Hunter v. Shanghai Huangzhou, No. 5:17-cv-00052 (N.D.N.Y. Dec. 7, 2020) [click for opinion]
This case was brought by Meghan Hunter, individually and as parent and natural guardian of M.H., against Shanghai Huangzhou, a group of three Shanghai-based manufacturing companies that sell products into the United States through stores such as Home Depot. Plaintiffs alleged that they purchased a defective heater through Home Depot that malfunctioned and caused injuries to M.H.
In December 2019, Plaintiffs obtained an entry of default against Defendants for their "failure to appear, plead or otherwise defend" the action. Plaintiffs moved for default judgment, which was denied, inter alia, because Plaintiffs had failed to allege facts sufficient for the court to find personal jurisdiction over Defendants.
In a renewed motion, Plaintiffs asserted that New York's long-arm statute, N.Y. C.P.L.R. § 302(a)(3), allowed the court to exercise personal jurisdiction against any non-domiciliary who (i) commits a tortious act outside the state causing injury to a person within the state, which that party (ii) expects or should reasonably expect to have consequences in the state, and where that party (iii) derives substantial revenue from interstate or international commerce.
The court was satisfied that it had personal jurisdiction over Defendants on this basis. The evidence established that Defendants manufactured the heater and Plaintiffs specifically alleged that the heater was defective and that those defects caused injuries to M.H. within New York. The evidence also established that Defendants expected any defects in the heater to have consequences in New York because Defendants purposefully shipped the heater, and thousands of units like it, directly to New York for sale, establishing their awareness that any defects in those products could have consequences there.
Finally, sales history reports submitted by Plaintiffs reflected that, in the year the heater allegedly caused injury to M.H., Defendants sold more than 50,000 units to Home Depot, earning total sales revenue of approximately $1.8 million. While the court commented that it did not have available to it information about supplier costs and revenue share, it was satisfied that Defendants had derived a significant amount of revenue from international commerce. In any event, the court also commented that the "substantial revenue" requirement is intended to exclude non-domicilaries whose business operations are of a local character.
Despite the fact that the court was satisfied it had personal jurisdiction over Defendants, as well as well-pled allegations that sufficiently stated claims for negligence and strict liability under design and manufacturing defect theories, it declined to enter default judgment against Defendants. As part of the motion, Home Depot, as a separate defendant, argued that there were good reasons to delay the determination of damages until the action was resolved against all remaining defendants. The court agreed. The court noted, however, that the Defendants' default operated as an admission of all well-pled facts as to liability, and that the Defendants had thus forfeited their right to contest their liability in future proceedings.
Patrick Dennien of the Washington DC office contributed to this summary.
