#24804-a-SLZ 

2008 SD 98 

IN THE SUPREME COURT 

OF THE 

STATE OF SOUTH DAKOTA 

* * * * 

STATE OF SOUTH DAKOTA, Plaintiff and Appellant, 

 v. 

GRAND RIVER ENTERPRISES, INC., 

an alien Corporation, Defendant and Appellee. 

STATE OF SOUTH DAKOTA, Plaintiff and Appellant, 

 v. 

GRAND RIVER ENTERPRISES, INC., 

a/k/a GRAND RIVER ENTERPRISES 

SIX NATIONS, LTD., an alien 

Corporation, Defendant and Appellee. 

STATE OF SOUTH DAKOTA, Plaintiff and Appellant, 

 v. 

GRAND RIVER ENTERPRISES, INC., 

a/k/a GRAND RIVER ENTERPRISES 

SIX NATIONS, LTD., an alien 

Corporation, Defendant and Appellee. 

* * * * 

APPEAL FROM THE CIRCUIT COURT OF 

THE SIXTH JUDICIAL CIRCUIT 

HUGHES COUNTY, SOUTH DAKOTA 

* * * * 

HONORABLE LORI S. WILBUR 

Judge 

* * * * 

ARGUED ON AUGUST 27, 2008 

 OPINION FILED 10/22/08 
* * * * 

LAWRENCE E. LONG 

Attorney General 

JEFFREY P. HALLEM 

Assistant Attorney General Attorneys for plaintiff 

Pierre, South Dakota and appellant. 

HAVEN L. STUCK 

GENE N. LEBRUN of 

Lynn, Jackson, Shultz & Lebrun, P.C. 

Rapid City, South Dakota 

AMY L. VANDAMME 

PAUL E. BENSON of 

Michael Best & Friedrich LLP Attorneys for defendant 

Milwaukee, Wisconsin and appellee. 
-1- 

 

#24804 

ZINTER, Justice 

[¶1.] Grand River Enterprises Six Nations Ltd. (Grand River), a Canadian 

cigarette manufacturer, moved the circuit court to vacate three default judgments 

arising out of the sale of cigarettes in the State of South Dakota. Grand River 

argued that the circuit court lacked personal jurisdiction because Grand River had 

not purposefully availed itself of the South Dakota market sufficient to permit 

jurisdiction under the Due Process Clause of the Fourteenth Amendment. After an 

evidentiary hearing on the merits of the jurisdictional issue, the circuit court 

granted the motions. We affirm. 

[¶2.] In 1998, South Dakota and forty-five other states reached a settlement 

with major cigarette manufacturers1 to recoup healthcare-related costs incurred as 

a result of smoking-related illnesses. The settling manufacturers and the settling 

states entered into a Master Settlement Agreement (MSA) under which the 

manufacturers agreed to pay the states annual sums in return for the release of 

past, present, and future claims. The MSA included a “Model Escrow Statute” to be 

adopted by the settling states to protect the settling manufacturers from a 

competitive disadvantage following an anticipated rise in prices to pass the cost of 

the settlement onto consumers. 

[¶3.] South Dakota adopted the Model Escrow Statute in SDCL ch 10-50B 

(Escrow Statutes). Those statutes impose financial obligations on nonparticipating 

1. The manufacturers included the following companies that controlled up to 

98% of the market for tobacco products in 1998: Phillip Morris, Inc., R.J. 

Reynolds Tobacco Co., Brown and Williamson Tobacco Corp., and Lorillard 

Tobacco Co. 
#24804 

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manufacturers (NPMs), which are defined as “tobacco product manufacturer[s] 

selling cigarettes to consumers within” South Dakota. SDCL 10-50B-7. The Escrow 

Statutes require NPMs to either join the MSA or place in escrow a certain sum for 

their cigarettes sold in this State. SDCL 10-50B-6; SDCL 10-50B-7. 

[¶4.] Grand River is a company that manufactures cigarettes on an Indian 

reserve in Ontario, Canada. It is owned by members of the Six Nations, a group of 

six Indian tribes, also referred to as the Iroquois Confederacy. Grand River 

operates exclusively on the Six Nations Reserve under the authorization of the 

governing councils of the Six Nations. Grand River’s principal place of business is 

in Ohsweken, Ontario. It is incorporated under the Canada Business Corporations 

Act. 

[¶5.] Grand River began manufacturing “Seneca” brand cigarettes under a 

1999 “Cigarette Manufacturing Agreement” (Agreement) with Native Tobacco 

Direct.2 In June 2000, Native Tobacco Direct (NTD) assigned the Agreement to 

Native Wholesale Supply (NWS). NTD and NWS are owned by Arthur Montour, Jr. 

Both companies are separate Native legal entities located on an Indian reservation 

in the State of New York.3

2. In the Agreement, Native Tobacco Direct is referred to as Native Tobacco 

Company. To avoid confusion we, like the parties, refer to Native Tobacco 

Company as Native Tobacco Direct. 

3. Grand River also entered into a Cigarette Manufacturing Agreement with 

Tobaccoville USA, Inc. (Tobaccoville). This agreement related to 

Tobaccoville’s distribution of cigarettes in non-Indian country in the United 

States. The State argues that Grand River’s agreement with Tobaccoville is 

evidence that Grand River had knowledge of an established distribution 

network that would reach a retailer like that involved here: the Plaza, an 

 (continued . . .) 
#24804 

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[¶6.] According to Grand River’s Agreement with NTD/NWS, the latter 

parties owned the proprietary rights to Seneca brand cigarettes, which included the 

trademarks, copyrights, and tobacco blending formulas. Grand River was granted a 

“limited license to use” NTD’s/NWS’s “proprietary properties” for “the sole purpose 

of manufacturing and delivery of the cigarettes” for NTD/NWS. Agreement, ¶1. 

