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A Foreign Manufacturer May be Subject to Personal Jurisdiction in the United States Under the “Stream of Commerce” Theory Where It Is Closely Affiliated with Its Intermediary Distributer

Valichka v. Kettler Int’l, Inc., et al.
No. RDB-13-0618 (D. Md., June 24, 2014)
by Sarah M. Grago, Summer Associate
Semmes, Bowen & Semmes (www.semmes.com)

Available at: http://www.mdd.uscourts.gov/Opinions/Opinions/
Valichka%20v.%20Kettler%20MEMO%20AND%20ORDER.pdf

In Valichka v. Kettler Int’l, Inc., et al., the United States District Court for the District of Maryland denied Defendant’s Motion to Dismiss for Lack of Personal Jurisdiction. Plaintiff William Valichka (“Valichka”) sued Defendants Kettler International, Inc., (D/B/A “Kettler USA”) and Heinz Kettler GmbH & Co. KG (“Heinz”) for negligence and strict product liability, alleging that a defective plastic folding chair manufactured and distributed by the Defendants injured him. Valichka is a New Jersey resident, but he sustained injuries from the allegedly defective chair while on his yacht docked in St. Michael’s, Maryland. Neither Defendant is a resident of Maryland. Kettler USA, the distributor, is a Virginia corporation and Heinz is a German corporation. Heinz moved to dismiss the claim against it on the basis of lack of personal jurisdiction. The court denied Defendants’ Motion to Dismiss for it concluded that the Plaintiff had made a prima facie showing that Heinz was subject to personal jurisdiction.

In reaching its conclusion, the court first considered the fundamental requirements for a finding of personal jurisdiction. First, it must be authorized by the forum state’s long arm statute. Next, the court’s exercise of personal jurisdiction must be consistent with due process. The court noted that the plaintiff need only make a prima facie showing of personal jurisdiction to survive a Motion to Dismiss. Further, it explained that it must make all reasonable inferences and resolve all factual disputes in favor of the Plaintiff.

The court found that the Plaintiff adequately identified the Maryland long arm statute, albeit not explicitly, to satisfy the requirements for a finding of personal jurisdiction. Although the court recognized that it is preferable for plaintiffs to identify the statute authorizing jurisdiction in its complaint or response to a Motion to Dismiss, here, the court found that the plaintiff used language that mirrored that of the Maryland statute. The Plaintiff alleged that the Defendants “suppl[ied] and/or contract[ed] to supply goods, services and/or manufactured products in Maryland and derive[d] substantial revenue from the sale of goods and/or manufactured products, used, consumed, or purchased in Maryland.” Similarly, the Maryland long arm statute grants a court personal jurisdiction over a person who “regularly does or solicits business, engages in any other persistent course of conduct in the State or derives substantial revenue from goods, food services, or manufactured products used or consumed in the State.” Thus, the court concluded that the Plaintiff sufficiently identified the statute, even though he failed to reference it specifically.

Next, the court concluded that a finding of personal jurisdiction over Heinz would not offend due process requirements of the Fourteenth Amendment. It underscored that due process requires that a nonresident defendant have “certain minimum contacts” with the forum state “such that the maintenance of the suit does not offend ‘traditional notions of fair place and substantial justice.’” Int’l Shoe Co. v. Washington, 326 U.S. 310, 316 (1945) (internal quotations omitted). To discern whether the Defendants had sufficient minimum contacts, the court considers the number and relationship of their contacts to the forum state and the nexus between the contacts and the pending cause of action.

Although Defendant Heinz contended that he lacked sufficient minimum contacts, the court found that the Plaintiff made a prima facie showing that Heinz was subject to personal jurisdiction before the court. Heinz argued that he had no connection to Maryland as he manufactured the products in Germany and then sold the products to a separate corporate entity, Kettler USA and, thus, he did not receive any revenue from product sales in Maryland. Instead, Kettler USA, controlled which markets the product entered. In contrast, the Plaintiff argued that Heinz had sufficient minimum contacts. First Plaintiff posited that Heinz used Kettler USA as an intermediary to market and sell its product in Maryland. Additionally, Plaintiff offered proof of Defendant’s internet website that indicated at least some of the goods were manufactured in Virginia, not Germany.

Interpreting the facts presented in the light most favorable to the non-moving party, the court concluded that the Plaintiff demonstrated that Heinz subjected himself to jurisdiction in Maryland by way of the “stream of commerce” theory of personal jurisdiction. Under this theory, a foreign manufacturer may be subject to personal jurisdiction if it “delivers its products into the stream of commerce with the expectation that they will be purchased by consumers in the forum state” even though it may lack direct contact with that state. World-Wide Volkswagen Corp., 444 U.S. 286 (1980) (emphasis added). The court echoed the warning of the Supreme Court by noting that the mere foreseeability that a product may appear in the forum state does not trigger personal jurisdiction. (citing J. McIntyre Mach., Ltd. v. Nicastro, ___ U.S.___, 131 S.Ct. 2780 (2011)). The contact must not be fortuitous, but intended and purposeful. Copiers Typewriters Calculators, Inc. v. Toshiba Corp., 576 F.Supp. 312, 320 (D. Md. 1983).

In an effort to determine whether Defendant’s contacts with Maryland were sufficiently purposeful, the court considered the facts of a similar case. It found the facts of Copies Typewriters Calculators, Inc. sufficiently analogous to provide guidance. In Copies, this court found that a Japanese manufacturer, Toshiba, that distributed products in the United States by way of a wholly-owned subsidiary, intended its products to reach the United States. While Toshiba did not enter the forum state, this court found that Toshiba intended its products to reach the forum state as its own subsidiary marketed products there. Here, although Heinz did not own Kettle USA, the Plaintiff offered evidence that the two (2) Defendants maintained a close affiliation. Additionally, the court noted that use of an intermediary does not insulate a foreign manufacturer from being subject to personal jurisdiction in forum states in which the product is sold. The court found the facts here sufficiently alike to warrant a similar finding; the court’s exercise of jurisdiction did not offend “traditional notions of fair play and substantial justice.” Int’l Shoe Co., 326 U.S. at 316.

The court held that Plaintiff presented a prima facie case that Heinz “purposefully directed its products to, and had a reasonable expectation of sales in, the United States as whole, and Maryland specifically.”