District Court Finds Personal Jurisdiction over Japanese Company Involved in Designing a Defective Automobile Part Prone to Failure

The World in U.S. Courts: Summer 2015 - Personal Jurisdiction/Forum Non Conveniens | April.06.2015

Falco v. Nissan North Am. Inc., U.S. District Court for the Central District of California, April 6, 2015

The Plaintiffs brought a consumer protection lawsuit against NML, the Japanese parent company of Nissan North America (NNA). Plaintiffs purchased four Nissan vehicles between 2005 and 2007 that shared in common a timing chain system they alleged was prone to failure and put consumers at risk. NML moved to dismiss for lack of personal jurisdiction.

The Court observed that it could assert jurisdiction over NML if that company had introduced the allegedly defective cars into the "stream of commerce," and had "purposefully directed" its activities toward California. The Court found that both requirements had been met.

First, although it was involved with the design and testing of the timing chain system, NML argued that specific personal jurisdiction should not attach because it never manufactured, distributed, sold, or warranted any of the vehicles in question and that the "stream of commerce" theory of personal jurisdiction on which Plaintiff relied only applied to an entity that actually placed the product into the stream of commerce.

The Court disagreed, finding that design was a critical portion of the manufacturing process and that NML took almost total responsibility for the relevant components up through the initial production release and conducted testing of the components. NML also had authority over the manufacturing process, because parts and vehicles could not be manufactured without NML's release. It also was involved in monitoring the manufacturing plant and had the final authority to change the manufacture of faulty parts. Thus, the Court found that NML participated in manufacturing the vehicles and had therefore placed them into the stream of commerce.

Second, the Court found that the "purposeful direction" test was satisfied. NML used NNA as a distributor to serve as the sales agent in California for the vehicles that NML helped to manufacture, intended for the components at issue to be sold in California, used NNA as its sole authorized distributor of Nissan and Infiniti vehicles in the U.S., and that NML and NNA worked closely together on the distribution, sale, lease, servicing, and warranting of the vehicles. Also, NML engaged in direct advertising aimed at the American market, including California, for some of the vehicles.

The Court easily found that Plaintiffs' claims under various consumer protection statutes arose out of NML's California-related activities, and thus upheld the assertion of specific personal jurisdiction.

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