Personal jurisdiction and product liability

Southern California Law Review

Volumn 85, Issue 6, 2012, Pages 1551-1596

  Klerman, Daniel ^a  

^a USC Law School   (United States)

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EID: 84878542384     PISSN: 00383910     EISSN: None     Source Type: Journal    
DOI: None     Document Type: Review

References (104)

1. J. McIntyre Mach., Ltd. v. Nicastro, 131 S. Ct. 2780 (2011);
2. Asahi Metal Indus. v. Superior Ct. of Cal., 480 U.S. 102 (1987).
3. Albert H. Choi & Kathryn E. Spier, Should Consumers Be Permitted to Waive Products Liability? Product Safety, Private Contracts, and Adverse Selection (Harv. Law & Econ., Discussion Paper No. 680; Va. Law & Econ., Research Paper No. 2010-11), available at http://papers.ssrn.com/sol3/papers. cfm?abstract-id=1680932.
4. Abraham Wickelgren, The Inefficiency of Contractually-Based Liability with Rational Consumers, 22 J.L. ECON. & ORG. 168 (2006).
5. Avery Katz, Your Terms or Mine? The Duty to Read the Fine Print in Contracts, 21 RAND J. ECON. 518 (1990).
6. Yeon-Koo Che & Albert H. Choi, Shrink-Wraps: Who Should Bear the Cost of Communicating Mass-Market Contract Terms? (Va. Law & Econ., Research Paper No. 2009-15), available at http://papers.ssrn.com/sol3/papers.cfm? abstract-id=1384682;
7. Abraham Wickelgren, Standardization as a Solution to the Reading Costs of Form Contracts, 167 J. INSTITUTIONAL & THEORETICAL ECON. 30 (2011).
8. Dustin E. Buehler, Jurisdictional Incentives, 20 GEO. MASON L. REV. 105 (2012). The author thanks Yoed Halbersberg for bringing Dustin Buehler's article to his attention.
9. RICHARD A. POSNER, ECONOMIC ANALYSIS OF LAW 904 (8th ed. 2011).
10. ROBERT G. BONE, CIVIL PROCEDURE: THE ECONOMICS OF CIVIL PROCEDURE (2003);
11. George Priest, The Simple Economics of Civil Procedure, 9 KAN. J.L. & PUB. POL'Y 389 (2000).
12. Alan O. Sykes, Transnational Forum Shopping as a Trade and Investment Issue, 37 J. LEGAL STUD. 339 (2008).
13. Jack L. Goldsmith & Alan O. Sykes, Lex Loci Delictus and Global Economic Welfare: Spinozzi v. ITT Sheraton Corp., 120 HARV. L. REV. 1137 (2007).
14. Andrew T. Guzman, Choice of Law: New Foundations, 90 GEO. L.J. 883 (2002);
15. Bruce L. Hay, Conflicts of Law and State Competition in the Product Liability System, 80 GEO. L.J. 617 (1992);
16. Michael E. Solimine, An Economic and Empirical Analysis of Choice of Law, 24 GA. L. REV. 49 (1989).
17. Michael W. McConnell, A Choice-of-Law Approach to Products-Liability Reform, in NEW DIRECTIONS IN LIABILITY LAW, 37 PROC. ACAD. POL. SCI. 90 (Walter Olson ed., 1988).
18. ERIN A. O'HARA & LARRY E. RIBSTEIN, THE LAW MARKET 67-70 (2009).
19. Daniel Klerman, Jurisdictional Competition and the Evolution of the Common Law, 74 U. CHI. L. REV. 1179 (2007). The literature on jurisdictional competition in corporate law is vast.
20. FRANK H. EASTERBROOK & DANIEL R. FISCHEL, THE ECONOMIC STRUCTURE OF CORPORATE LAW 212-27 (1991);
21. ROBERTA ROMANO, THE GENIUS OF AMERICAN CORPORATE LAW (1993);
22. Lucian Arye Bebchuk, Federalism and the Corporation: The Desirable Limits on State Competition in Corporate Law, 105 HARV. L. REV. 1435 (1992);
23. Marcel Kahan & Ehud Kamar, The Myth of State Competition in Corporate Law, 55 STAN. L. REV. 679 (2002).
24. Doron Teichman, The Market for Criminal Justice: Federalism, Crime Control, and Jurisdictional Competition, 103 MICH. L. REV. 1831 (2005).
25. World-Wide Volkswagen Corp. v. Woodson, 444 U.S. 286 (1980);
26. Asahi Metal Indus. v. Superior Ct. of Cal., 480 U.S. 102 (1987);
27. J. McIntyre Mach., Ltd. v. Nicastro, 131 S. Ct. 2780 (2011);
28. Goodyear Dunlop Tires Operations, S.A. v. Brown, 131 S. Ct. 2846 (2011).
29. McIntyre, 131 S. Ct. at 2790.
30. Woodson, 444 U.S. at 297-98.
31. Int'l Shoe Co. v. Washington, 326 U.S. 310 (1945).
32. Hanson v. Denckla, 357 U.S. 235 (1958).
