On February 2, 2010, the New Jersey Supreme Court decided 5-2 that a foreign manufacturer of an allegedly defective product may be subject to suit in New Jersey based only on the fact that its product made its way to New Jersey through standard commercial channels. Justice Barry Albin, writing for the majority, 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 products-liability action." Nicastro v. McIntyre Mach. Am., Ltd., 2010 N.J. LEXIS 19, at *51 (N.J. 2010). Noting the increasing globalization of the modern commercial marketplace, Justice Albin emphasized that a manufacturer that "knows or reasonably should know that its products are distributed through a nationwide distribution scheme that might lead to those products being sold in any of the 50 states must expect that it will be subject to [New Jersey's] jurisdiction if one of its defective products is sold to a New Jersey consumer, causing injury." Nicastro, 2010 N.J. LEXIS 19, at *58. Two vigorous dissents-one calling for the United States Supreme Court to overturn the majority decision-disagreed, characterizing the ruling as a "radical departure" from established law.

Pertinent Background

In 2001, plaintiff Robert Nicastro, an employee of Curcio Scrap Metal in Saddle Brook, New Jersey, was operating a McIntyre Model 640 Shear, a recycling machine used to cut metal, when an accident occurred, resulting in the loss of four of Nicastro's fingers. Id., at *14. Nicastro filed suit in 2003, alleging that the machine was defective because it did not have a protective safety guard. Id. The defendants were J. McIntyre Machinery Ltd. ("J. McIntyre"), a company incorporated in the United Kingdom that manufactured the 640 Shear, and its exclusive U.S. distributor, McIntyre Machinery America, Ltd. ("McIntyre America"), an Ohio-based distributor. Despite sharing the same name, the two "McIntyre" companies were distinct corporate entities that shared no common ownership. Id.

J. McIntyre, the manufacturer, moved to dismiss the action on the grounds that it did not have sufficient minimum contacts with New Jersey to justify the state's exercise of personal jurisdiction. Id., at *16. The trial court granted J. McIntyre's motion, finding that New Jersey lacked personal jurisdiction even under the more expansive "stream of commerce" theory. Id.

The New Jersey Appellate Division reversed the trial court in an unreported decision and remanded to allow the parties to engage in jurisdictional discovery. Nicastro, 2010 LEXIS 19, at *17. Discovery revealed that in 1994 or 1995, the owner of Curcio Scrap Metal traveled to a trade convention in Las Vegas, Nevada. Id. The president of J. McIntyre also attended this convention (as well as other conventions throughout the United States), where the company set up a booth to advertise the 640 Shear. Curcio's owner visited J. McIntyre's booth and returned home to New Jersey, where he placed an order for a 640 Shear. Id. J. McIntyre shipped the 640 Shear from England to McIntyre America, in Ohio, and McIntyre America shipped the product to New Jersey, where it was ultimately used by plaintiff Nicastro. Notably, McIntyre America's invoice instructed Curcio Scrap Metal to make its check payable to "McIntyre Machinery of America, Ltd." Id., at *17-18.

After discovery, the trial court once again granted J. McIntyre's motion to dismiss for lack of personal jurisdiction, holding that the stream-of-commerce theory could apply only if J. McIntyre participated in a plan of distribution that "purposefully brought [its] shear machines to New Jersey." Id., at *20. The Appellate Division again reversed, holding that J. McIntyre purposefully placed the 640 Shear into the stream of commerce with an awareness that the product might end up in New Jersey. Nicastro v. McIntyre Mach. Am., Ltd., 399 N.J. Super. 539, 545, 945 A.2d 92 (App. Div. 2008) (citing Asahi, supra, 480 U.S. at 112, 107 S. Ct. at 1032, 94 L. Ed. 2d at 104). Accordingly, the Appellate Division "had no hesitancy" in ruling that J. McIntyre was subject to the jurisdiction of the New Jersey Superior Court. Id.

The Majority Opinion

The Supreme Court granted J. McIntyre's petition for certification, and Justice Albin, writing for the majority, affirmed the decision of the Appellate Division. The majority began its analysis by noting that the New Jersey long-arm statute, New Jersey Court Rule R. 4: 4-4, permits the exercise of jurisdiction over a nonresident defendant to the utmost limits permitted by the United States Constitution. Nicastro, 2010 LEXIS 19, at *50. The majority then purported to reaffirm its 1986 decision in Charles Gendler & Co. v. Telecom Equipment Corp., 102 N.J. 460 (1986), which held that New Jersey, as the forum state, does not exceed its powers under the Due Process Clause if it asserts personal jurisdiction over a corporation that delivers its products into the stream of commerce with the expectation that they will be purchased by consumers in New Jersey. Gendler, 102 N.J., at 475. The majority recognized that J. McIntyre did not have a "presence or minimum contacts in [New Jersey,]" and, therefore, Nicastro's claim "must sink or swim with the stream-of-commerce theory of jurisdiction." Id., at *28. Justice Albin, citing the opinion of Justice Brennan of the United States Supreme Court in Asahi, stated that the stream of commerce refers to the regular and anticipated flow of products from manufacture to distribution to retail sale. Nicastro, 2010 LEXIS 19, at *45, citing Asahi Metal Indus. Co. v. Superior Court of Cal., 480 U.S. 102, 117 (U.S. 1987) (Brennan, concurrence). Therefore, as long as a participant in that distribution process is aware that the final product is being marketed in the forum state, the possibility of a lawsuit there cannot come as a surprise. Nicastro, 2010 LEXIS 19, at *44. The majority reasoned that "J. McIntyre knew or reasonably should have known that the distribution system extended to the entire United States, because its company officials, along with McIntyre America officials, attended scrap metal trade shows and conventions in various American cities where its products were advertised." Id., at *61. As a result, J. McIntyre was subject to the personal jurisdiction of the New Jersey Superior Court.

