In New London County Mutual Ins. Co. v. United Pet Group, Inc., 2012 WL 3206345 (D. Mass. Aug. 6, 2012), two Massachusetts homeowners alleged that a defective aquarium heater purchased in Massachusetts had caused a fire in their house. Plaintif insurer, as subrogee of its insured homeowners, sued the heater’s distributor, an Ohio company, in Massachusetts Superior Court. The distributor removed the case to the United States District Court for the District of Massachusetts based on diversity of citizenship and filed a third-party complaint against the heater’s Italian manufacturer, asserting claims for indemnification, contribution and breach of warranty under a distribution agreement between the parties. The manufacturer moved to dismiss for lack of personal jurisdiction.
In opposing the motion, the distributor argued the manufacturer was subject to personal jurisdiction under the Massachusetts long-arm statute, M.G.L. c. 223A, § 3(a), because the claim arose out of the manufacturer’s “transacting any business” in the Commonwealth by placing its product in the national stream of commerce, knowing it could be sold in Massachusetts. The manufacturer argued that United States Supreme Court precedent prohibits the exercise of jurisdiction based on the “stream of commerce” absent evidence the manufacturer specifically targeted the forum state, and there was no such evidence here.
The court first noted that the “transacting any business” clause of the long-arm statute has been interpreted to authorize jurisdiction to the full extent allowed by the due process clause of the United States Constitution. Therefore, determining whether jurisdiction is proper requires consideration of: (1) whether the claims arise out of or are related to the manufacturer’s in-state activities; (2) whether the manufacturer, by those activities, has purposefully availed itself of the laws of the forum state; and (3) whether the exercise of jurisdiction comports with fair play and substantial justice. The court resolved the issue solely under the third element, holding that the exercise of jurisdiction would offend traditional notions of fair play and substantial justice. Perhaps the most important factor guiding the court was that a forum selection clause in the parties’ distribution agreement designated London as the place for dispute resolution, and thus the parties never could have expected that litigation between them would take place in Massachusetts. The court also found that being forced to litigate in Massachusetts would result in undue expense and burden for the manufacturer, and that Massachusetts had little interest in entertaining an indemnification and contribution dispute between Italian and Ohio parties. Accordingly, the court allowed the manufacturer’s motion to dismiss.