Buy something online and you may not have any recourse if it breaks or you are hurt. Sell stuff without a plan to sell in a specific state may prevent you from being sued in that state.

Personal jurisdiction is the term given to whether or not a defendant can be sued in a particular location. What that means is the legal issue is whether the court has the legal right to have the defendant brought before it. Another way of defining it is whether or not the defendant has done enough to have the minimum contacts with the state or the people of the state to be brought into the state for a lawsuit.

Boyce v. Cycle Spectrum, Inc., et al., 2014 U.S. Dist. LEXIS 96545

State: New York, US District Court for the Eastern District of New York

Plaintiff: Timothy Boyce and Courtney Boyce

Defendant: HL Corp is the party in the motion. The following defendants were sued: Cycle Spectrum, Inc.; AZ Velo Imports, Inc.; CS Velo AZ Inc.; AZ Desert Velo, Inc.; CS Bike, Inc.; CS Velo HT, Inc.; Velo Bdbi Support, Inc.; Cycle Support, Inc.; Spratt Cycle Support, Inc.; Windsor America Corporation; and (USA)

Plaintiff Claims: Probably negligence but it does not say

Defendant Defenses: Jurisdiction, whether the court has the legal authority to compel the defendant HL Corp to a trial in New York

Holding: for the defendant

Year: 2014

This is a mixed emotion’s case, but it is also an “I told you so” case. The plaintiff purchased a bicycle online. While riding the bike the handlebars broke injuring the plaintiff. The defendant HL Corp manufactures and sells bicycle parts, and the plaintiff attempted to sue the defendant.

The defendant, however, did not sell parts in New York or to someone knowing that they would be sold in New York. The defendant HL filed a motion to dismiss for lack of personal jurisdiction.

Analysis: making sense of the law based on these facts.

Whether a court has jurisdiction over a defendant is a two-part test. The first is whether the law of the state, the long-arm statute, allows the defendant to be brought to a local court and how. The second is whether bringing the defendant to a local court would violate the defendant’s 14^th Amendment of the US Constitution.

Under New York Law jurisdiction is established when the defendant “…”expects or should reasonably expect [its actions] to have consequences in the state and derives substantial revenue from interstate or international commerce.” The test for this has five steps.

(1) the defendant’s tortious act was committed outside New York, (2) the cause of action arose from that act, (3) the tortious act caused an injury to a person or property in New York, (4) the defendant expected or should reasonably have expected that his or her action would have consequences in New York, and (5) the defendant derives substantial revenue from interstate or international commerce.

The fourth element was at issue here, “the defendant expected or should reasonably have expected that his or her action would have consequences in New York”

The court found that bicycles are a local product, not like cars, which can be sold in one state and the seller can reasonably expect to show up in another state. Therefore, there was no reasonable expectation that a product sold for a bicycle in one state would show up in another state. Nor did the defendant have distribution or sales agreements with its customers who would create an expectation that the defendants’ products would show up in New York.

Consequently, it was not foreseeable or reasonable under New York law that the defendants’ products would show up in New York.

The allegations and conceivable facts are insufficient to establish specific jurisdiction under New York law. (“The ‘reasonable expectation’ test . . . is not satisfied by ‘[t]he mere likelihood that a product will find its way into the forum state . . . .”

The next issue was whether or not by allowing the defendant to be sued in New York it would violate the defendant’s Fourteenth Amendment. The Fourteenth Amendment is:

All persons born or naturalized in the United States, and subject to the jurisdiction thereof, are citizens of the United States and of the state wherein they reside. No state shall make or enforce any law which shall abridge the privileges or immunities of citizens of the United States; nor shall any state deprive any person of life, liberty, or property, without due process of law; nor deny to any person within its jurisdiction the equal protection of the laws.

Section 2.

Representatives shall be apportioned among the several states according to their respective numbers, counting the whole number of persons in each state, excluding Indians not taxed. But when the right to vote at any election for the choice of electors for President and Vice President of the United States, Representatives in Congress, the executive and judicial officers of a state, or the members of the legislature thereof, is denied to any of the male inhabitants of such state, being twenty-one years of age, and citizens of the United States, or in any way abridged, except for participation in rebellion, or other crime, the basis of representation therein shall be reduced in the proportion which the number of such male citizens shall bear to the whole number of male citizens twenty-one years of age in such state.

Section 3.

No person shall be a Senator or Representative in Congress, or elector of President and Vice President, or hold any office, civil or military, under the United States, or under any state, who, having previously taken an oath, as a member of Congress, or as an officer of the United States, or as a member of any state legislature, or as an executive or judicial officer of any state, to support the Constitution of the United States, shall have engaged in insurrection or rebellion against the same, or given aid or comfort to the enemies thereof. But Congress may by a vote of two-thirds of each House, remove such disability.

Section 4.

The validity of the public debt of the United States, authorized by law, including debts incurred for payment of pensions and bounties for services in suppressing insurrection or rebellion, shall not be questioned. But neither the United States nor any state shall assume or pay any debt or obligation incurred in aid of insurrection or rebellion against the United States, or any claim for the loss or emancipation of any slave; but all such debts, obligations and claims shall be held illegal and void.

Section 5.

The Congress shall have power to enforce, by appropriate legislation, the provisions of this article.

The Fourteenth Amendment is usually heard in modern society when looking at voting laws and laws that may treat a member of another state differently than the residents of a state. More importantly, it is the civil rights amendment.

The jurisdiction test under the Fourteenth Amendment has been defined as:

In a recent opinion, a plurality of the Supreme Court addressed this argument: “The principal inquiry in cases of this sort is whether the defendant’s activities manifest an intention to submit to the power of a sovereign. . . . [A]s a general rule, it is not enough that the defendant might have predicted that its goods will reach the forum State.”

The Fourteenth Amendment protects defendants “without meaningful ties to the forum state from being subjected to binding judgments within in its jurisdiction” This is a two-part test, whether the defendant has (1) minimum contacts and (2) whether this analysis is reasonable. The test for minimum contacts is whether the defendant has sufficient contacts with the state to “justify the court’s exercise of personal jurisdiction.”

The reasonableness test is:

..whether the assertion of personal jurisdiction comports with ‘traditional notions of fair play and substantial justice’–that is, whether it is reasonable to exercise personal jurisdiction under the circumstances of the particular case.”

Again, the court found that the requirements for the defendant to be sued in New York in this case would violate the defendant’s Constitutional rights under the Fourteenth Amendment.

So Now What?

It is extremely difficult to explain, “minimum contacts” and how someone in one state can be sued in another. It is a nightmare in law school and one of the basic hurdles for first-year law students. students. Understand minimum contacts and continue moving down the path to being a lawyer.

Here is what you should come away with. As much as a manufacturer wants to sell products, doing so may cost you more than it is worth. Investigate the liability of selling in a state by looking at how easy it is to be drawn into a state court there, the number of products you have to sell there to justify the risk and whether your products are already there.

From a consumer standpoint, remember no matter how good the deal, if it goes bad, you just can’t walk down the street and exchange the broken product for a new one.  Not much comes from China, Taiwan or Vietnam with a warranty. Any warranty is going to come from the US business that brings it in. If you bring it in, you are supplying the warranty.

No insurance follows most products from the foreign manufacturer as exemplified here. Consequently, if you are injured, you better have good health insurance because you won’t be recovering from the manufacturer.  Make sure the money you save, pays for the health, life and disability insurance you may need.

What do you think? Leave a comment.

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By Recreation Law       Rec-law@recreation-law.com              James H. Moss

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