Donald Noll And Candance Noll v. Special Electric Company, Inc. ( 2015 )

.'i;-;.lL Ui- .215 Cal. App. 4th
1343, 1346-48, 1355-56, 156 Cal. Rptr. 3d 335. review denied. No. S211282
(Sup. Ct. July 17, 2013) (explaining the recent history and current status of
Special Electric). For purposes of this appeal, we refer to Special Electric and
the companies for which it has financial responsibility simply as "Special."
At all relevant times, Special was a Wisconsin corporation with its principal
place of business in Milwaukee, Wisconsin. Special maintained offices and staff
in as many as eight different states to sell and help facilitate the delivery of
asbestos. It did not keep an office or staff in Washington.
Noll's complaint asserted specific personal jurisdiction over Special in King
County under Washington's long-arm statute, RCW 4.28.185(1). Special entered
a limited appearance and attended Donald Noll's preservation depositions in April
2013.
Special then moved to dismiss under CR 12(b)(2).1 Noll opposed the
motion, presenting as the sole issue whether Washington courts may exercise
1 CR 12(b)(2) provides:
(b) How Presented. Every defense, in law or fact, to a claim
for relief in any pleading, whether a claim, counterclaim, cross
claim, or third party claim, shall be asserted in the responsive
pleading thereto if one is required, except that the following
defenses may at the option of the pleader be made by motion: . . .
(2) lack of jurisdiction over the person.
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specific personal jurisdiction over Special under the stream-of-commerce
doctrine. The trial court dismissed Noll's complaint, citing J. Mclntvre Machinery.
Ltd. v. Nicastro. _ U.S. _, 131 S. Ct. 2780, 180 L Ed. 2d 765 (2011). Noll
appeals.
When proceeding under CR 12(b)(2), we treat the allegations in the
complaint as established. If the trial court considers materials outside the
pleadings, as it did here, we review its decision under the de novo standard of
summary judgment, taking all factual inferences in favor of the plaintiff. State v.
AU Optronics. Corp.. 180 Wash. App. 903, 920-25, 328 P.3d 919 (2014).
Reviewed in this light, the record shows that Special supplied asbestos to
a CertainTeed manufacturing plant in Santa Clara, California. CertainTeed used
the asbestos to make pipe that it shipped into Washington in substantial
quantities. According to shipping invoices, the Santa Clara plant sent at least
55,000 linear feet of asbestos-cement pipe to buyers in Washington between
1977 and 1979, through at least 31 discrete shipments.
During that time period, Special supplied approximately 95 percent of the
asbestos used at CertainTeed's Santa Clara plant to manufacture asbestos-
cement pipe. In December 1977, Special contracted to supply CertainTeed's
pipe division with approximately 4,000 tons of blue asbestos per year from 1978
until 1983. The contract is acknowledged in a letter from General Mining, a
mining company in South Africa, agreeing to make that amount of blue asbestos
available to Special for distribution to CertainTeed. Special arranged for 1,018
No. 71345-1-1/5
tons of blue asbestos obtained from General Mining to be delivered to
CertainTeed's Santa Clara plant between 1977 and 1979.
In short, Special regularly supplied raw asbestos for the manufacture of
pipe that moved into Washington through established channels of sale. The
issue is whether such conduct is enough to permit a Washington court to
exercise specific personal jurisdiction over Special, a nonresident defendant.
A court may exercise specific personal jurisdiction over a nonresident
based on much more limited contacts with a forum state than would be required
for the exercise of general personal jurisdiction. But specific jurisdiction extends
only to causes of action that arise out of those limited contacts. AU Optronics.
180 Wash. App. at 913. Washington courts may exercise specific jurisdiction over
an out-of-state defendant if authorized by our long-arm statute, RCW
4.28.185(1), and if doing so is consistent with due process. Our long-arm statute
is designed to be coextensive with federal due process. Failla v. FixtureOne
Corp.. 181 Wash. 2d 642, 650, 336 P.3d 1112 (2014). cert, denied. 135 S. Ct. 1904
(2015).
A state court's assertion of jurisdiction is subject to review for compatibility
with the Fourteenth Amendment's Due Process Clause because it exposes
defendants to that state's coercive power. Goodyear Dunlop Tires Operations.
