Tort reformer: N.J. SC's jurisdiction decision a dangerous one

John O'Brien Mar. 10, 2010, 12:55pm


TRENTON, N.J. (Legal Newsline) - Even if foreign companies don't want to do business in New Jersey, they can still find themselves in state courtrooms as a result of a recent state Supreme Court decision, a legal reform advocate told Legal Newsline.

Marcus Rayner, executive director of the New Jersey Lawsuit Reform Alliance, said the Feb. 2 decision against an English company is another example of why businesses need to be worried about the state's legal climate.

"It's a rather breathtaking expansion of the New Jersey Supreme Court's jurisdiction," said Rayner, who has worked for former U.S. Rep. Mike Ferguson and former Gov. Christine Todd Whiteman.

"Certainly, businesses need to be concerned now. Whether they intend to do business or not in New Jersey, if their product ends up in the hands of a New Jersey resident they can be hauled into a New Jersey court."

The 5-2 decision says a foreign company may be sued in New Jersey if knows or reasonably should have known that its products are being sold in New Jersey.

"A manufacturer that knows or reasonably should know that its products are distributed through a nationwide distribution system that might lead to those products being sold in any of the fifty states must expect that it will be subject to this State's jurisdiction if one of its defective products is sold to a New Jersey consumer, causing injury," a syllabus of the opinion provided by the court says.

"The focus is not on the manufacturer's control of the distribution scheme, but rather on the manufacturer's knowledge of the distribution scheme through which it is receiving economic benefits in each state where its products are sold. A manufacturer cannot shield itself merely by employing an independent distributor - a middleman - knowing the predictable route the product will take to market."

The lawsuit involved a shear machine that Robert Nicastro claimed was defective, causing four of his fingers to be severed. The trial court said it did not have jursdiction even under "the most liberal(ly) accepted form of the stream of commerce theory."

The New Jersey Association for Justice, the state's trial lawyer group, participated in arguments as amicus curiae. Justice Barry Albin's opinion began, "Today, all the world is a market."

Justices Roberto Rivera-Soto and Helen Hoens each delivered dissenting opinions.

Hoens wrote that the majority created a new test for asserting jurisdiction over foreign entities, while Rivera-Soto wrote that the decision "offends those core federalist concepts that rightly and prudentially limit the exercise of any one state's judicial power via the invocation of long-arm jurisprudence."

Rayner noted that Rivera-Soto finished his dissent by declaring the decision ripe for review and correction by the U.S. Supreme Court.

"Traditioinally, a company has had to show intent to have its product sold in the state in order to be under the jurisdiction of the state. This decision departed in a significant way," Rayner said.

"If it's in a New Jersey consumer's hands, New Jersey law applies."

And that law, Rayner said, is getting increasingly plaintiff-friendly. Atlantic County and beyond was named the No. 4 Judicial Hellhole in the American Tort Reform Foundation's most recent yearly report.

Small and mid-size businesses will be most affected by the decision, Rayner said. He also worries that other states could follow the state Supreme Court's lead.

"It puts business in a position where they could always face the weakest possible law," he said. "If you're a plaintiff in California, and you buy a product in Ohio from a company then move the product to New Jersey and get harmed by it, then you could have your choice.

"If you've been harmed by a product, you deserve your day in court. You don't deserve the venue that is most beneficial to you."

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