- Placing Product Into the Stream of Commerce, with Expectation that Product Will Be Delivered Through Sales Channels to Colorado, Provides Sufficient Basis for Colorado Court to Exercise Personal Jurisdiction Over Manufacturer
- August 10, 2016 | Authors: Malcolm S. Mead; Adam B. Wiens
- Law Firm: Hall & Evans, LLC - Denver Office
Align Corporation Ltd. is a Taiwanese company that manufactures and sells remote control model helicopters. Align has no corporate presence in the United States, but engages distributors in the United States who sell Align's products to retailers who, in turn, sell their products to consumers. When the incident at issue arose, Align had engaged four distributors in the United States, including Horizon Hobby, Inc.
Plaintiff Allister Boustred purchased a remote control model helicopter manufactured by Align and distributed by Horizon. Boustred was then injured when operating the helicopter.
Boustred filed strict product liability and negligence claims against Align and Horizon in Larimer County District Court. After Boustred served Align in Taiwan, Align asked the trial court to quash service and dismiss all claims against it for lack of personal jurisdiction. The trial court found that it could assert personal jurisdiction over Align and denied the motion. The trial court later granted Align's motion to certify interlocutory appeal, which the Court of Appeals accepted. After extensive review, the Court of Appeals affirmed the trial court's decision that it could assert personal jurisdiction over Align.
Colorado's long arm statute confers jurisdiction to the maximum extent allowable by the Due Process Clauses of the United States and Colorado Constitutions. To meet the requirements of due process, a defendant must have sufficient minimum contacts with the forum state so that he may reasonably foresee being sued in the courts of that state. Because Boustred's complaint alleged only that the trial court had specific jurisdiction over Align, and not general jurisdiction, the court did not need to address the question of general jurisdiction.
Specific jurisdiction exists when the injuries resulting in litigation arise out of and are related to a defendant's activities that are significant and purposely directed at residents of the forum state. Evaluating minimum contacts for specific jurisdiction involves a two-part test, assessing (1) whether defendant purposely availed itself of the privilege of conducting business in the forum state, and (2) whether the litigation arises out of the defendant's forum-related contacts. Once the plaintiff establishes that the defendant has the requisite minimum contacts with the forum state, the next inquiry involves a determination of whether the court's exercise of personal jurisdiction over the defendant is reasonable and comports with notions of fair play and substantial justice. Align argued that merely placing a product into the stream of commerce, without more, is insufficient for a Colorado court to assert personal jurisdiction over it. The Court of Appeals disagreed.
In World-Wide Volkswagen v. Woodson, 444 U.S. 286 (1980), the United States Supreme Court held that a forum state does not exceed its powers under the Due Process Clause if it asserts personal jurisdiction over a corporation that delivered its products into the stream of commerce with the expectation that they will be purchased by consumers in the forum state. Since World-Wide Volkswagen established the stream of commerce theory, United States Supreme Court Justices have provided competing versions of the scope of that theory in two later decisions: Asahi Metal Industry v. Superior Court, 480 U.S. 102 (1987); and J. McIntyre Machinery v. Nicastro, 131 S. Ct. 2780 (2011). Justice Brennan's concurrence in Asahi opined that the stream of commerce does not refer to an unpredictable current which sweeps a product further than reasonably foreseeable, but consists of the regular and anticipated flow of products from the manufacturer to distributer to retail sale. Justice Brennan noted that World-Wide Volkswagen carefully differentiated between a product reaching a forum through a chain of distribution as opposed to the unilateral act of a consumer, and concluded that World-Wide Volkswagen's articulation of the stream of commerce theory should not be altered. The Court of Appeals agreed that Justice Brennan's opinion in Asahi provides the correct test, ultimately holding that a plaintiff may establish a defendant's sufficient minimum contacts by showing that the defendant placed products into the stream of commerce with the expectation that the regular course of sales would lead those products to the forum state.
In this case, Align had provided marketing materials to distributors, attended trade shows in the United States, and established channels through which consumers could receive assistance with their Align products in the United States. Align also injected a substantial number of products into the stream of commerce, knowing that those products had reached Colorado. The Court of Appeals concluded that Align purposely availed itself of the privilege of conducting business in Colorado by placing its products into the stream of commerce with the expectation that they would be sold to consumers in Colorado through the regular flow of commerce. Accordingly, the Court of Appeals held that the trial court could exercise specific personal jurisdiction over Align. Full text of opinion . . . Boustred v. Align Corp., 2016 COA 67 (April 21, 2016)