S.A. v. Brown U.S. , 131 S. Ct. 2846, 2850, 180 L. Ed. 2d 796 (2011).
The maintenance of the suit will not offend traditional notions of fair play and
substantial justice so long as the defendant has "certain minimum contacts" with
the forum that is asserting jurisdiction. Int'l Shoe Co. v. State of Wash.. 326 U.S.
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310, 316, 66 S. Ct. 154, 90 L. Ed. 95 (1945). As a general rule, the sovereign's
exercise of power requires some act by which the defendant "purposefully avails
itself of the privilege of conducting activities within the forum State, thus invoking
the benefits and protections of its laws." Hanson v. Denckla. 357 U.S. 235, 253,
78 S. Ct. 1228, 2 L. Ed. 2d 1283 (1958). This principle "gives a degree of
predictability to the legal system that allows potential defendants to structure their
primary conduct with some minimum assurance as to where that conduct will and
will not render them liable to suit." World-Wide Volkswagen Corp. v. Woodson.
444 U.S. 286, 297, 100 S. Ct. 559, 62 L. Ed. 2d 490 (1980); accord Burger King
Corp. v. Rudzewicz. 471 U.S. 462, 471-72, 105 S. Ct. 2174, 85 L Ed. 2d 528
(1985).
A three prong test is used to determine whether the federal due process
clause is satisfied. Specific jurisdiction comports with federal due process so
long as (1) purposeful "minimum contacts" exist between the defendant and the
forum state; (2) the plaintiff's injuries arise out of or relate to those minimum
contacts; and (3) the exercise of jurisdiction will be reasonable, that is, it will be
consistent with notions of fair play and substantial justice. AU Optronics. 180
Wash. App. at 914. If a plaintiff satisfies the first two prongs, the burden shifts to
the defendant to set forth a compelling case that the exercise of jurisdiction
would not be reasonable. AU Optronics, 180 Wash. App. at 914-15.
At issue in the present case is the first prong, that is, whether Special
"purposefully established" minimum contacts with Washington. Burger King. 471
U.S. at 474. Defendants may not be haled into Washington solely as the result
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of contacts that are random, fortuitous, or attenuated. Burger King. 471 U.S. at
475. Noll must show either that Special's activities constituted purposeful
availment of Washington's laws or purposeful direction toward Washington. AU
Optronics. 180 Wash. App. at 915.
Noll relies on the stream-of-commerce doctrine to prove purposeful
availment. "The forum State does not exceed its powers under the Due Process
Clause if it asserts personal jurisdiction over a corporation that delivers its
products into the stream of commerce with the expectation that they will be
purchased by consumers in the forum State." World-Wide Volkswagen Corp..
444 U.S. at 297-98. Cases utilizing the stream-of-commerce doctrine as the
basis for long-arm jurisdiction are numerous. The limits of the doctrine were
recently explored by the United States Supreme Court in J. Mclntvre. 131 S. Ct.
2780.
In that case, a British manufacturer—J. Mclntyre—wanted to develop a
market for its metal shearing machines in the United States. It sent
representatives to attend trade shows in a number of American cities, though not
in New Jersey. And it contracted with an American distributor who sold a single
machine to a company in New Jersey. That machine allegedly malfunctioned
and injured the plaintiff who brought a product liability suit in a New Jersey court.
The New Jersey Supreme Court held that the single sale in New Jersey was a
sufficient contact to satisfy the test for due process. J. Mclntyre "knew or
reasonably should have known that by placing a product in the stream of
commerce through a distribution scheme that targeted a fifty-state market the
No. 71345-1-1/8
product might be purchased by a New Jersey consumer." Nicastro v. Mclntvre
Mach. Am.. Ltd.. 201 N.J. 48, 987 A.2d 575, 577 (2010), reversed. J. Mclntvre.