The right to manufacture was limited to “such quantities and at such times as per 

the written request from [NTD/NWS] to do so.” Id. ¶¶1, 8. Grand River was also 

required to manufacture the cigarettes “according to pre-approved quality 

standards” of NTD/NWS, “using the tobacco blends and packaging as designated” by 

NTD/NWS. Id. ¶¶1, 4. Finally, with certain exceptions not applicable here, Grand 

River was prohibited from manufacturing Seneca brand cigarettes for itself, or for 

any other person or entity. Id. ¶9. 

[¶7.] Following manufacture, Grand River’s involvement ended upon its 

shipment of the cigarettes, FOB Grand River’s facility in Ohsweken, Ontario, to a 

“Foreign Trade Zone in Western New York, as designated by [NTD/NWS] in 

advance for each delivery.” Agreement, ¶3. NTD/NWS was responsible for the 

________________________ 

(. . . continued) 

Indian-owned enterprise located in non-Indian country in South Dakota. See

infra ¶8. The relationship between Grand River and Tobaccoville is, 

however, irrelevant to the judgments. The judgments were based on sales of 

cigarettes in 2000, 2001, and 2002; but, according to the NAFTA complaint, 

see infra ¶28, Grand River and Tobaccoville did not enter into their 

agreement until the fall of 2002. Consequently, the circuit court found that 

the cigarettes at issue “did not enter South Dakota through any agreement 

between Grand River and Tobaccoville USA, Inc. Thus, [the Tobaccoville 

USA Inc./Grand River] business relationship is irrelevant to this case.” For 

this reason, Tobaccoville’s distribution activities are not discussed. 
#24804 

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payment of “all applicable taxes and duties arising from the importation [of the 

cigarettes] into the United States and/or Seneca Nation Territory or other Native 

Territory.” Id. Thereafter, NTD/NWS distributed the cigarettes without direction 

or control from Grand River. Id. The Agreement did not indicate in which states 

NTD/NWS might sell its cigarettes.4

[¶8.] In 2000, 2001, and 2002, NTD/NWS delivered the Seneca cigarettes at 

issue to HCI Distribution Company (HCI). HCI is a Nebraska subsidiary of HoChunk, Inc., a Wisconsin Tribe. HCI acted as a tribal development corporation for 

the Winnebago Tribe, located on the Winnebago Reservation in Nebraska. After 

purchasing cigarettes from NTD/NWS, HCI stamped them for sale in South Dakota 

and sold the cigarettes to tribally-owned clients, including those of the Yankton 

Sioux Tribe in South Dakota. As is relevant here, HCI sold Seneca cigarettes to the 

Fort Randall Casino, which is located on the Yankton Sioux Reservation in South 

Dakota. HCI also sold Seneca cigarettes to the Yankton Sioux Travel Plaza (Plaza), 

which was owned and operated by the Yankton Sioux Tribe, but which was, 

unbeknownst to HCI, located in non-Indian country in South Dakota. According to 

the State’s evidence, HCI sold 1,097,760 units5 of Seneca brand cigarettes in South 

Dakota in 2000, 1,650,800 units in 2001, and 440,000 units in 2002. 

 

 (continued . . .) 

4. The Agreement merely acknowledged that NTD/NWS was a Native business 

enterprise that distributed cigarettes to Native wholesalers and retailers on 

Native Territories, and also to other wholesalers and retailers off Native 

Territories in and outside the United States. 

5. The Escrow Statutes define “units sold” as the “number of individual 

cigarettes sold in the state by the applicable tobacco product manufacturer . . 

. during the year in question, as measured by excise taxes collected by the 
#24804 

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[¶9.] As a result of these sales, the State filed separate suits against Grand 

River in 2001, 2002, and 2003. The complaints alleged that Grand River knowingly 

violated the Escrow Statutes for the 2000, 2001, and 2002 sales. Grand River failed 

to answer or appear, resulting in the entry of default judgments. 

[¶10.] In early 2007, Grand River moved to vacate the judgments under 

SDCL 15-6-60(b)(4), arguing that the court lacked personal jurisdiction over Grand 

River. The circuit court consolidated the actions, and after a hearing on the merits 

of the motions to vacate, the court issued a detailed decision granting Grand River’s 

motions. The court concluded that the “State has not demonstrated any action by 

Grand River to purposefully avail itself to the South Dakota market” thereby 

precluding this State’s exercise of personal jurisdiction under the Due Process 

Clause of the Fourteenth Amendment.6 We review this conclusion regarding 

jurisdiction as a question of law under the de novo standard of review. Grajczyk v. 

Tasca, 2006 SD 55, ¶8, 717 NW2d 624, 627.

[¶11.] The question of personal jurisdiction over a nonresident involves two 

initial inquiries: 

First, the court must determine whether the legislature granted 

the state court jurisdiction over defendants who do not meet the 

traditional bases for personal jurisdiction. In South Dakota, 

this legislative approval is found in the state’s Long Arm 

________________________ 

(. . . continued) 

state on packs bearing the excise tax stamp or imprint of the state[.]” SDCL 

10-50B-6. 

6. The circuit court also concluded that the State’s manner of serving the 2001, 

2002, and 2003 summonses and complaints was insufficient under South 

Dakota law and the Hague Convention. Because the due process issue is 

dispositive, we do not reach the services of process issues. 
#24804 

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Statute.7 Next, the court must determine whether the proposed 

assertion of jurisdiction comports with federal due process 

requirements. 

Frankenfeld v. Crompton Corp., 2005 SD 55, ¶9, 697 NW2d 378, 381. For purposes 

of this opinion, we address only the latter inquiry because, assuming that 

jurisdiction exists under the Long Arm Statute, the due process inquiry is 

dispositive. 