The majority further emphasized that product liability cases present an added justification for states to exercise jurisdiction over nonresident defendants. The Nicastro court stated that "a state...has a paramount interest in ensuring a forum for its injured citizens who have suffered catastrophic injuries due to allegedly defective products in the workplace." Nicastro, 2010 LEXIS 19, at *8. Due process, the majority ruled, could not allow the stream-of-commerce theory to "render a state, such as New Jersey, powerless to provide relief to a resident who suffers serious injuries from a product that was marketed and sold by a manufacturer, through an independent distributor, knowing that the final destination might be a New Jersey consumer." Id., at *54. The court also observed that "a manufacturer that wants to avoid being hauled into a New Jersey court need only make clear that it is not marketing its products in [New Jersey]." Id., at *57.

The Dissents

While agreeing that the stream-of-commerce theory is an established and proper doctrine in finding personal jurisdiction over nonresident defendants, Justice Hoens opined that the majority drastically misapplied the theory to this case. After analyzing the text of Gendler, Justice Hoens stated that "the simple process of a product being placed into the general stream of commerce and ending up here [is not] enough to support jurisdiction. Nor did this Court [in Gendler] decide that creating a system of distribution that resulted in a product finding its way here was enough. Instead, this Court linked together two elements, awareness and purposefulness, that are critical, from the point of view of due process, to an exercise of jurisdiction." Id., at *75. Hoens also cited Justice Brennan's opinion in Asahi for the premise that "the stream of commerce refers not to unpredictable currents or eddies, but to the regular and anticipated flow of products from manufacturer to distribution to retail sale." Id., at *78, citing Asahi Metal Indus. Co., 48 U.S. at 177. Without some action or conduct that demonstrates that the defendant "purposefully availed itself of the forum state's market," the dissent argued, personal jurisdiction of the defendant is not proper.

Justice Hoens concluded by stating that the majority "avoids faithful application of the fundamental fairness concerns that have long guided this Court, and the United States Supreme Court, by relying on circular rhetoric about the global economy as if that alone comports with due process." Nicastro, 2010 LEXIS 19, at *98. In the end, argued Hoens, "the majority has replaced a carefully balanced test, albeit one with some slightly varying emphases, but that remained true to our notions of due process, with an unbounded one that presumes that participation in the global economy, without more, bespeaks purposeful availment of the benefits of this jurisdiction." Id., at *98-99.

Justice Roberto Rivera-Soto, who joined Justice Hoens' dissent, also authored a brief dissent of his own. Rivera-Soto wrote that while he "wholeheartedly" agreed with Justice Hoens, he believed that the majority "has decided an important federal question in a way that conflicts with" settled federal constitutional principles and "disturbs the careful balance that limits the exercise of judicial power between and among the several states." Justice Rivera-Soto called for review and correction by the Supreme Court of the United States. Nicastro, 2010 LEXIS 19, at *99-100 (Rivera-Soto dissent). Whether or not the Supreme Court of the United States will accept Justice Rivera-Soto's suggestion remains to be seen.

Implications

Nicastro will have short-term and long-term implications for manufacturers whose products make their way to New Jersey. Nicastro stands for the proposition that even if a company has no other ties or interactions with New Jersey, it may be subject to jurisdiction because it targets the United States as a geographic market for its product. In issuing Nicastro, New Jersey courts join those federal and state jurisdictions, about half of such jurisdictions in the nation, that previously adopted the broad stream-of-commerce justification for the exercise of personal jurisdiction in product liability cases. Simply put, after Nicastro, a nonresident defendant company's targeting the United States as a market means targeting New Jersey as a market.

Further, the increasingly global economy minimizes the merits of a defendant's argument that being hauled into a foreign court creates an onerous or unfair burden. To avoid being subject to jurisdiction in New Jersey, the Nicastro majority observed, a company "need only make clear that it is not marketing its products in [New Jersey]." Id., at *57. This may not be a workable solution, because the increasingly global economy does not favor the type of restrictions that the Nicastro majority offered as the only protection against the exercise of personal jurisdiction. [1]

The majority in Nicastro recognized that its broad stream-of-commerce approach to personal jurisdiction would not be applied if the underlying claims did not involve serious injuries or were not based on product liability. And, so far, the expanded stream-of-commerce basis for the exercise of personal jurisdiction has not been applied in New Jersey courts when there has been a claimed breach of contract or warranty or other commercial claims, despite the increasing availability and use of the Internet as a primary vehicle of commerce. Nevertheless, the jurisdictional analysis announced in Nicastro shifted the focus away from an investigation of the nonresident defendant's due process rights and toward an emphasis on the concerns of the resident plaintiff's rights and convenience. This analytical shift may well prove to be the defining takeaway from Nicastro. It is not a large leap of logic to predict that the Nicastro stream-of-commerce analysis will eventually be applied in the commercial law context where New Jersey courts could deem use of the Internet to be evidence of a manufacturer's intent to engage in business in New Jersey, because its products and/or its product information find their way there. As the predominant instrument facilitating global commerce, the Internet provides a myriad of possible situations that may now expose nonresident defendants to suit in New Jersey in connection with commercial claims. Whether New Jersey will limit Nicastro's expansive personal jurisdictional analysis to severe personal injury claims or whether it will eventually encompass commercial transactions as well deserves careful monitoring.