pdf

Litigation Alert: In the Wake of Nicastro, Illinois Reaffirms Jurisdiction Over a Foreign Manufacturer

Date: Jan 26, 2012

The U.S. Supreme Court's decision in J. McIntyre Machinery Ltd. v. Nicastro, seemingly limited the power of state courts to exercise specific jurisdiction over a foreign defendant. Nicastro held, in a divided opinion, that a small number of sales of a product within a state is not sufficient to confer jurisdiction on a foreign defendant even when that product is distributed by an American company.

Some states, however, may be trying to limit the reach of that decision. Prior to Nicastro, the Illinois Court of Appeals had held in Russell v. SNFA that Illinois courts had jurisdiction over a French company that sold tail-rotor bearings to an Italian company when those bearings ultimately ended up in a helicopter that crashed in Illinois, killing the pilot. No. 1-09-3012 (Ill. App. Ct. Sept. 25, 2009). Our analysis of that decision can be found here.

Following Nicastro, the Illinois Supreme Court directed the Illinois Court of Appeals to review its decision in Russell. The Illinois Court of Appeals did so and reaffirmed its earlier holding that Illinois courts had both specific jurisdiction over the foreign manufacturer and jurisdiction to the extent permitted by the due process clause of the fourteenth amendment of the U.S. Constitution. The court noted that each of the Nicastro opinions had cited Asahi Metal Industry Co. v. Superior Court, which until Nicastro was the Supreme Court's most authoritative statement on specific jurisdiction, with approval. The Asahi court had cited Rockwell International Corp v. Costruzioni Aeronautiche Giovanni Agusta, S.p.A. as an example of a case in which minimum contacts existed because the defendant had designed its product in anticipation of sales in the forum state.

The defendant in Rockwell was SNFA, the same defendant as in Russell. In both cases, SNFA argued that there were not sufficient minimum contacts to subject it to personal jurisdiction in the forum state. However, the Rockwell court had found sufficient minimum contacts on the basis that SNFA had uniquely designed its bearings for incorporation into the helicopter thereby intending that its products would be an inseparable part of the helicopter manufacturer's marketing plan. The Rockwell court determined that SNFA thus had a stake in, and expected to derive definite benefit from, sales of the helicopter in the United States through the American distributor.

The Illinois Court of Appeals agreed, noting that SNFA, with full knowledge that its tail rotor bearings would be distributed as part of the finished helicopter in the United States, could not escape jurisdiction simply by using an American distributor as a conduit rather than engaging in marketing and distribution activities itself.

The Illinois Court of Appeals distinguished Nicastro, which had held that the British manufacturer had not subjected itself to jurisdiction in the forum state even though it had used an American distributor, where there was only one sale to the forum state. All the Justices in Nicastro, the Court of Appeals noted, had found that distribution by an American distributor in the United States could be sufficient to establish jurisdiction, given the right set of facts. In the Russell case before Illinois' Court of Appeals, the American distributor had sold approximately 2,198 parts produced by SNFA, thus insufficient sales was not a bar to jurisdiction, as it had been in Nicastro. Moreover, five helicopters had been sold in Illinois, which the court felt represented significant sales in terms of dollar value.

Thus, relying on most of the same bases as in its earlier opinion and distinguishing Nicastro on the amount of activities directed at the forum state, the Illinois Court of Appeals reaffirmed its holding that the Illinois courts had jurisdiction over a foreign manufacturer when that manufacturer had designed its product specifically for inclusion in a product that ultimately caused injury within the forum state.