[¶12.] The Due Process Clause affords protection against judgments of a 

forum with which a person has no meaningful contacts, ties, or relations. Id. ¶10, 

697 NW2d at 381-82. To satisfy due process, a putative defendant must have 

sufficient minimum contacts with the forum state to not offend traditional notions 

of fair play and substantial justice: 

In International Shoe, the United States Supreme Court 

established the minimum contacts test for determining whether 

personal jurisdiction comports with Fourteenth Amendment 

due process. 326 US 316, 66 SCt 158, 90 LEd 95. According to 

the Court, due process requires that a non-resident defendant 

“have certain minimum contacts with [the forum state] such 

that the maintenance of the suit does not offend ‘traditional 

notions of fair play and substantial justice.’” Id. (quoting 

 

7. This State’s relevant Long Arm Statute provides in pertinent part: 

Any person is subject to the jurisdiction of the courts of this state as 

to any cause of action arising from the doing personally, through 

any employee, through an agent or through a subsidiary, of any of 

the following acts: 

(1) The transaction of any business within the state; 

 . . . . 

(14) The commission of any act, the basis of which is not inconsistent with 

the Constitution of this state or with the Constitution of the United 

States. 

SDCL 15-7-2. 
#24804 

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Milliken v. Meyer, 311 US 457, 463, 61 SCt 339, 343, 85 LEd 

278 (1940)). 

Id. 

[¶13.] The minimum contacts issue in this case is whether, through its 

activities directed at this forum, Grand River “purposefully avail[ed] itself of the 

privilege of conducting activities within [this] state, thus invoking the benefits and 

protections of its laws.” See id. ¶12, 697 NW2d at 382 (citing Hanson v. Denckla,

357 US 235, 253, 78 SCt 1228, 1240, 2 LEd2d 1283 (1958)). This requires that the 

defendant’s activities must be “purposefully directed” toward the forum. Burger 

King v. Rudzewicz, 471 US 462, 472, 105 SCt 2174, 2182, 85 LEd2d 528 (1985). “It 

is not enough that it is foreseeable that a defendant’s activities may cause injury in 

a forum.” Frankenfeld, 2005 SD 55, ¶11, 697 NW2d at 382 (citing World-Wide 

Volkswagen Corp. v. Woodson, 444 US 286, 295, 100 SCt 559, 566, 62 LEd2d 490 

(1980)). Rather, “the foreseeability that is critical to the due process analysis . . . is 

that the defendant’s conduct and connection with the forum State are such that he 

should reasonably anticipate being haled into court there.” Id. (citing World-Wide 

Volkswagen, 444 US at 297, 100 SCt at 567, 62 LEd2d 490). Further, the 

defendant’s contacts with the forum must “proximately result from actions by the 

defendant himself that create a ‘substantial connection’ with the forum State.” 

Burger King, 471 US at 476, 105 SCt at 2184, 85 LEd2d 528 (citation omitted) 

(emphasis added). “Thus, the unilateral activity of a third party with some 

relationship to a nonresident defendant cannot suffice to establish personal 

jurisdiction.” Frankenfeld, 2005 SD 55, ¶12, 697 NW2d at 382 (citing Denckla, 357 

US at 253, 78 SCt at 1240, 2 LEd2d 1283). 
#24804 

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[¶14.] In this case, it is undisputed that Grand River did not have any offices, 

personnel, real estate, sales agents, bank accounts, or similar connections with 

South Dakota. Further, Grand River did not advertise or solicit business in South 

Dakota, and it did not ship to or sell cigarettes in South Dakota. Grand River had 

no connection with South Dakota other than it manufactured the Seneca cigarettes 

for NTD/NWS, a New York importer. Thereafter, NTD/NWS sold the cigarettes to 

HCI, an independent wholesale distributor, located on the Winnebago Reservation 

in Nebraska, who sold tobacco products primarily to tribally-owned entities. This 

Nebraska distributor, HCI, was the first entity that paid the tax and stamped the 

cigarettes for sale in South Dakota. HCI then sold the cigarettes to Yankton Siouxowned businesses in South Dakota. The Yankton Sioux businesses then sold the 

cigarettes to consumers in South Dakota. 

[¶15.] The Supreme Court analyzes purposeful availment through such 

distribution networks under a “stream of commerce” standard. Asahi Metal Ind. 

Co. v. Superior Court of California, 480 US 102, 107 SCt 1026, 94 LEd2d 92 (1987). 

In Asahi, a California resident brought suit in California state court to recover for 

injuries he sustained when a tire on his motorcycle exploded. The plaintiff sued the 

tire tube manufacturer, a Taiwanese company, who then impleaded the 

manufacturer of the tube’s valve, a Japanese company. The Japanese 

manufacturer contested personal jurisdiction, pointing out that it manufactured the 

valves only in Japan, and that it was the Taiwanese corporation that incorporated 

the valves into the tubes in Taiwan and sold the finished tubes throughout the 

world. 
#24804 

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[¶16.] The Supreme Court concluded that California’s exertion of personal 

jurisdiction over the Japanese valve manufacturer exceeded the limits of due 

process. Id. at 112, 107 SCt at 1032, 94 LEd2d 92. Delivering judgment for a 

unanimous Court, Justice O’Connor wrote a plurality opinion expressing the view of 

four members of the Court, which has become known as the stream of commerce 

“plus” standard. Under that standard: 

The placement of a product into the stream of commerce, 

without more, is not an act of the defendant purposefully 

directed toward the forum State. Additional conduct of the 

defendant may indicate an intent or purpose to serve the 

market in the forum State, for example, designing the product 

for the market in the forum State, advertising in the forum 

State, establishing channels for providing regular advice to 

customers in the forum State, or marketing the product through 

a distributor who has agreed to serve as the sales agent in the 

forum State. But a defendant’s awareness that the stream of 

commerce may or will sweep the product into the forum State 

does not convert the mere act of placing the product into the 

stream into an act purposefully directed toward the forum state. 

