The courts recitation of such nationwide contacts is remarkable, because factors such as these, indicating a general openness to U.S. customers without reference to any particular state forum, arguably have no place in state-specific jurisdictional analysis. As the Supreme Court recently stressed in Nicastro, personal jurisdiction requires a forum-by-forum, or sovereign-by-sovereign, analysis. A foreign litigant may have the requisite relationship with the United States Government but not with the government of any individual State. Accordingly, a foreign companys general contacts with the U.S. are not sufficient to establish jurisdiction on the state level. Nevertheless, the court appears to have regarded Taishan Gypsums nationwide contacts as at least probative of the jurisdictional question.
The Eastern District of Louisiana concluded that all of Taishan Gypsums activities, taken together, were cumulatively sufficient to support the assertion of jurisdiction over Taishan Gypsum, despite Taishan Gypsums lack of physical contacts with the forum. In the words of the court, Taishan Gypsum had purposefully directed its activities at Virginia with the understanding that its drywall would end up in and be used in Virginia. For the court, this was sufficient to justify the exercise of personal jurisdiction, suggesting that a foreign company with no presence in the U.S. may nevertheless find itself subject to the judgment of a U.S. court simply by consenting to do businessand contemplating future businesswith a U.S. company.
The implications of the courts jurisdictional findings did not go unnoticed, least of all by counsel for Taishan Gypsum, who have appealed to the Fifth Circuit. Whether the Fifth Circuit will take this opportunity to curb the lower courts expansive exercise of jurisdiction remains to be seen. However, the ruling is certainly not invulnerable. As the Eastern District of Louisiana itself has acknowledged, a substantial ground exists for difference of opinion concerning the propriety of the exercise of personal jurisdiction over Taishan, suggesting a recognition by the court that its assertion of jurisdiction approached, if it did not in fact overstep, the outer boundaries of the permissible.
Practical Application to Companies in the U.S. and Abroad
If the District Courts decision stands, it could potentially affect companies (and, of course, their counsel) in a number of ways. First, consider the example of a manufacturer located in Japan, Taiwan, South America, or Europe, which has been very careful not to have a presence in the U.S. They dont advertise there, or solicit U.S. customers. A U.S. citizen walks into their offices, unsolicited, and buys a few thousand bedspreads to be shipped back to the U.S. Theres a problem: The bedspreads havent been treated with flame retardant and catch fire. In the past, the customer would have great difficulty trying to sue this non-U.S. company in a U.S. court. But now? The situation is much blurrier.
Consider too, the U.S. manufacturer that incorporates foreign parts or products into its own products, but gets those products from a source that does not have a U.S. presence by going directly to the foreign source as an unsolicited customer. If that U.S. buyer is sued because of something thats gone wrong with the foreign-sourced component part, the buyer wants to know that it can look to its foreign supplier for indemnity. This ruling potentially makes it easier to do that, by enlarging the types of contacts in the legal analysis.
The Eastern District of Louisianas assertion of jurisdiction over Taishan Gypsum is a compelling example of how the U.S. courts have stretched their territorial reach in tandem with the expansion of the global economy. For foreign-based businesses, the ultimate disposition of Taishan Gypsums appeal on the jurisdictional question will bear close watching. Taishan Gypsum does not appear to have actively sought out business in Virginia, but when a Virginia customer arrived at its doorstep, Taishan Gypsum did not turn that customer away. Instead, Taishan Gypsum negotiated with the customer in the customers language, tailored its product to meet the customers specifications, and assisted the customer with export logistics.
In short, Taishan Gypsum engaged in standard customer relations with a Virginia company and extended the most basic business courtesies. These unremarkable interactions, coupled with Taishan Gypsums expectation that its product would find its way to Virginia, may have been sufficient to place the Chinese company within the ambit of a U.S. court, half a world away.
Jay Mayesh is a partner in Kaye Scholers litigation group. He received his J.D. from Columbia University, where he is now an adjunct lecturer on forensic psychiatry. Mayesh has defended a broad range of clients at trial and has particular experience in evaluating contingent product liabilities arising out of corporate acquisitions and reorganizations. He also serves as national counsel to Knauf in the Chinese drywall litigation. M. Tomas Murphy is an associate in Kaye Scholers product liability and complex commercial litigation groups.