June 27, 2011

Supreme Court Decides J. McIntyre Machinery, Ltd. v. Nicastro

On June 27, 2011, the Supreme Court decided J. McIntyre Machinery, Ltd. v. Nicastro, No. 09-1343, holding that because a machinery manufacturer never engaged in any activities in New Jersey that revealed an intent to invoke or benefit from the protection of the state's laws, New Jersey lacked personal jurisdiction over the company under the Due Process Clause.

Robert Nicastro seriously injured his hand while using a metal-shearing machine manufactured by J. McIntyre Machinery, Ltd. The accident occurred in New Jersey, but the machine was manufactured in England, where J. McIntyre is incorporated and operates, and was sold to Nicastro's employer by an Ohio company that distributes J. McIntyre machinery in the United States.

The Supreme Court of New Jersey held that New Jersey had personal jurisdiction over J. McIntyre, based largely on the following facts:

  • The injury occurred in New Jersey to a New Jersey resident.
  • McIntyre's distributor sold and shipped one machine to a New Jersey customer: Nicastro's employer.
  • J. McIntyre permitted and wanted its independent U.S. distributor to sell its machines to anyone in America who wanted to buy them.
  • J. McIntyre's representatives attended trade shows in several U.S. cities.
  • J. McIntyre held both U.S. and European patents on its recycling technology.
  • J. McIntyre's distributor structured its advertising and sales efforts in accordance with J. McIntyre's direction and guidance whenever possible.

The court held that jurisdiction was proper because J. McIntyre knew or reasonably should have known that its products were distributed through a nationwide distribution system that might lead to those products being sold in any of the 50 states, including New Jersey, and J. McIntyre failed to take some reasonable step to prevent its products from being distributed in New Jersey. The court based its decision in large measure on Asahi Metal Industry Co. v. Superior Court of California, 480 U.S. 102 (1987), and a so-called "stream-of-commerce" doctrine.

The Supreme Court reversed in a plurality opinion. (Six Justices voted to reverse the lower court's decision, but only four joined the lead opinion.) The plurality began by emphasizing that the general rule of personal jurisdiction is that a state may not exercise jurisdiction over a defendant unless the defendant "personally avails itself of the privilege of conducting activities within the forum State, thus invoking the benefits and protections of its laws." Hanson v. Denckla, 357 U.S. 235, 253 (1958). The plurality reaffirmed that this rule applies to product liability cases. The plurality commented that confusion has arisen regarding its use of the phrase "stream of commerce" in Asahi. The plurality clarified that the plurality in Asahi meant simply that when a defendant places goods into the stream of commerce "with the expectation that they will be purchased by consumers within the forum state," that might indicate the type of purposeful availment that supports jurisdiction, even if the defendant does not enter the forum state. But a defendant's transmission of goods into a state permits the exercise of jurisdiction only where the defendant can be said to have targeted the forum. It is not enough that the defendant "might have predicted that its goods will reach the forum State." The plurality therefore expressly rejected a theory of personal jurisdiction based on "general notions of fairness and foreseeability." The plurality emphasized that "it is the defendant's actions, not his expectations, that empower a State's courts to subject him to judgment." The focus must be on the particular state that seeks to exercise jurisdiction over the defendant, and whether the defendant directed its conduct at that state. The defendant's contacts with the United States as a whole are not relevant when it is the state court that will be exercising its power over the defendant.

The Court held that J. McIntyre had not engaged in conduct purposefully directed at New Jersey. It had no office in New Jersey, neither paid taxes nor owned property there, and did not advertise in or send employees to the state. The only connection to the state was the four machines that its distributor sold in New Jersey, and that was not enough of a connection to support jurisdiction.

Justice Breyer (joined by Justice Alito) concurred in the judgment reversing the decision of the New Jersey Supreme Court, but stated that the outcome of the case was dictated by the Court's precedents. Justice Breyer stated that a single isolated sale of a product into a state, even if accompanied by a sales effort, is not sufficient to support personal jurisdiction, even if the defendant knows and hopes that such a sale will take place. Justice Breyer said that he would go no further than this, and specifically would not make "broad pronouncements that refashion basic jurisdictional rules" in a case that does not implicate issues of changes in modern commerce and communications, which might call for a different outcome in a case depending on the extent of a company's internet advertisements, for example. Thus, Justice Breyer rejected a "strict no-jurisdiction rule" just because the defendant did not target the forum state in particular.

Because no opinion won the support of a majority of Justices, the Court's holding is the narrowest holding that did have the assent of a majority of Justices. See Marks v. United States, 430 U.S. 188, 193 (1977). Thus, the Court's holding in this case is essentially Justice Breyer's concurring opinion, to the extent that it agrees with the plurality opinion.

Justice Kennedy delivered the opinion of the plurality, which Chief Justice Roberts and Justices Scalia and Thomas joined. Justice Breyer filed a concurring opinion, in which Justice Alito joined. Justice Ginsburg filed a dissenting opinion, in which Justices Sotomayor and Kagan joined. 

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