NM Court of Appeals sets standard for personal jurisdiction over foreign defendants

Minimum contacts.  Purposeful availment.  Haled into court. Stream of commerce.

You may not have heard those phrases since your first year of law school, but last week the Court of Appeals, in Sproul v. Rob & Charlie’s, Inc., took up the difficult task of deciding whether New Mexico can constitutionally exercise personal jurisdiction over the foreign manufacturer of an allegedly defective bicycle part.

The defendant manufactured the parts in Taiwan, and brought them to market in the United States through a distributor in Florida.  The defendant also had an employee in California who provides customer service and support to bicycle manufacturers and other customers in the country, apparently including some in New Mexico.

Judge Vanzi, writing for the majority, had the unenviable task of wading through the U.S. Supreme Court’s murky pronouncements in this area.  Perhaps the major unresolved issue involving foreign defendants is (1) whether an individual State may exercise specific jurisdiction over a defendant who sells its products to the United States market in general but has not specifically targeted that State in particular; or (2) whether the State may only exercise specific jurisdiction if it is shown that the defendant directed its business activities toward that State in particular. 

The U.S. Supreme Court’s cases in this area have provided no clear guidance.  In the 1987 case of Asahi Metal Industry Company v. Superior Court, Justice O’Connor, writing for four justices, argued that personal jurisdiction should exist only where the defendant has purposely directed activities towards the State in question (in that case, California), while Justice Brennan, also writing for four justices, argued that that where a defendant places its products in the stream of commerce, and is aware that they could end up in California, then it was proper for California to exercise jurisdiction.  The Supreme Court addressed the question once more last year in J. McIntyre Machinery, Ltd. v. Nicastro, but again failed to produce a majority for either approach.

Similarly, the Court of Appeals has also divided on this issue.  Judge Vanzi’s majority opinion seems to adopt the more liberal view, concluding that “a manufacturer of an allegedly defective component part that has otherwise placed it into a distribution channel with the expectation that it will be sold in our national market cannot be insulated from liability simply because it does not specifically target or know its products are being marketed in New Mexico.” ¶ 32.

Judge Kennedy’s dissent, on the other hand, asserted that “[t]he focus should be on [defendant’s] actions in their business that are directed toward New Mexico, not a nebulous post hoc imputation of their expectations deriving from where their product might turn up.” ¶ 55.

The reason this issue has been so difficult to resolve is because there are good arguments on both sides.  The liberal approach makes it easier for deserving plaintiffs to obtain relief in their home state, and is based on the reality that international markets are more interconnected than ever before.  The stricter approach recognizes that it can be burdensome for a defendant to be haled into court on the other side of the world, and that our federal system depends, in part, on imposing limits on state jurisdiction.

Which do you feel is the better approach?  Please leave a comment and tell us why.