Printer Friendly

German manufacturer must defend products suit in Massachusetts.

Byline: Eric T. Berkman

A machine manufacturer in Germany whose products were sold in the U.S. through an American distributor could be forced to defend an injured worker's products liability suit in Massachusetts state court, the 1st U.S. Circuit Court of Appeals has determined.

Plaintiff Stephen Knox was injured while operating a metal-bending machine made in Germany by defendant Schechtl Maschinebau GmbH. The machine was sold to Knox's employer by Schechtl's U.S. distributor, defendant and cross-claimant MetalForming, Inc.

After the defendants removed the plaintiff's state court action to U.S. District Court, the judge found that because Schechtl had not designated Massachusetts for "special attention" and had not "targeted" buyers in Massachusetts, it was not subject to personal jurisdiction in the commonwealth.

But the 1st Circuit reversed. Based on Schechtl's lengthy history of selling machines in Massachusetts, the fact that it made its machines to customer specifications subject to its approval, and the fact that customers were expected to contact Schechtl itself and not its distributor for troubleshooting issues and replacement parts, the 1st Circuit panel found the defendant purposely availed itself of business opportunities in Massachusetts, justifying personal jurisdiction.

"Schechtl's channels to Massachusetts purchasers constitute efforts to continue and perhaps to expand its relationship with Massachusetts purchasers. Those deliberately opened channels, kept open over many years and presumably used, are relevant to the jurisdictional analysis," Judge Sandra L. Lynch wrote for the court.

"Those channels established a direct link between Schechtl and its purchasers," Lynch continued. "Schechtl's long service of purchasers in Massachusetts through at least its spare parts sales bolsters our conclusion that the exercise of jurisdiction here is foreseeable."

The 21-page decision is Knox, et al. v. MetalForming, Inc., et al., Lawyers Weekly No. 01-031-19. The full text of the ruling can be found here.

'Correct decision'

Stacey L. Pietrowicz of Boston, one of the plaintiff's attorneys, said the ruling was the "correct one" under the U.S. Supreme Court's 2011 decision in J. McIntyre Machinery, Limited v. Nicastro.

In that case, a Supreme Court plurality held that a state court cannot exercise jurisdiction over a defendant that has not purposefully availed itself of business opportunities in that state or placed goods in the stream of commerce expecting that they would be purchased in that state.

Justice Stephen G. Breyer also wrote a concurrence in Nicastro suggesting that where many of a manufacturer's machines were flowing into the state, there could be jurisdiction absent specific targeting of the state.

The 1st Circuit held in Knox that Breyer's opinion, as the narrower of the two, was binding, but that there would also be jurisdiction under the plurality opinion.

"We certainly feel it's the correct decision for Massachusetts individuals and businesses who suffer personal or even economic damages at the hands of large manufacturers knowingly targeting and benefitting from both the Massachusetts economy and the U.S. economy," Pietrowicz said. "This ruling will allow consumers to bring claims against large manufacturers who use distributors in an attempt to shield themselves from being brought into our court system."

Neither the manufacturer's lead counsel, Frederick W. Reif of New York, nor its co-counsel, Marie E. Chafe of Boston, responded to requests for comment.

But Javier F. Flores, who represented the distributor a co-defendant that filed a cross-claim for indemnification and contribution against the manufacturer said the decision was helpful given how unsettled the issue of personal jurisdiction over foreign defendants has been in recent years.

"While all personal jurisdiction determinations are fact-specific inquiries, the Knox decision provides clarity concerning the relevant factors and applicable standards for determining whether a party has purposefully availed itself of the jurisdiction of the foreign state," Flores said.

In particular, he said, the 1st Circuit's discussion of the "channels of communication" and "regular course of sales" components of the stream-of-commerce analysis will help defendants better assess their prospects of being hauled into court in a particular jurisdiction and plan accordingly.

Products liability attorney John Egan of Boston, who was not involved in the case, said he was surprised the federal District Court judge dismissed the suit in the first place.

"The fact that these machines weren't just shipped off an assembly line but were orders placed through a U.S. sales agent to a German manufacturer, who designed and assembled the machines according to specifications provided by the ultimate American customer and that even after the sale, the German manufacturer encourages the customer to communicate directly with it regarding repair and maintenance issues and purchases of spare parts shows that there really is a customer relationship," he said. "I thought those facts were pretty strong for the plaintiff."

He said the case illustrates how changing technology has impacted the issue of personal jurisdiction.

