Knox v. MetalForming, Inc.
Knox v. MetalForming, Inc.
Opinion of the Court
O'TOOLE, D.J.
The plaintiff, Stephen D. Knox, injured his hand when his foot inadvertently activated a switch on an allegedly defective metal folding machine. The machine was manufactured by the defendant, Schechtl Maschinenbau GmbH, and distributed by co-defendant MetalForming, Inc. Knox and his wife Jean assert claims against both defendants for negligence, breach of warranty, loss of consortium, and violation of Massachusetts General Laws Chapter 93A. MetalForming filed crossclaims against Schechtl for indemnification, contribution, and breach of contract. Pending before the Court is Schechtl's motion under Federal Rule of Civil Procedure 12(b)(2) to dismiss the claims against it for lack of personal jurisdiction. Both Knox and MetalForming have opposed Schechtl's motion to dismiss.
I. Legal Standard
The plaintiff bears the burden of establishing that a court has personal jurisdiction over a defendant. See, e.g., Mass. Sch. of Law at Andover, Inc. v. Am. Bar Ass'n,
II. Facts Considered
MetalForming, a Georgia-based company, and Schechtl, a German company, entered into a Distributor Agreement in May 1998. (Mem. of Law in Supp. of Def. Schechtl Maschinenbau GMBH's Mot. to Dismiss, Ex. A ¶ 5 (dkt. no. 22-1); see
The procedure the parties followed with respect to the sale of any machinery was outlined in the Agreement. After locating a prospective purchaser of a Schechtl product, MetalForming would send a purchase order to Schechtl in Germany. If Schechtl accepted the order, it would issue a written order confirmation. Under the Agreement, MetalForming would take ownership of the machine in Germany. (Id. at 3.) MetalForming was responsible for the installation of the machine at the purchaser's site, as well as the training of the purchaser's personnel in the proper use of the machine. MetalForming also agreed to maintain "a spare part service" for the machine. (Id. at 6.) MetalForming further undertook "to provide any and all warranty services for the Products at its expense." (Id. at 5.)
MetalForming was responsible for marketing and promoting the sale of Schechtl products in the Contract Territory, and to facilitate those activities it received ongoing information "concerning products, markets, competition, [and] prices" from Schechtl. (Id. at 2.) Some sample marketing materials submitted by MetalForming appear to have been prepared by Schechtl. In the sample provided both companies' logos are displayed on various pages, but the contact information provided is for MetalForming. (See Opp'n of Def. MetalForming, Inc. to Co-Def. Schechtl Maschinenbau GMBH's Mot. to Dismiss, Ex. 8 at 1-61 (dkt. no. 30-3).)
Between 2000 and September 2017, MetalForming sold 2,639 Schechtl sheet metal machines throughout the United States at a value of just over $97 million. In Massachusetts specifically, MetalForming sold 45 Schechtl machines and 234 Schechtl parts at a value of nearly $1.5 million between July 2001 and September 2017. (Id. Ex. 6 ¶¶ 16-17 (dkt. no. 30-1).)
Schechtl sold the particular machine at issue to MetalForming pursuant to a purchase order dated April 20, 2001. In August 2001, MetalForming sold and delivered the machine to Cape Cod Copper, Knox's employer in Massachusetts. (Id. ¶ 15.) The respective purchase orders are in the record. They indicate that MetalForming purchased the machine from Schechtl for $25,830, (id. Ex. 9 (dkt. no. 30-3) ), and sold it to Cape Cod Copper for $38,950, (Opp'n of Pls., Stephen D. Knox *183and Jean Knox, to Def., Schechtl Maschinenbau GMBH's Mot. to Dismiss, Ex. 4 (dkt. no. 29-1) ).
Schechtl has never owned or leased real or personal property in the Commonwealth. As noted above, Schechtl does not itself directly solicit business from customers in Massachusetts. It has never employed any agents or representatives in Massachusetts, and has never maintained offices, telephone listings, or bank accounts in Massachusetts. (See Schechtl's Mem. of Law, Ex. A.)