131 S. Ct. 2780.
Six justices of the United States Supreme Court agreed to reverse the
decision of the New Jersey Supreme Court, but they were not united in their
reasoning. All six agreed that the New Jersey court had erroneously rested
jurisdiction upon a single sale of a defective product in the forum State. The four-
justice plurality—Justice Kennedy writing for himself, Chief Justice Roberts, and
Justices Scalia and Thomas—was particularly concerned that the New Jersey
court was erasing the constraints of political boundaries. The plurality opinion
reminds courts that jurisdiction is rooted in "the central concept of sovereign
authority." J. Mclntvre. 131 S. Ct. at 2788 (plurality opinion). It is "inconsistent
with the premises of lawful judicial power" to exercise personal jurisdiction over a
nonresident "based on general notions of fairness and foreseeability." J.
Mclntvre. 131 S. Ct. at 2789 (plurality opinion). The plurality would have
permitted the exercise of jurisdiction to be based on transmission of goods "only
where the defendant can be said to have targeted the forum." J. Mclntvre. 131
S. Ct. at 2788-89 (plurality opinion).
According to the plurality, the question is whether a defendant has
followed a course of conduct "directed at" the society or economy existing within
the jurisdiction of a given sovereign. J. Mclntvre. 131 S. Ct. at 2789 (plurality
opinion). The trial court here, relying on the plurality's statement of what is
required in a stream-of-commerce case, concluded that Noll's complaint had to
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No. 71345-1-1/9
be dismissed because there was no showing that Special directed its conduct at
the society or economy of the State of Washington.
Justice Breyer authored a concurring opinion joined by Justice Alito. The
concurring opinion is controlling because it resolved the issue on narrower
grounds than the plurality's. AU Optronics. 180 Wash. App. at 919. The two
concurring justices did not endorse the plurality's proposal for a strict rule
requiring targeting of the forum. But neither were they willing to endorse New
Jersey's view of the stream-of-commerce doctrine, as they concluded it would
"abandon the heretofore accepted inquiry" into the relationship between the
defendant and the forum. J. Mclntvre. 131 S. Ct. at 2793 (Breyer, J., concurring
in the judgment). According to the concurrence, the defendant's activities in J_.
Mclntvre failed to establish personal jurisdiction under any articulation of the
stream-of-commerce theory and thus the case could be resolved under the
court's existing precedents, in particular World Wide Volkswagen Corp.. 444 U.S.
at 297-98. J. Mclntvre. 131 S. Ct. at 2792 (Breyer, J., concurring in the
judgment); State v. LG Elecs.. Inc.. 185 Wash. App. 394, 417-19, 341 P.3d 346
(2015). petition for review granted. No. 91391-9 (Wash. June 3, 2015). The
concurrence rejected the New Jersey court's approach as too "absolute." J.
Mclntvre. 131 S. Ct. at 2793 (Breyer, J. concurring in the judgment). "None of
our precedents" finds that a single isolated sale of a product in a State reflects a
relationship between the defendant and the forum sufficient to support jurisdiction
over an out-of-state defendant, "even if that defendant places his goods in the
stream of commerce, fully aware (and hoping) that such a sale will take place."
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J. Mclntvre. 131 S. Ct. at 2792 (Breyer, J., concurring in the judgment); AU
Optronics. 180 Wash. App. at 918-19.
Justice Breyer discussed the three separate opinions of Justices
O'Connor, Brennan, and Stevens analyzing the stream-of-commerce metaphor in
Asahi Metal Industry Co. v. Superior Court. 480 U.S. 102, 107 S. Ct. 1026, 94 L.
Ed. 2d 92 (1987). Justice O'Connor's opinion, he noted, would require
"'something more'" than simply placing a product into the stream of commerce,
even if the defendant is aware that the stream may or will sweep the product into
the forum State. J. Mclntvre, 131 S. Ct. at 2792 (Breyer, J., concurring in the
judgment). Justice Brennan's opinion would allow jurisdiction where a sale in a
State is part of '"the regular and anticipated flow'" of commerce into the State but
not where that sale is only an eddy, i.e., an isolated occurrence. J. Mclntvre. 131
S. Ct. at 2792 (Breyer, J., concurring in the judgment). Justice Stevens' opinion
indicated that "'the volume, the value, and the hazardous character'" of a good
may affect the jurisdictional inquiry and it emphasized Asahi's "'regular course of
dealing.'" J. Mclntvre. 131 S. Ct. at 2792 (Breyer, J., concurring in the judgment).
