First Circuit Court of Appeals Holds that Foreign Manufacturer Can Be Sued in Massachusetts

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In an important decision for foreign companies, the First Circuit Court of Appeals recently reversed a trial court ruling and held that a foreign manufacturer of an allegedly defective product was subject to personal jurisdiction and could be sued in Massachusetts.  In Knox v. Metalforming, Inc., 914 F.3d 685 (1st Cir. 2019), plaintiff Stephen Knox badly injured his hand at his place of work, Cape Cod Copper, while operating a machine manufactured by German company Schechtl Maschinenbau GmbH and sold to Cape Cod Copper by MetalForming, Inc., Schechtl's Georgia-based exclusive U.S. distributor.  

 

Knox and his wife initially sued MetalForming and Schechtl in state court.  MetalForming subsequently removed the action to federal court on the basis of diversity and filed crossclaims against Schechtl.  The German manufacturer, which maintained no operations within the United States, moved to dismiss the case for lack of personal jurisdiction.  The U.S. District Court granted Schechtl's motion to dismiss, holding that Schechtl had not purposely availed itself of the privilege of doing business in the United States.  

 

There was no assertion by the litigants that Schechtl was subject to general personal jurisdiction in Massachusetts.  Rather, the Knoxes and MetalForming asserted that Schechtl was subject to suit with respect to the manufacture of a product sold by MetalForming in Massachusetts. The First Circuit began its analysis of whether the Knoxes and MetalForming had properly asserted specific personal jurisdiction over Schechtl by summarizing the Supreme Court's lengthy precedent on the issue, explaining "plaintiffs must show that (1) their claims directly arise out of or relate to the defendant's forum activities; (2) the defendant's forum contacts represent a purposeful availment of the privilege of conducting activities in that forum, thus invoking the benefits and protections of the forum's laws and rendering the defendant's involuntary presence in the forum's courts foreseeable; and (3) the exercise of jurisdiction is reasonable." Id. at 690, citing Plixer Int'l., Inc. v. Scrutinizer GmbH, 905 F.3d 1, 7 (1st Cir. 2018).  

 

The Court explained that the relatedness prong requires only that the plaintiffs' claims have a "demonstrable nexus" to the defendant's forum contacts, easily met by the allegations that the defendant manufacturer's defect caused Knox's injury.  Id. at 691.  The Court explained that the personal jurisdiction question turned on the purposeful availment prong.  The U.S. District Court had dismissed the case due to its ruling that Schechtl had not specifically targeted the forum of Massachusetts for special attention and targeted buyers within Massachusetts.  The First Circuit rejected that narrow test, explaining "'Supreme Court precedent does not establish specific targeting of a forum as the only means of showing that the purposeful availment test has been met.' Depending on the facts, a defendant's 'regular flow or regular course of sale' in the [forum] could make the exercise of jurisdiction foreseeable to the defendant."  Id. at 691-92 (emphasis in original), quoting Plixer at 9-10.  The Court held that Schechtl's voluntary sales flow, through MetalForming, of 45 machines and 234 parts into Massachusetts, which amounted to almost $1.5 million in Massachusetts sales  over the course of 16 years, was sufficient to satisfy the purposeful availment prong.  Important to the Court's analysis was the fact that Schechtl's "relationship with purchasers in Massachusetts did not end when Schechtl accepted the purchase order and manufactured the machine.  Schechtl required that MetalForming include, with each machine, materials that instructed that purchaser to contact Schechtl directly, whether to purchase replacement parts or to obtain assistance with troubleshooting and fixing problems."  Id. at 693.  Finally, the Court found that the exercise of jurisdiction was reasonable.        

 

Knox v. Metalforming is a warning to foreign manufacturers that they may be subject to personal jurisdiction within Massachusetts even if they do not specifically target the forum of Massachusetts, if such companies maintain regular sales flow into Massachusetts and encourage contacts with end users of their machines in Massachusetts. 

 

Fitch Law Partners will continue to monitor developments in this area of the law.  For more information on Fitch Law Partners' international litigation practice, please visit our website.  

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