III. Discussion
Personal jurisdiction over a defendant may be exercised if the forum State has a long-arm statute that purports to grant jurisdiction over the defendant and if the exercise of jurisdiction pursuant to that statute does not violate the Due Process Clause of the Fourteenth Amendment. See, e.g., Cossart v. United Excel Corp.,
A. Massachusetts Long-Arm Statute
The Massachusetts long-arm statute permits the exercise of jurisdiction over a non-resident defendant in several enumerated circumstances. See Mass. Gen. Laws ch. 223A, § 3. Section 3(d) authorizes personal jurisdiction over a person who "cause[s] tortious injury in [the] commonwealth by an act or omission outside [the] commonwealth if he regularly does or solicits business, or engages in any other persistent course of conduct, or derives substantial revenue from goods used or consumed or services rendered, in [the] commonwealth."
Here, the requirements of subsection (d) have easily been satisfied. Knox alleges that Schechtl's product, although manufactured in Germany, caused tortious injury to him in Massachusetts. At least in the circumstances of this case, revenues from indirect sales through an independent intermediary like MetalForming count as having been "derived" from the sale of machines in Massachusetts. See Heins v. Wilhelm Loh Wetzlar Optical Mach. GmbH & Co. KG.,
B. Due Process
The exercise of in personam jurisdiction over a non-resident defendant must be consistent with the requirements of the Due Process Clause of the Fourteenth Amendment. In brief, the defendant must "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.' " Int'l Shoe Co. v. Washington,
A foreign defendant's contacts with the forum State "must represent a purposeful availment of the privilege of conducting activities in the forum state, thereby invoking the benefits and protections of that state's laws and making the defendant's involuntary presence before the state's courts foreseeable." United Elec., Radio & Mach. Workers,
The plaintiffs here have failed to establish Schechtl's purposeful availment of the privilege of conducting activities in Massachusetts. The facts in J. McIntyre pertinent to the question of personal jurisdiction are very similar to the facts of this case. J. McIntyre Machinery, Ltd., a manufacturer in England, sold a machine to an Ohio-based company that served as the exclusive, independent distributor of the manufacturer's products in the United States. The distributor sold one of the manufacturer's machines to a company in New Jersey. The plaintiff in the case, an employee of the New Jersey company, was injured using the machine. Apart from its relationship with the distributor, the English manufacturer had few contacts with the United States, and, crucially, none with New Jersey except for the presence of a small number of its machines in that State.
In the present case, the pattern of relationships is the same; a European manufacturer sold a machine to an exclusive, independent distributor in the United States, which in turn sold it to an end user, an employee of which was injured using the machine. The only potentially significant factual difference between the two cases is that whereas in J. McIntyre the distributor had sold very few machines in New Jersey, in this case the distributor has sold many Schechtl machines over the years to customers in Massachusetts, and the revenue "derived" by Schechtl from those sales was "substantial" for state law purposes. If that factual difference between the two cases is significant for the constitutional analysis, then J. McIntyre may be distinguishable. On the other hand, if the factual difference is not significant for the constitutional analysis, then the outcome in J. McIntyre controls the outcome here.
The volume of MetalForming's sales of Schechtl machines in Massachusetts and the indirect revenue to Schechtl from those sales are not significant factors in *185assessing "purposeful availment" because those sales were solicited not by the nonresident manufacturer but by the independent U.S. distributor. In this case as in J. McIntyre, under the parties' Agreement it was the distributor, and not the manufacturer, that controlled where machines would be sold in the United States and thus made the important decision whether to avail itself of the opportunity to do business in any particular State. There is no question that Schechtl intended to sell its machines through MetalForming to ultimate buyers located in the United States generally. But, as Justice Breyer pointed out in his concurrence in J. McIntyre, knowing that its products might be sold in a particular State through a national distributor is not, standing alone, enough to justify the exercise of jurisdiction over the manufacturer by that State.
The defendant's transmission of goods permits the exercise of jurisdiction only where the defendant can be said to have targeted the forum; as a general rule, it is not enough that the defendant might have predicted that its goods will reach the forum State.
"The main ingredients of purposeful availment are voluntariness and foreseeability." Baskin-Robbins,
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.
Hanson v. Denckla,
The foreseeability necessary for the assertion of jurisdiction is not just the foreseeability that another party might-or even likely will-sell the nonresident's products in a particular State, but importantly is rather the foreseeability to the defendant that its own actions may provide *186a valid basis-the necessary "minimum contacts"-to subject it to the forum's laws and judicial authority.
