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 14th 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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Boyce v. Cycle Spectrum, Inc., et al., 2014 U.S. Dist. LEXIS 96545

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

Timothy Boyce and Courtney Boyce, Plaintiffs, – against – 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 HL Corp (USA), Defendants.

14-CV-1163

UNITED STATES DISTRICT COURT FOR THE EASTERN DISTRICT OF NEW YORK

2014 U.S. Dist. LEXIS 96545

July 14, 2014, Decided

July 15, 2014, Filed

COUNSEL: [*1] For Courtney Boyce, Timothy Boyce, Plaintiffs, Counter Defendant: Gary A. Zucker, LEAD ATTORNEY, Zucker & Bennett, P.C, Brooklyn, NY.

For Velo BDBI Suport, Inc., Spratt Cycle Support, Inc., Defendant, Cross Claimants, Cross Defendants: Angelantonio Bianchi, LEAD ATTORNEY, Cohen Kuhn & Associates, New York, NY.

For HL Corp (USA), Defendant, Cross Defendant, Cross Defendant: Cynthia K. Messemer, George S. Hodges, Hodges Walsh Messemer & Moroknek, LLP, White Plains, NY; Paul E. Svensson, Hodges, Walsh & Slater, LLP, White Plains, NY.

For Advanced Sports, Inc., Defendant, Cross Defendant, Cross Claimant: Richard H. Bakalor, LEAD ATTORNEY, Quirk & Bakalor, New York, NY.

JUDGES: Jack B. Weinstein, Senior United States District Judge.

OPINION BY: Jack B. Weinstein

OPINION

MEMORANDUM, ORDER, & JUDGMENT

Jack B. Weinstein, Senior United States District Judge:

Contents

I. Introduction
II. Facts
III. Law
A. Personal Jurisdiction Generally
B. Specific Jurisdiction in New York
C. Constitutional Limits on Personal Jurisdiction
IV. Application of Law to Facts
A. Specific Jurisdiction in New York
B. Constitutional Limits on Personal Jurisdiction
V. Conclusion

I. Introduction

Plaintiffs sue Defendant HL Corp. (USA), among others, for injuries plaintiff [*2] Timothy Boyce he sustained while riding a bicycle. Defendant HL Corp. (USA) moves to dismiss for lack of personal jurisdiction.

For the reasons stated below, the motion is granted.

II. Facts

On April 25, 2010 plaintiff Timothy Boyce purchased a Windsor Timeline bicycle from bikesdirect.com, a website operated by Velo BDBI from outside New York. See Am. Compl. ¶ 36. The bicycle was shipped to his residence in New York from a place outside New York. See Pl’s Aff. in Opp., Ex. B.

In July 2012, plaintiff, a New York resident, was riding the bicycle across the Manhattan Bridge when the handlebar broke, causing him injuries. See id. ¶ 51-52.

The alleged manufacturer of the handlebar part is HL Corp (Shenzhen), an organization operating outside of New York. See Pl. Mem. in Opp. 3; Def.’s Reply, Ex. A. HL Corp. (USA) (hereinafter “HL”) is a California Corporation that sells bicycle parts, sporting goods, and medical equipment manufactured by HL Corp. (Shenzhen), presumably in China. See Def.’s Reply Aff. These bicycle components are sold to companies in California, Wisconsin, Minnesota, Florida, and Idaho. See id. HL does not sell bicycle parts in New York. It has sold medical equipment in New [*3] York in quantities and at a time not yet revealed. See Def. HL’s Answers ¶ 9. HL does not sell handlebars for the Windsor TimeLine model bicycle used by plaintiff. See Def.’s Reply Aff.; Def.’s Reply Mem., Ex. A.

III. Law

A. Personal Jurisdiction Generally

“District courts resolving issues of personal jurisdiction must engage in a two-part analysis.” Grand River Enters. Six Nations, Ltd. v. Pryor, 425 F.3d 158, 165 (2d Cir. 2005) (internal quotation marks and ellipses omitted). First, the court looks to the personal jurisdiction law of the forum state and determines whether it is satisfied. See Metro. Life Ins. C. v. Robertson-Ceco Corp., 84 F.3d 560, 567 (2d Cir. 1996). Once state law is found to confer personal jurisdiction over the defendant, the court determines whether the exercise of personal jurisdiction comports with constitutional due process requirements. Id.

There are two traditional foundations for personal jurisdiction in the forum state, New York: general and specific, the latter known as long-arm jurisdiction. See, e.g., Burger King Corp. v. Rudzewicz, 471 U.S. 462, 473 n.15, 105 S. Ct. 2174, 85 L. Ed. 2d 528 (1985). Plaintiff relies on specific jurisdiction. See Pl’s Opp. Mem. 7.

B. Specific Jurisdiction [*4] in New York

Plaintiff supports its claim for jurisdiction by subsection 302(a)(3)(ii) of the New York Civil Practice Law and Rules (“N.Y.C.P.L.R.”), which provides specific personal jurisdiction over a non-domiciliary that “expects or should reasonably expect [its actions] to have consequences in the state and derives substantial revenue from interstate or international commerce.” N.Y.C.P.L.R. 302(a)(3)(ii). Establishing jurisdiction under this subsection requires satisfaction of five elements: “(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.” Penguin Grp. (USA) Inc. v. Am. Buddha, 609 F.3d 30, 35 (2d Cir. 2010). In the instant case, the parties dispute the fourth element.

