United States: High Court In California Applies Broad Interpretation Of Personal Jurisdiction While New York Appellate Court Applies Narrower One

In Jayone Foods Inc. v. Aekyung Industrial Co., Inc., the Court of Appeals of California reversed an order of the trial court finding that a foreign manufacturer's purposeful availment of the privilege of doing business in California subjected the manufacturer to specific personal jurisdiction in California. The family of Sunja An brought a wrongful death suit after a humidifier cleaning agent caused An's death. The Aekyung Humidifier Cleaning Agent was manufac-tured in Korea for Aekyung by SK Chemical, and imported by Jayone, a California importer and distributor of Korean consumer products. Jayone sold the cleaning agent to Kim's Home Center, a Los Angeles retail store, where it was purchased by An and used to maintain and clean her humidifier. Plaintiffs alleged that An's death from pulmonary fibrosis was due to her long-term and frequent use of the cleaning agent.

After Plaintiffs filed suit, Jayone filed a cross-complaint against Aekyung, the Korean manufacturer and distributor that sold the cleaning agent to Jayone. Aekyung, which is incorporated in the Re-public of South Korea with its principal place of business in Seoul, filed a motion to quash service of summons for lack of personal jurisdiction. Aekyung primarily targets the Korean domestic market and has never had a specific sales or business unit targeting any US market. Aekyung sold the Humidifier Cleaning Agent to Jayone on two occasions and was aware that Jayone distributed goods throughout the US; Aekyung claimed, however, that it did not know if the orders from Jayone resulted in the sale of the cleaning agent to any consumers in California.

The trial court found that Aekyung had purposefully availed itself of the benefits of doing business in California, but that the controversy did not arise out of or relate to Aekyung's California contacts because it was not demonstrated that An purchased the cleaning agent from the two shipments that came from Aekyung. As such, the trial court granted Aekyung's Motion to Quash for lack of personal jurisdiction.

On appeal, the Second Appellate District reversed the trial court's decision, finding that Aekyung had purposely availed itself of the privileges of doing business in California and, accordingly, subjected it to the specific personal jurisdiction. In reaching this conclusion, the court found that the plaintiffs' wrongful death action was related to Aekyung's sale of the cleaning agent because Aekyung was aware that the company's products were being sold to consumers in California. This decision represents a very broad application of personal jurisdiction law in light of recent Supreme Court jurisprudence.

An intermediate appellate court in New York took a narrower view of personal jurisdiction in Aybar v. Aybar, reversing a century of case law by holding that obtaining a license to do business in New York does not constitute consent to personal jurisdiction.

Jose Aybar, a New York resident, was driving a Ford Explorer that was registered in New York when one of its tires allegedly failed, causing the vehicle to become unstable and overturn resulting in the death of three of the six passengers. The plaintiffs, the surviving passengers and representatives of the deceased passengers' estates, filed suit against Ford and Goodyear alleging that Ford negligently manufactured and designed the Ford Explorer and that Goodyear negligently manufactured and designed the faulty tire.

Ford is incorporated in Delaware with a principal place of business in Michigan and Goodyear is incorporated in, and has its principal place of business in, Ohio. The Complaint alleged that at all relevant times, both corporations were registered to do business in New York and each, in fact, derived substantial revenue from business in New York.

Mr. Aybar purchased the car and tire from a third party in New York. The vehicle was manufactured in Missouri and sold to a dealer in Ohio and the tire was designed in Ohio and manufactured in Tennes-see. Ford and Goodyear moved to dismiss the com-plaint for lack of personal jurisdiction. Plaintiffs argued that Ford and Goodyear were essentially "at home" in New York because of the hundreds of dealerships and service centers in New York, the manufacturing plants in New York, and the incentive and tax credits received from New York State. The trial court denied the motions to dismiss for lack of jurisdiction on the basis that both Ford and Good-year were subject to general jurisdiction because their activities in New York were so continuous and systematic as to render them "at home" in New York, and they both consented to general jurisdiction in New York by registering to do business in New York and designating a local agent for service of process.

The appellate court reversed the decision of the trial court. First, it found that while both Ford and Good-year had extensive commercial activity in New York, this activity was not sufficient to support a holding that they were "at home" in New York in light of the Supreme Court's narrow application of general personal jurisdiction in Daimler AG v. Bauman. The appellate court also reversed the lower court's holding that registration to do business in New York and ac-companying appointment of an in-state agent by a foreign corporation, in itself, was sufficient to constitute consent to jurisdiction, holding that the lower court's finding was "unacceptably grasping." Jayone Foods, Inc. v. Aekyung Industrial Co. Ltd., 31 Cal. App. 5th 543 (Cal. App. 2019); Aybar v. Aybar, 2019 N.Y. App. Div. LEXIS 444 (N.Y. App. Div. Jan. 23, 2019).

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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