[T]he foreseeability that is critical to due process analysis is not the mere likelihood that a product will find its way into the forum State. Rather, it is that the defendant's conduct and connection with the forum State are such that he should reasonably anticipate being haled into court there.
World-Wide Volkswagen Corp. v. Woodson,
A nonresident manufacturer that sells through a national distributor might voluntarily and foreseeably subject itself to the jurisdiction of a particular State if there were some "plus" factor(s) that signaled an intention on the part of the manufacturer that the distributor should target buyers within that State. See J. McIntyre,
No Massachusetts-specific "plus" factor has been identified in this case. Under the parties' Agreement, MetalForming promised generally "to exert its best efforts to build brand recognition in the Contract Territory for the Company's products and to distribute the Company's products within the Contract Territory and to further the sale of the Company's Products [sic]." (Distrib. Agreement 2.) The Contract Territory was North America. There was no subordinate territory designated for special attention, and certainly not Massachusetts. As noted above, the Agreement provided that MetalForming would "distribute the Products as an independent distributor in its own name and on its own account." (Id. at 1.) By that provision, the parties essentially agreed that Schechtl would not direct MetalForming's activities. There is no evidence in the record that it did direct those activities.
Purposeful availment is not simply transitive. That is, while Schechtl may be subject to personal jurisdiction in Georgia because of its contractual relationship with MetalForming,
It may be tempting to think that because Schechtl has derived, albeit indirectly, "substantial revenue" from MetalForming's sales of Schechtl equipment to Massachusetts customers, that benefit itself establishes a sufficient relationship with Massachusetts to warrant subjecting *187Schechtl to the jurisdiction of Massachusetts courts. It is true that derived revenues may be an appropriate factor in resolving the constitutional question if the manner of derivation itself supports a conclusion of purposeful availment, which is not the case here.
The guiding precedents are quite clear about this: For there to have been "minimum contacts" with the forum sufficient to support the exercise of personal jurisdiction over a nonresident of the forum State, there must have been (a) contacts (b) as a result of the nonresident's purposeful availment of contact with the forum. From its origin, the test for "minimum contacts" sufficient to justify the exercise of jurisdiction over a nonresident defendant has always been a relational one. See Int'l Shoe,
C. Conclusion
The plaintiffs have failed to demonstrate that Schechtl maintained the required "minimum contacts" with Massachusetts to justify subjecting it to personal jurisdiction in this forum. Although § 3(d) of the Massachusetts long-arm statute would authorize it, the exercise of jurisdiction would not comport with due process. Schechtl's products entered the stream of commerce and found their way into Massachusetts via MetalForming's transaction of business here, but the record fails to establish that Schechtl purposefully availed itself of the privilege of conducting business in the State.
IV. Jurisdictional Discovery
The plaintiffs and MetalForming have both requested the opportunity to conduct jurisdictional discovery. A plaintiff who files suit against a nonresident defendant and who makes a "colorable case for the existence of ... jurisdiction" may be entitled to jurisdictional discovery. Negrón-Torres v. Verizon Commc'ns, Inc.,
*188V. Conclusion
For the aforementioned reasons, Schechtl's Motion to Dismiss pursuant to Federal Rule of Civil Procedure 12(b)(2) (dkt. no. 21) is GRANTED.
It is SO ORDERED.
The record is unclear, but no more than four and perhaps only one machine had been sold in New Jersey.
By a forum-selection clause in their Agreement, the parties provided that the "court of jurisdiction for all disputes that may arise in connection with this Agreement shall be Traunstein/Germany." (Id. at 8.)
Schechtl has also moved to dismiss MetalForming's crossclaims for failure to state a claim under Federal Rule of Civil Procedure 12(b)(6) on the basis of the forum-selection and choice-of-law provision in the Agreement. In light of its conclusion regarding personal jurisdiction, the Court does not reach that motion.
Reference
- Full Case Name
- Stephen D. KNOX and Jean Knox v. METALFORMING, INC., and Schechtl Maschinenbau GmbH, and MetalForming, Inc., Third-Party v. Schechtl Maschinenbau GmbH, Third-Party
- Cited By
- 2 cases
- Status
- Published