Id. at 112, 107 SCt 1026. 

[¶17.] Justice Brennan, however, expressed the view of four members of the 

Court that due process did not require the “plus”; i.e., additional conduct. Id. at 

117, 107 SCt at 1034, 94 LEd2d 92 (Brennan, J., concurring in part and concurring 

in the judgment). In the concurrence’s view, “[a] defendant who has placed goods in 

the stream of commerce benefits economically from the retail sale of the final 

product in the forum State, and indirectly benefits from the State’s laws that 

regulate and facilitate commercial activity.” Id. Justice Brennan continued, 

“[t]hese benefits accrue regardless of whether the participant directly conducts 

business in the forum State, or engages in additional conduct directed toward that 
#24804 

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State.” Id. He opined that Justice O’Connor’s stream of commerce “plus” standard 

“represented a marked retreat from the analysis in World-Wide Volkswagen[.]” Id. 

at 118, 107 SCt at 1035, 94 LEd2d 92. According to Justice Brennan, under WorldWide Volkswagen, delivery of a product into the stream of commerce with an 

expectation that it would be purchased in the forum state was sufficient: “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 the 

forum State.” Id. at 119, 107 SCt at 1036, 94 LEd2d 92 (citing World-Wide 

Volkswagen, 444 US at 298, 100 SCt at 567, 62 LEd2d 490). Thus, Justice Brennan 

concluded that minimum contacts were present because: “Asahi was aware of the 

distribution system’s operation, and it knew that it would benefit economically from 

the sale in California of products incorporating its components.” Id. at 121, 107 SCt 

at 1037, 94 LEd2d 92. 

[¶18.] In this case, the parties agree that the issue is one of purposeful 

availment. The parties disagree, however, which standard of purposeful availment 

applies. The circuit court applied Justice O’Connor’s stream of commerce “plus” 

standard. Grand River contends that this Court adopted that standard when we 

discussed the issue in Frankenfeld, 2005 SD 55, 697 NW2d 378. The State 

disagrees. The State contends that the circuit court should have applied Justice 

Brennan’s World-Wide Volkswagen “expectation” standard as applied by the Eighth 

Circuit Court of Appeals in Clune v. Alimak AB, 233 F3d 538 (8thCir 2000) and 

Barone v. Rich Bros. Interstate Display Fireworks Co., 25 F3d 610 (8thCir 1994). 
#24804 

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Further, the State argues that the South Carolina Supreme Court’s recent opinion 

in State v. NV Sumatra Tobacco Trading, Co., 379 SC 81, 666 SE2d 218 (2008) 

supports the assertion of personal jurisdiction over Grand River. We review these 

authorities. 

Frankenfeld 

[¶19.] In Frankenfeld, tire consumers sued multiple defendants (including 

Crompton and Flexys), alleging that defendants conspired to fix the price of rubber 

processing chemicals used to manufacture tires. 2005 SD 55, 697 NW2d 378. 

Crompton was a Connecticut corporation with its principal place of business in 

Connecticut. It marketed specialty chemical products and processing equipment 

that were used in the manufacture of rubber and tires. Flexys was a Delaware 

Corporation with headquarters in Ohio and was the world’s leading supplier of 

chemicals to the rubber industry. Crompton and Flexys sold their rubber 

processing chemicals to tire manufacturers principally located in Tennessee and 

North Carolina. After the tires were made, they proceeded along a chain of 

distribution from manufacturers to distributors, then to retailers, and eventually to 

consumers. Once Crompton and Flexys sold their chemicals to the tire 

manufacturers, they had no control over the rest of the marketing chain in which 

the tires were distributed. 

[¶20.] As in the instant case, both Crompton and Flexys argued that they 

lacked sufficient minimum contacts with South Dakota rendering personal 

jurisdiction inappropriate. On appeal, we noted that although no South Dakota 

case had specifically adopted Justice O’Connor’s stream of commerce “plus” 
#24804 

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standard, our decision in Rothluebbers v. Obee, 2003 SD 95, 668 NW2d 313, was 

“more consistent with the ‘stream of commerce plus’ analysis.” 2005 SD 55, ¶19, 

697 NW2d at 385. We further stated, “[i]n fact, one of our earlier cases, Miller v. 

Weber, 1996 SD 47, 546 NW2d 865, confirms this analytical framework.” Id. ¶20, 

697 NW2d at 385. Therefore, in Frankenfeld, we first applied the stream of 

commerce “plus” standard, concluding: 

[A]pplying the analysis from Asahi, Rothluebbers, and Miller, 

the facts here established that Crompton and Flexys did not 

purposefully avail themselves of the privilege of acting in South 

Dakota. Rather, their products, like the tube valves in Asahi, 

were incorporated by a third party into a finished product 

which found its way to South Dakota. At most, Crompton and 

Flexys placed their products into a stream of commerce which 

took them to Tennessee and North Carolina, where they were 

manufactured into a third party’s product (tires) and then 

injected into the stream of commerce that eventually lead to 

South Dakota. Further, Crompton and Flexys did not enter 

into a contract with anyone in South Dakota. Because no fact 

suggests that they purposefully availed themselves of the 

benefits and protections of South Dakota’s laws, the first 

element of proper personal jurisdiction is lacking. 

Id. ¶22, 697 NW2d at 385. Significantly, however, we did not rest our holding solely 

on this stream of commerce “plus” standard. We noted that even if we were to apply 

Justice Brennan’s “expectation” standard, personal jurisdiction over the defendants 

would have been lacking because the Frankenfeld defendants “did not deliver their 

products into the stream of commerce with the expectation that they would be 

purchased by consumers in South Dakota.” Id. ¶24, 697 NW2d at 386. Thus, 

Frankenfeld did not determine which standard should be applied in future cases. 

