Can Expanding Your Wine Distribution Expose You to Lawsuits in Other States?
Attorneys, and particularly litigation attorneys such as me, get excited when the U.S. Supreme Court issues new “jurisdiction” proclamations. The Court did just that in late-June, and the Court’s recent rulings have some impact on wineries.
First, I will explain “jurisdiction” and outline prior law regarding jurisdiction. Then, I will address the Supreme Court’s new opinions.
“Jurisdiction” is equivalent to the reach of the Court. For example, if a person sues a California winery in a New Jersey State court, that winery might argue that the New Jersey court has no jurisdiction or authority to issue any rulings regarding the California winery. In 1987, the Supreme Court, in a case called Asahi Metal Ind. Co. v. Sup. Ct. (480 U.S. 102), explained that a defendant (and even a defendant residing outside the U.S.), could be subject to a state court’s jurisdiction if that defendant placed a product into the “stream of commerce” with some intent that the product would reach that state. In the case of our California winery, that winery might be subject to the jurisdiction of that New Jersey State court if it sold its wine to a nation-wide distributor who, in turn, marketed that wine in New Jersey (even if a sub-distributor did the actual marketing of the wine in New Jersey). In such a case, the New Jersey State court might have jurisdiction if the California winery had some level of intent that its wines reach New Jersey.
The question, however, has always been – what level of intent is required for jurisdiction? This is the issue that the Supreme Court addressed in two cases in late June: J. McIntyre Machinery, Ltd. v. Nicastro and Goodyear Dunlop Tires Operations, S.A. v. Brown. In short, these two cases make it more difficult for plaintiffs to sue defendants who are physically outside the court’s geographic jurisdiction. These two new cases explain that putting a product into the “stream of commerce” with an expectation that it might reach a particular state might not be enough to give the courts’ in that state jurisdiction over the person or entity that placed the product into the stream of commerce. In our example, the California winery could sell wine to a nation-wide distributor with an expectation that the wine would reach New Jersey, but that might be enough to give the New Jersey State court jurisdiction over the California Winery. (These two recent opinions, however, raise new questions and leave certain issues unanswered. In fact, the Court in the J. McIntyre Machinery case issued three differing opinions with no single opinion commanding the majority.)
A May 27, 2011 ruling from the District Court for the Northern District of California offers a further example. There, defendant, who was based in Massachusetts, imported wine and sold it to three nation-wide distributors based in New York, Massachusetts, and Connecticut. The wine ended up in California stores, but this was not enough to establish jurisdiction over the defendant in California. (One True Vine, LLC v. Liquid Brands LLC, Case No. C 10-04102 (N.D.Cal. 2011)).
In any specific case, questions of jurisdiction are complicated and involve a detailed review of all the specific facts. However, these two recent cases from the U.S. Supreme Court raise the jurisdiction bar. In very simple terms, they make it even more difficult (but certainly not impossible!) for the California winery in our example to face a lawsuit in New Jersey, or, from our other example, a California winery to sue a Massachusetts importer in California federal court.
For more information or assistance on litigation issues, contact us.
Copyright Dickenson Peatman & Fogarty at www.lexvini.com