33. Int'l Shoe, 326 U.S. at 316
34. quoting Milliken v. Meyer, 311 U.S. 457, 463 (1940).
35. Hanson, 357 U.S. at 253.
36. World-Wide Volkswagen Corp. v. Woodson, 444 U.S. 286 (1980).
37. Goodyear Dunlop Tires Operations, S.A. v. Brown, 131 S. Ct. 2846, 2851 (2011).
38. Asahi Metal Indus. v. Superior Ct. of Cal., 480 U.S. 102 (1987).
39. quoting Int'l Shoe Co. v. Washington, 326 U.S. 310, 316 (1945).
40. J. McIntyre Mach., Ltd. v. Nicastro, 131 S. Ct. 2780 (2011).
41. Asahi, 480 U.S. at 112.
42. McIntyre, 131 S.Ct. at 2792 (Breyer, J., concurring).
43. See Patrick J. Borchers, J. McIntyre Machinery, Goodyear, and the Incoherence of the Minimum Contacts Test, 44 CREIGHTON L. REV. 1245, 1265 (2011) ("One could easily imagine a court reaching the conclusion that because Ohio was merely a way station for machines destined for other states, the English distributor did not target the Ohio market.").
44. Brief of Law Professors as Amici Curiae Supporting Respondents at 18-19 n.10, J. McIntyre Mach., Ltd. v. Nicastro, 131 S. Ct. 2780 (2010) (No. 09-1343) (although Petitioner could sue McIntyre's distributor in Ohio, "none of the Petitioner-side briefs concede that Ohio (or any other U.S. court) could obtain jurisdiction over Petitioner, despite Petitioner's purposeful efforts to access the U.S. market for its products").
45. McIntyre, 131 S. Ct. at 2789.
46. Goodyear Dunlop Tires Operations, S.A. v. Brown, 131 S. Ct. 2846 (2011).
47. quoting Helicopteros Nacionales de Colombia, S.A. v. Hall, 466 U.S. 408, 416 (1984).
48. RESTATEMENT (THIRD) OF TORTS: PRODUCTS LIABILITY § 18 (1998).
49. Patrick J. Borchers, The Choice of Law Revolution: An Empirical Study, 49 WASH. & LEE L. REV. 357, 366 (1992);
50. Michael E. Solimine, An Economic and Empirical Analysis of Choice of Law, 24 GA. L. REV. 49, 85, 87-88 (1989);
51. Stuart E. Thiel, Choice of Law and the Home-Court Advantage: Evidence, 2 AM. L. & ECON. REV. 291 (2000).
52. SYMEON C. SYMEONIDES, THE AMERICAN CHOICE-OF-LAW REVOLUTION: PAST, PRESENT AND FUTURE 273-364 (2006);
53. Christopher A. Whytock, Myth of Mess? International Choice of Law in Action, 84 N.Y.U. L. REV. 719, 764-69 (2009).
54. Eric Helland & Alexander Tabarrok, The Effect of Electoral Institutions on Tort Awards, 4 AM. L. ECON. REV. 341 (2002);
55. Alexander Tabarrok & Eric Helland, Court Politics: The Political Economy of Tort Awards, 42 J.L. & ECON. 157 (1999).
56. Hill v. Gateway 2000, Inc., 105 F.3d 1147, 1150 (7th Cir. 1997).
57. Klocek v. Gateway, Inc., 104 F. Supp. 2d 1332, 1341 (D. Kan. 2000).
58. Alan Schwartz, The Case Against Strict Liability, 60 FORDHAM L. REV. 819, 837 (1992).
59. See generally William M. Landes & Richard A. Posner, A Positive Economic Analysis of Products Liability, 14 J. LEGAL STUD. 535 (1985).
60. A. Mitchell Polinsky & Steven Shavell, The Uneasy Case for Product Liability, 123 HARV. L. REV. 1437 (2010);
61. J. Mark Ramseyer, Product Liability and Product Safety: Japan and the U.S (Harv. Law Sch. Ctr. for Law, Econ., & Bus., Discussion Paper No. 714, 2012).
62. Tort Reform Record, ATRA 35, Dec. 22, 2011, available at http://www.atra.org/sites/ default/files/documents/record-12-22-11.pdf.
63. J. McIntyre Mach., Ltd. v. Nicastro, 131 S. Ct. 2780 (2011).
64. Empirical evidence from other kinds of contracts is mixed. Florencia Marotta-Wurgler found that only 28 percent of contracts for online products had forum-selection clauses and that such clauses almost always designated the defendant's headquarters state as the forum. Florencia Marotta-Wurgler, "Unfair" Dispute Resolution Clauses: Much Ado About Nothing?, in BOILERPLATE: THE FOUNDATION OF MARKET CONTRACTS 45, 50, 63 (Omri Ben-Shahar ed., 2007). The choice of the defendant's headquarters state as the forum could indicate that such clauses are being used to favor defendants over plaintiffs. On the other hand, as discussed below, jurisdiction in the defendant's headquarters state might also reduce total litigation costs and thus be efficient. See supra Part IV.
