In J. McIntyre Machinery, Ltd. v. Nicastro, a plurality of the United States Supreme Court held that merely placing a product into the stream of commerce with the expectation that it would wind up in the forum state was not enough to justify the exercise of personal jurisdiction over the manufacturer. Russell v. SNFA is the Illinois Supreme Court's first opportunity to apply Nicastro. Our preview of Russell is here. Watch the video of the oral argument here.
Russell arose from a 2003 helicopter crash in Illinois. The decedent's estate sued, alleging that one of the helicopter's tail rotor drive-shaft bearings had failed, fracturing the drive shaft, making the tail rotor inoperable, and leading to the crash.
The helicopter was built in Italy by Agusta, an Italian company that wasn't related to SNFA. It passed to a German company, then to Metro Aviation, a Louisiana-based company, and finally to Air Angels, the decedent's employer, which was based in Cook County. The Louisiana company had replaced several of the bearings with replacements manufactured by SNFA. The replacements were custom-made in France, sold to Agusta in Italy, sold again to Agusta Aerospace Corporation in America, and then to Metro Aviation in Louisiana. SNFA had three American customers for its aerospace bearings, but none for its helicopter bearings.
Confused yet? Well, that's the point. The trial court tossed the case for lack of jurisdiction on the grounds that SNFA's only contact with Illinois had been a single visit to an entirely different customer. The Appellate Court reversed, relying on Asahi Metal Industry Co. v. Superior Court; the defendant knew that Agusta sold its helicopter throughout the United States, and that it had an American subsidiary - since SNFA's ball bearings were custom-made, Agusta's distributors essentially were SNFA's American distribution arm.
The Supreme Court initially bounced the case back to the Appellate Court, directing the court to reconsider its decision in light of Nicastro. A few days before Christmas 2011, the Appellate Court reaffirmed its decision, holding that Nicastro made the panel even more certain that it was right.
The Appellate Court found jurisdiction under both subsection (a) -- "the commission of a tortious act within this State" and subsection (c) -- a catchall provision -- of 735 ILCS 5/2-209, the long arm statute. SNFA knew that Agusta helicopters were sold throughout the US, the Court noted. Essentially imputing Agusta's conduct to SNFA, the Court held that Agusta's five helicopters sold in Illinois during the relevant period were enough to subject SNFA to minimum contacts:
By custom-making parts for a helicopter manufacturer, defendant made itself dependent on the marketing and distribution network of the manufacturer.
Counsel for the defendant opened his argument by emphasizing his client's complete lack of a corporate, virtual or physical presence in Illinois. SNFA has no, and never has had any, U.S. customers for its helicopter bearings, counsel argued. Justice Theis pointed out that Nicastro was a plurality decision, with a four-Justice decision announcing the judgment. She asked counsel where Federal law stood in the wake of Justice Breyer's concurrence. Counsel responded that the majority of the Court had certainly rejected the New Jersey Supreme Court's standard that placing products into the stream of commerce subjected the manufacturer to jurisdiction everywhere the product might go. Instead, a majority of the Court had held that "something more" was necessary - a state-specific design or advertising, etc. Justice Burke asked whether there was some suggestion in the record of Illinois contacts between SNFA and Hamilton Sunstrand. Counsel pointed out that Hamilton Sunstrand involved sales in San Diego of aerospace bearings, not helicopter bearings. Counsel detailed the distinction for the Court between general and specific jurisdiction. Justice Freeman asked why the Court shouldn't follow Rockwell International Corp. v. Costruzioni Aeronautiche Giovanni Agusta, S.p.A., the case heavily relied upon by the lower court and cited with approval by the Supreme Court in Asahi. Counsel responded that Rockwell was not on point; it was a thirty year old decision which time has passed by. In fact, when Rockwell was decided, even Asahi was five years in the future. Justice Freeman followed up, asking whether the facts of international commerce had changed to a degree that the law should change. Counsel responded that the law had already changed in ways not supportive of a finding of personal jurisdiction. The law had changed not only to reflect differences in international commerce, but also to reflect a requirement of some knowledge of a particular jurisdiction. The constant lodestar of the law in this area, counsel argued, was the requirement of purposeful availment. Ultimately, Rockwell didn't govern because both Asahi and Nicastro required knowledge of the specific jurisdiction.
Counsel for the plaintiff began his argument by arguing that Nicastro lacked a majority for either its judgment or reasoning, and thus, the law still stood at World Wide Volkswagen. Justice Garman asked what the defendant had done to satisfy the "something more" of Justice Breyer's concurrence in Nicastro. Counsel responded that he was not persuaded that Justice Breyer objected to the stream of commerce theory found in World Wide Volkswagen. Justice Breyer was troubled by the Nicastro facts - one product, simply one machine, being the basis of jurisdiction in New Jersey. Justice Freeman asked what the so-called "substantial" connection between SNFA and Illinois was. Counsel responded that many of defendant's facts were inconsistent with the record; for example Hamilton Sunstrand was not in fact a California corporation. SNFA had signed two purchase agreements with Hamilton Sunstrand in Rockford, Illinois, and two contracts which specifically said that Illinois law applied. Justice Garman asked whether the products sold by SNFA to Illinois entities were the same ones that failed here. Counsel responded that the distinction was irrelevant -- SNFA sold ball bearings all over the United States and in Illinois. SNFA is a worldwide operation, counsel insisted, which has heavily penetrated the market in the United States, and worked hard in Illinois to cultivate their contacts. Counsel once again suggested that Nicastro really hadn't produced much of a rule at all. Chief Justice Kilbride asked how many entities made what counsel had described as "high end ball bearings," and counsel answered that SNFA had fewer than ten competitors worldwide.
In rebuttal, counsel for the defendant suggested that plaintiff had melded general and special jurisdiction in a way that the Supreme Court's Goodyear decision specifically barred. In fact, the concepts are distinct. Counsel read several passages to the Court from Justice Breyer's concurrence in Nicastro, arguing that Justice Breyer required an interrelationship between contacts and cause which was absent on this record. Ultimately, Justice Breyer couldn't reconcile the rule of the New Jersey Supreme Court with the standard of minimum contacts and purposeful availment. Counsel pointed out that the plaintiff's argument that SNFA knew that its product was being sold throughout the United States necessarily required imputing the Agusta distribution network to SNFA. Neither a national distribution network nor "permeating the U.S. market" was enough to justify jurisdiction. From there, counsel moved to analyzing Justice Ginsburg's dissent in Nicastro; arguing that in fact, the Nicastro Court might well have been unanimous in finding no jurisdiction in SNFA -- at minimum, that Court would have had six votes for "no jurisdiction."
SNFA should be decided in the next three to five months.