District Court Finds No Personal Jurisdiction Over British Manufacturer Having Exclusive Sales Contract With Florida Corporation, But Orders Discovery On Jurisdictional Issue

The World in U.S. Courts: Fall 2015 - Personal Jurisdiction/Forum Non Conveniens

Ikeda v. Organix Salon Systems, U.S. District Court for the Southern District of New York, July 6, 2015

Ikeda brought a personal injury action against her salon and hairstylist after a hair treatment caused damage to her hair and scalp. The defendants in turn filed a product liability suit against HERB UK, the British manufacturer, of the hair product used on Plaintiff, as well as a Florida corporation called International Hair, with which HERB UK had an exclusive sales contract. HERB UK moved to dismiss the product liability claim for lack of personal jurisdiction.

The District Court first held that HERB UK fell within the scope of the New York statute authorizing jurisdiction over non-NY entities, which applies to parties that "should reasonably expect" their actions to have consequences in the State and that derive "substantial revenue" from trade with New York. The Court concluded that HERB UK's exclusive sales agreement with a single U.S. distributor, though not expressly targeting the New York market, was nevertheless sufficient to show an attempt to serve the New York market, and a reasonable expectation by HERB UK that its acts would have consequences in New York.

The assertion of personal jurisdiction must also comport with the Due Process Clause of the U.S. Constitution, however, and the Court held that HERB UK's dealings with New York did not satisfy the constitutional "minimum contacts" standard. The Court began by noting that HERB UK was organized under the laws of the United Kingdom; was not licensed to do business in New York; has no directors, officers, or employees acting on its behalf within the state; maintained no offices, bank accounts, or property in New York; has no designated agent for service in New York; and has never sold its products nor entered into a contract to perform services in New York. The Court also concluded that a defendant must be seen at least to have "targeted" New York with its products, not merely that it "might have predicted that its goods will reach" the State, to satisfy the Due Process Clause. The Court concluded no such allegations had been made, commenting that the complaint had not even identified the amount of HERB UK products being sold in the State.

Though holding that the parties pursuing the product liability complaint had failed to carry their burden of making a prima facie showing of minimum contacts, the Court denied HERB UK's motion to dismiss, and instead ordered limited jurisdictional discovery to allow more facts to be developed.

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