C. Constitutional Limits on Personal Jurisdiction

The Due Process Clause of the Fourteenth Amendment “protects a person without meaningful ties to the forum state from being [*5] subjected to binding judgments within in its jurisdiction.” Metro. Life Ins. C. v. Robertson-Ceco Corp., 84 F.3d 560, 567 (2d Cir. 1996). To decide whether this requirement is met, courts analyze two factors: (1) minimum contacts; and (2) reasonableness. Id. An inquiry into minimum contacts asks “whether the defendant has sufficient contacts with the forum state to justify the court’s exercise of personal jurisdiction.” Chloé v. Queen Bee of Beverly Hills, LLC, 616 F.3d 158, 164 (2d Cir. 2010). The second component, reasonableness, involves consideration of “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.” Id.

“The import of the ‘reasonableness’ inquiry varies inversely with the strength of the ‘minimum contacts’ showing–a strong (or weak) showing by the plaintiff on ‘minimum contacts’ reduces (or increases) the weight given to ‘reasonableness.'” Bank Brussels Lambert, 305 F.3d at 129 (citations omitted). For example, “[a]ssuming that a constitutional threshold of contacts has been demonstrated, fewer [*6] contacts may be necessary where the ‘reasonableness’ factors weigh heavily in favor of an exercise of jurisdiction.” City of New York v. A-1 Jewelry & Pawn, Inc., 247 F.R.D. 296, 335 (E.D.N.Y. 2007) (citing Metro. Life Ins. Co., 84 F.3d at 568).

IV. Application of Law to Facts

A. Specific Jurisdiction in New York

Plaintiff claims that the court has specific jurisdiction under C.P.L.R. 302(a)(3)(ii) because HL should have expected that New York residents would purchase bikes outfitted with its products. See Pl’s Opp. Mem. He does not directly rely on HL’s sales of medical equipment at some time in New York. Defendant responds that it has no distribution or sales agreements for bicycle parts in New York, had no knowledge or expectation that its customers would sell bicycle products containing its parts to individuals in New York, and has not established any contact with New York. See Def.’s Mem.

There is no HL contact with New York supporting a finding of specific jurisdiction. Bicycles are generally limited, unlike cars, to local use. Expansion of jurisdiction to this case would exceed New York statutory limits.

Foreign and out-of-state manufacturers have been held amenable to product liability [*7] suits after their products were distributed to New York through third parties and caused injury within the State. In those cases, the defendants had distribution or sales agreements with its customers that gave rise to the reasonable expectation that its product would be used in New York. See, e.g., LaMarca v. Pak-Mor Mfg. Co., 95 N.Y.2d 210, 214-16, 735 N.E.2d 883, 713 N.Y.S.2d 304 (2000) (Texas manufacturer of rear-loading device subject to specific jurisdiction based on agreement with New York-based distributor that sold device to plaintiff’s employer); see Kernan v. Kurz-Hastings, Inc., 175 F.3d 236, 242-44 (2d Cir. 1999) (Japanese manufacturer of hot stamping press subject to specific jurisdiction based on targeting North American market generally, including New York, with its products through an “exclusive sales rights agreement” with a Pennsylvania distributor).

In the instant case, HL did not enter into any distribution or sales agreements with its customers leading to an expectation that its product would be sold to or used by a person in New York. Def. Reply Mem. 1, 3; Id., Ex. D.

The allegations and conceivable facts are insufficient to establish specific jurisdiction under New York law. See Kernan, 997 F. Supp. at 372 [*8] (“The ‘reasonable expectation’ test . . . is not satisfied by ‘[t]he mere likelihood that a product will find its way into the forum state . . . .” (quoting Cortlandt Racquet Club, Inc. v. OySaunatec, Ltd., 978 F. Supp. 520, 523 (S.D.N.Y. 1997)); see also Jash Raj Films (USA) Inc. v. Dishant.com LLC, 2009 U.S. Dist. LEXIS 116431, 2009 WL 4891764 (E.D.N.Y. 2009) ([T]he Second Circuit requires “a discernible effort [by the defendant] to directly or indirectly serve the New York market.” (quoting Kernan, 175 F.3d at 241).

B. Constitutional Limits on Personal Jurisdiction

Even if plaintiff could show specific jurisdiction under New York law, the case would still warrant dismissal on due process grounds. Plaintiff’s theory is that defendant established the requisite minimum contacts with New York by placing its goods into the national stream of commerce. See Pl’s Mem. in Opp. 10-12.

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 [*9] State.” J. McIntyre Mach., Ltd V. Nicastro, 131 S. Ct. 2780, 2788, 180 L. Ed. 2d 765 (2011) (plurality opinion). Concurring in the opinion, Justice Breyer explained that jurisdiction is lacking when:

there is no “‘regular . . . flow’ or ‘regular course’ of sales in [the State]; and there is no ‘something more,’ such as special state-related design, advertising, advice, marketing, or anything else. . . . And [defendant has not] ‘purposefully avail[ed] itself of the privilege of conducting activities’ within [the State], or that it delivered its goods in the stream of commerce ‘with the expectation that they will be purchased’ by [the State’s] users.”

Id. at 2792 (Breyer, J. concurring) (citations omitted).

Plaintiff has failed to allege facts sufficient to establish minimum contacts. Absent are any arrangements with companies incorporated or doing business in New York to sell bicycle parts or bicycles containing their parts in New York. HL did not target the New York market. See id. at 2788 (“The defendant’s transmission of goods permits the exercise of jurisdiction only where the defendant can be said to have targeted the forum.”) (plurality opinion).

V. Conclusion

For the foregoing reasons, defendant HL [*10] Corp. (USA)’s motion to dismiss due to lack of personal jurisdiction is granted.

SO ORDERED.

/s/ Jack B. Weinstein

Jack B. Weinstein

Senior United States District Judge

Dated: July 14, 2014

Brooklyn, New York