Product companies should prepare for the increased likelihood of defending litigation in the state courts of New Jersey as a result of a New Jersey Supreme Court opinion issued this week that significantly expands state courts' exercise of personal jurisdiction over company defendants in product liability litigation.

Nicastro et al. v. McIntyre Machinery America Ltd. et al. involved a personal injury lawsuit against the British manufacturer of an industrial metal cutter. The plaintiff severed four fingers while using the machine. (Click here to read our alert on the Appellate Division holding in this case.) The court, in its February 2, 2010, opinion, acknowledged that J. McIntyre Machinery, Ltd., had no presence in or even "minimum contacts" with New Jersey that would justify a state court's exercising jurisdiction. Instead, the court restated and relied upon a "stream-of-commerce" theory, the original and arguably more narrow version of which it first endorsed almost 25 years ago.

Specifically, the court held that "a foreign manufacturer that places a defective product in the stream of commerce through a distribution scheme that targets a national market, which includes New Jersey, may be subject to the in personam jurisdiction of a New Jersey court in a product liability action." Notably, it further held that "a manufacturer [that] does not want to subject itself to the jurisdiction of a New Jersey court while targeting the United States market … must take some reasonable step to prevent the distribution of its products in this State."

A dissenting opinion in the Nicastro decision argues that this approach improperly expands New Jersey's precedent on jurisdiction. Previously, placing a product into the stream of commerce was, by itself, insufficient to establish jurisdiction. Instead, distribution purposefully directed at New Jersey residents—or at least an awareness that the product was being marketed to them—was required. With the latest ruling, any manufacturer with a national marketing or distribution scheme, regardless of whether that scheme specifically targets New Jersey or whether there are any actual contacts with the State, must be prepared to defend itself in state court. The court noted that this doctrine of jurisdiction is particularly suitable in product liability cases while acknowledging that it would not necessarily apply in contract or other cases.