65. See RESTATEMENT (THIRD) OF TORTS: PRODUCTS LIABILITY, §§ 1, 20 (1998).
66. Ronen Avraham, Leemore S. Dafny & Max M. Schanzenbach, The Impact of Tort Reform on Employer-Sponsored Health Insurance Premiums (Dec. 30, 2010), J.L. ECON. & ORG. ADVANCE ACCESS (forthcoming) (manuscript at 17, 27 tbl.1), doi: 10.1093/jleo/ewq017 (finding that tort reform reduces health care premia by 2.1 percent);
67. Eric Helland & Alexander Tabarrok, Product Liability and Moral Hazard: Evidence from General Aviation, J.L. & ECON. (forthcoming) (manuscript at 20) (on file with author) (finding that a statute exempting small aircraft more than eighteen years old from product liability suits reduced aircraft prices by $911, which is about 1 percent);
68. Patricia H. Born & W. Kip Viscusi, The Distribution of the Insurance Market Effects of Tort Liability Reforms, in BROOKINGS PAPERS ON ECONOMIC ACTIVITY: MICROECONOMICS 55, 83 (Martin Neil Baily et al. eds., 1998) (determining that damage reforms reduce liability insurance premia 5.8 percent to 8.4 percent. Note that, since liability is a small part of product prices, a 5.8 to 8.4 percent decrease in liability insurance premia is likely to be a much smaller effect on product prices).
69. Lee Benham, The Effect of Advertising on the Price of Eyeglasses, 15 J.L. & ECON. 337, 343-44 (1972) (determining that state restrictions on advertising increase prices by 25 percent or more);
70. Mark Bergen et al., When Little Things Mean a Lot: On the Inefficiency of Item-Pricing Laws, 51 J.L. & ECON. 209, 220-231 (2008) (finding that state-item pricing laws increase prices twenty cents to twenty-five cents per item);
71. Judith A. Chevalier & Finoa M. Scott Morton, State Casket Sales Restrictions: A Pointless Undertaking?, 51 J.L. & ECON. 1, 9 (2008) (explaining that state restrictions on casket sales increase the price of caskets by $261, but decrease the cost of funeral services by $252);
72. Reint Gropp, John Karl Scholz & Michelle J. White, Personal Bankruptcy and Credit Supply and Demand, 112 Q.J. ECON. 217, 243 (1997) (finding that low-asset households in states with generous bankruptcy exemptions pay 13 percent higher interest rates on car loans);
73. Theodore E. Keeler et al., Do Cigarette Producers Price-Discriminate by State? An Empirical Analysis of Local Cigarette Pricing and Taxation, 15 J. HEALTH ECON. 499 (1996) (finding interstate differences in cigarette prices depending on state taxes and other factors);
74. John E. Kwoka, Jr., Advertising and the Price and Quality of Optometric Services, 74 AM. ECON. REV. 211, 216 (1984) (explaining that states without restrictions on optometry advertising have prices 20 percent lower than those with restrictions).
75. JIANSHENG LI, LAW ON PRODUCT QUALITY CONTROL AND PRODUCT LIABILITY IN CHINA 467 (2006) (considering that although Chinese law formally provides for full compensation, "it is [a] very common occurrence that, in the Chinese tort cases, the amount of compensation was generally too low and that the compensation obtained by the victim was lower than the actual loss") (footnote omitted).
76. Paul D. Carrington, Business Interests and the Long Arm in 2011, 63 S.C. L. REV. 637, 639-40 (2012);
77. LUKE NOTTAGE, PRODUCT SAFETY AND LIABILITY LAW IN JAPAN: FROM MINAMATA TO MAD COWS 20, 74-75, 114, 148-49 (2004) (describing how U.S. substantive law and procedure generally provide more certain and more generous recoveries than Japanese or E.U. law).
78. Foreign Manufacturers Legal Accountability Act of 2011, H.R. 3646, 112th Cong. § 3(a) (2011);
79. S. 1946, 112th Cong. § 5(a) (2011).
80. See also the nearly identical H.R. 4678, 111th Cong. § 3 (2010);
81. S. 1606, 111th Cong. § 5 (2009).