Clune and Barone. 
#24804 

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[¶21.] The State argues that we should apply the expectation standard as 

applied in Clune and Barone. In those cases, the Eighth Circuit observed that five 

Justices declined to adopt Justice O’Connor’s “plus” standard, and consequently, the 

Eighth Circuit applied Justice Brennan’s expectation analysis from Asahi and

World-Wide Volkswagen. See Clune, 233 F3d at 542 (noting: “Although a majority 

of the Asahi Court agreed with Justice O’Connor that jurisdiction was not proper in 

that case, five Justices refused to adopt her articulation of a stream of commerce 

‘plus’ theory.”); Barone, 25 F3d at 614 (noting: “Because the Supreme Court 

established the stream of commerce theory, and a majority of the court has not yet 

rejected it, we consider that theory to be determinative.”) (quoting Dehmlow v. 

Austin Fireworks, 963 F2d 941, 946 (7thCir 1992)).

[¶22.] Clune involved a Swedish manufacturer that had designed 

construction hoists for the United States market. 233 F3d 538. A Missouri 

construction worker fell from one of the hoists and brought a wrongful death action 

in that state. The evidence reflected that the manufacturer had exclusive 

distribution agreements with United States distributors, and these distributors 

were a subsidiary of the manufacturer. The Clune court observed, “at minimum, 

[the manufacturer] had constructive knowledge that its construction hoists would 

end up in Missouri. . . . Also, the intermingling of directors and officers between 

[the manufacturer and distributor] suggests that the parent was aware of its 

subsidiary’s activities.” Id. at 545 n9. Thus, the court found that the defendant 

“head[ed] a distribution network,” and the Swedish manufacturer “did more than 

simply set a product adrift in the international stream of commerce. The record 
#24804 

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shows [the defendant] created the distribution system that brought the hoist to 

Missouri.” Id. at 543. Based on these facts, the Eighth Circuit concluded that the 

manufacturer “purposefully directed its products to the United States through the 

distribution system it set up in this country.” Id. at 544. The court explained, “[t]he 

company knew that by virtue of this system, its construction hoists entered 

Missouri,” and the “creation of the system that brought hoists to Missouri 

established sufficient minimum contacts with that forum to satisfy the due process 

standards.” Id. at 544-45.

[¶23.] Barone involved a Nebraska man, injured by fireworks, who sued the 

fireworks’ foreign manufacturer. 25 F3d 610. The Eighth Circuit held that 

although the manufacturer had no office, agent, or distributor in Nebraska, did not 

advertise in Nebraska, and did not send any products into Nebraska, it was subject 

to personal jurisdiction because of the way its products arrived in that state. Id. at 

615. The court observed that the manufacturer had strategically selected a network 

of distributors that could reach much of the United States. Id. After noting that 

the manufacturer used nine distributors in six states, the Barone court explained 

that the manufacturer’s “strategic choice of distributors that could reach much of 

the country” was evidence of the manufacturer’s efforts “to place its products in the 

stream of commerce throughout the Midwest[.]” Id. at 614. The Barone court 

concluded that “when a seller heads a distribution network it realizes the much 

greater economic benefit of multiple sales in distant forums, which in turn may 

satisfy the purposeful availment test.” Id. at 613. Barone ultimately held that 

because the manufacturer “ha[d] reaped the benefits of its network of distributors . . 
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. it is only reasonable and just that it should now be held accountable in the forum.” 

Id. at 615 (emphasis added). 

[¶24.] Although the Eighth Circuit declined to apply the stream of commerce 

“plus” standard, the reasoning of these opinions nevertheless reflects that a 

manufacturer must do “more than simply set a product adrift in the international 

stream of commerce.” Clune, 233 F3d at 543; see also Barone, 25 F3d at 615. The 

court found personal jurisdiction only because those manufacturers expected their 

products to reach the forum through marketing networks that were created or 

headed by the defendant manufacturers. 

Sumatra Tobacco 

[¶25.] In Sumatra Tobacco, 379 SC 81, 666 SE2d 218, South Carolina 

brought an action under its Escrow Statutes against Sumatra Tobacco (Sumatra). 

Sumatra was an Indonesian tobacco product manufacturer. Sumatra alleged that it 

sold its products solely to a Singapore corporation, UNICO Trading Pte, Ltd. 

Sumatra admitted, however, that: UNICO may have sold the cigarettes to a British 

Virgin Islands corporation, Silmar Trading Ltd; and Silmar may have engaged a 

United States importer based in Florida for the purpose of selling tobacco products 

manufactured by Sumatra in the United States. Similar to Clune and Barone, the 

South Carolina Supreme Court applied the World-Wide Volkswagen “expectation” 

standard and concluded that Sumatra had sufficient minimum contacts with South 

Carolina based upon the following facts: 

(1) Sumatra admits it manufactured the United brand 

cigarettes; (2) Sumatra admits it owns the United States 

trademark for that brand; (3) the Department of Revenue 

states 6,868,000 United brand cigarettes were sold in South 
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Carolina in 2001; (4) Sumatra, either on its own or by someone 

else on its behalf, filed an ingredient report for the United 

brand cigarettes with the Center for Disease Control; (5) 

Sumatra admits it packaged its cigarettes in packs and cartons 

which bear the United States-required health warnings; and (6) 

the United brand packaging identifies the cigarettes as an 

“American blend,” has a Surgeon General’s warning, and shows 

an eagle and striped packaging. 

Id. 379 SC 81, *4, 666 SE2d at 223. 

[¶26.] Although the circuit court did not have the Sumatra Tobacco case for 

its review, it concluded that similar applications of the expectation standard in 

Clune and Barone were “unpersuasive as applied to the facts of [Grand River’s] 

case.” The State disagrees, contending that it has shown purposeful availment 

under these cases and the World-Wide Volkswagen/Asahi expectation standard. 

