The Supreme Court Protects Foreign Manufacturers In The Stream Of Global Commerce

In one of its final decisions this term, the U.S. Supreme Court, in a plurality opinion in J. McIntyre Machinery, Ltd. v. Nicastro, No. 09-1343, 2011 U.S. Lexis 4800 (June 27, 2011), reversed a New Jersey Supreme Court decision permitting the exercise of personal jurisdiction over a foreign manufacturer with no contacts with New Jersey other than the fortuitous circumstances that its allegedly defective product made its way to New Jersey through a nationwide distributor and caused injury there. Rejecting the so-called "stream-of-commerce theory of jurisdiction" and purporting to clarify the components of personal jurisdiction jurisprudence, the fractured Supreme Court opinions in Nicastro ensure there will be more decisions on this issue as federal and state courts address the pervasive impact of the globalization of commerce and worldwide use of the Internet.

Pertinent Background

The factual setting was not complex and did not involve the Internet economy. Manufacturer J. McIntyre Machinery, Ltd. ("McIntyre") is incorporated and operates in the United Kingdom. McIntyre engaged an Ohio-based distributor to sell its metal-shearing machines in the United States. Robert Nicastro was seriously injured while using the machine manufactured by McIntyre at his place of employment in New Jersey. Nicastro sued McIntyre in New Jersey state court pursuant to New Jersey's long-arm statute. McIntyre challenged New Jersey's exercise of personal jurisdiction, claiming McIntyre did not have sufficient contacts with New Jersey. The New Jersey Supreme Court ruled that personal jurisdiction was proper over McIntyre in New Jersey "even though it had never advertised in, sent goods to, or in any relevant sense targeted the State" because "the injury occurred in New Jersey; because [J. McIntyre] knew or reasonably should have known 'that its products are distributed through a nationwide distribution system that might lead to those products being sold in any of the fifty states,' and because [J. McIntyre] failed to 'take some reasonable steps to prevent the distribution of its products in this State.'" (Nicastro, 2011 U.S. Lexis 4800, at *11-12) (quoting N.J. Supreme Court decision, 987 A.2d 575, 592 (2010).)

The Plurality Opinion

The plurality opinion in Nicastro was written by Justice Kennedy and was joined by Chief Justice Roberts and Justices Scalia and Thomas. The plurality recognized that the Nicastro case presented "an opportunity to provide greater...