82. H.R. 3646, 112th Cong. § 3(c)(1);
83. S. 1946, 112th Cong. § 5(c)(1).
84. The proposed statutes would require the agent to be located in a state "with a substantial connection to the importation, distribution, or sale of the products." H.R. 3646 § 3(a)(2)(A);
85. S. 1946 § 5(a)(2). Nevertheless, since the foreign manufacturer could choose a distributor in just about any state, this restriction would not significantly constrain foreign manufacturers.
86. Burger King Corp. v. Rudzewicz, 471 U.S. 462, 472 (1985)
87. quoting World-Wide Volkswagen Corp. v. Woodson, 444 U.S. 286, 297 (1980).
88. Thus, this interpretation of purposeful availment is consistent with McGee v. Int'l Life Ins. Co., 355 U.S. 220, 224 (1957) (holding that personal jurisdiction was proper over a life insurance company that issued a policy to a resident of the forum state).
89. Thus, this interpretation of purposeful availment is consistent with World-Wide Volkswagen Corp. v. Woodson, 444 U.S. 286, 299 (1980) (holding that personal jurisdiction is not proper over a distributor and retailer that sold a car outside of the forum state, although the driver drove the car to the forum). One might think that the distributor and retailer could avoid jurisdiction in Oklahoma (or some other state) by contracting with the purchaser that the car never be driven to Oklahoma. Not only would this be a very strange contract, it would not really protect the retailer and distributor because covenants do not run with chattels, so such a contract would not bind subsequent purchasers of the car.
90. Thus, this interpretation of purposeful availment is consistent with Kulko v. Superior Ct. of Cal., 436 U.S. 84 (1978).
91. The only Supreme Court case with which the definition in the text might not be consistent is Hanson v. Denckla, 357 U.S. 235 (1958). If the trustee in that case wanted to avoid jurisdiction in Florida, it could have insisted that Mrs. Donner put a clause in the trust authorizing the trustee to resign if Mrs. Donner or the beneficiaries lived or moved to Florida. Or, it could have insisted that Mrs. Donner include a forum-selection clause in the trust. The Supreme Court does not seem to have considered these possibilities and instead focused on the fact that Mrs. Donner's move to Florida and the location of the beneficiaries was beyond the trustee's control.
92. AUSTIN WAKEMAN SCOTT ET AL., SCOTT AND ASCHER ON TRUSTS 648-49, 3125, 3127-29 (5th ed. 2010).
93. Int'l Shoe Co. v. Washington, 357 U.S. 310, 316 (1945);
94. Asahi Metal Indus. v. Superior Ct. of Cal., 480 U.S. 102, 113 (1987);
95. J. McIntyre Mach., Ltd. v. Nicastro, 131 S. Ct. 2780, 2787 (2011).
96. McIntyre, 131 S. Ct. at 2780-2806.
97. PETER REUTER, RAND CORP., THE ECONOMIC CONSEQUENCES OF EXPANDED CORPORATE LIABILITY: AN EXPLORATORY STUDY 12-14 (1988).
98. RESTATEMENT (THIRD) OF TORTS: PRODUCTS LIABILITY §§ 1, 20 (1998).
99. Jennifer Arlen, Contracting over Liability: Medical Malpractice and the Cost of Choice, 158 U. PA. L. REV. 957, 992-1000 (2010);
100. Jennifer Arlen & W. Bentley MacLeod, Malpractice Liability for Physicians and Managed Care Organizations, 78 N.Y.U. L. REV. 1929, 2000-02 (2003).
101. World-Wide Volkswagen Corp. v. Woodson, 444 U.S. 286 (1980), where the consumer was injured while driving out-of-state, is a relatively rare case.
102. Carnival Cruise Lines, Inc. v. Shute, 499 U.S. 585, 593 (1991) (holding that forum-selection clause printed on a cruise ticket was enforceable);
103. CompuCredit Corp. v. Greenwood, 132 S. Ct. 665, 673 (2012) (holding that the Federal Arbitration Act requires the enforcement of an arbitration agreement in a credit-card application);
104. AT&T Mobility LLC v. Concepcion, 131 S. Ct. 1740, 1753 (2011) (holding that an arbitration agreement prohibiting class actions was enforceable despite a contrary state statute).