"The old rules about personal jurisdiction were based on a much less globalized economy than the one we're living in today," he said. "It makes more sense to deny jurisdiction over a company based in the Midwest manufacturing something that wasn't necessarily marketed in a targeted way outside that geographical area and where maybe a few items might find their way to Massachusetts or California. Today, that's increasingly unlikely because [with the internet] it's so much easier for even a small manufacturer to market its product beyond its state or regional locale."

Zachary M. Mandell of Providence, who also handles products liability cases, said the Knox the ruling was particularly helpful in that context.

"These cases have highly fact-specific analyses, and those facts tend to change when technology changes," he said. "We're in a much more connected world, and when the guidance being given is from two plurality opinions of the Supreme Court, the circuit courts are critical."

Defective machine?

Knox, an employee at Cape Cod Copper in Lakeville, was operating a metal-bending machine when he inadvertently hit the foot pedal, activating the machine and crushing his left hand.

The machine was manufactured by Schechtl, which is headquartered in Germany and has no U.S. operations.

All Schechtl machines in the U.S. are sold through MetalForming, an independently owned distributor based in Georgia.

Under the distribution agreement, the purchaser places an order with MetalForming, which then buys the machine from Schechtl. MetalForming then sends a purchase order to Schechtl that includes all the customer's technical specifications. If Schechtl accepts the purchase order, it manufactures the machine to those specifications.

MetalForming installs the machine at the customer's site and trains its workers. It is required to pass along Schechtl's instruction manual, which directs customers to contact Schechtl directly for troubleshooting and replacement parts.

Between 2000 and 2017, 45 Schechtl machines and 234 parts were sold in Massachusetts for a total of $1.5 million.

After the accident, Knox and his wife sued Schechtl and MetalForming in Superior Court. MetalForming removed the case to U.S. District Court, where it filed cross-claims against Schechtl.

Citing Nicastro, Judge George A. O'Toole Jr. granted Schechtl's motion to dismiss for lack of personal jurisdiction. The plaintiff appealed.

Purposeful availment

The 1st Circuit found that Schechtl's alleged lack of special attention to Massachusetts or targeting of buyers in the commonwealth was not, despite O'Toole's finding, the exclusive test to establish purposeful availment.

Instead, jurisdiction hinged "on the totality of Schechtl's activities, voluntarily undertaken, that connect the German company to Massachusetts," Lynch said.

She then pointed out that voluntary acts on Schechtl's part created a "regular flow or regular course of sales."

Though those sales may have been part of a nationwide sales effort, "the question is not whether a defendant sells its product across the U.S.; it is instead whether a defendant's forum connection is such 'that the exercise of jurisdiction is essentially voluntary and foreseeable,'" Lynch wrote, emphasizing that the use of a nationwide distributor does not automatically preclude the exercise of jurisdiction either.

Here, Lynch said, Schechtl could direct where its products went, sold dozens of machines in Massachusetts over nearly a two-decade period, and initiated an ongoing relationship with its Massachusetts purchasers.

Accordingly, she wrote, "the exercise of personal jurisdiction over Schechtl comports with due process."

Knox, et al. v. MetalForming, Inc., et al.

THE ISSUE: Could an industrial equipment manufacturer in Germany that sold its products through a U.S. distributor be forced to defend an injured worker's products liability suit in Massachusetts state court?

DECISION: Yes (1st U.S. Circuit Court of Appeals)

LAWYERS: Benjamin R. Zimmermann and Stacey L. Pietrowicz, of Sugarman & Sugarman, Boston (plaintiff)

Javier F. Flores, Eric V. Skelly and Thaddeus M. Leniewicz, of Manning, Gross & Massenburg, Boston (cross-claimant)

Frederick W. Reif and Debra Tama, of Wilson, Elser, Moskowitz, Edelman & Dicker, New York, and Marie E. Chafe of Cornell & Gollub, Boston (defense)

Copyright {c} 2019 BridgeTower Media. All Rights Reserved.
COPYRIGHT 2019 BridgeTower Media Holding Company, LLC
No portion of this article can be reproduced without the express written permission from the copyright holder.
Copyright 2019 Gale, Cengage Learning. All rights reserved.

Article Details
Printer friendly Cite/link Email Feedback
Title Annotation:Knox v. MetalForming, Inc., U.S. Court of Appeals for the 1st Circuit
Author:Berkman, Eric T.
Publication:Massachusetts Lawyers Weekly
Date:Feb 14, 2019
Words:1454
Previous Article:Corporate insulation and piercing the veil.
Next Article:Airline passenger claiming PTSD gets $2.3M.
Topics:

Terms of use | Privacy policy | Copyright © 2021 Farlex, Inc. | Feedback | For webmasters