Alternatively, the State contends that even if stream of commerce “plus” applies, 

the facts of this case satisfy the “plus.” We do not reach the State’s “plus” argument 

because we conclude that the State failed to meet its burden of proof even under the 

more inclusive expectation standard in World-Wide Volkswagen/Asahi. In arriving 

at this conclusion, we address the factual considerations that the State contends 

establish purposeful availment under Clune, Barone, Sumatra Tobacco and two 

Ohio decisions. 

1. Grand River’s relationship with Arthur Montour, Jr., the principal 

in NTD/NWS, and NTD’s/NWS’s distribution of Seneca cigarettes 

within the United States. 

[¶27.] As previously indicated, Arthur Montour, Jr. owns both NTD and 

NWS, the New York importers/distributors who licensed Grand River to 

manufacture the cigarettes for them. Although these corporations sold Seneca 

cigarettes as legal entities separate and apart from Grand River, the State labels 
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the relationship as a “co-venture” between Arthur Montour, Jr. and the principals of 

Grand River. The State argues that these principals made statements in other 

litigation (a complaint filed in a NAFTA dispute) that they were involved in a “coventure” to manufacture and market Seneca cigarettes throughout the United 

States. The State contends that this marketing co-venture was the type of 

distribution network that was expected to reach the South Dakota market, thereby 

establishing personal jurisdiction. Citing Clune, 233 F3d at 543-45, and Barone, 25 

F3d at 613-15. 

[¶28.] Unlike Clune and Barone, however, the State’s evidence does not 

reflect Grand River’s utilization of a distribution network that it knew or expected 

to include the South Dakota market. On the contrary, the NAFTA complaint’s coventure statements only reflect expected connections with limited parts of the 

Canadian and United States market; namely, certain Canadian and New York 

Indian reservations, the East Coast, Virginia and Nebraska.8 And, the Nebraska 

connection mentioned in the NAFTA complaint was with an Indian tribe other than 

 

8. The NAFTA complaint reflects that the “co-venture” activities were started 

only between the principals of Grand River’s predecessor and then only to 

distribute tobacco products “principally on Six Nations territory” in Canada 

and the United States. NAFTA Complaint, ¶7. When Arthur Montour, Jr., 

later became involved, distribution was “principally in the East Coast region 

of the USA,” and he became involved because of his experience “throughout 

Six Nations land.” Id. ¶8. Later, the three principals expanded their 

production facility to Virginia for the sale of cigarettes “on Six Nations 

territory.” Id. ¶14. Finally, when production was ultimately consolidated at 

Grand River’s facility, the NAFTA complaint reflects it was done so for 

distribution “on Indian land in the USA.” Id. ¶22. 

 
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the one with whom HCI was affiliated.9 Thus, the assertions made in connection 

with the NAFTA complaint are not evidence of a co-venture to market Seneca 

cigarettes for the South Dakota market. For that reason, this case is unlike Barone

because there is no evidence that Grand River poured Seneca cigarettes into a 

regional distribution system under circumstances where one should have known 

that the product would reach the forum state. See Barone, 25 F3d at 615 (noting, 

“in this case the defendant poured its products into regional distributors throughout 

the country,” one of which served the Midwest market). This case is also unlike 

Clune because there was no showing of a parent-subsidiary and interlocking board 

of director’s relationship between the principals of Grand River and NTD/NWS. See 

Clune, 233 F3d at 544 (noting that members of the parent’s board of directors also 

served as directors of its marketing subsidiary and the subsidiary’s activities were 

intended to generate profits for the parent corporation). 

[¶29.] The State, however, also argues that the 1999 Agreement is no 

different than those considered in two Ohio cases: State ex rel. Attorney General v. 

Grand Tobacco, 171 OhioApp 3d 551, 871 NE2d 1255 (2007) (concluding that 

personal jurisdiction existed considering the fact that the distributor’s CEO 

introduced the defendant manufacturer’s cigarettes into the forum state and held 

himself out as a representative of the defendant manufacturing company); and 

State v. Bulgartabac Holding Group, 2007 WL 4395514 (OhioCtApp 2007) 

(concluding that personal jurisdiction existed based upon the volume of sales, the 

 

9. The Nebraska relationship did not include Arthur Montour, Jr., and it was 

also limited to a manufacturing facility.
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manufacturer’s relationship with a distributor, evidence of the manufacturer’s 

involvement in the packaging of the products, and the manufacturer’s compliance 

with federal law). The State further argues that Grand River’s activities are similar 

to those considered in Sumatra Tobacco, supra. We disagree. 

[¶30.] Unlike Grand Tobacco, the State presented no evidence that Arthur 

Montour, Jr., or NTD/NWS did anything on behalf of Grand River to assist in its 

manufacture of cigarettes for the United States, let alone the South Dakota 

market.10 On the contrary, the Agreement reflects that Montour’s companies were 

acting independently on their own behalf in the distribution of cigarettes. 

Furthermore, unlike Sumatra Tobacco11 and Bulgartabac, NTD/NWS owned the 

proprietary rights to Seneca cigarettes and it merely granted Grand River a limited 

 

10. Unlike the instant case, Grand Tobacco involved a distributor that was 

acting on behalf of the manufacturer in several relevant respects: 

The State submitted evidence of a close, ongoing relationship between 

Grand Tobacco and its distributor, ITP, that went beyond that of a 

typical manufacturer and importer/distributor, including evidence 

that ITP’s Chief Executive Officer, Jeffrey Uvezian, acted at various 

times on behalf of Grand Tobacco. More specifically, there was 

evidence that Uvezian, as “Managing Member, International Tobacco 

Partners,” certified ingredients lists submitted by Grand Tobacco to 

the Center for Disease Control and Prevention. On the website of the 

United States Patent and Trademark Office, Uvezian is listed as the 

“Domestic Representative” for Grand Tobacco. Further, ITP’s website, 

which listed “Bonita,” “Tough Guy,” and “Garni” brand cigarettes, 

specifically noted its “affiliation with Grand Tobacco.” 

