United States: Lack Of Jurisdiction Grounds Lawsuit Asserting Failure To Warn

Marc Antonecchia is a Partner in Holland & Knight's New York office

A federal court in the District of Arizona, applying Ninth Circuit precedent, has weighed in on the limitations of personal jurisdiction over a non-resident engine manufacturer in the context of tort claims alleging failure to warn about changes in a helicopter engine Operation and Maintenance Manual ("OMM"). The court reached the correct result in view of the 2014 U.S. Supreme Court decisions in Daimler1 and Walden2 that refined the contours of general and specific jurisdiction, respectively.

In the District of Arizona case, Quantum Leasing, LLC v. Robinson Helicopter, Inc., the complaint alleged that in 2011 plaintiff Quantum Leasing ordered a helicopter from non-party Quantum Helicopter in Arizona, an independent seller of aircraft. The helicopter was manufactured by Robinson Helicopter Company ("Robinson"), located in California. The helicopter utilized a Rolls-Royce RR300 engine manufactured by Rolls-Royce Corporation (RRC) in Indiana and sold to Robinson in Indiana. Quantum Helicopter delivered the helicopter to Quantum Leasing by taking delivery of the helicopter from Robinson's factory in California and flying it to Arizona to deliver it to Quantum Leasing.

The helicopter experienced a "hot start" in May 2013. In September 2014, RRC issued a change to its OMM regarding hot starts. Quantum Leasing alleged that RRC did not send any notification to Quantum Leasing of the amended OMM, although RRC did send an email to Quantum Helicopter. In October 2014, the helicopter experienced another hot start resulting in its grounding. After commencing litigation in June 2015, Quantum Leasing filed an amended complaint in September 2015 asserting claims against RRC for negligence, negligent misrepresentation, consumer fraud, and failure to warn. Underlying each of these claims was the theory that RRC failed to advise Quantum Leasing about the changes in the OMM regarding hot starts. RRC moved to dismiss on the basis that the Arizona court lacked personal jurisdiction over RRC.

The court acknowledged that there was consensus among the parties that the court did not have general jurisdiction over RRC, which exists if "the nonresident's contacts with the forum are continuous and systematic, and the exercise of jurisdiction satisfies traditional notions of fair play and substantial justice." There was no dispute that RRC did not have "continuous and systematic" contacts with Arizona. The court then analyzed whether there was specific jurisdiction by employing a three-part test: (1) the non-resident defendant must purposefully direct its activities or consummate some transaction with the forum or resident thereof; (2) the claim must be one which arises out of or relates to the defendant's forum-related activities; and (3) the exercise of jurisdiction must comport with fair play and substantial justice. Citing Walden, the court noted that application of the first prong requires the court to "look to the defendant's contacts with the forum State itself, not the defendant's contacts with persons who reside there." As a result, mere injury to a forum resident is not a sufficient connection to the forum.

Plaintiff argued that RRC's activities satisfied the first prong because RRC evidenced an intent or purpose to serve Arizona by establishing an exclusive supplier relationship with Robinson knowing that Robinson sells helicopters in Arizona. But the court found that this argument incorrectly suggested that Robinson's contacts with Arizona could be imputed to RRC under an agency theory. Plaintiff also argued that RRC established channels to ensure that all Arizona purchasers of RR300 engines know which Arizona maintenance and repair centers are authorized to service RR300 engines. The court rejected this argument on the basis that RRC's website was a "passive website" and that any print material (including the OMM) that made its way to Arizona did not alone support a finding of jurisdiction. As a result, the court found that plaintiff failed to show that RRC met the first prong and did not need to analyze the second and third prongs.

Based on the court's determination that there was no jurisdiction in Arizona, plaintiff moved to transfer the case to the Central District of California on the basis that both RRC and Robinson were subject to general jurisdiction in California. Quantum Leasing argued that RRC "does business" in California by selling engines to Robinson and because RRC has had a registered agent there since 1993. The court found, however, that RRC's contacts were not "substantial or continuous and systematic" because RRC was not incorporated in, did not have its principal place of business in, pay taxes in, maintain bank accounts in, or actively market its products in California. In addition, the court found that RRC was not subject to specific jurisdiction, rejecting Quantum Leasing's argument that the requirement that the harm occur in the forum state applies only in cases where intentional torts are alleged. According to the court, the alleged harm occurred in Arizona and/or Indiana and thus did not support a finding of jurisdiction in California.

Given the limitations imposed by Daimler and Walden, the holding is not unexpected. Surprisingly, however, the court did not actually cite Daimler in its general jurisdiction analysis, instead citing Ninth Circuit precedent that pre-dates Daimler and that seemingly contemplates a broader view of general jurisdiction.3 Daimler held that the relevant test is whether the corporation's affiliations with the forum State are so continuous and systematic "as to render it essentially at home" there, and that the paradigm all-purpose forums for general jurisdiction are a corporation's place of incorporation and principal place of business. Had the court followed Daimler, it should not have been necessary to analyze such issues as whether RRC paid taxes or maintained bank accounts in California.

Further, the court left one issue potentially unresolved in its Arizona specific jurisdiction analysis. In opposition to the motion to dismiss, plaintiff argued that RRC had created continuing obligations between itself and residents of Arizona by providing engine warranties directly to owners of RR300 helicopters and that such warranties were "systematically and widely delivered to every purchaser of a RR300 engine." The court declined to address the argument on the basis that the amended complaint contained no such allegation, instead alleging only that "all owners/operators of RR300 engines are provided this Warranty." According to the court, there were no allegations that the warranty was "widely delivered" in Arizona and no allegations that suggested that the warranty was delivered by RRC, as opposed to being delivered by Quantum Helicopters. The court gave no indication whether such allegations would have altered the result.

Footnotes

1. Daimler AG v. Bauman, 134 S. Ct. 746 (2014).

2. Walden v. Fiore, 134 S. Ct. 1115 (2014).

3. No. 2:15-cv-1005-HRH, 2016 WL 192145 (D. Ariz. Jan. 15, 2016).

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

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