UTC Fire & Security Americas Corp., Inc. v. NCS Power, Inc., No. 10-6692, 2012 U.S. Dist. LEXIS 17112 (S.D.N.Y. Feb. 10, 2012)
Hong Kong-based manufacturer Yoku contracted with NCS to serve as Yoku’s agent for the distribution of lithium polymer battery products in North America. Delaware-based UTC retained NCS to provide batteries for automatic mobile devices used by realtors; NCS contracted with Yoku to supply the batteries in accordance with UTC’s specifications. When the batteries allegedly failed, UTC sued NCS for breach of contract and negligent design. NCS, in turn, sued Yoku as a third-party for breach of contract, product liability, and negligence. Yoku moved for summary judgment, arguing that the court lacked personal jurisdiction.
The question of whether a court has personal jurisdiction is a two-part inquiry: First, the defendant must be found to be amenable to service of process under the forum state’s laws (identified in state “long-arm” statutes, which provide the conditions that must be met for courts within the state to adjudicate claims against nonresidents of the state). Second, the court’s assertion of jurisdiction over the defendant under those laws must be found to comport with the requirements of due process.
A court must have either “general” or “specific” jurisdiction over the defendant to adjudicate claims against it. A finding of “general” jurisdiction permits a court to adjudicate claims that are related or unrelated to the defendant’s “contacts” in the state. New York law conditions a finding of “general” jurisdiction on a showing that the defendant has engaged in such a “continuous and systematic” course of business in the state as to warrant a finding of its “presence” there. Yoku had had only limited New York contracts and sales, and these were not shown to constitute a significant portion of Yoku’s overall U.S. sales. Furthermore, mere sales of a manufacturer’s products in New York were not enough to establish “general” jurisdiction. Thus, the court declined to find that it had general jurisdiction over Yoku.
The court next considered whether it had “specific” long-arm jurisdiction, which permits adjudication of only those claims arising out of a defendant’s contacts with the state (which need not meet the “continuous and systematic” threshold that general jurisdiction requires). Under New York law, specific long-arm jurisdiction may be established by showing that the litigant did business in New York and that the cause of action arose from those transactions. Under the long-arm statute of New York, Section 302 of the Civil Practice Law and Rules, a court may have specific jurisdiction if the litigant contracted (directly or though an agent) to supply goods or services in the state. The court deemed Yoku’s contract to supply batteries to a New York entity to be insufficient, however, given that the present claims against Yoku arose out of a “discrete set of batteries” Yoku manufactured for UTC, not for other New York residents. Furthermore, Yuko had not overseen the distribution of its batteries to New York, and the fact that the batteries had wound up there through others’ efforts did not establish specific jurisdiction.
The court next considered whether specific long-arm jurisdiction could be established, in accord with another provision of New York’s long-arm statute, on the basis of allegations of Yoku’s alleged commission of torts outside of New York – in this case, the sale of defective batteries – because the torts had foreseeable consequences in New York and Yoku had derived substantial revenue from interstate or international commerce. Because UTC alleged it had been forced to undertake costly corrective action to mitigate damages in New York (upgrades of the electronic devices) and might be forced to replace the remaining batteries in New York, the requisite injury in the state was found. The court reasoned that given that Yoku had delivered some 300,000 batteries to its North American distributor, it “strain[ed] credulity” to conclude that Yoku could not have foreseen that its actions would have consequences in New York. Furthermore, Yoku’s revenue from international commerce was substantial; NCS had committed to make $10 million worth of Yoku battery sales in one year alone.
The two-part showing that the exercise of personal jurisdiction over Yoku comported with “due process” was also met. First, maintaining the suit would not “offend traditional notions of fair play and substantial justice” because Yoku had purposefully availed itself of the forum by soliciting New York sales and placing defective batteries in the U.S. “stream of commerce.” The court’s resort to the “stream of commerce” theory relied not on the mere “foreseeability” that Yoku’s batteries might end up in New York, but on the large volume of sales to a national company and Yoku’s presumptive knowledge thereof. Second, the exercise of personal jurisdiction was presumed to be “reasonable” and to “comport with traditional notions of fair play and substantial justice” under the circumstances, and Yoku had failed to make a compelling case to the contrary.
The court, having found personal jurisdiction over Yoku, denied the motion for summary judgment.