171 OhioApp3d at 558-59, 871 NE2d at 1261. 

11. As indicated supra ¶25, Sumatra (the manufacturer) admitted that it owned

the United States trademark for the particular brand, and also that Sumatra 

controlled the packaging of the cigarettes for the United States market. 

Those pivotal facts are not present in this case. 
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license to manufacture cigarettes for NTD/NWS in accordance with the latters’ 

direction as to blending, quality, packaging, and quantities for NTD’s/NWS’s 

marketing enterprise. Thus, NTD/NWS had exclusive control over the packaging 

for the markets it desired and it was distributing as an independent corporate 

importer/distributor of cigarettes. Finally, unlike this case, in Bulgartabac the trial 

court did not make an evidentiary determination whether the plaintiff met its 

burden of proving personal jurisdiction. That case was appealed before an 

evidentiary hearing on the merits of personal jurisdiction, and therefore, the Court 

of Appeal’s language only reflected that the evidence, considered “in a light most 

favorable to finding jurisdiction,” established a prima facie case sufficient to shift 

the burden to the defendant. Bulgartabac, 2007 WL 4395514, ¶18. In this case, the 

matter was tried on the jurisdictional merits, and the circuit court’s factual findings 

on the jurisdictional merits are adverse to the State. 

[¶31.] In sum, even if there were no pure, corporate separation between 

Montour and Grand River’s principals, the State’s argument does not account for 

the fact that the State has failed to prove that Grand River was involved in the 

distribution system by which Seneca cigarettes were expected to be sold in South 

Dakota. Grand River’s activities were limited to those of a licensee for NTD/NWS. 

Further, Grand River’s activities ended when the cigarettes were shipped FOB 

Ohsweken per NTD’s/NWS’s instructions to a free trade zone in New York. Finally, 

the State did not prove that Grand River knew or should have known that 

NTD/NWS was selling to HCI, and that HCI, who the State concedes “primarily 

s[old] tobacco products to tribally owned entities,” would sell to a retailer located off 
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the reservation in South Dakota. Therefore, we conclude that the State’s 

characterization of Grand River’s relations with Montour as a “co-venture” directed 

at South Dakota is not a correct description of the relationship of these parties. 

Rather, the businesses involved were the type of “fully independent corporations 

whose relations with each other [were] contractual only.” World-Wide Volkswagen, 

444 US at 289, 100 SCt at 563, 62 LEd2d 490. Because the State further failed to 

prove that Grand River’s activities were, for the 2000-2002 years at least, expected 

to reach the South Dakota market, Grand River’s relationship with Montour and 

NTD/NWS fails to establish purposeful availment under Clune, Barone, Sumatra 

Tobacco, Grand Tobacco, and Bulgartabac.

2. Grand River’s compliance with federal and Nebraska law in 

manufacturing and delivering Seneca cigarettes. 

[¶32.] Citing Bulgartabac, the State argues that Grand River designed its 

product for South Dakota by complying with federal and Nebraska requirements for 

the sale of cigarettes.12 This argument, however, again fails to recognize that those 

were not the acts of Grand River: they were the acts of independent third parties. 

 

12. Under the State’s argument, a manufacturer who designed its product to 

comply with federal and Nebraska requirements would -- by that act alone -- 

be designing its product for sale in each of the fifty states. The State offers 

Sumatra Tobacco, in support of this assertion. 379 SC 81, 666 SE2d 218. 

That case is, however, substantially different because, after a review of six 

factors, see supra ¶25, the court specifically concluded, “Regardless of how the 

cigarettes arrived in South Carolina,” Sumatra’s actions indicated “that it 

purposefully availed itself of conducting business in all 50 states, including 

South Carolina.” Id. 379 SC 81, *4, 666 SE2d at 223 (emphasis added). 

There is nothing in this record suggesting that Grand River purposefully 

availed itself of conducting business in all fifty states. 
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[¶33.] It must be emphasized that under the Agreement, Grand River and 

NTD/NWS were to “respectively comply with all applicable laws [requirements] of 

Canada and the United States regarding the exportation and importation” of 

Seneca cigarettes. Agreement, ¶3 (emphasis added). Thus, for example, although 

Grand River was responsible for paying all taxes, charges, fees, duties and tariffs 

arising out of the export from Canada, NTD/NWS was responsible for those matters 

relating to importation into the United States. Id. And more importantly, under 

the Agreement, NTD/NWS -- not Grand River -- was the party responsible for the 

United States and Nebraska requirements because NTD/NWS alone dictated the 

relevant manufacturing specifications, like blending, quality, and packaging. 

Therefore, in this case, Grand River cannot be charged with those activities. The 

State’s argument finally fails to recognize it was only after the cigarettes left Grand 

River’s and NTD’s/NWS’s control that HCI -- which the State concedes is an 

independent party -- met the requirements for a South Dakota sale by stamping the 

cigarettes for sale in South Dakota. 

[¶34.] Because NTD/NWS and HCI alone were responsible for the activities 

necessary to meet United States, Nebraska and South Dakota requirements, their 

independent acts cannot be attributed to Grand River. See Burger King, 471 US at 

475, 105 SCt at 2183, 85 LEd2d 528 (noting that the purposeful availment

requirement “ensures that a defendant will not be haled into a jurisdiction solely as 

a result of . . . the ‘unilateral activity of another party or a third person’”) (citing 

Helicopteros Nacionales de Colombia, S.A. v. Hall, 466 US 408, 417, 104 SCt 1868, 

1873, 80 LEd2d 404 (1984)). See also Frankenfeld, 2005 SD 55, ¶12, 697 NW2d at 
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382 (noting that “it is essential in each case that there be some act by which the 

defendant purposefully avails itself of the privilege of conducting activities within 

the forum state, thus invoking the benefits and protections of its laws”) (quoting 

Denckla, 357 US at 253, 78 SCt at 1240, 2 LEd2d 1283) (emphasis added). 

