UK Product Manufacturer Stuck in NJ

The world is truly a global marketplace. Product manufacturers seek to sell their wares throughout the globe but are understandably concerned about being subjected to countless schemes of liability in the U.S. and beyond. What’s a manufactuer to do? The most common answer is to associate with a foreign distributor who has the “boots on the ground” to sell the product and hopefully insulate the manufacturer from lawsuits in the foreign market.

In Nicastro v. McIntrye Machinery America Ltd, the New Jersey Supreme Court wrestled with the question of whether a foreign manufacturer was subject to jurisdiction despite having insufficient contacts with the Garden State to satisfy the traditional tests of personal jurisdiction. In Nicastro, plaintiff lost 4 fingers while working on an allegedly defective recycling machine used to cut metal. The U.K. based manufacturer did not directly manufacture or market its equipment in New Jersey. However, it used an exclusive U.S. distributor who marketed McIntrye’s machinery on a national basis. The manufacturer’s president also attended several national trade shows in the U.S. over the years to support the sales effort of its distributor and was aware of the strategy of selling his company’s equipment througout the U.S.

Relying on the “stream of commerce” theory, the New Jersey Supreme Court ruled that the manufacturer was subject to jurisdiction and had to fight the case in a New Jersey court. Although its direct contacts with New Jersey were almost non existent, the Supreme Court noted that McInrye knew or should have reasonably known that the distribution of its product through a national distributor naturally lead to the sale of its machines to consumers in New Jersey. This knowledge was enough to support New Jersey’s power to hear the case.

The trend is for U.S. courts to support the exercise of jurisdiction over foreign manufacturers no matter have slim the reed supporting personal jurisdiction. The traditonal concepts of “minimum contact” or “presence within the state” are seemingly outdated given the outsourcing of product manufacturing beyond U.S. shores. A lesson learned: what the markets giveth, the courts (and juries) can taketh away.