The isolated sale of a single metal shearing machine to one company in New
Jersey did not satisfy the stream-of-commerce analysis articulated by any of
these separate opinions in Asahi. Where there is no regular flow or regular
course of sales into the forum state, and no "'something more,' such as special
state-related design, advertising, advice, marketing, or anything else," the
stream-of-commerce doctrine does not support personal jurisdiction. J. Mclntvre.
131 S. Ct. at 2792 (Breyer, J., concurring in the judgment).
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No. 71345-1-1/11
We have applied Justice Breyer's concurring opinion in two recent cases,
AU Optronics and LG Elecs. In AU Optronics, the defendant was an out-of-state
manufacturer of display panels. The display panels became components of
appliances that were sold in Washington through a regular flow or regular course
of sales. AU Optronics. 180 Wash. App. at 925. Considering the volume of sales
of these finished products in Washington, we rejected the defendant's argument
that there was an insufficient showing of purposefulness. AU Optronics. 180 Wn.
App. at 925. In LG Elecs.. we similarly permitted the exercise of personal
jurisdiction based on a regular flow of sales into Washington. LG Elecs.. 185
Wash. App. at 422-25. Purposeful availment will be found "if the incidence or
volume of sales into a forum points to something systematic—as opposed to
anomalous." LG Elecs.. 185 Wash. App. at 419.
Here, too, we conclude a Washington court may assert specific personal
jurisdiction over Special, a component supplier, under the stream-of-commerce
doctrine. Special's product was a known hazardous material, one of the factors
mentioned by Justice Stevens in Asahi as affecting the jurisdictional inquiry.
Special's asbestos was supplied for use in making large quantities of pipe to be
distributed through existing channels of interstate commerce, including channels
regularly flowing into the State of Washington. It is the regular flow or course of
sales that distinguishes the facts here from the facts of J. Mclntyre. A plaintiff is
not required to prove both a regular flow and "something more."
This result is consistent with the stream-of-commerce analysis articulated
in World-Wide Volkswagen Corp.. 444 U.S. at 286. There, the Court rejected a
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No. 71345-1-1/12
plaintiffs attempt to have an Oklahoma court exercise personal jurisdiction over a
New York seller based on "the fortuitous circumstance that a single Audi
automobile, sold in New York to New York residents, happened to suffer an
accident while passing through Oklahoma." World-Wide Volkswagen Corp.. 444
U.S. at 295. On the other hand, if the sale of a defective product in the forum
state arises from efforts to serve the market for that product in other states
"directly or indirectly," the exercise of jurisdiction in the forum state may be
consistent with the Due Process Clause.
This is not to say, of course, that foreseeability is wholly
irrelevant. But the foreseeability that is critical to due process
analysis is not the mere likelihood that a product will find its way
into the forum State. Rather, it is that the defendant's conduct and
connection with the forum State are such that he should reasonably
anticipate being haled into court there.. ..
. . . Hence if the sale of a product of a manufacturer or
distributor such as Audi or Volkswagen is not simply an isolated
occurrence, but arises from the efforts of the manufacturer or
distributor to serve, directly or indirectly, the market for its product in
other States, it is not unreasonable to subject it to suit in one of
those States if its allegedly defective merchandise has there been
the source of injury to its owner or to others. The forum State does
not exceed its powers under the Due Process Clause if it asserts
personal jurisdiction over a corporation that delivers its products
into the stream of commerce with the expectation that they will be
purchased by consumers in the forum State. Cf. Gray v. American
Radiator & Standard Sanitary Corp.. 22 III. 2d 432, 176 N.E.2d
761 (1961).
World-Wide Volkswagen Corp.. 444 U.S. at 297-98 (some citations omitted).
Special claims that even when a steady current of sales carries a product
such as asbestos-cement pipe into the forum state, personal jurisdiction over the
asbestos supplier depends on the supplier's actual knowledge that the asbestos
would ultimately arrive in the forum state as a component. Special knew that its
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No. 71345-1-1/13
asbestos was being used to make pipe at CertainTeed's plant in Santa Clara,
California. But the record does not prove Special had actual knowledge that
CertainTeed distributed its pipe outside California. According to Special, its
dealings with the Santa Clara plant are sufficient purposeful contacts to allow
California to assert jurisdiction but not Washington. The regular flow of Special's
asbestos into Washington does not by itself support the assertion of jurisdiction
by Washington, Special argues, because it does not establish that Special had
contacts with Washington that were purposeful in nature.