3. NTD’s/NWS’s distribution of Seneca cigarettes to HCI for resale, 

and HCI’s licensing and distribution of Seneca cigarettes in South 

Dakota for sale to consumers. 

[¶35.] This factor also relates to the unilateral activities of independent third 

parties, not Grand River. NTD/NWS, without direction or control of Grand River, 

sold the cigarettes to HCI, a second-level, independent wholesaler. HCI then 

unilaterally stamped the cigarettes so HCI could sell them in South Dakota. HCI 

subsequently sold the cigarettes to Yankton Sioux tribal businesses for sale to an 

ultimate consumer. Thus, the cigarettes passed through a number of independent 

wholesalers including HCI, and the State failed to prove that Grand River had 

knowledge, direction or control of HCI’s unilateral activities for the three years at 

issue. 

[¶36.] The State, however, points out that as of August 2001, it notified 

Grand River by letter that Seneca cigarettes had been sold in South Dakota by 

HCI. That letter did not, however, indicate that HCI had acquired the cigarettes 

through the only party with whom Grand River had a relationship; i.e., NTD/NWS. 

According to Grand River’s evidence, it did not acquire such knowledge until 2003, 

in the course of related litigation involving the State’s attempts to enforce the 

Escrow Statutes. Because the State has not proven that Grand River was aware 

that HCI was selling cigarettes in South Dakota in 2000-2002, through the 
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NTD/NWS distribution network with which Grand River was associated, there was 

insufficient knowledge to meet the expectation standard: Grand River was not 

“aware of the distribution system’s operation[.]” See Asahi, 480 US at 121, 107 

SCT at 1037, 94 LEd2d 92 (Brennan, J., concurring in part and concurring in the 

judgment). Under these circumstances, HCI’s unilateral activities directed at this 

State in 2000-2002, do not establish Grand River’s purposeful availment to the 

South Dakota market. See World-Wide Volkswagen, 444 US at 298, 100 SCt at 

559, 62 LEd2d 490; Frankenfeld, 2005 SD 55, ¶12, 697 NW2d at 382. 

4. The State’s action against Grand River as it relates to the sales of 

cigarettes within the State of South Dakota.

[¶37.] The State finally argues that personal jurisdiction is conferred by 

SDCL 10-50B-7,13 a provision that requires compliance with the Escrow Statutes. 

The fact that the State brought an action against Grand River for cigarettes “sold in 

South Dakota” under this statute, however, only begs the question. The question is 

 

13. This statute provides in relevant part: 

Any tobacco product manufacturer selling cigarettes to consumers 

within the state, on or after July 1, 1999, whether directly or through a 

distributor, retailer, or similar intermediary or intermediaries, shall do 

one of the following: 

(1) Become a participating manufacturer . . . of the Master 

Settlement Agreement, and generally perform its financial 

obligations under the Master Settlement Agreement; or 

(2) Place into a qualified escrow fund by April fifteenth of the 

year following the year in question the following amounts, as 

such amounts are adjusted for inflation: 

(b) For 2000: $.0104712 per unit sold; 

(c) For each of 2001 and 2002: $.0136125 per unit sold[.] 

SDCL 10-50B-7. 
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whether an action under this statute is permitted by due process. The mere 

existence of the statute and the fact of this action are not evidence of purposeful 

availment by Grand River to the South Dakota market. 

Conclusion 

[¶38.] The State’s evidence does not establish purposeful availment under 

World-Wide Volkswagen. Grand River: did not advertise or solicit business in 

South Dakota; had no offices, employees, agents, or personnel in South Dakota; did 

not design its products to appeal to the South Dakota market or to comply with the 

laws specific to South Dakota; did not establish channels for advising South Dakota 

customers; and did not utilize a distributor who had agreed to serve as a sales agent 

in South Dakota. Further, the State did not establish that Grand River had any 

expectation that its limited license to manufacture cigarettes for NTD/NWS was, for 

the years at issue, directing itself to the South Dakota market. In sum, Grand 

River’s only connection with South Dakota was that, as a Canadian cigarette 

manufacturer, it manufactured cigarettes under a limited license for an 

independent New York importer/distributor. That importer/distributor 

subsequently and unilaterally sold the cigarettes to an independent Nebraska 

distributor, who unilaterally sold those cigarettes to South Dakota Native 

businesses that ultimately sold the cigarettes in South Dakota. Paraphrasing 

World-Wide Volkswagen with the facts of this case: “It is foreseeable that the 

purchasers of [cigarettes manufactured] by [Grand River] may take them to [South 

Dakota]. But the mere ‘unilateral activity of those who claim some relationship 

with [Grand River ] cannot satisfy the requirement of contact with the forum 
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State.’” 444 US at 298, 100 SCt at 567, 62 LEd2d 490 (quoting Denckla, 357 US at 

253, 78 SCt at 1239-40, 2LEd2d 1283). Absent a more significant relationship with 

or knowledge of this distribution chain suggesting that Grand River expected or 

should have expected its manufacturing activities to be directed at the South 

Dakota market during the years 2000-2002, the State failed to demonstrate that 

Grand River purposefully availed itself of the laws and benefits of South Dakota 

under the “expectation” standard.

[¶39.] GILBERTSON, Chief Justice, and KONENKAMP and MEIERHENRY, 

Justices, and GIENAPP, Circuit Court Judge, concur. 

[¶40.] GIENAPP, Circuit Court Judge sitting for SABERS, Justice, 

disqualified.