The World in U.S. Courts: Spring 2017 - Personal Jurisdiction/Forum Non Conveniens | March.24.2017
The plaintiffs were consumers who purchased outboard boat engines with allegedly defective exhaust systems. They sued the Japanese manufacturer, Yamaha Motor Co. Ltd., and its U.S. subsidiary, Yamaha Motor Corporation, U.S.A., (Yamaha-US), the entity from which they purchased the engines. The District Court in Los Angeles granted Yamaha’s motion to dismiss for lack of personal jurisdiction (in addition to granting the US subsidiary’s motion to dismiss for failure to state a claim). The Court of Appeals upheld both dismissals.
The Court of Appeals first observed that personal jurisdiction was to be judged under California’s “long-arm” statute, which extends the reach of courts in California to the fullest extent permitted under the Due Process Clause of the US Constitution.
Then it found that “general” personal jurisdiction, which requires that a defendant’s contacts with a forum be so significant that it could be considered “at home” there, did not attach. Yamaha is incorporated and has its principal place of business in Japan, and has no offices or employees in California. Further, it has 109 consolidated subsidiaries in 26 different countries, spanning five continents, and its net sales in North America accounted for only 17% of its total net sales. Under those facts, the Court of Appeals concluded Yamaha could not be considered “at home” in California. It also rejected the theory that general personal jurisdiction over a non-US parent could established if its US subsidiary were found merely to be its “agent,” concluding that the proper focus was the parent’s own contacts with the forum.
The plaintiffs also argued that the operations of Yamaha and Yamaha-US were so intertwined that they were merely “alter egos” of one another, and that the subsidiary’s conduct could thus be imputed to the parent on this ground. Under applicable precedent, the “alter ego” test could be used to extend personal jurisdiction to a non-US parent where (1) there is such unity of interest and ownership that the separate personalities of the two entities no longer exist and (2) failure to disregard the separate identities would result in fraud or injustice. The Court of Appeals held that the plaintiffs failed to plead facts sufficient even to create a genuine issue of fact that the Japanese parent and its US sub were “alter egos” of one another. The Court also made statements that could be read to mean that the “alter ego” theory might no longer be available for general personal jurisdiction.
The Court of Appeals then examined the question of specific jurisdiction, observing that the “minimum contacts” required to establish specific jurisdiction had to arise out of contacts that the defendant itself creates with the forum. Specific personal jurisdiction involves satisfaction of a three-part test: (1) did the defendant “purposely direct” its activities to or “purposely avail” itself of a forum, (2) does the claim “arise out of or relate” to the defendant’s forum-related activities, and (3) does the exercise of jurisdiction “comport with fair play and substantial justice” and is it reasonable? The Court of Appeals found that this test was not satisfied as to Yamaha, which unrebutted evidence showed does not conduct any activities in California and does not target California via marketing or advertising.
Yamaha’s only connections to California were through Yamaha-US. But the Court of Appeals determined that the “agency” theory is equally inapplicable to specific jurisdiction as it is to general jurisdiction, concluding that the contacts of Yamaha-US should not be imputed to its parent.