The governing precedents do not require a plaintiff to prove a component
supplier's actual knowledge of the manufacturer's plans to ship the finished
product into the forum state. AU Optronics. World-Wide Volkswagen Corp.. and
Justice Breyer's concurrence in J. Mclntvre require objective facts evidencing a
regular flow or regular course of sales by which the product enters the forum
state. As in AU Optronics. Special had a "large volume of expected and actual
sales." AU Optronics. 180 Wash. App. at 924. The volume of Special's shipments
of asbestos to CertainTeed's Santa Clara manufacturing plant, coupled with the
volume of finished pipe distributed into Washington by CertainTeed, signifies that
Special purposefully availed itself of the protection of Washington law.
This reasoning is supported by Gray v. American Radiator, a leading case
on the application of the stream-of-commerce doctrine to a nonresident supplier
of components. Gray. 22 III. 2d at 442, cited with approval in World-Wide
Volkswagen Corp., 444 U.S. at 298. In Gray, the nonresident defendant in an
Illinois court was Titan, an Ohio manufacturer. Titan negligently manufactured
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No. 71345-1-1/14
and marketed a defective valve. The valve was later incorporated into a water
heater by a Pennsylvania company. The water heater was sold to an Illinois
resident, who was injured in Illinois when the heater exploded. Titan, the Ohio
manufacturer, had no other contacts with Illinois. Titan argued, as Special does
here, that the mere occurrence of an injury caused by its product in Illinois was
insufficient to support personal jurisdiction by the Illinois court. But Titan did not
claim that the use of its product in Illinois was an isolated occurrence. The court
recognized that "the relevant inquiry is whether defendant engaged in some act
or conduct by which he may be said to have invoked the benefits and protections
of the law of the forum." Gray. 22 III. 2d at 440. Based on the inference that
there was substantial use in Illinois of hot water heaters incorporating Titan's
valves, the court determined that Titan purposefully availed itself of the protection
of Illinois law, directly or indirectly:
While the record does not disclose the volume of Titan's business
or the territory in which appliances incorporating its valves are
marketed, it is a reasonable inference that its commercial
transactions, like those of other manufacturers, result in substantial
use and consumption in this State. To the extent that its business
may be directly affected by transactions occurring here it enjoys
benefits from the laws of this State, and it has undoubtedly
benefited, to a degree, from the protection which our law has given
to the marketing of hot water heaters containing its valves. Where
the alleged liability arises, as in this case, from the manufacture of
products presumably sold in contemplation of use here, it should
not matter that the purchase was made from an independent
middleman or that someone other than the defendant shipped the
product into this State.
With the increasing specialization of commercial activity and
the growing interdependence of business enterprises it is seldom
that a manufacturer deals directly with consumers in other States.
The fact that the benefit he derives from its laws is an indirect one,
however, does not make it any the less essential to the conduct of
his business; and it is not unreasonable, where a cause of action
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No. 71345-1-1/15
arises from alleged defects in his product, to say that the use of
such products in the ordinary course of commerce is sufficient
contact with this State to justify a requirement that he defend here.
Gray, 22 III. 2d at 442.
Special does not claim that the presence of its asbestos on the
construction sites in Washington where Donald Noll cut pipe was an isolated
event. Whether Special knew that CertainTeed's Santa Clara plant was shipping
pipe into Washington is not dispositive. Special's contacts with Washington were
systematic. They were not random, isolated, fortuitous, attenuated, or
anomalous. Pipe containing Special's asbestos flowed into Washington in the
regular stream of commerce, not in a mere eddy. Special benefited indirectly
from the laws of Washington that protected the marketing, sale, and use of
asbestos pipe in Washington during the years that Donald Noll was exposed to it.
Having accepted that benefit, Special cannot claim that its relationship with
Washington lacked purpose.
Reversed.
WE CONCUR:
&**«/,} y.
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