Opinion ID: 1867006
Heading Depth: 1
Heading Rank: 2

Heading: The Stream-of-Commerce Theory of Minimum Contacts

Text: This court has recognized that minimum contacts may be indirect, under the stream-of-commerce theory. In Rostad v. On-Deck, Inc., 372 N.W.2d 717 (Minn. 1985), we considered the personal jurisdiction over a New Jersey manufacturer of a product that caused injury to a Minnesota resident. Although the manufacturer had no office in Minnesota, owned no property here, had no agent to represent it here and was not licensed to do business here, we held that the manufacturer was subject to jurisdiction in Minnesota because the manufacturer placed its products in the stream of commerce through its contacts with distributors who sold the products throughout the United States and within Minnesota. Id. at 722. We determined that the manufacturer's contacts, though indirect, were sufficient and purposeful, stating: [The manufacturer's] distribution contacts and marketing efforts were calculated attempts to create a national market for [its] product, a market which specifically includes Minnesota. Id. The decision in Rostad relied upon the stream-of-commerce theory enunciated by the United States Supreme Court in World-Wide Volkswagen Corp. v. Woodson , where the Court stated: When a corporation purposefully avails itself of the privilege of conducting activities within the forum State, it has clear notice that it is subject to suit there, and can act to alleviate the risk of burdensome litigation by procuring insurance, passing the expected costs on to customers, or, if the risks are too great, severing its connection with the State. Hence if the sale of a product of a manufacturer or distributor such as Audi or Volkswagen is not simply an isolated occurrence, but arises from the efforts of the manufacturer or distributor to serve, directly or indirectly, the market for its product in other States, it is not unreasonable to subject it to suit in one of those States if its allegedly defective merchandise has there been the source of injury to its owner or to others. 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. 444 U.S. 286, 297-98, 100 S.Ct. 559, 62 L.Ed.2d 490 (1980) (citation omitted). [4] Two years after our decision in Rostad, the United States Supreme Court decided Asahi. The facts of Asahi are strikingly similar to those of this case. Asahi involved an indemnification action brought in California by Cheng Shin, a Taiwanese tire manufacturer, against Asahi, the Japanese tire-valve manufacturer that had sold an allegedly defective component part to Cheng Shin. Asahi, 480 U.S. at 106, 107 S.Ct. 1026. The Court unanimously held that the exercise of jurisdiction over Asahi would offend traditional notions of fair play and substantial justice given the burden on the Japanese defendant and the minimal interest of California in the indemnification dispute. Id. The Asahi Court split four-to-four on the initial question whether introducing products into the stream of commerce satisfies the due process requirement of minimum contacts in a product liability case. [5] Justice O'Connor, joined by Chief Justice Rehnquist and Justices Powell and Scalia, set forth the most restrictive test of whether a nonresident party has sufficient contacts with a forum to justify the assertion of personal jurisdiction. Justice O'Connor concluded that [t]he placement of a product into the stream of commerce, without more, is not an act of the defendant purposefully directed toward the forum State, even if the defendant is aware that the stream of commerce may or will sweep the product into the forum State. Id. at 112, 107 S.Ct. 1026 (emphasis added). Justice O'Connor offered the following examples of additional conduct that would show purposeful direction: 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. Id. Justice Brennan, joined by Justices White, Marshall and Blackmun, rejected the something more test and concluded that due process is afforded as long as the defendant knew its product was being marketed in the forum state. Id. at 116-17, 107 S.Ct. 1026 (Brennan, J., concurring in part and in judgment). Justice Brennan's approach was largely a rearticulation of the dicta in World-Wide Volkswagen, which stated that when a manufacturer or distributor attempts to serve a market directly or indirectly   , it is not unreasonable to subject it to suit in [that market] if its allegedly defective merchandise has there been the source of injury to its owner or to others. 444 U.S. at 297, 100 S.Ct. 559. Because the Asahi Court failed to reach a majority on the proper test to apply when determining minimum contacts, it was error for the court of appeals to rely on Justice O'Connor's something more approach in this case. [6] We conclude that the first three factors of our five-factor test (which trace their roots to the landmark decision of International Shoe and its progeny) continue to provide the proper framework for determining whether a foreign defendant has sufficient minimum contacts with Minnesota to support an exercise of personal jurisdiction.