts are supposed to adjudicate similar cases.
From these concurrences we receive two prongs:
- O’Connor or Brennan Analysis of “purposeful availement”
- Reasonableness
The big takeaway is that if there is purposeful availment, then we also have reasonableness.
Disclaimer
The content contained in this article may contain inaccuracies and is not intended to reflect the opinions, views, beliefs, or practices of any academic professor or publication. Instead, this content is a reflection on the author’s understanding of the law and legal practices.
